Second Circuit dismisses suit against title insurers

Jessica M. Karmasek Jul. 16, 2012, 7:30am


NEW YORK (Legal Newsline) - A federal appeals court has agreed to dismiss a lawsuit against a group of title insurance companies.

In its July 3 ruling, the U.S. Court of Appeals for the Second Circuit affirmed a decision of the U.S. District Court for the Eastern District of New York dismissing an action against defendants Fidelity National Title Insurance Company, aka Fidelity National Titles Insurance Company; Chicago Title Insurance Company; Ticor Title Insurance Company; Fidelity National Finance Inc.; First American Title Insurance Company of New York; United General Title Insurance Company; First American Corporation; and Stewart Title Insurance Company.

In their putative class action against the title insurers, plaintiff Gerry Galiano and others similarly situated allege that the defendants sold insurance at improperly inflated rates as a result of illegal kickbacks in violation of the anti-kickback provision of the Real Estate Settlement Procedures Act, or RESPA.

Following the district court's dismissal, the plaintiffs appealed.

The Second Circuit also sided with the defendants, finding in its 17-page ruling that the plaintiffs failed to state a plausible claim under RESPA.

While the complaint did allege a kickback scheme, the court explained, it did so in a "wholly conclusory and speculative" manner.

"The complaint failed to identify: (1) a payment or thing of value; (2) given by defendants and received by plaintiffs' title agents, lawyers, brokers, lenders, or other third parties pursuant to an agreement to refer settlement business; and (3) an actual referral," Circuit Judge Denny Chin wrote.

"Second, the complaint failed to allege any specifics as to the date, time, or amount of the alleged § 8(a) violations, or any connections between these plaintiffs -- or their title agents, lawyers, brokers, or lenders -- and these defendants."

Third, the court said, the plaintiffs are essentially relying on a supposed industry-wide practice of kickbacks and referrals to sustain their RESPA claim.

"Without facts as to the alleged kickbacks, referral agreements, or referrals, however, plaintiffs are engaging in mere conjecture; this speculation is insufficient to state a plausible claim," Chin wrote.

And without "specific facts" as to the alleged kickback scheme, plaintiffs' RESPA claim effectively becomes a claim of overcharge, the Second Circuit said.

"Because RESPA is not a price-control statute, federal courts cannot review the reasonableness or validity of title insurance rates for actual services performed," Chin explained.

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