its created attorney agent programs to disguise the fact that they were paying their tourney agents for the referral because it's not for performing or title it in service is as required under wraps in reality then it's performed those same services then pay the why and share of the title insurance premiums to that's turns the troubling are one of the most troubling aspects of this is that in the closing for one hundred one forms that are required to be used in all of these residential transactions there's a section on the second page starting it i think section eleven hundred through eleven hundred eight and in those sections throughout the entire us area they fail to disclose with very specific instructions about the true issues that needed to be resolved on really one whether defendant chicago thailand thai who are could lawfully pay their attorney agents full compensation after sending them a pro forma title commitment into whether chicago titles preliminary commitment to thai hordes exit were pro forma commitments is that term is defined by how so in other words these summary judgment for the points that was a few months before trial was and i think march first of two thousand and thirteen or trial was in september so at that time we were guided by the statement of policy which where the  ensured she gave deference to that have policy statement in ruling that defendants could not lawfully pay their attorney agents the full contract compensation after sending them a profile and with respect to exactly the same policy statement despite very clear evidence and and i i think we've made it clear in our briefs that we don't only challenge the factual findings of the trial court the maybe a couple things we point that out in a race but by who large the that the lower courts heard a giving a far too expansive reading of that case there obviously important distinctions between ages before the court today and the freeman versus quicken decision the different issues different language and asked for different claims under rasta and different policy statements and regulations freeman concerned a single service provider quicken loans a mortgage broker that was a violated respa section eight b by charging consumers a loan discount fee without giving them a lower interest in return this u s supreme court stated that in  discussing what was before the court with the sole issue was before the court said quote the dispute between the parties wells down to whether this provision rest baby prohibits the collection of a man or in charge by a single service provider what we might call an undivided or an earthy or whether it covers only transactions in which the provider shares a part of some service charge with one or more other persons who did nothing to earn that ar cases was divided between two persons the defendants and their attorney agents so the freemans courts holding doesn't really directly impact what we're discussing here today the cases will involve completely different  is really involved in these cases in contrast to freeman is the issue of what the safe harbor provisions of eight c mean when we talk about actually performing a service where the defendant's attorney agents were actually performing those title services and i'm like the clear language of rush with section eight b requiring two separate actors rights but is not clear on what it means to actually perform service is let me ask my i guess i ask these questions to explain is an attorney agent who perform services that merely duplicate those already performed by the title company actually performing service if a pile company does the title search generates a pro forma identifies basically basically all of the information in schedule a and b of the of the  and then pays the lion's share of that entire premium to the attorney is that attorney performing inch a determination to ensure ability or title services is an attorney who performs exactly the same services that he would have to perform in representing the buyer or seller in the transaction actually performing services to be paid separately by the title company russell is silent on what it means to actually perform the service is there any difference between performing cork idol agents services and actually perform services used in different parts of the regulations and in terms of your honor in terms of whether there would be a separate definition now the there really isn't the one thing that i that you would see in the core title services and twenty five twenty four c f r i think it's part thirty five hundred in that section in the description of more title he didn't services the court was on and that was early on in the history of rasa in describes very very clearly what's required in other words you have to do all these file companies don't want somebody who doesn't really have their eye on the ball making the terminations we put them in at best so they want to do all of this themselves make sure their risk is here to perform if they didn't have like the there's no question in the c p i case they actually in the call a case the document they sent as the pro forma was the final document used in the in the  from scheduling everything from schedule b all of those determinations of title insure billeted the only thing left out with some language that would be attached everyone that's boilerplate language everything else is exactly the same and if you look at the order entered by the trial court i think probably starting at paragraph five through like thirteen there is a description of the services that it term and exactly what happened in this case which we absolutely do not dispute those are very precise a good discussion of what took place though this effectively establish a pro forma what when artists it is with the court s interpretation