F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

D E N I S E P. E D W

A R D S , individually and on behalf of all others similarly situated, Plaintiff-Appellant
,

v

.

T H E F I R S T A M E R

I C A N C O R P O R A T I O N ; F I R S T A M E R

I C A N T I T L E I N S U R A N C E C O M

P A N Y , Defendants-Appellees

. N o. 13-55542

D.C. No. 2:07-cv-03796- SJ O-F F M

OPI NI ON

A ppeal from the United States District Court for the Central District of California S. J ames Otero, District J udg e, Presiding

Arg ued and Submitted March 3, 2015—Pasadena, California

F iled Aug ust 24, 2015

B efore: Michael R. Murphy
, * Ronald M. Gould,

a nd Richard C. Tallman, Circuit J udg es.

O pinion by

J udg e Gould

* T h e Ho n orab le Mich ael R. Mu rp h y , S en io r Circu it J u d g e f

or th e U .S. Co u rt o f A p peals f o r th e T en th

Circu it, sittin g b y

d esig n atio n

.E D W A R D S V

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SUMMARY * *

C lass Certif

ication

The panel affirmed in part and vacated in part the district

c ourt’s order deny ing class certification in a case in w h i c h Denise P. Edwards, seeking to represent a class of similarly

situated h o m e b u

y e r s , alleg es that F irst American Corporation and its wholly owned su b s i d i ary F irst American Title I nsurance Company
, eng ag ed in a national scheme o f pay ing title ag encies thing s of v a l u e in ex c hang e for the title
ag encies’ ag reement to refer future title insurance business to F irst American, in violation of the Real Estate Set tlement Procedures Act (RESPA).

The panel held that in d etermining the prop riety of class certification, the district court erred in h o l d i n g that the safe harbor in 12 U .S.C. § 2607(c)(2) requires Edwa r d s t o prove that F irst American overpaid f or its o wnership i n t e r ests in each of the title ag encies. The panel ex plaine d t h a t the ownership interests p urchased b y F irst A mer i c a n a re e quity shares—not g oods, services or f acilit i e s within the meaning of § 2607(c)(2). The pane l a l so held that the district court abused its discretion in deny in g c lass certification on the
g round that 12 U.S.C. § 2607(a) requires an indiv idual inquiry
, on ea c h t r ansaction, to determine whether F irst American’s p urchase prices of the ow n er s hip interests

ex c ee d e d t heir fair market value. The panel held that cases involving illeg al kickbacks in violation of § 2607(a) are not necessarily

unfit for class adjudication.

** T h is su m m ary co n stitu

t es n o p ar t o f t h e o p in io n o f th e co u rt. It h as b een p rep ared b y

co u rt staf

f f o r th e co n v en i en ce o f

th e read er.E D W A R D S V

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Apply ing F ed. R. Civ. P. 23(b)(3), the panel held that issues r elating to the alleg ed common scheme p r e dominate

o v e r individual issues. The panel wrote that E d wards n e e d only prove the ex istence of a n ex chang e involving a referral
ag reement, which does n o t require inquiry into individual facts across all 38 captive title ag e ncies, and that the proposed class members also share common quest i o n s o f fact. The panel c o n c luded that the alleg ed common scheme, if true, presents a sig nificant aspect o f F irst American’s transactions that warrant c lass adjudication: Whether F irst American p aid

a thing of v a l u e to g et its ag reement for ex clusive referrals. The panel therefore vacated the district court’s d enial o f class certification in part as to these transactions that involved the

common s c h e me presented to F irst American’s board o f directors.

The panel disag reed w ith the district court’s holding that i nfluences b y third parties c onstitute individual issues that render class adjudication improper. T h e p a n el wrote that other sources of referral do not d efeat the pre d o m i n a nt

common questions of fact, i.e., w heth e r t h e title ag encies have contractual oblig ations to r e f e r their customers to F irst American.

The p anel h eld that the district court erred in d etermining that individual inquiries a re required in con n e c tion with twelve title ag e ncies that are a ffiliated business arrang ements and in c onnection with c e rtain a g e ncies that are majority

owned by F irst American. The panel ag reed with the district
court that F irst American’s transactions with newly -formed title ag encies d o not r aise c ommon issues sufficient for class action adjudication, and affirmed the district court’s d e nial o f certification as to the newly -formed title ag encies.E D W A R D S V

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Remanding for further proceeding s, the panel wrote that the remaining prerequisites o f class certification, w h ich the district court d eclined to address, are best a d dressed by the district court.

COUNSEL

J ames W

. Spertus ( arg ued), Ez ra D. L a ndes, Spertus, L andes & Um h o fer, L L P, L os Ang eles, California; Cy ril V

. Smith (arg ued), William K. Mey e r , Z uckerman Spaeder L L P, B altimore, Maryland; David A

. Reiser, Z uckerman Spaeder L L P, W ashing ton, D.C.; Richard S. G ordon, Martin E. W olf, Gordon & W olf, Chtd., To w s on, Maryland, for PlaintiffsAppellants.

B rian J

. Murray (arg

ued), N athaniel P. G a rrett, L e ig h A

. Krahenbuhl, J o nes Day
, Chicag o, I llinois; Matthew A. Kairis, J ones Day , Columbus, Ohio, for Defendants-Appellees.

