The opinion of the court was delivered by: Hon. Petrese B. Tucker, U.S.D.J.
Presently before this Court is Plaintiff's Amended Motion for Class Certification. For the reasons set forth below, upon consideration of Plaintiff's Motions (Doc. 97), and Defendant's Response thereto (Doc. 100), this Court will grant Plaintiff's Motion.
Plaintiff, Donna Markocki, brings this class action on behalf of Pennsylvania homeowners seeking relief from predatory lending practices of Defendant title insurance company, Old Republic National Title Insurance Company, for violations of statutory and common law obligations. Compl., ¶ 1. Plaintiff alleges that Defendant improperly collected excess and unearned premiums in violation of the Real Estate Settlement Procedures Act ("RESPA").
A. The Business of Title Insurance
The purpose of title insurance in a real estate transaction is to insure against losses from past events and to eliminate most risks through the title examination and the settlement process. There are two types of title insurance policies available: an owner's policy, generally purchased by the borrower-homeowner to protect the borrower's property interest, and a lender's policy, generally paid for by the borrower, but purchased for the protection of the lender's security interest in the property. Alberton v, Commonwealth, 247 F.R.D. 469 (E.D. Pa. 2008) recon. den.
While a typical transaction involves the issuance of both types of insurance policies, a refinance transaction involves the issuance of a lender's policy only, paid for by the homeowner. The title agent facilitates the closing and handles the actual closing of the transaction, including paying of the earlier mortgage with new loan proceeds, obtaining releases, providing homeowners with the settlement sheet, or HUD-1, recording documents to update the public record, and issuing the title insurance loan policy.
In Pennsylvania, title insurers typically do not sell title insurance directly to the public, but rather though agents appointed by the insurer under a protocol established by Pennsylvania law. 40 P.S. §§ 910-24, 910-26. Defendant's title agent, third-party Defendant, Citizens' Abstract, was the appointed agent who handled Plaintiff's transaction.
B. Statutory Regulation of Title Insurance Premiums
All title insurers are governed by the Pennsylvania Title Insurance Companies Act. 40 P.S. § 910-1 et seq. This statute regulates the business of title insurers, as well as the specific rates insurers may charge for title insurance policies. The statute requires title insurers to either:
(1) file individual proposed rates with the Insurance Commissioner, 40 P.S. § 910-37(a); or 2) elect to become a member of a rating organization that files proposed rates on behalf of all members of the organization. During the relevant time period, Defendant elected to file rates through the Title Insurance Rating Bureau of Pennsylvania ("TIRBOP"). Compl., ¶¶ 15-24. The rates and regulations approved and enacted constitute the Manual of Title Insurance Rating Bureau of Pennsylvania ("Rate Manual").
The Rate Manual provides for three different rate tiers, (1) the Basic Rate; (2) the Reissue Rate, which is 90% of the Basic Rate; and (3) the Refinance Rate, which is 80% of the Reissue Rate, or 72% of the Basic Rate. The Basic Rate is the default rate charged where neither the Reissue nor Refinance Rate apply. Both the Reissue and Refinance Rates, are discounted rates which reflect that when only a few years have passed since the issuance of the title insurance policy, there is a reduced risk of title defects and claims against the policy, warranting a lesser amount.
In every transaction in which a title insurance policy is issued, the title agent will first produce a "Title Commitment", or "title binder", which serves to bind the insurer to issue a policy in any particular transaction. The Title Commitment is prepared by Defendant's appointed agents from standard, computerized forms, and contains the information necessary to determine whether a prior policy exists, calling for the charge of a reissue or refinance rate. This includes whether the property was purchased or refinanced within the previous ten (10) years, information about any outstanding mortgages, and often the name and address of the borrower.
Once filed, proposed rates enacted by the Insurance Commissioner are mandatory. Charging any amount other than the approved rates is prohibited by law:
. . . no title insurance company or agent of a title insurance company shall charge any fee for any policy or contract of title insurance except in accordance with filings or rates which are in effect for said title insurance company . . . .