of the law about how all of these have so we don't dispute those facts because we think that captures the essence of what happened did the trial court as a i mean specifically that these is there some issue that they would it be the one that i i can find the language of the order if you want me to your honor but the the one the see the high she said very clearly that this was the final document in the the difference can't be finalized until you do all this work go to the closing and you have this document well we submit that that's really not an accurate read our expert shots have been a pro forma commitment pro form of a preliminary committee for title insurance it's a roadmap to the attorneys for what they have to do so you send this out early it says you go get this you do this this this and this and then once you really once you what you're really arguing about is the trial court's finding that there was some work done and the difference between some work and anough were to make this not pro forma it's  know it's not it's not a few days and that i think is part of the confusion the freeman verse the second prong of freeman vs quick and rich really wasn't involved in my case because the  and and everybody agreed it was absolutely no service provider ok but the discussion that took place there seemed to refer to say that there is no plan was not a price control stat not claiming we paid one hundred bucks for fifty dollars worth of service that's not a claim ok that's been the disconnect in this case and to the extent as the trial while you're in a while you're in this case we've been unable to invade that i guess it's our problem i think that's a big huge as well let's just say that through a little bit we go back to court said some work with time when you services as defined in part thirty five hundred you are not entitle to this fee and that's it and that's set out very clearly so it's not a question of whether they did something and the only thing they could ever find that they did that they thought it might be separately compensable was waving exceptions and closing and even then that was explained because in every case the defendants had to have the right have somebody there to questions further under the statement of policy one thousand nine hundred six of hide when an attorney receives a pro forma from the title insurance carrier the attorney agent is not entitle to payment preparation service the type the title insurance agent is not actually performing those services as such the title insurance agent would not be providing who are title services for the payments performer it's a person correct and it it take absolutely is and there the question then isn't which says it's a question of what you pay him under and here this club these two classes are confine good morning in may please the court michael brody on behalf of chicago title tykwer and fidelity national mr teller he has created some confusion about what the attorney agents did and what the proper legal standard is under arrest and i would like to start by dressing those points first under the attorney agent programs what is it that the attorney agents did i think plaintiffs ignore that we are here on an appeal from a trial verdict and in a trial there is a winner and a loser and facts are found and because this was a bench trial the facts that were found were written down and they cannot be challenged and i just heard mr tillery saying he was not challenging  so what did judge mikva find as a matter of fact well mr tillery spent a lot of time talking about pro forma commitments to admit for found that the plaintiff failed to prove that the defendants in fact issued pro forma commitments under the florida statement therefore elements of what's a pro forma commitment and she found that some of those elements were satisfied but all of them were not what else did she find she found in her late the opinion that services were actually performed as respire requires she found that the attorney agents provided necessary valuable court title services and that they were not duplicative they were distinct from the services they provided for their clients in the transaction she found that the attorney agents directed the title company to clear exceptions and clear liens as required to issue a policy she found that the attorney agents played the key role of determining insurability that's what attorney agents do they determine insurability and judge mikva found as a matter of fact that the attorney agent's played that role of determining insurability and that that role was ongoing up to and through the closing so if the transaction started with the issuance of a pro forma commitment which it didn't i'll get to that in a moment that wasn't the end of the game the attorney agents remained involved every step along the way determining insurability of title the agents were involved in the title exam the issue the total commitment the clear exceptions they determine the insurability of the deed mortgage they attended the closing they assumed personal liability and they retained records ok those are core title services found as a question as a matter of fact by the trial judge here that resolves the claim about whether services were provided they were they were not duplicative judge mikva found that but even if there were that wouldn't create a violation of arrest and she also found that the illinois regulators looked at this program on a regular basis one of the regulators testified at trial and he testified that it was in compliance with the requirements of illinois law and judge mikva so found so those facts cannot be disputed the pla conceded that the attorney agent's provided services or he said the value of those services and this gets to judge tice's question about the fee he said the value of