The opinion of the court was delivered by: Conti, District Judge.
Pending before the court is a renewed motion for class certification (Doc. No. 123) filed pursuant to Federal Rule of Civil Procedure 23(b)(3) in the above-captioned civil action by Anthony L. Slapikas and Alice B. Slapikas ("plaintiffs" or "Slapikas"). Plaintiffs seek class certification for all persons who were overcharged for residential title insurance policies purchased in the state of Pennsylvania from the defendant First American Title Insurance Company (the "defendant" or "First American").
On October 22, 2007, the court held a class certification hearing. On November 13, 2007, plaintiffs submitted a proposed trial plan (Doc. No. 155), and on January 22, 2008 the defendant submitted a response to the proposed trial plan (Doc. No. 162). Because plaintiffs satisfied the requirements for a class to be certified, the court will grant plaintiffs' motion.*fn1
Plaintiffs seek certification of a class defined as follows:
All persons in the Commonwealth of Pennsylvania who, at any time after December 19, 1999: (a) paid premiums for the purchase of residential title insurance from Defendant FA [First American]; (b) qualified for the Reissue rate or Refinance rate discounts provided in the Title Insurance Rate manual filed by the Title Insurance Rating Bureau of Pennsylvania; and (c) did not receive the discount specified in the Manual.
Plaintiff's Brief in Support of Motion for Class Certification ("Pl.'s Br.") at 1-2 n.3.
The first amended complaint (Doc. No. 32) alleges that plaintiffs, and thousands of other Pennsylvania homeowners, were overcharged for title insurance when they refinanced their home mortgages. Plaintiffs allege that First American charged plaintiffs and others the "Basic Rate" for title insurance even though it knew that they were entitled to premium discounts. Defendant is a member of the Title Insurance Rating Board of Pennsylvania ("TIRBOP"). TIRBOP files a Title Insurance Manual of Rates and Forms (the "Rate Manual"), which provides for premium rates and discounts, with the Pennsylvania Insurance Commissioner. Plaintiffs argue that plaintiffs and others were entitled to premium discounts pursuant to the Rate Manual which is binding on defendant as a member of TIRBOP pursuant to state law. See 40 PA. STAT. ANN. §§ 910-37(h), 910-42.
Plaintiffs assert that (1) pursuant to section 5.3 of the Rate Manual, an insured is entitled to a ten percent discount, known as the "Reissue Rate," if title insurance had been purchased for the same property within ten years preceding the transaction; and (2) pursuant to section 5.6 of the Rate Manual, an insured is entitled to a twenty-eight percent discount , known as the "Refinance Rate," if the prior purchase of title insurance with respect to the same property occurred within three years preceding the transaction.
Plaintiffs allege a total of five counts: count I - breach of express contract; count II -breach of implied contract; count III - fraud; count IV - violation of the Unfair Trade Practices and Consumer Protection Law, 73 PA. CONS. STAT. §§ 201-1 et seq. ("UTPCPL"); count V -unjust enrichment.
First American is a national title insurance underwriter that issues title insurance policies to customers throughout Pennsylvania directly and indirectly through a network of agents. (Defendant's brief in opposition to class certification ("Def.'s Br.") p. 2.) First American has 16 direct operation branch offices in Pennsylvania and 740 agents. (Id.) Approximately 40% of First American's residential title insurance business is conducted by direct operations and the other 60%, through its agents. (Id.) Third-party defendant, Mezzo Land Services, LLC ("Mezzo Land"), is one of First American's agents. On November 16, 2001, the two companies entered into an agency agreement (Pl.'s Br. at 5.)
2. First American's Procedures
First American sells the majority of its policies through an established network of hundreds of authorized agents (the "agents") to whom it periodically issues bulletins with instructions, guidelines, and standards. (Id. at 4.) First American issued instructions to its agents with respect to calculating title insurance premiums and filling out HUD-1 settlement statements. (Id.) First American provides its Pennsylvania agents with information related to the existence and availability of the Reissue Rate and Refinance Rate. (Def.'s Br. at 4.)
The agents' responsibilities include the following: receiving orders for title insurance from customers, searching the chain of title for prior deeds and mortgages, preparing title insurance commitments that identify prior mortgages unless satisfied, preparing HUD-1s, determining the premium charge for the title insurance, executing title insurance policies (jointly with the consumer), disbursing the loan proceeds (including paying off prior mortgages), issuing the title insurance policies, and sending "remittance reports" to First American informing it of the rate charged. (Pl.'s Br. at 4.) The agents retained the majority of the premium charged for title insurance, and the balance is remitted to First American. (Def.'s Br. at 2.)
First American is a member of the TIRBOP. (Pl.'s Br. at 3). TIRBOP is licensed by the Pennsylvania Insurance Department. (Id.). TIRBOP prepared the Rate Manual which sets forth the schedule of rates for TIRBOP members. Pursuant to Pennsylvania law, TIRBOP files its manual of rates with the Pennsylvania Insurance Commissioner. 40 PA. STAT. ANN. §910-37(b). Those rates, if approved, become binding on insurance companies that are members of TIRBOP, including First American. Id. at § 910-2. The Rate Manual legally obligates First American to charge the rates set forth in the Rate Manual. Id. at § 910-37(h). The Rate Manual establishes a three-tiered system of rates. The default Basic Rate applies when the purchaser of title insurance does not qualify for a special rate. Rate Manual § 5.50 (available at http://www.firstamne.com/printable/rates_filings/pa_manual.pdf). The Reissue Rate applies when a property owner purchases title insurance within ten years of obtaining a policy issued on the same property. Id. § 5.3. The Refinance Rate applies when a property owner purchases title insurance within three years of obtaining a previous policy. Id. § 5.6.
