The Supreme Court will hear oral arguments on Monday in First American Financial Corporation v. Edwards, a case that threatens to undermine a number of federal statutory protections Americans have fought to have enacted over the years. This case involves standing: Under the Constitution, in order to have their case heard in a federal court, a plaintiff must demonstrate that they have suffered an injury of some sort. The specific question in this case is whether an individual can sue over illegal real estate settlement kickbacks, notwithstanding the fact that those kickbacks did not result in poorer service or increased costs to the individual, if the lawsuit is brought pursuant to a statute giving private parties the ability to hold companies accountable for harm caused by their illegal practices.
When Denise Edwards bought her home, the company she used as her settlement agent was paid to refer her to First American for title insurance, a kickback she says violated the federal Real Estate Settlement Procedures Act (RESPA). Congress adopted RESPA to protect consumers from the national industry problem of kickbacks and referral fees that unnecessarily increase real estate settlement costs. If the statute is violated, the consumer is entitled to collect three times the amount of any settlement charge paid. Edwards filed a class action suit on behalf of similarly situated consumers.
The standing issue is based on the fact that Edwards was not overcharged and did not receive lower quality service. The corporation is using that to argue that Edwards suffered no injury and, therefore, does not have the constitutionally-required standing to file her claim in a federal court.
The Ninth Circuit disagreed, ruling that she did have an injury that gives her standing: the violation of her right under RESPA and the judicial relief the law entitles her to.
RESPA is one of many statutes where Congress has addressed a national problem by prohibiting certain specific harmful practices and giving the right to sue and collect damages to those who are most likely to be injured by those practices, regardless of whether the feared harm actually occurred in that particular case. Other examples include when:
- a credit report has negative information about you that is older than a certain cutoff date;
- you are denied a free credit report that you are guaranteed by statute;
- your employer fails to post a legally required notice of workers' rights;
- you are not provided legally required notices about your home mortgage; or
- someone discloses personally identifiable information from your motor vehicle records.
In these and other cases, Congress has created legal rights whose violation – and not some proven loss in that specific case – creates the required standing and the right of private parties to collect damages. Those damages are a key incentive for companies to comply with the law. First American Financial Corporation's dangerously cramped definition of standing would cripple Congress's ability to protect consumers, employees, and others from practices that on the whole harm people and the nation, even if they don't cause harm in every circumstance.