Nandan M. J oshi (arg

ued), Senior L itig ation Counsel, M e redith F uchs, General Counsel, To-Quy en Truong
, Deput y General Co unsel, David M. G ossett, Assistant General C o u n s e l
, C o n s u m e r F i n a n c i a l P r o t e c t i o n B u r e a u , W a shing ton, D.C., for Amicus Curiae Consum e r Financial Protection B ureau.E D W A R D S V

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OP INION

GOUL D, Circuit J udg e :

W e must decid e w h e ther the district court abused its discretion in deny ing Plaintiff Denise P. Edwards’s m otion for c lass certifi c at i o n , in her action ag ainst Defendants F irst American Corporation and its w holly owned subsidiary F irst American Title I nsurance Compan y ( collectively
, “F irst American”). Edwards, seek i n g t o represent a class o f similarly -situated h ome buy e rs, alleg ed that F irst American
eng ag ed in a national scheme of p a y ing the title ag encies thing s of value in ex chang e f or the title ag encies’ ag reement to refer future title insurance business to F i r st American, in violation of the Re a l E state Settlement Procedures A ct (“RESPA”), 12 U.S.C. §§ 26 0 1 –2617. W e affirm in part, vacate in part, and remand.

I

Edwards boug ht a h o m e in Cleveland, Ohio. Edwards used Tower City T itle Ag e ncy , L L C (“Tower City ”) as her settlement ag e nt, and by r eferral of Tower City
, she used F irst American as h e r title insurer. Prior to Edwards’s home purchase, F irst American and Tower C ity entered into a transaction: F irst American a cquired a 17. 5 % ownership i n t erest in Tower City for $2 million and, in the s a m e transaction, Tower City ag reed to refer future title insurance business to F irst American. F irst A merican also entered into similar transactions with various other title ag encies. I n e ach of these transactions, F irst Am e rican paid the title ag ency a lump sum of money in ex c h ang e f or (1) a minority ownership in t e r e s t in the title ag ency and (2) the title ag e ncy ’sE D W A R D S V

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ag reement to refer future title insur a nce business to F irst American.

Edwards f

iled a putative class a ction ag ainst F irst Ame rican, alleg ing that the transactions between F irst A m e rican and the captive title ag encies violated RESPA’s anti-kickback provis i o n , 12 U.S.C. § 2607. Edwards orig inally moved to certify a class of home buy ers referred to F irst A merican by any of the 1 80 title ag encies that F irst American partially owned. Th e d istrict court d e clined to certify that class but o rdered discovery to determine whether it should certify the Tower City class, consisting of a ll home buy ers who were referred to F irst American by Tower City

.

After completing discovery
, E dwards moved to certify the Tower City class. The district c ourt d enied certification. W e reversed and held that “there is a sing le, overwhelming

common question of fact: w hether the arrang ement between Tower City and F irst American violated” RESPA. Edwards

v. The First Am. Corp.
, 385 F

. A pp’x 629, 631 ( 9th Cir. 2 010) (“ Edwards I

”). W e ordered nationwide d iscovery on remand and g ave Edwar ds an opportunity to renew her motion to certify a nationwide c lass. Id. A f t e r further discovery
, Edwards moved to certify a nationwide class consisting of all home buy ers who entered into a federally -rel a t ed mortg ag e transaction using one of thirty -eig ht title ag encies that sold a minority ownership interest to F irst American a n d
, in the

same transaction, a g reed to refer future title insurance business to F irst American.

The district court ag ain denied c ertification, now o n t he basis that common issues did not predominate over individual i s s u e s for the nationwide class. F irst, the district court concluded that indiv idual inquiries were required toE D W A R D S V

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determine whether F irst A merican overpaid for its ownership interests in each title a g ency

. Second, the district c ourt f ound that common issues d id n ot predominate over individual issues of reliance and c ausa t i o n for referrals. Third, the district court concluded that transaction-specific inquiries a s

a result of the different ty

pes of title ag encies will not require

common proof related to F irst American’s liability

. Edwards appeals the district court’s order deny ing class certification.

II

W e review the district court’s determination of class certification for abuse of discretion and consider “whether the district court co r r e c tly selected and applied Rule 2 3’s criteria.” P arra v. Bashas’, Inc.
, 536 F .3d 9 75, 977 ( 9th Cir. 2008). The underlying leg al q u e s tions, however, a re reviewe d d e novo , and “any error of law on w hich a certification order rests is deemed a per se a b u s e o f discretion.” Conn. Ret. Plans & Trust F u n d s v

. Amgen Inc.
, 660 F .3d 1170, 1175 (9th Cir. 2011).

