FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

DENISE P. EDWARDS, individually

and on behalf of all others similarly

situated,

Plaintiff-Appellant,

v.

THE FIRST AMERICAN

CORPORATION; FIRST AMERICAN

TITLE INSURANCE COMPANY,

Defendants-Appellees.

No. 13-55542

D.C. No.

2:07-cv-03796-

SJO-FFM

OPINION

Appeal from the United States District Court

for the Central District of California

S. James Otero, District Judge, Presiding

Argued and Submitted

March 3, 2015—Pasadena, California

Filed August 24, 2015

Before: Michael R. Murphy,

* Ronald M. Gould,

and Richard C. Tallman, Circuit Judges.

Opinion by Judge Gould

* The Honorable Michael R. Murphy, Senior Circuit Judge for the U.S.

Court of Appeals for the Tenth Circuit, sitting by designation.
2 EDWARDS V. FIRST AMERICAN CORP.

SUMMARY**

Class Certification

The panel affirmed in part and vacated in part the district

court’s order denying class certification in a case in which

Denise P. Edwards, seeking to represent a class of similarlysituated home buyers, alleges that First American Corporation

and its wholly owned subsidiary First American Title

Insurance Company, engaged in a national scheme of paying

title agencies things of value in exchange for the title

agencies’ agreement to refer future title insurance business to

First American, in violation of the Real Estate Settlement

Procedures Act (RESPA).

The panel held that in determining the propriety of class

certification, the district court erred in holding that the safe

harbor in 12 U.S.C. § 2607(c)(2) requires Edwards to prove

that First American overpaid for its ownership interests in

each of the title agencies. The panel explained that the

ownership interests purchased by First American are equity

shares—not goods, services or facilities within the meaning

of § 2607(c)(2). The panel also held that the district court

abused its discretion in denying class certification on the

ground that 12 U.S.C. § 2607(a) requires an individual

inquiry, on each transaction, to determine whether First

American’s purchase prices of the ownership interests

exceeded their fair market value. The panel held that cases

involving illegal kickbacks in violation of § 2607(a) are not

necessarily unfit for class adjudication.

** This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.
EDWARDS V. FIRST AMERICAN CORP. 3

Applying Fed. R. Civ. P. 23(b)(3), the panel held that

issues relating to the alleged common scheme predominate

over individual issues. The panel wrote that Edwards need

only prove the existence of an exchange involving a referral

agreement, which does not require inquiry into individual

facts across all 38 captive title agencies, and that the proposed

class members also share common questions of fact. The

panel concluded that the alleged common scheme, if true,

presents a significant aspect of First American’s transactions

that warrant class adjudication: Whether First American paid

a thing of value to get its agreement for exclusive referrals. 

The panel therefore vacated the district court’s denial of class

certification in part as to these transactions that involved the

common scheme presented to First American’s board of

directors.

The panel disagreed with the district court’s holding that

influences by third parties constitute individual issues that

render class adjudication improper. The panel wrote that

other sources of referral do not defeat the predominant

common questions of fact, i.e., whether the title agencies

have contractual obligations to refer their customers to First

American.

The panel held that the district court erred in determining

that individual inquiries are required in connection with

twelve title agencies that are affiliated business arrangements

and in connection with certain agencies that are majorityowned by First American. The panel agreed with the district

court that First American’s transactions with newly-formed

title agencies do not raise common issues sufficient for class

action adjudication, and affirmed the district court’s denial of

certification as to the newly-formed title agencies.
4 EDWARDS V. FIRST AMERICAN CORP.

Remanding for further proceedings, the panel wrote that

the remaining prerequisites of class certification, which the

district court declined to address, are best addressed by the

district court.

COUNSEL

James W. Spertus (argued), Ezra D. Landes, Spertus, Landes

& Umhofer, LLP, Los Angeles, California; Cyril V. Smith

(argued), William K. Meyer, Zuckerman Spaeder LLP,

Baltimore, Maryland; David A. Reiser, Zuckerman Spaeder

LLP, Washington, D.C.; Richard S. Gordon, Martin E. Wolf,

Gordon & Wolf, Chtd., Towson, Maryland, for PlaintiffsAppellants.

Brian J. Murray (argued), Nathaniel P. Garrett, Leigh A.

Krahenbuhl, Jones Day, Chicago, Illinois; Matthew A. Kairis,

Jones Day, Columbus, Ohio, for Defendants-Appellees.

