Briefs and Orders in the case

On November 28, 2011, the U.S. Supreme Court will hear argument in First American Financial Corporation, et al. v. Edwards, U.S. Supreme Court Docket No. 10-708, October 2011, on appeal from Edwards v. First American Corporation, 610 F.3d 514 (9th Cir. 2010). The Court’s decision in this case is significant in that it has the potential to curtail the recent rise of no-harm class actions.

The Court will review the Ninth Circuit’s decision finding that a plaintiff had standing to sue under the anti-kickback provision of the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2607, even though she did not allege she was overcharged for title settlement services relative to her Ohio home purchase, or that the quality of her insurance policy was diminished or impaired. Indeed, no one in Edwards’ putative Ohio class could allege they were overcharged because the applicable fees are fixed by statute in Ohio. See also Edwards v. First Am. Corp., 385 Fed. Appx. 629, 631 (9th Cir. 2010) (companion case finding that the U.S. District Court for the Central District of California abused its discretion in denying certification of the Ohio class).

Edwards argues she has standing purely on the basis of her allegation that an illegal “exclusive” referral agreement was in place relative to the transaction, a technical violation of RESPA.

Considering the longstanding three-part inquiry for Article III standing—injury, damages, and redressability — the Ninth Circuit found that because RESPA provides defendants are liable “to the person or persons charged for the settlement service involved in the violation in an amount equal to three times the amount of any charge paid for such settlement service,” damages are not limited to overcharges and include any fees paid. 12 U.S.C. § 2607(d)(2) (emphasis added). Here, that means statutorily fixed fees.

Liability and damages thus became one upon Edwards’ allegation of a technical statutory violation. This decision aligns with others in recent years awarding monetary damages to plaintiffs simply because they prove a violation of a statute without suffering any specific damage. Such decisions have fueled—and the Ninth Circuit’s decision in Edwards reinforces—the rise of no-harm class actions, wherein plaintiffs seek damages under a variety of theories despite the absence of a concrete, palpable injury.

Perhaps because Edwards so clearly illustrates the no-harm class — neither the cost nor the quality of the policy was affected by the alleged breach — many interested parties and amici surmise that the Supreme Court accepted the case out of concern for the broad expansion of this type of case. For example, at least one recent decision in Ohio declined to permit class claims to go forward in the absence of a demonstrable injury. See, e.g., Hirsch v. CSX Transp., Inc., ____ F.3d ____, 2011 WL 3926369 (6th Cir. Sept. 8, 2011) (affirming dismissal of no-harm class action in the medical monitoring context for lack of standing); see also No Harm, No Class: Damage Element Still Standing in the Sixth Circuit.

To date, fourteen different groups have written amicus briefs in support of the Petitioners, from Facebook, Inc. to the Defense Research Institute (DRI). For example, in its amicus brief in support of Petitioners, DRI explains that if the Ninth Circuit’s decision to narrow the doctrine of standing prevails, “there will effectively be no limit to Congress’s ability to authorize ‘bounty hunting’ by plaintiff-side lawyers who can wield the threat of ruinous class action verdicts as a weapon to extract expensive settlements.” In these no-loss class actions, DRI explains, “verdicts and settlements do not compensate any victim because, by definition, there is no injured plaintiff.” The Respondent’s briefing must be filed by October 11, 2011.

A finding by the Supreme Court that the injury and damages elements for Article III standing remain separate and distinct would markedly assist defendants’ positions that the plaintiff, and all putative class members, must have suffered damages apart from the technical injury/violation resulting in statutory penalties.

In addition, the case will likely have a significant impact on the dozens of other statutory schemes, both on the federal and state level, that permit suit and recovery for a violation of a statute, irrespective of actual harm. Finally, this case may impact a variety of theories that have been used to certify no-harm classes, including products liability cases, medical monitoring cases, and data security breach cases, to name a few.

Moreover, it would bring this aspect of class actions back in line with the Supreme Court’s past findings that, while Congress can create new statutory causes of action, it cannot unilaterally eliminate the element of damages from the Article III standing analysis.