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San Francisco Superior Court Judge Stuart Pollak on Friday ordered Old Republic Title Co. to refund $13.8 million to 400,000 customers for keeping the secret interest generated by their escrow accounts. Pollak also ordered Old Republic — which has a national division in Minneapolis and a western division in San Francisco — to pay $3 million in penalties to San Francisco for unfair business practices. In his tentative decision in State of California v. Old Republic Title Co., 9930507, the judge also ordered injunctive relief that requires the company to develop a plan for crediting the accounts of its escrow customers with the interest due them. The company must also draft disclosure statements that tell customers of their right to the money in their accounts. Deputy City Attorney Matthew Davis said his office was “delighted” with Pollak’s ruling, which came after a two-year effort to win refunds for loan customers denied their interest. Davis said it was a combined effort with his boss, retiring San Francisco City Attorney Louise Renne, and District Attorney Terence Hallinan, whose office first developed a criminal case against Old Republic that led to the civil action. He said a second-phase trial begins June 18 to determine whether Old Republic also failed to turn over to the state dormant money in its accounts and instead kept the funds for itself. Pollak last month held that Old Republic had violated state law by keeping the escrow interest. His ruling Friday determined how much the firm illegally withheld and must now refund. Although the city attorney’s and district attorney’s offices brought the lawsuit, there was also a companion class action filed by plaintiffs’ attorneys seeking restitution for their clients. The class mechanism will be used to find and return the money to those who had opened escrow accounts between July 24, 1994 and Feb. 7, 2001. Attorney Terry Gross, one of the lawyers for the class, called Pollak’s ruling a “win for the consumer.” “It should be a warning to companies that they can’t be part of these underhanded schemes,” said Gross, a partner with San Francisco-based Gross & Belsky. Class lead attorney Niall McCarthy of Burlingame’s Cotchett, Pitre & Simon predicted the ruling “will forever change the way title companies do business.” Jon Tigar of Keker & Van Nest, lead defense counsel for Old Republic, said his client has forbidden him to comment on the proceedings. In his order, the judge was critical of Old Republic’s tactics when it “created and submitted false invoices to banks” in order to pocket the escrow interest. “These violations are particularly serious in that they improperly took money directly from consumers,” Pollak said.

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