III

A

F ederal Ru l e of Civil Procedure 2 3 allows a

r e p resentative to litig a te on behalf of a class of similarl y

situated individuals who are too numerous to join the litig ation. The party seeking class certification bears the burden of e stablishing that the p roposed class meets the requirements of Rule 23. See W al-Mart S tores, Inc. v. Dukes
, 131 S. Ct. 2541, 2551 ( 2011); Zinser v. A c cufix Research In st., Inc.
, 2 53 F .3d 1180, 1186 (9th Cir.), amended by 2 7 3 F .3d 1266 (9th Cir. 2001). To be certified, a p ropo s e dE D W A R D S V

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class must satisfy

all requirements in Rule 23(a) and at least

one of the requirements in Rule 23 ( b). Rule 23(a) requires that plaintiffs demonstrate (1) numerosity , (2) commonality
, (3) ty picality
, and (4) adequacy of representation. F ed. R. Civ. P. 2 3(a). Rule 23(b) lists three alternative requirements for class certification, and where, as here, plaintiffs seek class certification under subsection (b)(3), they mus t d emonstrate the superiority of maintaining a class act i o n and show “that the q u e stions of law or fact common to class members predominate o ver any questions affecting only individual members.” F ed. R. Civ. P. 23(b)(3); see also Zinser
, 253 F .3d at 1189–92.

A court, when asked to certify a c lass, is merely to decide

a suitable method of adjudicating t h e case and should not “turn class c ertification into a mini-trial” on the merits. Ellis

v. Costco W

holesale Corp.
, 657 F .3d 9 70, 9 8 3 n

. 8 (9th Cir. 2011). B u t Rule 23(a)(2) is n ot a pleading standard, so to the

ex tent necessary , our determination of commonality will inevitably touch upon the merits of pl a intiffs’ underly ing RESPA claims. See, e.g.
, Amgen Inc. v. Conn. R et. Plans & Trust Funds
, 133 S. Ct. 1184, 1194 (2013); W al-Mart Stores
, 131 S. Ct. at 2551; S

tockwell v. City & Cty. of S.F.
, 749 F .3d 1107, 1111–12 (9th Cir. 2014).

I n 1974, Con gr ess passed RESPA to protect consumers from “unnecessarily h i g h settlement charg e s caused b y certain abusive practices.” 12 U.S.C. § 2601(a). One of the

consumer- p r otection provisions is RESPA § 8, 12 U .S.C. § 2607, which furthers Cong ress’s g oal of “eliminat[ ing ]

. . . kickbacks or referral fees that tend to increase unnecessarily the costs of certain settlement services.” Id. § 2601(b)(2); see also Freeman v. Quicken Loans, Inc. , 132 S. Ct. 2034, 2038 (2012). Pay

ing kickbacks or referral fees to induce referralsE D W A R D S V

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of title insurance underwriting is part of the serious problem Cong r ess soug ht to remedy in RESPA. See S. R e p

. No. 93- 866 (1974), reprinted in 1974 U.S.C.C.A.N. 6546, 6551.

The national title insurance ind u s try is hig hly concentrated, with most states dominated by two o r three larg e title insurance companies. S e e U .S. G ov’t Accountability Office, Titl e Insurance: Actions Needed to Improve Oversight of the Title Industry and Bette r P r otect Consumers 3 ( A p r

. 2007). A “factor that raises questions about the ex istence of price competition is that title ag ents market to those from whom they g et consumer referrals, a nd
not to consumers t h e m selves, creating potential conflicts o f interest where the referrals could be made in the best interest of the referrer and not the consumer.” Id. Kickbacks paid b y th e t itle insurance companies to those making referrals lead
to hig h e r c o s t s of real estate settlement services, which a re passed on to c onsumers without any corresponding

benefits.

Section 8(a) o f RESPA a ims to eliminate these unlawful kickbacks. I t prohibits any ex chang e of a thing of value pursuant to real estate referrals:

No person shall g ive a n d no person shall accept any fee, k ickback, o r thing of value pursuant to any ag r eement or understanding
, oral or otherwise, that business incident to o r

a p a r t of a real estate settlement service involvi n g a federally related mortg ag e loan shall be referred to any

person.

12 U.S.C. § 2607(a). RESPA de fi n e s a “thing o f value” broadly to include “any pay ment, adva n ce, funds, loan, service, or other consideration.” Id. § 2602(2). CourtsE D W A R D S V

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commonly

find a violation of § 2607(a) when (1) a pay ment

or thi n g o f v alue was e x chang ed, (2) pursuant to an ag reeme n t to refer settlement business, and (3) there was an actual r e ferral. See Galiano v. Fid. Nat’l Title I n s

. Co.
, 684 F .3d 309, 3 14 (2d Cir. 2 0 1 2 ); s e e also Egerer v. W oodland Realty, Inc.
, 556 F .3d 415, 427 (6th Cir. 2009); Culpepper v

. Irwin Mortg. Corp.
, 491 F

. 3 d 1 2 60, 1265 ( 11th Cir. 2007). Notwithstanding the g e neral prohibition of e x chang ing any thing of value for a referral
, a statutory safe harbor ex empts

a pay ment from RESPA viola tion if the pay ment—despite being made simu l t a n e o usly with a referral—was “for g oods

or facilities actually furnishe d or for services actually performed.” See id. § 2607(c)(2).

