Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—3d Cir.: Title agency may have unlawfully misrepresented its fees, (Jul 22, 2013)

By Jody Coultas, J.D.

A district court erred in dismissing a New Jersey Consumer Fraud Act (CFA) claim filed by homeowners against settlement agent North American Title Agency, Inc. (NATA) for allegedly inducing the homeowners to pay more money by misrepresenting fees due for closing services, the U.S. Court of Appeals in Philadelphia has held (Tubbs v. North American Title Agency, Inc., July 19, 2013, McKee, T.).

As the settlement agent for a refinancing by the homeowners, NATA prepared a HUD-1A Settlement Statement which listed all disbursements and fees applied to the refinancing. It identified a “Release Recording Fee” and “Settlement or Closing Fee” in proceeds disbursed to NATA. The homeowners alleged that NATA charged the homeowners a recording fee despite the bank actually performing all recording services.

A trial court held that the CFA claim failed because NATA did not engage in any fraudulent conduct. Specifically, the court viewed the CFA claim as being dependent upon the merit of the Real Estate Settlement Procedure Act (RESPA) claim, and concluded that the CFA claim failed because the RESPA claim was meritless.

NATA may have violated the CFA by misrepresenting its closing fees, according to the court. NATA listed its Release Recording Fee on a line-item of the Settlement Statement designated for government recording and transfer charges. The closing agent for NATA testified that, although the $150 was related to recording services NATA performed, the money was not used to pay the government for recording. Such conduct could be an unlawful misrepresentation under the CFA regardless of whether the homeowners were actually misled. Also, the “Settlement or Closing Fee” could have been viewed by a reasonable fact finder that as the cost of all services NATA performed, and that the “Release Recording Fees” was an overcharge. An overcharge could constitute an ascertainable loss under the CFA because such fees were paid from the refinancing loan obtained by the homeowners.

The case is No. 11-4510.

Attorneys: Robert J. LaRocca (Kohn, Swift & Graf) for Author P. Tubbs. Kristofor T. Henning (Morgan, Lewis & Bockius) for North American Title Agency, Inc.

Companies: North American Title Agency, Inc.

Cases: StateUnfairTradePractices DelawareNews NewJerseyNews PennsylvaniaNews