those services were twenty to fifty percent of the premium that the attorney and that ends the rest one else but as i say the evidence is even stronger attorney home who did the title work in the color transaction testified that he spent more time on this transaction on behalf of the title company at his hourly rate than he was compensated for so he spent more than one hundred percent of the fee he received that's what the evidence was and and that was the basis of the findings here so on this first question about were services provided absolutely was a pro forma commitment provided judge mikva found as a question of fact no and i think that it's a big dent in plain argument but second what's the proper legal standard and mr tillery talks about the regulations and the requirement of a pro forma the term pro forma commitment is not in res if the attorney agent's provide services yes or no if they provide services it's not a violation of respa rest but is a binary test and frankly there are no cases  the reach is a contrary result now is that a correct interpretation of the statute is what the two lower courts did hear a correct interpretation of the statute and the answer is yes and first i would direct the court to the words congress used in rest by congress use the language that we keep coming back to service is actually performed in section eighty eight the feet splitting section in section eight see the exemption the safe harbor sections and that language has been interpreted over and over by court after court to create this binary standard plaintiffs look back to the two thousand  occasion in error because the circuit court had looked at the facts rather than the allegations but the plaintiff first claim in this case and it's what was alleged in the complaint who raised in two thousand and ten was that there were no services provided as i've shown we had a trial and judge mikva said that was not the case so then plaintiffs have pivoted in two ways first they argue this all or nothing theory you have to provide all of the services in order to recover full compensation that's not supported by any of the cases and freeman is really the place to look their plaintiffs says freeman rises in a different circumstance and that's exactly right in freeman there was a single service provider but the plaintiff argued relying on hud guidance similar to the florida statement in this case that you should treat the money paid to that single service provider as if it were split as if it were split between a compensation for a legitimate service and then an excess compensation that was not earned and under fifty the supreme court said that that was manifestly in error it was  overage it ignored the statute that hud was called upon to interpret the regulation thirty five hundred cited in one of the footnotes and the guidance specific to the freeman case that adopted this theory the supreme court said could not be followed well that's the same distinction that hud made in the florida statement distinguishing between earned fees and under fees and that's why the two lower courts here found freeman to be so administrative guidance at all and it said the rest was not about whether the price paid for a service was too high it was this binary test if you provide a service you satisfied rest and the supreme court pointed out that when rescue was passed there was a question about whether respa should be a more of a price control or price guides statute and how it was directed to report back if those kinds of changes needed to be made to rest and it never did those changes were never m court correctly found here and as the circuit court correctly found here freeman goes a long way to answering the question in this case given the course disposition occasion ever reached the issue of what the measure of damages would be is that correct that's correct but there's an argument about what the damages are mr hilary started out saying this is about it backs of that the argument was there was no change in the you or your argument was or no difference in the amount of the charge whether there was a kic or without the involvement of attorney agents and if it was without the involvement of attorney agents there was no split of the premium and in both cases the fees were the say so if a customer wanted to do without this attorney a they wouldn't pay any less rates in illinois during the time period we're substantially lower the rates elsewhere so this was not contributing to an increase in fees in illinois but there was no difference in fees to accommodate this practice was just the way the title company chose to allow the work to be done and then let me turn again to the florida state mr truly relies on the florida state in very heavily than  hundred six statement and says the courts should defer to it but we contend that's incorrect for legal reasons and for factual reasons legally the forest statement is inconsistent with rest as we argue the research as i've tried to explain it applies a different standard than the interpretation of rest by every court to interpret it looks to a pro forma commitment words not found in the statute so legally the floor statement is incorrect and the briefs go into that in detail we also argue legally given the united states supreme court's determination in freeman that russell is unambiguous there's no reason to or there's no reason to look beyond the words the unambiguous words of the statute to an agency action legally the florida state and says it's not intended to provide guidance to companies like my clients as to what they're to do it's not intended to create standards that parties are to follow so legally for a variety of reasons the florida state has no application here but judge rick also rule on the state and factually and she concluded even if