A pair of bills currently working their way through the 114th Congress would help some members of the real estate industry yet hurt others. The first bill would bar class actions in which people suffer no money damages; the second would prohibit referrals between affiliated businesses.
The Fairness in Class Action Litigation Act of 2015 (H.R. 1927), which is sponsored by House Judiciary Chairman Bob Goodlatte (R-Va.) and Constitution and Civil Justice Subcommittee Chairman Trent Franks (R-Ariz.), targets “no injury” class actions. Those are cases in which class members have lost no money; instead the plaintiffs complain about alleged violations of statutory rights, like those under RESPA (to a taint-free transaction) or TILA (to receive certain disclosures). The problem with these lawsuits, critics say, is that they expose honest companies to devastating liability for what are arguably technical violations that ultimately hurt no one.
The one-page bill blocks federal courts from granting class certification unless the party asking for that relief “affirmatively demonstrates through admissible evidentiary proof that each proposed class member suffered an injury of the same type and extent as the injury of the named class representative or representatives.” Injury is defined as “the alleged impact of the defendant’s actions on the plaintiff’s body or property.” Although the wording leaves plenty of wiggle room about what exactly constitutes the same injury, people without money or property damage would presumably be banished from the land of class actions and stuck instead in traditional, two-party litigation.
The second bill, the Ensure Fair Prices in Title Insurance Act of 2015, would be a coup for small, independent title agents. In the past few years, those organizations have decried the loss of revenue to joint-venture situations in which, for example, a title insurer and a real estate brokerage create a new title agency (an affiliated business arrangement) that handles at least some of the title work that arises in the brokerage’s transactions. RESPA currently has a safe-harbor provision allowing those sort of arrangements, but this new bill would gut it. Affiliated business could continue, but only if no business is referred to or from the parent organizations. Needless to say, that would remove most of the incentive for creating an affiliated-business arrangement in the first place.
The new bill would also have a new twist: it would permit aggrieved competitors to sue violators and recover legal expenses. Right now, RESPA can be enforced only by public agencies and by consumers who pay settlement charges. That has left law-abiding companies with little recourse against less scrupulous competitors. As a result, competitors have to enlist government enforcement (a tough thing to do) or find a disaffected customer of the violating company who is willing to sue (an even tougher thing to do).
The bill’s sponsor, Keith Ellison (D-Minn.), has introduced prior legislation on behalf of the North American Independent Land Title Association. On its website, NAILTA says it is “proud to be a supporter of Congressman Ellison and members of the Democratic Caucus who continue to speak out in defense of our industry.”