The Ninth Circuit holds that common questions predominate in homebuyers’ class action

Edwards v. First Am. Corp., No. 13-55542 (9th Cir. Aug. 24, 2015).

This case has been around since 2007, and has gone up and down the federal judicial ladder once before. It could have been the subject of a big Supreme Court ruling in 2012, but the Court dismissed the writ of certiorari as improvidently granted. The case is now back before the Ninth Circuit on a Rule 23(f) appeal from the district court’s denial of class certification. 

Defendant First American is a title insurance company. It bought an ownership interest in Tower City, a real estate settlement agency, in exchange for $2 million and a promise by Tower City to refer title insurance business to First American. First American entered into similar arrangements with 38 other settlement agencies across the country.

Plaintiff Denise Edwards bought a home, employing Tower City as her settlement agent and First American as her title insurance company. Edwards asserts that the arrangement between First American and Tower Cityand between First American and the 38 other settlement agenciesviolates the anti-kickback provision of the Real Estate Settlement Procedures Act (RESPA). And she makes this assertion on behalf of a proposed class of similarly situated homebuyers. The district court denied class certification under Rule 23(b)(3) on “predominance” grounds—i.e., on the ground that individual issues predominate over common ones. 

The Ninth Circuit, speaking through Judge Gould (no relation), now reverses in large part. As a threshold matter, the court holds that a statutory safe harbor that might create individual issues does not apply here. Common issues also predominate over individual ones. The class’s claims, the Ninth Circuit says, turn largely on whether the arrangements between First American and the settlement agencies violate RESPA’s anti-kickback provision, and not on the details of each homebuyer’s transaction. Classwide proof will be able to determine whether that arrangement violates RESPA, so common questions predominate.

But this reversal pertains only to 26 of the 38 settlement agencies. The 12 other settlement agencies were not preexisting when First American decided to purchase an ownership interest in them. Instead, First American (along with other investors) formed and invested in these agencies. According to the Ninth Circuit, these agencies present a “different set of facts” that “do not require common proof.” So the district court’s ruling as to these agencies is affirmed.