Nandan M. Joshi (argued), Senior Litigation Counsel,

Meredith Fuchs, General Counsel, To-Quyen Truong, Deputy

General Counsel, David M. Gossett, Assistant General

Counsel, Consumer Financial Protection Bureau,

Washington, D.C., for Amicus Curiae Consumer Financial

Protection Bureau.
EDWARDS V. FIRST AMERICAN CORP. 5

OPINION

GOULD, Circuit Judge:

We must decide whether the district court abused its

discretion in denying Plaintiff Denise P. Edwards’s motion

for class certification, in her action against Defendants First

American Corporation and its wholly owned subsidiary First

American Title Insurance Company (collectively, “First

American”). Edwards, seeking to represent a class of

similarly-situated home buyers, alleged that First American

engaged in a national scheme of paying the title agencies

things of value in exchange for the title agencies’ agreement

to refer future title insurance business to First American, in

violation of the Real Estate Settlement Procedures Act

(“RESPA”), 12 U.S.C. §§ 2601–2617. We affirm in part,

vacate in part, and remand.

I

Edwards bought a home in Cleveland, Ohio. Edwards

used Tower City Title Agency, LLC (“Tower City”) as her

settlement agent, and by referral of Tower City, she used First

American as her title insurer. Prior to Edwards’s home

purchase, First American and Tower City entered into a

transaction: First American acquired a 17.5% ownership

interest in Tower City for $2 million and, in the same

transaction, Tower City agreed to refer future title insurance

business to First American. First American also entered into

similar transactions with various other title agencies. In each

of these transactions, First American paid the title agency a

lump sum of money in exchange for (1) a minority ownership

interest in the title agency and (2) the title agency’s
6 EDWARDS V. FIRST AMERICAN CORP.

agreement to refer future title insurance business to First

American.

Edwards filed a putative class action against First

American, alleging that the transactions between First

American and the captive title agencies violated RESPA’s

anti-kickback provision, 12 U.S.C. § 2607. Edwards

originally moved to certify a class of home buyers referred to

First American by any of the 180 title agencies that First

American partially owned. The district court declined to

certify that class but ordered discovery to determine whether

it should certify the Tower City class, consisting of all home

buyers who were referred to First American by Tower City.

After completing discovery,Edwards moved to certifythe

Tower City class. The district court denied certification. We

reversed and held that “there is a single, overwhelming

common question of fact: whether the arrangement between

Tower City and First American violated” RESPA. Edwards

v. The First Am. Corp., 385 F. App’x 629, 631 (9th Cir. 2010)

(“Edwards I”). We ordered nationwide discovery on remand

and gave Edwards an opportunity to renew her motion to

certify a nationwide class. Id. After further discovery,

Edwards moved to certify a nationwide class consisting of all

home buyers who entered into a federally-related mortgage

transaction using one of thirty-eight title agencies that sold a

minority ownership interest to First American and, in the

same transaction, agreed to refer future title insurance

business to First American.

The district court again denied certification, now on the

basis that common issues did not predominate over individual

issues for the nationwide class. First, the district court

concluded that individual inquiries were required to
EDWARDS V. FIRST AMERICAN CORP. 7

determine whether First American overpaid for its ownership

interests in each title agency. Second, the district court found

that common issues did not predominate over individual

issues of reliance and causation for referrals. Third, the

district court concluded that transaction-specific inquiries as

a result of the different types of title agencies will not require

common proof related to First American’s liability. Edwards

appeals the district court’s order denying class certification.

II

We review the district court’s determination of class

certification for abuse of discretion and consider “whether the

district court correctly selected and applied Rule 23’s

criteria.” Parra v. Bashas’, Inc., 536 F.3d 975, 977 (9th Cir.

2008). The underlying legal questions, however, are

reviewed de novo, and “any error of law on which a

certification order rests is deemed a per se abuse of

discretion.” Conn. Ret. Plans & Trust Funds v. Amgen Inc.,

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

III

A

Federal Rule of Civil Procedure 23 allows a

representative to litigate on behalf of a class of similarlysituated individuals who are too numerous to join the

litigation. The party seeking class certification bears the

burden of establishing that the proposed class meets the

requirements of Rule 23. See Wal-Mart Stores, Inc. v. Dukes,

131 S. Ct. 2541, 2551 (2011); Zinser v. Accufix Research

Inst., Inc., 253 F.3d 1180, 1186 (9th Cir.), amended by

273 F.3d 1266 (9th Cir. 2001). To be certified, a proposed
8 EDWARDS V. FIRST AMERICAN CORP.

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) typicality, and (4) adequacy of representation. Fed. R.

Civ. P. 23(a). Rule 23(b) lists three alternative requirements

for class certification, and where, as here, plaintiffs seek class

certification under subsection (b)(3), they must demonstrate

the superiority of maintaining a class action and show “that

the questions of law or fact common to class members

predominate over any questions affecting only individual

members.” Fed. R. Civ. P. 23(b)(3); see also Zinser,

253 F.3d at 1189–92.

A court, when asked to certify a class, is merely to decide

a suitable method of adjudicating the case and should not

“turn class certification into a mini-trial” on the merits. Ellis

v. Costco Wholesale Corp., 657 F.3d 970, 983 n.8 (9th Cir.

