The U.S. Supreme Court has agreed to hear a case that will decide whether a plaintiff who cannot show any actual injury from a violation of the Real Estate Settlement Procedures Act’s (RESPA) anti-kickback provision has standing to sue in federal court under Article III of the U.S. Constitution. The consequences of the Supreme Court’s eventual decision, however, could extend significantly beyond RESPA litigation.

In First American Financial Corporation v. Edwards, No. 10-708 (cert. granted. June 20, 2011), the U.S. Court of Appeals for the Ninth Circuit ruled that RESPA provided a cause of action to a plaintiff who purchased title insurance based on a referral that allegedly violated RESPA, without regard to whether the plaintiff was overcharged for the title insurance. According to the Ninth Circuit, the existence of the statutory cause of action established an injury sufficient to satisfy Article III.

The title insurer’s certiorari petition presented two questions. The first question asked whether the Ninth Circuit erred in its interpretation of RESPA. The second question presented was whether a plaintiff has standing under Article III to sue for an alleged RESPA violation that caused no actual injury. The Supreme Court has limited its grant of certiorari to the second question presented by the title insurer. In agreeing to hear the case, the Supreme Court rejected the position of the Obama administration, which, through a brief filed by the Acting U.S. Solicitor General in response to the Supreme Court’s invitation, urged that the petition be denied. (Click here to read an earlier legal alert summarizing that brief.)

A Supreme Court decision in favor of the petitioner could have far-reaching consequences because many federal lawsuits assert claims under a host of federal and state statutes such as the Truth in Lending Act that provide statutory damages. For example, hundreds, if not thousands, of cases have been brought and threatened against companies alleging violations of the Telephone Consumer Protection Act (TCPA). Those cases seek recoveries of at least $500 for each contact in violation of the TCPA. Yet another example is the many class actions seeking statutory damages under Article 9 of the Uniform Commercial Code for allegedly faulty automobile repossession notices. The viability of this type of garden variety “gotcha” litigation might be undermined if the Supreme Court rules in favor of the petitioner. By analogy, such a ruling might also support the argument we have made in a number of cases that statutory damages that bear no relationship to the amount of actual damages violate the Due Process Clause of the U.S. Constitution.