Cong r ess g ave the Department of Ho u s i n g and Urban Development (“HUD”) a uthor i t y to reg ulate under RESPA, and HUD promulg ated the corresponding reg ulations known

as Reg u lation X. See Pub. L

. No. 9 4-205 § 10, 89 Stat. 1157, 1159 (1976). The Dodd- Fr an k W all Street Reform a nd Consumer Protection Act transferred the reg ulatory authority of RESPA from HUD to the Consumer F inancial Protection B ureau (“CF PB ”), and CF PB later republished Reg ulation X without material chang es. See 76 F ed. Reg

. 78,977 (Dec. 20, 2011); 12 C.F .R. § 1024. 1

Under Reg ulation X, a “referral” includes “ a n y oral o r written action dir ec t ed to a person which has the effect o f affirmatively influencing the selection by any person of a provider o f a settlement service for which the h o m e b u y er

w i l l pay a charg e”; and an ex chang e of a “thing of v a l u e ” i s used as sy

nony mous with a p ay

ment a nd does not require a

1 B ecau se th i s case aro se w h en HUD w as th e reg u lato ry ag en cy , citatio n s to Reg u latio n

X w ill still b e to 2 4 C.F.R. § 3 5 0 0

.E D W A R D S V

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transfer of money

. 2 24 C.F.R. § 3500.14(d), (f)(1). Reg ulation X further ex plains the safe harbor in § 2607(c)(2). See id. § 3 5 0 0

. 1 4(g )(2) ( “I f the pay ment of a thing of value bears no reasonable relation s h i p to the market value o f the
g oods o r services provided, then the ex cess is not for services
or g oods actually

performed or provided.”).

B

W e first add ress w hether individual inquiries on each o f th e transactions are required d ue to the safe harbor in § 2607(c)(2) and 24 C.F .R. § 35 00.14(g )(2). The district
court held that the statute a nd the reg ulation require Edwards
to prove that F ir st American overpaid for its ownership interests in each of the title ag encies, and these individual inquiries render class action improper.

CF PB submitted an amicus brief interpreting RESPA a nd its own Reg ulation X. CF PB contends that § 2607(c)(2) does
not apply to the transactions here beca u se F irst American’s
pay ment f or ownership interests is n ot a pay ment for g oods, facilities, or services. CF PB urg es u s to g ive deference to its interpretation.

As a threshold matter, w e must consider the proper level of deference to be g i v en to the ag ency interpretation. Our analy tical framework d e p e nds on whether the ag ency is interpreti n g t h e statute or the r eg ulation. An ag e ncy ’s interpretation of an ambig u ous statute is entitled to Chevron deference when the interpretation is promu l g ated in the

ex e r ci s e of the ag ency ’s formal rule-making authority

. See Chevron, U.S.A., Inc. v

. Nat’l Res. Def. Council, Inc.
,

2 Here, w e u se th e term s “ th in g o f v alu e” an d p ay m en t in terch an g eab ly

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467 U .S. 837, 843 ( 1 9 8 4 )

. An ag ency ’s interpretation of its

own ambig uous reg ulation is g e n e r all y entitled to Auer deference. See Auer v

. R o b bins
, 519 U.S. 452, 461 (1997) (holding that a

n a g e ncy ’s interpretation of its own ambig uous regu lation is controlling u nless “plainly erroneous o r inconsistent with the reg ulation”) (internal citation omitted).

Here, CF PB is interpreting the statute, not the reg ulation. An ag ency ’s interpretation of the statute—when presented in

an amicus brief—is n ot promul ga t e d in the ex e rcise of its formal rule-mak i n g authority
, so no Chevron deference is warranted. See United States v. Mead Corp.
, 5 3 3 U.S. 218, 226–27 ( 2001); Price v

. S tevedoring Servs. of Am., Inc.
, 697 F .3d 820, 826 (9th Cir. 2012) ( e n banc). Even if the
terms “g o ods,” “services,” and “facilities” also appear in the
reg ulation, see 24 C.F .R. § 3500.14(g )(1)(iv), CF PB is in fact interpreting Cong ress’s words in the statute, so w e gi ve no deference to CF PB ’s interpretation. Chase Bank USA, N.A.

v. McCoy
, 562 U.S. 195, 210 (2011). I n addition, because the statutory terms at issue a re not ambig u o u s , no deference is merited. See Chevron , 467 U.S. at 8 42–43; U nited States v

. Able Time, Inc. , 545 F .3d 824, 835–36 (9th Cir. 2008).

W e nevertheless ag ree with CF PB ’s interpretation, which is consistent with the lang uag e of the statute. Neither RESPA

nor Reg ulation X defines “g o ods,” “facilities,” or “ services,”

see 12 U.S.C. § 2602; 24 C.F .R. § 3500.2, so we beg in with the statutory tex t and “ end[ ] t h e r e as well if the tex t is unambig uous.” Satterfield v. Simon & S c huster, Inc.
, 569 F .3d 946, 951 (9th Cir. 2009). Here, the mea n i n gs o f “g oods,” “facilities,” and “ser v i c e s ” are plain. “Goods” a re “tang ible movable personal p r o perty having intrinsic value

ex c luding money ”; a “facility ” is “something (as a hospital, machinery
, plumbing ) that is built, constructed, ins talled, o rE D W A R D S V

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established to perform some particular function or to serve o r facilitate some particular end”; and “ s e rvice” is “the performance of work c o mmanded o r paid for b y an other.” See W ebster’s Third New International Dictionary ( 1 9 9 3 );

see also A merican Heritage Dictionary (defining “g oods” a s “product that is boug ht and sold ” or “portable personal property ”; “facil i t y ” as “[ a] building
, room, array o f equipment, or a number of such thing s, desig ned to serve a particular f

unction”; and “service” as “[ w] ork that is done for others as an occupation or business” or “[ a] n act or a variety of work done for others, especially for pay ”).

