Supreme Court dismisses case over whether plaintiffs must show harm to sue
By Brady Dennis,
Largely overlooked amid the coverage of the Supreme Court’s historic health-care law ruling on Thursday was another case that the court dismissed altogether — one that could have long-term implications for corporations facing class-action lawsuits.
On the final day of its term, the court was expected to issue a ruling in First American Financial Corp. v. Edwards, a real estate case in which the central issue was whether a company could be sued for violating a statute even if the plaintiff had suffered no direct harm from that violation.
The case involved Cleveland homeowner Denise P. Edwards, who sued on behalf of a nationwide class, alleging that her title insurer, First American Financial Corp., had provided millions of dollars in kickbacks to her title agency to steer business its way.
Edwards contended that the company’s actions violated the Real Estate Settlement Procedures Act (RESPA) of 1974, which Congress passed in an effort to ensure that borrowers were treated fairly when getting a loan. The law forbids players in the mortgage industry — lenders, real estate agents, title insurers, construction firms and others — from engaging in illicit kickbacks.
Edwards sought monetary damages, even as she acknowledged that she wasn’t charged more for her title insurance because of the alleged kickbacks and had no complaints about the company’s performance. First American argued that Edwards did not have legal standing to bring the case because Article III of the Constitution requires that a plaintiff must have suffered actual injury in order to sue. The firm noted that Ohio regulates the cost of title insurance and that Edwards paid the same amount as any other customer.
The U.S. Court of Appeals for the 9th Circuit in California held in favor of Edwards, agreeing that she had standing to pursue a class-action because First American’s alleged actions violated the RESPA law as written by Congress.
Edwards herself was only entitled to win a small amount of restitution — a total of roughly $1,500. But a definitive Supreme Court ruling could have had much more far-reaching effects, essentially reshaping the standards of class-action litigation.
The case drew widespread attention from consumer advocates, who feared that a ruling against Edwards could undermine a wide range of consumer protection laws and make it more difficult to file class-action suits against the companies that breach them.
It also sparked action from companies in an array of industries concerned that they could face a slew of new class-action suits from plaintiffs who had not suffered any actual injuries but sought large settlements nevertheless.
Companies such as Facebook, Yahoo and LinkedIn, as well as groups such as the National Association of Home Builders and the Alliance of Automobile Manufacturers, filed amicus briefs on behalf of First American. The U.S. government and groups such as AARP filed amicus briefs on behalf of Edwards.
The court heard oral arguments in the case early in its current term, on Nov. 28. But on Thursday, it issued a one-sentence opinion reversing its decision to take the case and allowing the 9th Circuit ruling to stand. “The writ of certiorari is dismissed as improvidently granted,” the court stated. On a day when they issued a landmark ruling in one high-profile case, the justices passed on another much-anticipated decision.That was fine with those who had supported Edwards’s case all along.
“This opens the door to returning the integrity and transparency to the settlement process,” said Charles W. Proctor III, president of the National Association of Independent Land Title Agents, which advocates for transparency in the settlement process. “This will lead to a quality product to the consumer at a competitive price without giant entities controlling the market, the product and the process.”
But some groups that had sided with First American argued that the central legal question of the case remains unsettled.
“By dismissing First American Financial Corporation v. Edwards, the U.S. Supreme Court has left the issue to be worked out in the trial court,” said Michelle L. Korsmo, chief executive of the American Land Title Association, which bills itself as the voice of the title industry. “The decision to dismiss leaves the issue of the necessity of injury to bring a class-action suit yet to be resolved.”