First American's Opposition To Nailta

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Case No. 08-56536, 08-56538 In the Court Below: CV 07-03796 SJO (FFMx) (C.D. Cal.) ____________________________ UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT _____________________________ DENISE P. EDWARDS, individually and on behalf of all others similarly situated, Plaintiff-Appellant, v. THE FIRST AMERICAN CORPORATION and FIRST AMERICAN TITLE INSURANCE COMPANY Defendants-Appellees. __________________________________________________________________ OPPOSITION OF THE FIRST AMERICAN CORPORATION AND FIRST AMERICAN TITLE INSURANCE COMPANY, DEFENDANTS-APPELLEES TO MOTION OF NATIONAL ASSOCIATION OF INDEPENDENT LAND TITLE AGENTS FOR LEAVE TO FILE BRIEF AMICUS CURIAE __________________________________________________________________ Defendants-Appellees, The First American Corporation (“FAC”) and First American Title Insurance Company (“FATIC”, and with FAC, “First American”) respectfully submit this opposition to the motion of the National Association of Independent Land Title Agents (“NAILTA”) for leave to file a brief, amicus curiae.1

1

First American notes that NAILTA’s motion for leave to file an amicus brief is untimely. Under FED.R.APP.P. 29(e), an amicus curiae must file its brief and motion “no later than seven days after the principal brief of the party being supported is filed.” Plaintiff-appellant filed her opening brief on March 2, 2009 (cont’d)

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I.

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NAILTA IS NEITHER A NATIONAL ASSOCIATION NOR A SPOKESPERSON FOR THE TITLE INSURANCE INDUSTRY Critically and as an initial matter, NAILTA is not what it purports to be.

NAILTA was formed on December 1, 2008, barely three months before it presented itself to this Court as an industry spokesperson.2 Although it calls itself a “national association,” NAILTA’s membership is comprised of less than 40 individuals affiliated with less than two dozen title insurance agencies and one title insurance company in three Eastern states (New Jersey, Maryland, and Pennsylvania) and two mid-Western states (Ohio and Wisconsin)—a minute, and by no means representative, fraction of the title insurance industry in the nation.3 In its proposed brief to this Court, NAILTA proclaims that it “works to protect the independence of the title insurance industry,” but neither its proposed brief nor its website4 lists anything at all that it has done in the three months since it was established. Indeed, the nascent, tentative nature of NAILTA is reflected by (Dkt. 6828406). Thus, any amicus brief in support thereof was due by March 11, 2009. FED.R.APP.P. 26(a)(2). NAILTA filed its brief and motion on March 12, 2009, however (Dkt. 6843450). 2

www.corporations.state.pa.us/corp (visited March 23, 2009).

3

NAILTA’s membership list appears as an Addendum to its proposed brief. To put NAILTA’s size in context: The American Land Title Association, founded in 1907, has 3,000 members, including title agents, abstracters, and title insurance companies, ranging from small, one-county operations, to large national title insurers. www.alta.org (visited March 23, 2009). 4

www.nailta.org (visited March 23, 2009).

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the fact that its website tells new members that they will have the right to withdraw their membership applications once they later read the Code of Ethics, Constitution, or By-Laws of NAILTA that are not yet in existence.5 Trade associations presenting themselves as amici curiae are often met with skepticism. Amicus briefs are often attempts to inject interest-group politics into the federal appellate process by flaunting the interest of a trade association or other interest group in the outcome of the appeal. Nati’l Org. for Women, Inc. v. Scheidler, 223 F.3d 615, 617 (7th Cir. 2000). But whatever inquiry is appropriate when a bona fide, established, national trade association appears as an amicus curiae should be heightened when a new trade association with high aspirations but scant membership and no track record pretends to be an industry spokesperson. An entity seeking amicus status before this Court has a threshold obligation to describe itself accurately—an important factor in the Court’s evaluation of the motion and the proposed brief. NAILTA did not do so. See In re Grand Jury Witness, 695 F.2d 359, 363 n.7 (9th Cir. 1982) (“The court also received a motion from one Ralph L. Rogers, seeking leave to file an amicus brief. The motion failed

5

www.nailta.org (visited March 23, 2009).

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to identify Rogers or his interest in the case and was therefore denied. FED.R.APP.P. 29.”). II.

NAILTA’S PROPOSED BRIEF PRESENTS A DISTORTED, MISLEADING AND UNSUPPORTED PICTURE OF THE TITLE INSURANCE INDUSTRY NAILTA’s proposed brief is replete with bald, unsupported contentions

presented as though they were fact, but tethered to neither any evidence of record nor any reliable publications. In addition, many of NAILTA’s contentions have no bearing on any issue in this case. Two examples suffice. A.

