A Supreme Court decision long-awaited by the class action bar and businesses was a surprise non-event last Thursday when, seven months after hearing oral arguments in First American Financial Corp. v. Edwards, the Supreme Court issued an order dismissing the writ of certiorari in the case as improvidently granted. The Supreme Court's per curiam order, presented without reasoning, left intact the Ninth Circuit's holding that a plaintiff who pled a statutory violation but not actual damages had standing under Article III of the U.S. Constitution, which requires that a plaintiff has suffered a concrete "injury in fact." The Supreme Court's decision means that, at least in the Ninth Circuit "[t]he injury required by Article III can exist solely by virtue of 'statutes creating legal rights, the invasion of which creates standing.'"
In 2007, Denise Edwards filed a nationwide putative class action alleging that First American Financial Corp., a title insurance underwriter, violated the Real Estate Settlement Procedures Act ("RESPA") by paying a kickback to a title agent, Tower City, in exchange for an exclusive referral relationship. Edwards had purchased a home in 2006 and hired Tower City to manage the settlement. Tower City referred the title insurance to First American under their exclusive referral relationship. Edwards alleged that this agreement and similar agreements between First American and other title agents nationwide violated RESPA by depriving Edwards of her rights to a real estate transaction that was not the result of an illegal kickback, to receive information about the transaction, and to compare rates on the open market. She did not allege that she actually paid more for title insurance, received lower-quality service, or incurred any other injury or harm.
The Ninth Circuit held that because RESPA prohibited payment of "any fee, kickback, or thing of value" for referrals or services not rendered to the consumer and provided statutory damages related to payment of any charges, the fact that "RESPA gives Plaintiff a statutory cause of action" gives "Plaintiff standing to pursue her claims," even in the absence of a concrete injury. Citing Supreme Court case law, the Ninth Circuit concluded that "[t]he injury required by Article III can exist solely by virtue of 'statutes creating legal rights, the invasion of which creates standing'" and that, for example, plaintiff showing that she paid more for her title insurance because of the referral relationship was unnecessary for her to have Article III standing.
The Supreme Court granted certiorari on June 20, 2011. Numerous industry associations and companies, including the Consumer Data Industry Association, the Association of Global Automakers, Inc., Experian, Facebook, Zynga, Yahoo!, and LinkedIn, weighed in through amicus briefs and urged reversal of the Ninth Circuit's decision. Entities including the United States, the Electronic Privacy Information Center, the AARP, and Public Citizen submitted amicus briefs on behalf of Edwards. The Supreme Court heard oral arguments on November 28, 2011. It did not issue its decision until the last day of its term, at which point it surprisingly dismissed the writ as improvidently granted and left the Ninth Circuit opinion intact.
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