An appeals court has ruled that attorneys for an Ohio woman have a right to probe whether First American Corp. violated anti-kickback regulations by allegedly buying ownership stakes in local title insurance agencies around the nation and then requiring the companies to refer all future business to First American.

The lawsuit, by Cleveland resident Denise P. Edwards, claims First American paid $2 million in cash and securities for a 17.5 percent interest in Tower City Title Agency, and then required the agency to refer all future business "exclusively" to First American.

An appeals court has ruled that attorneys for an Ohio woman have a right to probe whether First American Corp. violated anti-kickback regulations by allegedly buying ownership stakes in local title insurance agencies around the nation and then requiring the companies to refer all future business to First American.

The lawsuit, by Cleveland resident Denise P. Edwards, claims First American paid $2 million in cash and securities for a 17.5 percent interest in Tower City Title Agency, and then required the agency to refer all future business "exclusively" to First American.

Edwards’ lawsuit claims First American has similar agreements in place with thousands of other local title insurance agencies, and seeks class-action status to represent homeowners nationwide who purchased title insurance policies from those agencies.

First American maintains that few of its "exclusive" agency agreements are completely exclusive, and that Edwards paid no more for her title insurance on a home purchase in 2006 than she would have if First American had not had an agreement in place with Tower City.

Attorneys for First American had successfully argued that Edwards had no standing to represent other homeowners, or to obtain evidence about its dealings with other title agencies.

But in a June 21 opinion, the Ninth Circuit U.S. Court of Appeals in Pasadena ruled that a district court "abused its discretion" in denying Edwards standing to represent other similarly situated consumers in Ohio, or to obtain evidence from First American as to whether other homeowners nationwide might also have been affected.

The appeals court ruled that the lower court was correct in denying Edwards standing to represent consumers nationwide, as she failed to meet the burden of proof required under federal law.

But Edwards will have the right to file another motion seeking certification to represent consumers nationwide after a discovery period during which her attorneys will be allowed to seek more evidence about First American’s agreements with other title agencies. First American did not immediately respond to a request for comment on the appeals court ruling.

Before rival Fidelity National Financial Inc. acquired the underwriting companies of bankrupt LandAmerica Financial Group Inc. in December 2008, First American was the nation’s largest title insurance underwriter.

In 2009, companies under the First American umbrella commanded a 27 percent market share, generating $2.6 billion in title insurance premiums, according to statistics published by the American Land Title Association.

Edwards’ lawsuit accuses First American of violating the Real Estate Settlement Procedures Act (RESPA), which prohibits the payment of "any fee, kickback, or thing of value" in exchange for business referrals. RESPA also forbids paying a "portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service."

First American argued that Edwards cannot show that she was harmed by the company’s agreement with Tower City, because she paid no more for her title insurance than she would have otherwise.

The Ninth Circuit Court of Appeals noted that Ohio law mandates that all title insurers must charge the same price, and agreed with Edwards’ attorneys that the damages provision in RESPA allows for lawsuits "whether or not an overcharge occurred."

RESPA’s provisions are clear, Judge Susan P. Graber said, writing for the court.

"A person who is charged for a settlement service involved in a violation is entitled to three times the amount of any charge paid," Graber said. "The use of the term ‘any’ demonstrates that charges are neither restricted to a particular type of charge, such as an overcharge, nor limited to a specific part of the settlement service. Further, the term ‘overcharge’ does not exist anywhere within the text of the statute."

Graber noted similar rulings by the Sixth Circuit and Third Circuit courts of appeal, which concluded that lawmakers intended to create a private right of legal action, even in the absence of any overcharge, when they amended RESPA in 1983.

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