you reject all of those legal arguments that the plaintiffs didn't prove that pro forma commitments were issued here that's in her opinion of page fourteen and that finding which the plaintiffs cannot challenge was correct let me ask you what was it factually in the record what was the judgment for his definition of what a pro forma was that was elements the plaintiff quoted in their brief in this court and that's the standard she applied will help me out on this what's the distinction between the pro forma and what at least i used to know was called a preliminary title insurance policy  well what what the title companies provided to their attorney agents here at the beginning of the process was the title evidence from the prior issuances of title on this existing property so they would generally provide the information relating to the last title policy which would again be out of date it would have liens and mortgages that were no longer current and would collect those in a package and send them to the haitians and what's the stink between the two that's my question what's the distinction between that appeal recommend right well that is not a pro forma commitment because there were important steps that we need to be taken between the provision of that initial information and the issuance of title title germs and that's what judge mikva found when she concluded that the attorneys were involved throughout the process in clearing leans in making sure that the new mortgage and the new orleans were properly listed in the policy and determining the insurability of the title up through it including the point of closing so the information that was issued to the title agents at the beginning of the process was it would be done internally at the title currently yes yes so and there were attorneys involved in that process at the title company but they were not the attorney agents we're talking about in the attorney agent programs and there were e i've spoken about the services were actually provided here and spoken about the legal standard i'd like to briefly address a couple of additional points the attorney ethics issue and that some classification issues i'm not sure if a court is concerned about the issue of attorney ethics it was raised in the i know the court is concerned about attorney ethics i mean in this case it was raised in the motion reconsider the denial of the  leave to appeal and we explained in our response brief the programs here operated in a way that complied with every element of the illinois rules of professional conduct the rule one point five was satisfied to one point seven was satisfied  one point it was satisfied and if the chorus questions about that will address it but the main point i'd like to make about this issue is the claim which the plaintiffs seem now to have abandoned is not a basis for rest we are here on an appeal of a class verdict the class was certified by the circuit court after the first appeal and we believe that was an  court in chicago by these same plaintiffs but at the same place counsel but against a dish different title insurance company and the district court ruled that a class could not be certified in the seventh circuit or firm and in rejecting the class the court found that even if you accept plaintiffs pro forma committed theory there are so many factual issues that go into whether a pro forma content was issued in a particular case what the value of services that were provided are and even whether rest plies at all and a variety of other issues that the matter cannot be maintained as a class and i close on that case because i've said in the briefs and as i've said today there are no cases and i mean no cases in which a court has upheld the theory of the plaintiffs asserted this case and the closest we can get to the controversy we have before us howland case where essentially the same facts alleged by the plaintiffs in this case the federal courts in chicago concluded that class could not be made all of the other cases that we cite establish a number of other principles that are dispositive of this of this case they establish that rest is not ambiguous and therefore you don't need to look at the regulations they establish that respa establishes this binary test if any services are provided  then the requirements are rest bar met in under those standards the plaintiffs cannot prevail but how one does not report in case if the court were inclined to look at the class issues because it arises on exactly the same facts we have here and the court concluded there could be no way for a class to be certified plaintiffs have had their day in court this case has been pending for a long time and they've been given every opportunity to prove their case first to prove their claim that no services were provided which they failed on and then the additional claims they've made the all or nothing theory and the fourth estate theory which the circuit court rejected primarily  may please the court a case that is factually purely at the threshold of rest of the freeman case is a case that they ask you to say controls here that was a twenty six zero seven b the key key difference here it was not in frame that is here is this referral with that second person because the congress was looking to prevent prohibit indeed eliminate payment for referrals now you'll note that the services provided or performed is the way it's for is to the language actually in this statute says for services actually perform for was missing in their analysis the pavement has to be for those services and that's where hud comes in hud isn't trying to regulate what's going on with this amount that's being kicked back and by the way to judges so far in this case of said these are the trial court called this these are no doubt she said that on february