Antitrust Law Daily Wrap Up, RICO NEWS: Title companies charged with defrauding buyers of title insurance, (Oct 7, 2015)

By Linda O’Brien, J.D., LL.M.

The leading title insurance companies in Georgia engaged in a scheme to artificially inflate the prices of title insurance by misrepresenting that they were required to publish and charge certain rates for title insurance, in violation of the Georgia RICO law, according to a complaint filed by a consumer in the federal district court in Newnan, Georgia (Downing v. Fidelity National Title Insurance Company, October 2, 2015).

The Real Estate Settlement Procedures Act (RESPA) was enacted to encourage competition for the provision of settlement services, including title insurance. RESPA specifically prohibits a seller from requiring the buyer to use a particular title insurance company as a condition of the sale and requires a lender to provide a good faith estimate of the costs of title insurance and other services to allow the purchaser to shop for the lowest possible price. William Downing purchased title insurance in May 2012 for his residence in Fayette County, Georgia.

The complaint states that Georgia is not a “file-and-use” state, meaning that title insurance companies are not required to file their rates with the state or to charge their list price. The companies are only required to charge a premium “fixed by the insurer.”

According to the complaint, the major title insurance companies in the state — Fidelity National Title Insurance Company, Chicago Title Insurance Company, Commonwealth Land Title Insurance Company, First American Title Insurance Company, American Guaranty Title Insurance Company, Old Republic Title Insurance Company, and Stewart Title Guaranty Company —faced a severe downturn in business in the midst of the 2009 recession. Instead of reducing prices to meet lower consumer demand, the title companies conspired to artificially inflate the prices for buyers of title insurance.

The title companies agreed that they would publish new list prices and refuse to discount those prices on the pretext that Georgia became a file-and-use state for title insurance. Multiple real estate law firms reported the agreement on their web sites at that time. As part of the mortgage closing process, the companies continually represented to their employees and agents that they were required by law to file their rates with the Department of Insurance and charge the published rates to the public. The misrepresentations were sent through the mail and interstate wires to their employees and agents to facilitate the increases in list prices for title insurance, the complaint states.

The complaint also alleges that by representing that they were required to charge the list prices for title insurance, the companies were able to prevent deterioration in the list prices and avoided charges that they were fixing prices in violation of state insurance regulations. As a result, the defendants eliminated price negotiations and raised list prices, and consumers were quoted artificially inflated prices for title insurance, according to the consumer.

The lawsuit asserts claims for violations of O.C.G.A. Section 16-14-4 (Georgia Racketeer Influenced and Corrupt Organizations Act). The action seeks injunctive relief, treble and punitive damages, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 3:15-cv-00154-TCB.

Attorneys: Jeffrey L. Berhold (Jeffrey L. Berhold, P.C.) and W. Thomas Lacy (The Lacy Law Firm P.C.) for William D. Downing.

Companies: Fidelity National Title Insurance Company; Chicago Title Insurance Company; Commonwealth Land Title Insurance Company; First American Title Insurance Company; American Guaranty Title Insurance Company; Old Republic Title Insurance Company; Stewart Title Guaranty Company

News: RICO GeorgiaNews