Section 5.3 of the Rate Manual, "REISSUE RATE," in effect in 1999 through August 2005 provided:
A purchaser of a title insurance policy shall be entitled to purchase this coverage at the Reissue Rate if the real property to be insured is identical to or is part of the real property insured 10 years immediately prior to the date the insured transaction closes when evidence of the earlier policy is produced not withstanding the amount of coverage provided by the prior policy. . . The Reissue Rate is set forth in Section 5.50 of this Manual. . . .
Id. § 5.3 (the rate in Section 5.3 is the "Reissue Rate").
Section 5.6 of the Rate Manual, "REFINANCE AND SUBSTITUTION LOANS," in effect in 1999 through August 2005 provided:
When a refinance or substitution loan is made within 3 years from the date of closing of a previously insured mortgage or fee interest and the premises to be insured are identical to or part of the real property previously insured and there has been no change in the fee simple ownership, the Charge shall be 80% of the Reissue Rate. . . .
Id. § 5.6 (the rate in Section 5.6 is the "Refinance Rate").
2. 2005 Amendments to the Rate Manual
As noted, sections 5.3 and 5.6 of the Rate Manual, quoted above, were the provisions which described the Reissue Rate and the Refinance Rates from 1999 until August 2005. During that period, the Rate Manual contained no section that specified what evidence must be produced in order to prove the issuance of prior insurance. First American issued bulletins to its agents explaining what constituted sufficient proof of prior insurance. (Id. at 4.) Although the Rate Manual was amended in 2000, 2002, 2003, and January 2005, the definitions of the Reissue Rate and Refinance Rate remained unchanged in those versions of the Rate Manual. (Id.)
In August 2005, the Rate Manual was amended ("2005 Manual"). The Reissue Rate (§ 5.3) and Refinance Rate (§ 5.6) provisions of the Rate Manual were amended. (Id.). Although the Reissue Rate and Refinance Rate provisions were substantively changed in the 2005 Manual, those changes are not material to our discussion in this case about the interpretation of the Rate Manual from 1999 to August 2005. The amendment to the 2005 Manual which helps to inform the discussion and is relevant to this case is the addition of section 2.8 ("§ 2.8"). In that addition, § 2.8, the kind of evidence an insurer may rely upon in making its determination whether the Reissue Rate or Refinance Rate will apply to a particular transaction is described as follows:
(a) the recording (within the period of time specified within the applicable Section of the Manual) of either:
(1) a deed to a bona fide purchaser for value, or
(2) an unsatisfied mortgage to an institutional lender; or in the alternative,
(b) any of the following documents produced by or on behalf of the purchaser of the title insurance policy:
(1) a copy of the prior policy;
(2) a copy of the marked-up commitment;
(3) a settlement sheet showing payment of a title insurance premium; or
(4) other written evidence acceptable to the Insurer that title insurance coverage was purchased for the property (Id. § 2.8.) Defendant argues that the addition of § 2.8 in the 2005 Manual lessens the evidentiary requirements customers must satisfy to be entitled to the Reissue Rate or Refinance Rate, and creates the presumption that prior insurance exists if a deed of a bona fide purchaser for value or unsatisfied mortgage to an institutional lender was recorded during the applicable "look-back" period. Plaintiffs argue that the new § 2.8 is not a substantive change in the evidentiary requirements, but a clarification of the already existing requirements. Plaintiffs maintain that the clarification was necessary due to the ambiguous language of the previous version of the rate manual.
C. Real Estate Settlement Procedures Act
The Real Estate Settlement Procedures Act, 12 U.S.C. § 2607 ("RESPA") requires lenders and mortgage brokers to provided customers with a HUD brochure that informs them of the Reissue and Refinance Rates. (Id. at 5.) The brochure, given to every customer who applies for a federally related mortgage loan, states, "If you are buying a home which has changed hands within the last several years, ask your title company about a 'Reissue Rate,' which would be cheaper." (Id. at 5.)
D. The Slapikases' Transaction
Plaintiffs purchased a home in Pittsburgh, Pennsylvania in 1990, obtained a mortgage, and purchased title insurance. (Id. at 6.) Between 1992 and 2003, plaintiffs refinanced their home five times (1992, 1998, 2000, 2001, and 2003). (Id.) In 2003, they refinanced their home with National City Mortgage Corporation ("National City"), who required plaintiffs to pay a premium for a lender's title policy. (Id.)
Plaintiffs subsequently hired Mezzo Land to perform the settlement and closing services related to the 2003 financing. (Id.) Mezzo Land dealt directly with plaintiffs' new lender, National City, in issuing a title insurance commitment, preparing a HUD-1 settlement statement, closing the transaction, keeping $1,036.90 of the $1,198.75 premium as its share, and remitting the remaining premium and remittance report to First American. (Id. at 7.)
Plaintiffs were charged the non-discounted Basic Rate of $1,198.75, despite the title search revealing evidence of multiple prior title policies, including a prior institutional mortgage recorded less than three years before plaintiff's 2003 refinancing. (Pl.'s Br. at 6.) Plaintiffs also had a HUD-1 statement from a premium paid in 2001 for a loan policy insuring their prior lender. (Def.'s Br. at 11.) Plaintiffs allege that they were entitled to the Refinance Rate (an 80% discount of the Reissue Rate), and allege they were overcharged by $335.65. (Pl.'s Br. at 6.) Neither Mezzo Land nor First American informed plaintiffs of the availability of the Reissue or Refinance Rate before their transaction closed. (Pl.'s Br. at 6.)*fn2 In connection with the National ...