The o wnership interests purchased by F irst American a re equity shares, not g oods, service s , o r facilities. F irst American contends that two of the thirty -eig ht transactions at i ssue a lso contained acquisitions of facilities, such as a tit l e plant 3 a nd building s. This misses the point. The purchase o f ownership interests—which a r e not g oods, services, o r f a c i l i t i e s

— d i s q

u a l i f i e d F i r s t A m e r ican’s transactions from the

ex e mption under § 2607(c)(2), reg ardless of whe t h e r the acquisitions may have also included facilities. W e conclude that § 2607(c)(2) cannot apply t o F irst American’s transactions as a matter o f la w , s o the district court erred in relying on § 2607(c)(2) to determine the propriety of class certification.

C

W e n ex t address whether individual inquiries are r equired because of § 2607(a). The district court interpreted the “thing

3 A title p lan t, acco rd in g to First A m erican , is “ title reco rd s assem bled

an d m ain tain ed f

o r th e p u rp o s e o f

issu in g title in su

ran ce.”E D W A R D S V

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of value” 4 in § 2607(a), as applied to the transactions at issue,
to be t h e a m o unt that F irst A merican overpaid for its ownership interests in each of the c a ptive title ag encies. The district court relied on decisions of o u r circuit, as well a s those of other circuits, to conclude that the determination o f kickback a mount requires individ ual comparisons b etween t h e pay ment and the services provided. See, e.g. , L a n e v. Residential Funding Corp

. , 323 F .3d 739, 745 (9th Cir. 2003); Bjustrom v. Trust One M o r tg. Corp.
, 3 2 2 F .3d 1201, 1 2 0 8 (9th Cir. 2003); Schuetz v. Banc One Mortg. Cor p

. , 292 F .3d 1004, 1014 (9th Cir. 2002); see also Howland v

. First Am. Title Ins. Co.
, 672 F .3d 525, 530 (7th Cir. 2 012); Glover v. S

t a n d a rd Fed. B ank
, 283 F .3d 953, 963–64 (8th Cir. 2002). As a result, it conc luded that an individual inquiry on each transaction will b e r e q u ired to determine whether F irst American’s purchase p rices of the ownership interests ex ceeded their fair market value.

The c ases relied on by the district cou r t are inapplicable here, because they interpreted the statutory ex emption under § 2607(c)(2), which we have concluded does not apply to F irst A merican’s transactions. See Lane
, 3 2 3 F .3d a t 742;

4 CFP B
, in its am i cu s brief
, o f f ers its ow n in terp reta t i o n o f th e p h rase

“ t h in g o f v alu e” u n d er Reg u latio n X. 2 4 C

. F

. R

. § 3 50 0 .1 4 (d ). A s a g en eral ru le, an ag en cy ’ s in terp retatio n o f i ts o w n am b ig u o u s reg u latio n , ev en if presen ted in an am icu s b rie f, is co n tro llin g u n less “ p lain ly

erro n e o u s o r in co n sisten t w ith th e reg u latio n .” Au er , 5 1 9 U.S. at 4 6 1 (in t ern al citatio n o m i t t e d )

. B u t n o Au er d ef eren ce is d u e w

h en th e reg u latio n at i ssu e is u n am b ig u o u s. S

ee Ch risten s en v. Ha rris Cty.
, 5 2 9 U.S. 5 7 6
, 5 88 (2 0 0 0 ); Bra y v. C o mm’r o f S o c. S ec. Ad min

. , 55 4 F.3 d 1 2 1 9 , 1 2 2 5 (9 th

Cir. 2 0 0 9). Here, th e reg u latio n ’ s d ef in itio n o f a “ th in g

o f v alu e” is u n am

b ig u o u s , see 2 4 C .F.R. § 35 0 0 .1 4 (d ), so w e d e c lin e to g iv e Au er d ef

eren c e an d in terp ret th e reg u latio n in acco rd an ce w ith its
p lain m ean in g

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Schuetz
, 292 F .3d 1012. Also
, these cases adopted a nd applied HUD’s two-prong test interpreting § 2607(c)(2): f irst, there must be actual p e rformance of compensable services; and second, the total com p e nsation must be reasonably related to the g oods or services provided. See, e.g. , Schuetz
, 292 F .3d a t 1012 (ex plaining that the HUD two-part test reflects the statutory safe harbor in § 8(c)). B ut the two-prong HUD test is also inapplicable here, because no services were provided by the title ag encies to F irst A merican. W e hold that the district c o urt a

bused its discretion in deny ing class certification based on an erroneous i nterpretation o f § 2607(a), Conn. Ret. Plans
, 660 F .3d a t 1175, and that cases alleg ing illeg al kickbacks in v iolation of § 2607(a) are not necessarily

unfit for class adjudication.

B u t the question remains: Are there individual issues here that could predominate over common i s s u es such that class action certification is inappropriate? S ee Fe d

. R. Civ. P. 23(b)(3). W e hold that the answer to this q u estion is no. RESPA does not—as the d istrict c ourt held—require Edwards t o pinpoint how much money F irst American p aid for the r eferral ag reement as o pp o s ed to the equity interest. Rather, she can state a claim under RESPA § 8(a) by alleg ing that F irst Ame r i can paid a lump sum of money to e ach captive title a g ency (the thing of value), and—in e x chang e for that money

—each title ag ency a g reed to refer F irst American future insurance (business ag reement).