NAILTA Premises Its Proposed Brief on the Proposition That Consolidation of Title Insurers Has “Impacted the Quality of the Product” Even Though There Is No Factual Basis for that Assertion and No Claim In this Case That There Was Any Deficiency in the Title Insurance Policy

NAILTA begins its proposed brief by asserting that “consolidation” in the title insurance industry has “impacted the quality of the product and service being provided by the title insurance underwriters” (NAILTA Proposed Br. 4). In its conclusion, NAILTA goes even further, bemoaning the “damage and harm to the title insurance consumers who were denied a meaningful choice between the standards offered by various title insurance underwriters” (Id. at 15). But NAILTA’s baseless assertions are neither relevant to this case nor supported by any facts—and are, First American respectfully submits, simply false.

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Plaintiff-appellant, Denise P. Edwards, makes no claim that her title insurance policy was deficient in any way (E.R. 94-95 ¶ 5). She does not claim that the title search was inadequate or incomplete, or that there are any clouds on her title that were missed, or that any adverse claims have been made (Id.). She does not claim that a different title insurer would have employed—in NAILTA’s words—higher “standards” (Id.). Her complaint implicitly acknowledges that the title search was properly done, and that there is absolutely nothing wrong with the title insurance policy, as she explicitly confirmed at her deposition: Q. [A]s far as the work that Tower City did and the policy that it provided to you back in October of 2006, did you have any complaints about any of that? A.

No.

(Edwards Deposition, p. 41) (Exhibit A hereto). Because there is absolutely no issue in this case about the quality of the title policy that Edwards received, NAILTA is “crying wolf” and has failed to show that its arguments about “standards” for title searches or title policies are “relevant to the disposition of the case,” as required by FED.R.APP.P. 29(b) (emphasis added). See also SUP.CT.R. 37.1 (“An amicus curiae brief that brings to the attention of the Court relevant matter not already brought to its attention by the parties may be of considerable help to the Court. An amicus curiae brief that does

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not serve this purpose burdens the Court, and its filing is not favored.”) (emphasis added). Worse yet, NAILTA’s claim that a title insurance purchaser such as Edwards might have received a title search or title policy with higher standards had a different title insurer been used is utterly baseless. NAILTA cites nothing (such as publications, or manuals of different title insurers) to support that assertion. Title insurers not only have a professional responsibility to ensure the quality of their title searches and title policies, but it is in their economic interest to do so. See Joyce Palomar, TITLE INSURANCE LAW § 1:15 (“[A] title insurance company makes underwriting judgments based on the preliminary title examination.”); id. §§ 12:1-12:13 (detailing title insurer’s duty to search title fully). Once the policy issues (like the policy First American issued covering Edwards’ property), the underwriting process is superseded and irrelevant. See id. §§ 1:15, 5:1. If there is an adverse claim based on facts that should have been, but were not, learned through a title search, it is the title insurer that will bear not only the costs of litigation but also the cost of clearing the title. See id. § 5:3 (title insurer will bear loss or damage to insured caused by defects in title); id. §§ 10:110:39 (detailing recoveries available against title insurer); id. §§ 11:1-11:20 (detailing title insurer’s duty to defend insured title).

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To support its claim that there has been a decline in quality of title searches, NAILTA asserts that some title insurance underwriters require only a “current owner” search rather than a full title search that would disclose defects in title or liens that predate the current owner’s acquisition of the property. (NAILTA Proposed Br. 14). That argument is based on a misrepresentation of Ohio law. In Ohio, where Edwards purchased her home, the Rate Manual of the Ohio Title Insurance Rating Bureau (“OTIRB”), which files uniform rates on behalf of all title insurers in Ohio in accordance with Ohio law, OHIO REV. CODE § 3935.04, authorizes title insurers to offer discounted “reissue” or “refinance” rates if: the home was sold within the last ten years; an “Owner’s Policy” was purchased at that time; and the owner-applicant meets other requirements including presenting the prior insurance policy. OTIRB, Schedule of Rates for Title Insurance in the State of Ohio, PR-4 (pp. 3.2-3.3), PR-9 (p. 3.6), and PR-10 (pp. 3.6-3.7) (effective December 1, 2008) (“OTIRB Rate Manual”).6 The reason for this requirement is self-evident: If a thorough title search was done and a title policy issued when the home was last sold the title company can rely upon that prior search, and need only 6

The current version of the OTIRB Rate Manual is available at http://www.stgoh.com/download/772/bulletins/OTIRB_Manual_OHPC_12587869 9.pdf (visited March 23, 2009). The version of the OTIRB Rate Manual in effect at the time of Edwards’ purchase of title insurance will appear in First American’s supplemental excerpts of record on appeal. (Decl. of Samuel Halkias, Ex. A (Dkt. 31)).

