The U.S. Supreme Court heard oral arguments this morning in First American Financial Corporation v. Edwards. This case arose in 2006 when Tower City, a title agency representing Denise Edwards during her purchase of a home, referred Edwards to First American Title Insurance. Edwards brought a class action lawsuit against First American under the Real Estate Settlement Procedures Act (RESPA) when she learned that First American was paying a substantial amount of money to Tower City so that Tower City would refer home buyers specifically to First American. RESPA prohibits the payment of kickbacks in connection with “a federally related mortgage loan.”

First American moved to dismiss the case on the grounds that Edwards suffered no direct injury (e.g. lower-quality service from First American) as a result of the kickback and thus she had no standing to sue the company. The U.S. Court of Appeals for the Ninth Circuit affirmed the district court’s ruling that RESPA provides a sufficient basis on which Edwards can sue First American. In its opinion, the Ninth Circuit cited Warth v. Seldin, which held that a statute like RESPA can create legal rights and provide a remedy when those rights are invaded. RESPA allows for plaintiffs like Edwards to recover a penalty of up to three times the amount paid for the service without having to prove a specific injury resulting from the kickback. The Supreme Court will now have the final say on whether Edwards can challenge First American’s kickback payment under this provision of RESPA.

To learn more about the arguments in this case, visit the Supreme Court of the United States Blog at http://www.scotusblog.com/?p=132413.