Absent § 8(c), nothing in the statute requires Edwards to prove F irst A merican g ave money to the title ag encies only in consideration for the referral ag reement. The statute merely
pro h i b i ts the e x c hang e of a “thing of value” for a referral
ag reement. 12 U.S.C. § 2607(a). I t and the reg ulation define “thing of value” broadly to in cl u d e a wide variety o fE D W A R D S V

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considerations, and an ex chang e of a thing of value need not involve a transfer of money solely a s a kickback. See 12 U.S.C. § 2602; 24 C.F .R. § 3500.14(d). Here
, E d wards alleg es that F irst American paid the title ag ency a lump sum of money ; in return, F irs t A m er i can obtained two items: the title ag e ncy ’s equity interest and the title ag ency ’s ag reement to refer future title insurance busin e ss. W h e ther this transaction violates RESPA § 8(a) d oes not require inquiry into individual issues of pay ment.

This c onclusion c o mports with our understanding o f
contract law. There is a “presumption that when parties enter into a c ontract, each and e very term and condition is in consideration of all the others, unless o therwise stated.” A m

. Sav. B ank, F.A. v. United States
, 5 19 F .3d 1316, 1324 ( F ed. Cir. 2008) (quoting Stone Forest Indus., Inc. v. United States
, 973 F

. 2d 1548, 1552 (F ed. Cir. 1992)). Althoug h the contract terms were silent on h ow much of F irst American’s monetary consideration was attributed to the referrals, the law does not require every term of the contract to have a separately stated

c o n sideration. Sarnoff v. Am. Home Products Corp

. , 798 F .2d 1075, 1080 (7th Cir. 1986), superseded o n o t h e r grounds by Gardynski-Leschuck v. Ford Motor Co.
, 142 F .3d 955, 958 (7th Cir. 1998). The undivided m o n e tary consideration p aid by F i r st American must be treated in law

as co n s ideration for both the e q uity interests and referrals. See Restatement (

Second) of Contracts § 80, cmt. a (Am. L aw I nst. 1981 ) ( “A sing le performance or return promise may thus f urnish consideration for any number of p romises.”); 3 W illiston on Contracts § 7:51 (4th ed.) (discussing that o ne consideration may support several p romises). A n ex ample clarifies: Assume that if o n e b uy s a bottle of water and a b o t t l e o f soda from a g rocery store, and pay s $5 in total, th e pay ment is for both the water and the soda, and value is beingE D W A R D S V

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g iven for both. W e decline to conclude that in this assumed
case, value has been g iven f or only o ne a

nd not for the other. I n other words, Edwards need only prove the e x istence of an

ex c h a ng e involving a re f

e rral ag reement. Such proof does
not require inquiry into individual facts across all thirty -eig ht captive title ag encies.

M oving on to the commonality inquiry under Rule 23(a)(2), 5 we ask whether the proposed class members share

a common question o f law or f act, the answer to which “will resolve an issue that is central to t h e v a l i d i ty of each one o f the [ class members’] claims.” W al-Mart
, 131 S. Ct. at 2551. W e ha v e p reviously held that there was an overwhelming

common question of fact c oncerning the Tower City c lass. Edwards I

, 3 85 F

. App’x

. at 631. There is also a common question of fact concerning some of the tr a n s a c t ions here: whether F irst American’s pattern of conducts in entering into similar transactions with the title ag encies violates RESPA. 6

The d istrict court erred in concluding that the common issue does not p redominate over individu a l issues for the proposed class members. “The Rule 23(b)(3) predominance inquiry t ests whether proposed classes are sufficiently cohesive to warrant ad

j u d ication by representation.” Amchem Prod., Inc. v. W

indsor , 521 U.S. 591, 623 (1997). Common issues predominate over individual issues when the common issues “represent a sig nificant aspect of the case and they can

5 T h e d istrict co u rt d id n o t ad d ress th e co m m o n ality issu e u n d e r R

u l e 2 3 (a)(2 ) b u

t seem ed to h av e co n clu d ed th at th ere w as a co m m o n issu e.

6 W e h old i n P art V th at First A m erican ’ s tran sactio n s w ith th e n ew ly

f o rm ed title ag en cies d o n o t sh are co m m o n issu e s o f fact w ith th e tran sactio n s w ith

th e p reex istin g title ag en cies. S ee in fra P art V.E D W A R D S V

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be resolved for a ll m e m b e r s of the class in a sing le adjudication.” 7AA Charles Alan W rig ht & Arthur R. Miller, Federal Practice and Procedure § 1778 (3d ed. 1998). Here, Edwards contends that F irst American utiliz ed a nationwide

s c heme of b uy ing minority interests in the title ag encies i n order to secure remittance streams from the ag encies’ future referrals. Edwards points to evidence showing this common scheme, including severa l memoranda submitted to F irst American’s board of directors a sking for approval o f t h ese transactions (referred to by the parties as the “Smoking Gun Memos”). Some of the s e Smoking Gun Memos described F irst A merican’s common strateg y to purchase certain title
ag enc ies’ minority interests to secure their ex clusive
ag reement to provide future referrals, and other Smoking G un Memos revealed that the primary motivation underly ing these transactions was not to g ai n r e t urns from the ownership interests but to lock up remitta n c e s t reams from future referrals. F o r ex ample, in the documentation for the purchase of a minority interest in Doral Title, L L C
, Fi rst American presented to its board a justification r eciting in part, “[ b ] uy ing

