Unless you’ve recently bought property, you probably aren’t familiar with the Real Estate Settlement Procedures Act, or RESPA. And unless you’re familiar with RESPA, you probably haven’t paid attention to the pending U.S. Supreme Court case First American v. Edwards.
But First American deserves your attention because it’s a wolf in misleadingly sleep-inducing sheep’s pajamas.
The case, which the Court will hear on November 28, involves homebuyer Denise Edwards’ claim that First American paid kickbacks to a real estate settlement company in exchange for that company’s promise to offer only First American-brand title insurance. As a result of this backroom deal, Ms. Edwards and other homebuyers paid a fixed price for settlement and insurance, and couldn’t shop around for lower-priced insurance. If Ms. Edwards’ claims are true, then First American’s payments to the settlement company violated RESPA, and First American must pay Ms. Edwards and like homebuyers three times their settlement costs.
The question before the Court, though, is not whether First American broke the law, but whether a slippery constitutional doctrine called “standing” prevents Ms. Edwards and other homeowners from going to court in the first place.
“Standing” rules require a plaintiff to prove she suffered a concrete harm from the defendant’s unlawful conduct. In statutes like RESPA, however, Congress gave citizens the right to sue over statutory violations without proving that they suffered an economic harm. Thus, under RESPA, a homebuyer can sue a settlement company that paid kickbacks to a title insurer even if the homebuyer can’t prove that as a result, she paid more for settlement services.
Why did Congress allow homeowners to sue over kickbacks that may not have directly injured them? Because legislators understood two things. First, kickbacks harm all homebuyers by distorting the market for settlement products. Second, individual homebuyers would have a hard time proving those market distortions because they have little information about transactions other than their own. Thus, Congress sought to level the playing field between homebuyers and settlement companies by easing homebuyers’ access to court.
Congress has used this approach in many contexts. The National Environmental Policy Act (NEPA), for example, seeks to improve access to information about the environmental consequences of government actions, and individual citizens can sue to enforce NEPA’s terms. An individual NEPA plaintiff must prove that she has a connection to the government action at issue in her case—for example, that she likes to hike on the land that the government proposes to develop—but she does not have to prove that the NEPA violation directly harmed that land. Why did NEPA’s drafters allow citizens to sue over violations that may not have directly affected them? Again, because Congress recognized that the absence of information about environmental impacts harms the public at large, but citizens would have difficulty proving specific injuries.
There are many other examples. Banking and medical privacy laws empower individuals to sue if their personal information is unlawfully disclosed, whether or not they can prove the information has been misused. The Fair Credit Reporting Act empowers consumers to sue when a reporting agency violates measures aimed at avoiding identity theft, whether or not they can prove their identities were stolen.
In short, RESPA is one of numerous statutes that protect the public and empower individuals to enforce the resulting protections. The fate of all such statutes hangs in the balance in First American. If the Court decides that standing doctrines bar Ms. Edwards from pursuing her RESPA claims, then the same doctrines will bar nature lovers, and bank account holders, and patients, and credit card users—all of us—from enforcing the consumer and natural resource protections that Congress has enacted over the last half-century.