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update that search by reviewing possible defects in title that arose since the last title policy was issued. The use of a “current owner” search in Ohio is not, as NAILTA contends, a device that title insurers concocted to cut corners, but a measure recognized by OTIRB as a sound approach to save home buyers money. The OTIRB Rate Manual recognizes that if a full title search—going back to the “root” of the title—was done when the current owner purchased his or her home a few years ago, all that need be done is to update that search. Thus, instead of “drawing the court’s attention to law that escaped consideration”—a proper role for a would-be amicus curiae, Miller-Wohl Co. v. Commissioner of Labor & Industry, 694 F.2d 203, 204 (9th Cir. 1982) (per curiam)—NAILTA seeks to infect this case with an inaccurate description of the law. If, in fact, there had been a decline in the quality of the service provided by title insurers, one would expect to see burgeoning claims made against title policies. NAILTA offers no such evidence, because there is none. B.

NAILTA’s Description of the Difference Between “Independent” Title Agencies, and Those In Which A Title Insurer Holds an Interest, Has No Basis In Fact

NAILTA’s brief asserts that there are essentially two kinds of title insurance agencies—those affiliated with title insurers, and “independent” agencies—and

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that only “independent” agencies can properly do their job.7 NAILTA thus asserts that once a title insurer acquires any interest in what had been an independent title agency, the agency can no longer function: Prior to the acquisition of interest, the independent title insurance agent or agency had the power to exercise its independent judgment as to which title insurance underwriter was best suited for a particular real estate transaction, i.e., land purchase or refinancing. After the acquisition of interest, the power of any purchased title insurance agent or agency to exercise an autonomous choice of title insurance underwriter is eliminated. (NAILTA Proposed Br. 10). This, similarly, is an extraordinary distortion of the title insurance industry. Here again, NAILTA turns the role of an amicus curiae upside down. “The privilege of being heard amicus rests in the discretion of the court which may grant or refuse leave according as it deems the proffered information timely, useful, or otherwise.” Community Ass’n for Restoration of Environment (CARE) v. DeRuyter Bros. Dairy, 54 F.Supp.2d 974, 975 (E.D.Wash. 1999) (citing Hoptowit v. Ray, 682 F.2d 1237, 1260 (9th Cir. 1982)). Leave to file an amicus brief should be denied unless a party is not represented competently or at all, a decision in the present case may affect the interest of the amicus in another case in which he has an interest, or the amicus has “unique information or perspective that can help the court beyond the help that the lawyers for the parties are able to provide.” Id. (citing Northern Sec. Co. v. United States, 191 U.S. 555, 556, 24 S.Ct. 119, 48 L.Ed. 299 (1903)).

7

NAILTA completely omits discussion of title insurance underwriters’ direct operations that issue title insurance policies. See Joyce Palomar, TITLE INSURANCE LAW § 2:2 & n.1.

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Greater Yellowstone Coal. v. Timchak, 2008 WL 4911410, *6 (D.Idaho 2008). Instead of providing special information not otherwise available to the court that would materially aid the court’s deliberations, NAILTA offers baseless contentions, not facts. Some title agencies, both those that are independently-owned and those in which an interest is owned by a title insurer, serve as exclusive or largely exclusive agents for only one title insurer. Other title agencies, again including both those that are independently-owned and those in which an interest is owned by a title insurer, serve as agents for more than one title insurer. Some title insurers also sell policies directly. When a home buyer selects a title agency (whether independently-owned or not) which has an exclusive agency relationship with one title insurer or purchases a policy from a title insurer’s direct operation, the home buyer typically thereby selects that title insurer. It is usually a simple matter for a home buyer to learn whether a title agency represents only one, or represents more than one, title insurer. The mere fact that a title agency—whether independentlyowned or not—has an exclusive relationship with one title company does not mean that a consumer is not receiving the highest quality service. Likewise, a customer who purchases a title policy from an underwriter’s direct operation, which necessarily does not offer a choice of policies underwritten by multiple companies, does not ipso facto receive some lesser service. -10 -

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To illustrate: NAILTA’s office address is in care of Charles W. Proctor III, one of its members.8 Mr. Proctor is a real estate attorney and title agent, whose law office adjoins his title office in Chadds Ford, Pennsylvania. His title agency, Industrial Valley Abstract Company, offers title insurance for only one title insurer, Stewart Title Guaranty Company (“Stewart Title”).9 Similarly, Gregory W. Happ, who is both counsel of record in this Court for NAILTA and a member of NAILTA, is both a real estate attorney and a land title agent, conducting both practices out of the same office in Medina, Ohio.10 As a title agent, Mr. Happ offers title insurance from only one title insurer, General Title and Trust Company (“General Title”).11 When a home purchaser goes to Mr. Proctor’s title agency for title insurance or settlement services, Mr. Proctor, as a title agent, does not “exercise [his]

8

(NAILTA Proposed Br. 18); www.cplaw1.com (visited March 24, 2009).

