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Home Buyers' Suit Seeks to Bar Overcharges by Title Insurers
New Jersey Law Journal
May 05, 2009
Plaintiffs in a consumer fraud class action are trying to convince a federal judge in Newark, N.J., to enjoin a dozen title insurance companies from overcharging home buyers on recording fees.
The named plaintiffs in Chassen v. Fidelity National Financial, 09-Civ.-291, are nine home buyers who claim they were overcharged amounts ranging from $95 to $350 for the recording of deeds and mortgages. For most of them, the settlement agent who did the overcharging was their own lawyer.
They seek to represent a class of every person similarly overcharged in buying or refinancing a home since Jan. 22, 2003. The class could number more than 1 million, the plaintiffs' counsel, the Philadelphia firm of Williams Cuker & Berezofsky, estimates.
The plaintiffs allege the overcharges are illegal and rampant, while the title companies contend the requested injunction would shut down residential real estate closings in New Jersey.
The recording fees are collected at closing and itemized on the closing statement, or HUD-1 form, by the settlement agent, usually the buyer's lawyer, though in the southern part of the state, it can be a title agency, title closing service or title insurance company.
It is alleged that the settlement agents falsely certified on the HUD-1 statements that the fees they collected were the amounts disbursed, that they did so with the intent that buyers would rely on the false statements and that they retained and misappropriated the excess monies on behalf of the title insurers.
The complaint also alleges breach of contract, conspiracy and violation of the Racketeer Influenced Corrupt Organizations Act.
The settlement agents are not defendants, only the title insurers, who allegedly issued closing protection letters, also known as closing service letters, to the buyers, and knew about the overcharging and failed to put a stop to it or return the money.
The defendants, which include such well-known names as Fidelity National Title Insurance Co., Chicago Title Insurance Co. and Lawyers Title Insurance Co., have moved to dismiss on various grounds, including the failure to also sue the settlement agents they argue are necessary parties to the litigation.
The request for a preliminary injunction was initially filed Jan. 26, four days after suit was commenced in U.S. District Court in Newark.
The title companies argued the burden of compliance would be so huge it would bring closings to a halt. In a joint brief, the companies said they usually do not send representatives to closings and have no control over how settlement agents calculate, disclose and collect recording fees and that the amount of the fees cannot be certified in advance because they are based on the number of pages and it would be too labor-intensive to check after the fact.
On March 13, U.S. District Judge Peter Sheridan denied an injunction but required counsel to discuss how to provide notice of the lawsuit to New Jersey settlement agents and attorneys. He gave them 10 days.
In the interim, the plaintiffs moved for reconsideration after they learned of an earlier lawsuit, Gaskill v. Fidelity National Title Insurance Company of New York, 00-Civ.-3620, where many of same defendants, sued for the same kinds of overcharging, agreed to stop doing so.
The Gaskill case, a class action covering closings and refinances between 1994 and 2002, alleged that title companies in New Jersey were overcharging for notary fees, recording fees and other pass-through and miscellaneous charges.
It settled in 2002 with no admission of wrongdoing, but the title companies consented to an injunction against charging fees above those allowed by the New Jersey Land Title Insurance Rating Bureau Manual or approved by the Department of Banking and Insurance. They also agreed to notify everyone conducting real estate closings in New Jersey.
The Gaskill settlement also provided for reimbursement of excess charges out of a $250,000 fund, to be replenished with another $100,000, if necessary, and it set aside $400,000 in fees for class counsel.
On April 3, the plaintiffs amended the complaint, adding counts based on Gaskill, including breach of the settlement.
What was possible then should be possible now, they argue. They also claim that the defendants remain bound by the judgment approving the settlement in Gaskill and that the injunction they seek is a means to enforce it.
Esther Berezofsky, who represents the Chassen plaintiffs, says Gaskill is important because it shows "these companies have been for some time now on notice about the practice of overcharging and in spite of that, have continued to do it."
The title companies say Gaskill should have been raised on the initial motion and asking Sheridan to reconsider is the proverbial second bite at the apple, which should be rejected out of hand.
The title companies asked Sheridan to hold off on the notice issue until he heard the motion to reconsider as well as the motion to dismiss they planned to file. Sheridan agreed.
The defense lawyers are Michael O'Donnell, of Riker, Danzig, Scherer, Hyland & Perretti in Morristown, N.J.; Michael Gugig, of Sonnenschein Nath & Rosenthal in New York; Joshua Robert Elias of Gibbons in Newark; and Anthony Michael Carlino of McElroy, Deutsch, Mulvaney & Carpenter in Ridgewood, N.J. O'Donnell, Gugig, Elias and Carlino declined comment.