a minority interest now will ensure that w e capture the Compan y ’s u/w remittance streams.” Similarly
, in connection with purchase o f a minority int e re s t in Equity L and Title L L C, F irst Ameri c an t o l d its board that “the u/w remittance stream i s the p rimary source of our economic
returns for this investment.” Pointing in the same direction,

on purchase of minority sha r e o f Equity Title I nsurance Ag ency , I nc., F irst A merican presented to its board that “ [ a] s

a condition to closing the proposed t r a nsaction, [ F irst American] and Equity will ex ecute an ex clusive a ge ncy ag reement.” B eside s t

he Smoking Gun Memos, Edwards also points to the standard contract terms that F irst A m e r i can imposed on the captive title ag encies to prohibit the ag enciesE D W A R D S V

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from is s u ing policies for F irst American’s competitors, subject to limited ex ceptions.

W e e mphasiz e that at this stag e of the litig ation w e a re making no c onclusions on whether the evidence ci ted above—including the Smoking Gun Memos and the alleg ed

s t a ndard contract terms imposed by F irst American—r e s o l v e s the merits of Edward’s underly ing RESPA claims. Our focus

now is to decide whether the issues relating to the alleg ed

common schem e predominate over individual issues for the proposed class, so that the case should be certified for class adjudication. See Stockwell
, 749 F .3d at 1111

– 1 2 (holding that a c ommon contention need not be o ne that w ill prevail on the merits) ( internal citation a nd quotation omitted). W e c ite F irst American’s alleg ed pr a c t ices not as bearing on the merits but as b e a ring on F irst A merican’s common

s c h e m e—as alleg ed in the complaint—t h a t p r e d o m i n a

t e s o v e r individual issues for certain class m e m b e r s

. This common scheme, if true, presents a sig nificant aspect o f F irst American’s transactions that warrant class a djudication: W h e ther F irst American paid a thing of value to g et i t s ag reement for ex c lusive r eferrals. W e v a c ate the district court’s denial of class certification in p a r t a s to these transactions that involved the common schem e presented to F irst American’s board of directors. 7

7 W e d o n o t h o ld th at co m m o n issu es pred o m in ate o v er in d iv id u al issu es

o n claim s of th e en tire p ro p o sed c lass relatin g to all th irty

- eig h t title
ag en cies. A s ex p l ain ed i n P art V
, w e af f irm in p art th e d en ial of certif icatio n as to th e n ew l y

- f

orm ed ag en cies. S

ee in fra P art V. A s to th e p reex istin g title ag en cies, w e rem an d f o r th e d istrict co u rt to d ecid e i n th e f irst in stan ce w

h ich o f th ese title ag en cies’ tran s actio n s w ith First A m erican f

it in to th e co m

m o n sch em e, i n cl u d i ng th e tran sactio n s ap p ro v ed b y F irst A m erican ’ s b o ard of d irecto rs p u rsu an t to th e “ Sm o k in g Gu n Mem o s .”E D W A R D S V

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IV

F irst American showed that on some occasions someone other than the captive title ag e n c ies—such as lend e r s, mortg ag e brokers, realtors, and ot h e r title ag encies— affirmatively influenced the home buy ers’ choice o f F irst American as their title insurance underwriter. The district
court h eld that the third p a rties’ influences constituted individual issues that render c lass adjudication improper. W e disag ree. Other sources o f referral d o not defeat the predominant common question of fact, i.e., whether the title
ag encies have contractual oblig ations to refer their customers to F irst American.

F or a referral to viol ate RESPA, it n e ed n ot be the

ex c lusive or even the primary reason that influenced a home buy er’s choice o f a real estate serv i c e p r o vider. See 24 C.F .R. § 3500.14(f)(1) (defining a referral a s “ a n y oral o r written action directed to a person which h a s t he effect o f affirmatively influencing the selection” of a real estate service provider”) (emphasis added); see also 12 U.S.C. § 2607(d)(2) (imposing joint and several liability on a l l of those w ho affirmatively influenced the s e l e ction of a title insurance provider). Here, Edwards c ontends that F irst American used standard, w ritten contracts to im p ose an oblig ation on the captive title ag encies to refer future title insurance busin ess, subject to some limited ex ceptions. I f this is t r u e , the title
ag encies’ contractual oblig ations affected t h e entire class o f home buy ers a s a r esult o f F irst American’s standard terms. See F e d. R. Civ. P. 23(b)(3) advisory committee note (“[ A] fraud perpetrated on numerous persons b y the use o f similar misrepresentations may be a n appealing situation for a class action

. . . . ”). Even if o ther service providers may have also influenced the home b u y er s’ decision to choose F irstE D W A R D S V

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American, there remains a p redominant, common question o f whethe r t h e t i t l e a g e n c i es ’ c o n t r a c t u a l o b l i g ations affirmatively influenc ed the home buy er’s choice o f F irst American.