9

www.cplaw1.com (visited March 24, 2009); www.ivacland.com (visited March 23, 2009). 10

(NAILTA Proposed Br. i, 17); http://www.ohioinsurance.gov/Agents/AgentLocator/Default.aspx (visited March 24, 2009). 11

http://www.ohioinsurance.gov/Agents/AgentLocator/Default.aspx (visited March 24, 2009). Some of the other NAILTA members are with title agencies that represent more than one title insurer. For example, James Squeo, a NAILTA member in Dublin, Ohio, is an agent for both FATIC and General Title. http://www.ohioinsurance.gov/Agents/AgentLocator/Default.aspx (visited March 24, 2009).

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independent judgment as to which title insurance underwriter [is] best suited for a particular real estate transaction.” (NAILTA Proposed Br. 10). Instead, Mr. Proctor’s title agency provides insurance underwritten by Stewart Title—the only title insurer which Mr. Proctor’s agency represents. In fact, if a home buyer goes to Mr. Proctor for legal services relating to the home purchase, the client will likely be referred to Mr. Proctor’s title agency (which will offer a policy only from Stewart Title). As Mr. Proctor states on his website: Our affiliated business, Industrial Valley Abstract Company, allows our office to provide our clients with the convenience of one location for legal representation and settlement services for their real estate acquisitions.12 Similarly, when a home purchaser goes to Mr. Happ’s title agency, Mr. Happ will provide title insurance underwritten by General Title, not because Mr. Happ made a comparative judgment between two or more underwriters that General Title is best suited for that particular transaction, but because that is the only title insurer for which Mr. Happ is a title agent. This does not mean that Mr. Proctor or Mr. Happ (or First American, for that matter) is doing anything wrong. A home buyer who goes to a title agency that 12

www.cplaw1.com (visited March 23, 2009). The Real Estate Settlement Procedures Act of 1974, 12 U.S.C. § 2601 et seq. (“RESPA”) specifically recognizes that attorneys and law firms may establish a “separate corporate title insurance agency … as an adjunct to his or its law practice.” 12 U.S.C. § 2607(c)(5).

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represents only one title insurer no more expects that title agency to offer policies underwritten by several title insurers than a car buyer who goes to a Chevrolet dealership would expect to be sold a Toyota. What ensures that the home purchaser (or lender) gets an appropriate title policy is the professionalism and service of the title agent and the title insurer, and their obligations to comply with laws and regulations in a highly-regulated industry. Many title agencies, whether or not independently-owned, represent only one title insurer; also, many underwriters sell title insurance policies directly: that does not violate the law, and does not prevent the title insurance purchaser from receiving high quality service. III.

NAILTA’S PROPOSED BRIEF SHEDS NO LIGHT ON THE ISSUES PRESENTED ON THIS APPEAL NAILTA’s proposed brief sheds no light on the two issues presented on this

appeal: (a) whether Edwards sustained a “particularized and concrete” injury caused by her referral by Tower City Title Agency, LLC to FATIC, that would give her Article III and RESPA standing, and (b) whether the District Court abused its discretion by denying class certification. On the standing issue, as noted above, NAILTA offers nothing to support its conclusory assertion that title insurance purchasers are harmed when a title agency

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acts as agent for only one title insurer, and therefore refers home purchasers to that insurer, or to identify any harm cognizable under Article III or its jurisprudence. On the class certification issue, NAILTA states that it supports reversal of the orders denying class certification—but it takes that position as a political issue—an “inject[ion of] interest-group politics into the federal appellate process”—not a legal issue, Nat’l Org. for Women, Inc. v. Scheidler, 223 F.3d at 617, and fails to address the requirements of Rule 23 at all. NAILTA does not purport to address any of the questions that bear upon class certification, such as the need for individualized proof and whether a class action would offer a superior means of adjudication. Most telling, NAILTA’s proposed brief is utterly silent on the fact that all of the supposed evils that NAILTA sees in the title industry can properly and thoroughly be addressed through the mechanisms established by RESPA. Those mechanisms include criminal prosecutions by the United States Department of Justice, enforcement actions by the Secretary of Housing and Urban Development, and enforcement actions by state attorneys general and insurance commissioners, as well as private actions by persons who have sustained actual damage—but do not extend to private actions (let alone class actions) by persons, such as Edwards, who have sustained no damages. See 12 U.S.C. § 2607(d); Durr v. Intercounty Title Co., 14 F.3d 1183 (7th Cir. 1994); Moore v. Radian Group, Inc., 233 -14 -