twenty second two thousand and those actual services we've shown they were not there is a set fee that are in the contracts for these referrals there's a contract a written agreement and that's the difference they don't have that in fr it was single payer here you have two players there's a contract under eight and so when that happens you have a whole different ball and they're kicking back money and they're holding this lump sum fee at eighty percent or whatever it is all doing not trying to regulate the amount it's being paid in any way you're not going number right they're putting a service minimum level on you've got to perform these who are services to be paid for th application the application of the law because she actually did not follow it for you who put up the pro forma definition that was pointed out in the dissent she actually followed some of the elements of thirty five hundred but the but the truth of that is and the dissent pointed this out and i would like to reiterate those for you she actually found the following because if you look at their findings of fact other than holding her findings affect absolutely support what we're talking about so it's an application of the fact she actually found the they were sent the lawyers were sent on this pro forma on this document the exam and the preliminary examination it that's not actual services for actual service reform actual issues so the policies paragraph one thousand and twenty indicate they were issued by the companies ultimately in i think mr call and may have signed off but he acknowledged that it was actually prepared by and then sent out by the company chicago title tight core absolutely issued the policy issuance of title commitment type corp her graphs twelve and thirteen that was that was what she discussed about the various features of those that they receive the at the big damage essentially that's the core of it and then tykwer would plug that into the back at tyco or would plug that into their and sign off on it tykwer all the work related to that conducting of the title search all done by the companies per gram of six through ten issuance of the title commitment i pointed out twelve and thirteen for t i fifteen in eighteen paragraphs tell you that the dissent below also matched up she actually the trial judge used thirty five hundred fourteen in terms of analysis not the pro forma but the trial court a permit is set below matched up all the services with the pro forma itself and in her opinion found every single one of them i wanted to address  couple of things about freeman that i need to get out one justice scalia called this in the second to last paragraph in response to the petitioners point he called this an absurdity and he said that what he described as the absurdity was the one dollar work for a thousand dollar fee that's what he said was an absurdity here he then went on to say that  and what i'm trying to point out is when he's describing that example as a could with no factual hypothetical provided he simply and it is it stood back and up a couple of pages or girly or he's talking about the example of giving sporting tickets for the referral he said that would violate twenty six zero seven i know written understand what an agreement here we have a written understanding there are having to perform we say a minimum amount of services in order to get this steady always the same number what is all of that for and by the way at paragraph twenty six and twenty seven of the findings of fact mikva said essentially these companies acknowledge that what they're doing is trying to make their programs as attractive as possible for the lawyers compared to the other competing companies why are they doing that they're trying to get the referrals and of course that's the only reason so what they're then doing is we're going to keep increasing the percentage that we are giving you and we're going to end they said this we're trying to keep the services as small as possible for the lawyers that's in the findings of fact twenty six and twenty something and when they actually get something that says change this name after they've gotten the pro forma they basically ignore it and that was in finding effect number twenty seven justice scalia did not have a referral case and fun justice scalia did not have a situation that congress was trying to prohibit here kickbacks of anything and it says anything of value and you'll find the definition for anything of value at twenty six zero two and a letter i can't report it was but basically that definition is very broad it could be both but damages are the charges that have been made and that says that's what it says that is this is a this is a violation it's for the charge i think that's right off the bat it's and the beating case that we cited in our briefs talks about the charge under the consumer product you have to show actual damages well you have to yeah i think we did we were we did was we said they wouldn't have they wouldn't have gone through with those are both of our plaintiffs indicate they would not have gone through with this they would have not paid this this law was being enforced and that's what that's what congress was all about in trying to prohibit these kickbacks because it does increase the costs that's one of these cost to repair they are because the kickbacks are involved they can go on charging paid the work being given first the work being picked back was a cover for the payment that she found the company said what they were trying to reduce completely not trying to control prices but here trying to control that money being used to kick to get the referrals exactly what we have going on or we would ask that the court reverse the trial court below and send it back for the administrative proceedings thank you thank you