C. Allegations of Defendant's Excess and Unearned Charges to Plaintiff and the Proposed Class
Plaintiff purchased her home at 3351 Almond Street in Philadelphia, PA in April, 2003, financing her purchase with a mortgage from Countrywide Home Loans Servicing, L.P. Compl., ¶ 26. She also purchased a title insurance policy covering the full value of the loan, as the lender required. Id. at 27. In November 2005, Plaintiff refinanced her home, with the closing and settlement services provided by Citizens' Abstract. At that time, Citizens' issued a lender's title insurance policy on behalf of Defendant valued at $123,750.00. According to line 1108 of the Plaintiff's 2005 HUD-1 Settlement Statement, Defendant charged Plaintiff $978.75, the Basic Rate for this lender's policy. Yet, Plaintiff alleges that because this refinancing transaction occurred within three (3) years of the date of closing on a previously insured mortgage on the property, she was actually entitled to the Refinance Rate of $704.70, or a 28% discount from the Basic Rate.
Plaintiff asserts that in addition to the required information being listed on the HUD-1 Settlement Statement, that it also appears on the Title Commitment, again substantiating her entitlement to the Refinance Rate. She further asserts that the class period 2000-2006, was a time of historically low interest rates, with a corresponding increase in refinancing transactions. Plaintiff relies on Housing Studies which indicate that consumers held their mortgage loans an average of two (2) years before refinancing. JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITY, THE STATE OF THE NATION'S HOUSING: 2005, at pp. 6, 33 (2005), http://www.jchs.harvard.edu/publications/markets/son2005/index.html. As a result, Plaintiff contends that ninety (90) percent of the consumers that were charged the Basic Rate were entitled to a non-discretionary, discounted premium. According to Plaintiff, rather than charging the proper premium, Defendant issued a higher premium, and unlawfully retained the difference.
Plaintiff now brings this class action against Defendant, reciting the following causes of action: violations of the Real Estate Settlement Procedures Act, 12 U.S.C. § 2607, money had and received, unjust enrichment/accounting/disgorgement/restitution, and violation of Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL").
Plaintiff's Proposed Order defines the class as follows:
All persons or entities in the Commonwealth of Pennsylvania who, within ten (10) years of having previously purchased title insurance in connection with their mortgage or fee interest, refinanced (during six (6) years preceding the filing of the Complaint) the identical mortgage or fee interest in a transaction that included the purchase of a title insurance policy from Old Republic Title, and who, for that subsequent transaction, were charged a title insurance premium by Old Republic Title that exceeded the applicable premium discount for title insurance in Pennsylvania. Excluded from the class are officers and directors of the Defendant.
Beyond proving the elements of the causes of action recited in the complaint, to proceed as a class action, the requirements of FED. R. CIV. P. 23 must be satisfied. According to Rule 23(a), one or more members of a class may sue or be sued as representative parties on behalf of all members only if: (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class.
After satisfying the prerequisites provided in Rule 23(a), parties seeking class certification must also demonstrate that the action is maintainable under Rule 23(b)(1), (2), or (3). Rule 23(b)(1) addresses cases where prosecuting separate actions by or against individual class members would create a risk of (A) inconsistent judgments or incompatible standards of conduct for the party opposing the class, or (B) would substantially impair or impede a nonparty class member's ability to protect their interests. Rule 23(b)(2) allows class actions where final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole. Finally, Rule 23(b)(3) permits class actions where the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy. It also provides a nonexhaustive list of factors courts may consider in determining predominance and superiority. This list includes (A) the interests of members in the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and (D) the difficulties likely to be encountered in the management of a class action.
In determining whether to certify a class action, a court must weigh the interests of individuals in conducting separate lawsuits against the practicality of separate actions. While individual interests may lean in favor of separate actions, these interest may be more theoretic than practical, and the amounts at stake for individuals may make separate actions impracticable. Anchem Products, Inc. et al., v. Windsor, et al., 521 U.S. 591, 616 (1997). The very purpose of the class action mechanism is to surmount the obstacle presented by small ...