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F.Supp.2d 819 (E.D. Tex. 2002), aff’d without opinion, 69 F.App’x 659 (5th Cir. 2003); Mullinax v. Radian Guar. Inc., 311 F.Supp.2d 474, 486 (M.D.N.C. 2004); Morales v. Attorneys’ Title Ins. Fund, Inc., 983 F.Supp. 1418, 1427 (S.D. Fla. 1997). CONCLUSION There is a spirited debate among the Circuits as to when leave to file an amicus curiae brief should be granted. The Seventh Circuit, relying on a decision of this Court, has held: An amicus brief should normally be allowed when a party is not represented competently or is not represented at all, when the amicus has an interest in some other case that may be affected by the decision in the present case (though not enough affected to entitle the amicus to intervene and become a party in the present case), or when the amicus has unique information or perspective that can help the court beyond the help that the lawyers for the parties are able to provide. Ryan v. Commodity Futures Trading Comm’n, 125 F.3d 1062, 1063 (7th Cir. 1997), citing Miller-Wohl Co. v. Comm’r, 694 F.2d 203. Other Circuits have been more receptive to amicus curiae briefs. E.g., Neonatology Assocs., P.A. v. C.I.R., 293 F.3d 128 (3d Cir. 2002). But even under the most lenient standard for permitting amicus curiae briefs, NAILTA’s proposed brief, which misrepresents the organization itself and offers baseless assertions in lieu of facts, inaccurate descriptions of the law in lieu of well-researched arguments supported by appropriate citations, and political -15 -

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advocacy in lieu of legal analysis, does not merit leave. First American respectfully requests that NAILTA’s motion for leave to file a brief amicus curiae be denied. Dated: March 24, 2009 Respectfully submitted, SONNENSCHEIN NATH & ROSENTHAL LLP Richard M. Zuckerman [email protected] 1221 Avenue of the Americas New York, New York 10020 212-398-5213; Fax: 212-768-6800

/s/ Charles A Newman Charles A. Newman [email protected] One Metropolitan Square - Suite 3000 St. Louis, MO 63102-2741 314-259-5399; Fax: 314-259-5959

Kenneth A. Pfaehler [email protected] 1301 K Street, N.W. Suite 600, East Tower Washington, DC 20005-3364 202-408-6468; Fax: 202-408-6399 Attorneys for The First American Corporation and First American Title Insurance Company, Defendants-Appellees

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CERTIFICATE OF SERVICE The undersigned hereby certifies that a copy of the foregoing Opposition of The First American Corporation and First American Title Insurance Company, Defendants-Appellees to Motion of National Association of Independent Land Title Agents For Leave to File Brief Amicus Curiae was served on March 24, 2009 on counsel of record via operation of this Court’s CM/ECF system and on the following via United States mail, first class, postage prepaid. Cyril V. Smith Peter M. Nothstein ZUCKERMAN SPAEDER LLP 100 E. Pratt Street, Suite 2440 Baltimore, Maryland 21202 (410) 332-0444 Edward G. Kramer David G. Oakley THE FAIR HOUSING LAW CLINIC 3214 Prospect Avenue Cleveland, Ohio 44115 (216) 431-5300

Richard S. Gordan QUINN GORDAN & WOLF CHTD 102 W. Pennsylvania Avenue Towson, Maryland 21204 (410) 825-2300 James W. Spertus Ezra D. Landes LAW OFFICES OF JAMES W. SPERTUS 12100 Wilshire Boulevard, Suite 620 Los Angeles, California 90025 (310) 826-4700

Attorneys for Plaintiff-Appellant Gregory W. Happ 238 West Liberty Street Medina, Ohio (330) 723-7000; Fax: (330) 725-8804

Mary Dryovage Law Offices of Mary Dryovage 600 Harrison Street, Suite 120 San Francisco, California 84107 (415) 593-0095; Fax: (415) 593-0096

Attorneys for National Association of Independent Title Agents, Proposed Amicus Curiae March 24, 2009

/s/ Charles A Newman Charles A. Newman -17 -