Today, the United States Supreme Court heard oral arguments in the RESPA case Edwards v. First American, which I will be reading shortly.  At issue is not just RESPA; the broader issue is the power of Congress to enact laws which specify statutory damages, which relieve would-be plaintiffs of the burden of proving concrete and specific damages to themselves in cases where an entity has engaged in a practice which Congress has outlawed.  While I have some issues with the Edwards case in particular, I’d like to say thank you to those who have worked on Edwards’ behalf to try to prevent RESPA from being gutted– and argue one reason why title searchers in particular should care about the issue in the RESPA case.

I’m not a title searcher myself, but I think I’ve been around searchers long enough to understand the legitimate reason for the frustration of many title searchers over their (lack of) power to collect from non-paying clients or clients who fail to pay them on a portion of their bill.  The main gist of the frustration usually is the fact that the unpaid balance is too small for a lawsuit to make financial sense.  But that in no way means that the unpaid balances are insignificant to the searcher’s business.  In fact, if a searcher has the misfortune of being stiffed by several clients, the unpaid balances can add up to an amount that is material to whether they are profitable, or even whether they can afford to stay in business.

In many cases, Congress has passed laws providing groups, usually consumers, with rights to statutory damages– amounts established by law that may have only slight relation to a person’s actual, provable damages– from violators of certain laws, particularly laws where violations tend to spread small amounts of harm over large numbers of people.  In situations where these laws apply, consumers have incentive to pursue lawsuits where they would otherwise have little to no incentive because their damages would be too small to make it worthwhile.  In many instances, the situations where these laws apply are similar to the situation faced by title searchers in that the individual amounts of damage may be small, but the aggregate damage is large.

RESPA is such a consumer protection law.  In a RESPA decision in 2002, a judge in Georgia succinctly explained the purpose of laws like RESPA:

Consumer protection statutes like RESPA are designed to remedy and prevent harm arising from practices that injure many people but are not, in most instances, sufficiently damaging to outweigh the cost of litigation. Often, these statutes provide for a private right of action and attempt to encourage litigation by allowing “statutory damages.” Statutory damages relieve litigants of the burden of having to prove an exact measure of pecuniary harm arising from a violation of their rights under the statute. They also provide litigants with a bounty for acting in the public interest.

That last rationale for consumer protection laws may be off-putting for some, because we have been conditioned as a society to look down on “ambulance chasers” or people who sue for amounts that seem to exceed the damages they have suffered, and this has made us suspicious of trial lawyers and people who sue in general.  But the fact is that when a person sues someone who has violated the law, that person is helping to enforce that law, which provides a benefit to the public.  A law that is never enforced has no teeth and might as well not exist, and entities which are regulated by such a law can ignore it with impunity.

Consumer protection laws like RESPA are intended to align the incentive to sue with the public interest in private law enforcement.  In the case of RESPA, Congress set the damages in RESPA so that a plaintiff could collect an amount that could possibly be far in excess of the amount of damages to themselves that they could reasonably prove (an overcharge).  This was intentional, despite the claims of some RESPA opponents who are arguing that Congress intended only to assess damages based on the amount a person was overcharged.

It should be easy for title searchers to see how those who sue violators of the law are serving the public interest.  When a stiffed title searcher sues a deadbeat client, the deadbeat client has to endure the time, money, and hassle of defending the claim… or they have to pay the bill.  In either case, it takes resources away from the deadbeat to expand its business and to cheat more title searchers out of compensation for their hard work. 

In fact, searchers often recognize the public service of lawsuits against deadbeats.  When a searcher posts a message in our forums indicating that they have taken legal action against a deadbeat, the post usually garners a few “attaboys” or “attagirls”.  Any misgivings we have about litigiousness in general seems to be overcome by our recognition that by fighting the deadbeat, our fellow searcher not only fights for themselves, but for all of us.

It’s only too bad that there is no RESPA equivalent for title searchers!  If title searchers could sue deadbeats for three times the amount of their total bill, there would be a whole lot fewer deadbeats!