V

The d istrict court denied c e r t ification on the additional
g round that the different ty p e s o f title ag encies will require individual, case-by -case p roof on F irst American’s liabi l i t y

. F irst American contends that in the proposed class, there a re three unique ty

pes of title ag encies, so that separate inquiries on each ty

p e will be required.

F irst, F irst American contends tha t its transactions with twelve of the thirty -eig ht title ag e n c ies a re affiliated business

ar r ang ements (“AB A”) that are ex e mpt from RESPA violations under § 2607(c)(4). An AB A e x e m p t i on under § 2 6 07(c)(4) permits a person who owns an interest in a settlement service provider to refer customers to the settlement service provider if (1) it disclos e d the affiliated relationship; ( 2) it does not require the person referred to use any particular service provider; a n d ( 3 ) the only thing o f value received from the arra n ge ment is a return on the ownership interest. See 12 U.S.C. § 2607(c)(4). The district
court concluded that class adjudication was improper because it had to take evidence to dete r m i n e if each of the twelve
ag encies fits the AB A ex emption.

W h en defendants opposing class certification r aise a leg al defense that may defeat commonality
, the distri ct court cannot assume its validity but s h o u l d make a threshold determination on the leg al merits. The district court n eed not take evidence to determi n e the leg al merits of defendants’E D W A R D S V

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defense, b ecause oth e rwise it would defeat the purpose o f class cer t i f

i c a tion. B ut if an alleg ed defense is invalid as a matter of law, the defense will n o t g ive rise to individual issues and thus cannot b e a v alid basis for deny ing class certification.

F ir s t A m erican’s defense on the basis o f § 2 607(c)(4) is invalid as a matter of law. S ection 2607(c)(4) ex empts a trans ac t i o n f

rom a RESPA violation when a p erson w ho partially owns a settlement service provider refers business to the service provider, and the o wner receives no t hing other than a return o f the service provider’s shares. B ut here, F irst American—the p artial o w n e r of the title ag encies—did not refer business to the title a g encies. T o the contrary , t h e service provider (i.e., the title ag encies) referred b usiness to the partial owner (i.e., F irst American). I n addition, in these transactions, F irst American did not r e c e ive a ny pay ments from the title ag encies as a return on its ownership interests. No individual inquiries on the twelve t i t l e ag encies’ AB A
status w ill be required, because § 2607(c)(4) cannot apply to these transactions as a matter of law.

Second, F irst American contends that certain ag e ncies a re majority -owned b y F irst American, and F irst American
cannot refer business to itself. F irst American cites the Supreme Court’s decision in Freeman
, 132 S. Ct. at 2043–44, which h e l d t h a t to establish a v iolation of § 2607(b), a plaintiff must demonstrate that a c harg e for settlement services w as divided between at least t w o p e rsons. B ut Freeman is inapplicable here : F irst American and its majority -owned title ag e ncies are n o t the same person, but separate leg al entities. No separate inquiries are necessary merely because F irst American is the m ajority owner o f certain captive title ag encies.E D W A R D S V

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Third, the district court concluded that F irst American’s transactions with the newly -formed title ag encies do not raise

common issues sufficient for cl a s s a ction adjudication. W e ag ree and affirm the district court’s denial of certification as
to the newly -formed title ag encies. F irst American contends that twelve of the thirty -eig ht t itle ag encies were not preex isting when F irst Ame r ican decided to p urchase their ownership interests. I

nstead, F irst American and third party investors formed and invested in these title ag encies, and the investors’ ownership interest s were proportional to their capital investments.

E d w ards alleg es in the complaint that F irst Ameri c a n eng ag ed i n a nationwide scheme of securing referral
ag reements by offering to purchase ownership interests o f various title ag encies. H owever, F irst Am e r i c an’s transactions with these n ewly -formed a ge ncies represent a different set of facts f

rom the n ationwide scheme al l ege d i n the c omplaint. W e c onclude that these t r a n s actions do not share common questions of fact between F irst American a nd the transactions with the preex isting title ag encies and thus do
not require common proof to r esol v e t he validity of each o f the class members’ claims. W al-Mart , 131 S. Ct. at 2551.

VI

Having concluded that common issues did not predominate o ver individual issues for the proposed class, the district court declined to address the remaining prerequisites of class certification, including whet her a class action is a superior method of ad

j u d ication, whether Edwards and her counsel are adequate, a nd whether the putative class is ascertainable. Edwards urg es us to consider these questions in the first instance on appeal and certify the proposed class.E D W A R D S V

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W e decline to do so. A lthoug h we h ave concluded that

common issues predominate over individual issues for a sub class of home buy ers referred by the title a ge n cies that were subject to F irst American’s common scheme, the rem a ining
pre r e q u isites of class certification a re b e st a ddressed by the district court, w hich is “in the best position to c onsid e r t he
most f air a nd efficient procedure for conducting any g iven litig ation.” Stockwell
, 7 49 F .3d at 1116–17 (internal citation omitted).

W e affirm the district court’s denial of class c ertification in part as to the n ewly -formed title ag encies, vacate the district court’s denial of class cert i f i c a tion in part as to the remaining title ag encies, and remand for further proceeding s.

Each party

shall bear its own costs on appeal.

AF F IRMED IN P ART, V A C ATED IN P ART, AND REMANDED.