2011). But Rule 23(a)(2) is not a pleading standard, so to the

extent necessary, our determination of commonality will

inevitably touch upon the merits of plaintiffs’ underlying

RESPA claims. See, e.g., Amgen Inc. v. Conn. Ret. Plans &

Trust Funds, 133 S. Ct. 1184, 1194 (2013); Wal-Mart Stores,

131 S. Ct. at 2551; Stockwell v. City & Cty. of S.F., 749 F.3d

1107, 1111–12 (9th Cir. 2014).

In 1974, Congress passed RESPA to protect consumers

from “unnecessarily high settlement charges caused by

certain abusive practices.” 12 U.S.C. § 2601(a). One of the

consumer-protection provisions is RESPA § 8, 12 U.S.C.

§ 2607, which furthers Congress’s goal 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). Paying kickbacks or referral fees to induce referrals
EDWARDS V. FIRST AMERICAN CORP. 9

of title insurance underwriting is part of the serious problem

Congress sought to remedy in RESPA. See S. Rep. No. 93-

866 (1974), reprinted in 1974 U.S.C.C.A.N. 6546, 6551.

The national title insurance industry is highly

concentrated, with most states dominated by two or three

large title insurance companies. See U.S. Gov’t

Accountability Office, Title Insurance: Actions Needed to

Improve Oversight of the Title Industry and Better Protect

Consumers 3 (Apr. 2007). A “factor that raises questions

about the existence of price competition is that title agents

market to those from whom they get consumer referrals, and

not to consumers themselves, creating potential conflicts of

interest where the referrals could be made in the best interest

of the referrer and not the consumer.” Id. Kickbacks paid by

the title insurance companies to those making referrals lead

to higher costs of real estate settlement services, which are

passed on to consumers without any corresponding benefits.

Section 8(a) of RESPA aims to eliminate these unlawful

kickbacks. It prohibits any exchange of a thing of value

pursuant to real estate referrals:

No person shall give and no person shall

accept any fee, kickback, or thing of value

pursuant to any agreement or understanding,

oral or otherwise, that business incident to or

a part of a real estate settlement service

involving a federally related mortgage loan

shall be referred to any person.

12 U.S.C. § 2607(a). RESPA defines a “thing of value”

broadly to include “any payment, advance, funds, loan,

service, or other consideration.” Id. § 2602(2). Courts
10 EDWARDS V. FIRST AMERICAN CORP.

commonly find a violation of § 2607(a) when (1) a payment

or thing of value was exchanged, (2) pursuant to an

agreement to refer settlement business, and (3) there was an

actual referral. See Galiano v. Fid. Nat’l Title Ins. Co., 684

F.3d 309, 314 (2d Cir. 2012); see also Egerer v. Woodland

Realty, Inc., 556 F.3d 415, 427 (6th Cir. 2009); Culpepper v.

Irwin Mortg. Corp., 491 F.3d 1260, 1265 (11th Cir. 2007). 

Notwithstanding the general prohibition of exchanging any

thing of value for a referral, a statutory safe harbor exempts

a payment from RESPA violation if the payment—despite

being made simultaneously with a referral—was “for goods

or facilities actually furnished or for services actually

performed.” See id. § 2607(c)(2).

Congress gave the Department of Housing and Urban

Development (“HUD”) authority to regulate under RESPA,

and HUD promulgated the corresponding regulations known

as Regulation X. See Pub. L. No. 94-205 § 10, 89 Stat. 1157,

1159 (1976). The Dodd-Frank Wall Street Reform and

Consumer Protection Act transferred the regulatory authority

of RESPA from HUD to the Consumer Financial Protection

Bureau (“CFPB”), and CFPB later republished Regulation X

without material changes. See 76 Fed. Reg. 78,977 (Dec. 20,

2011); 12 C.F.R. § 1024.1

Under Regulation X, a “referral” includes “any oral or

written action directed to a person which has the effect of

affirmatively influencing the selection by any person of a

provider of a settlement service for which the home buyer

will pay a charge”; and an exchange of a “thing of value” is

used as synonymous with a payment and does not require a

1 Because this case arose when HUD was the regulatory agency,

citations to Regulation X will still be to 24 C.F.R. § 3500.
EDWARDS V. FIRST AMERICAN CORP. 11

transfer of money.

2

24 C.F.R. § 3500.14(d), (f)(1). 

Regulation X further explains the safe harbor in § 2607(c)(2). 

See id. § 3500.14(g)(2) (“If the payment of a thing of value

bears no reasonable relationship to the market value of the

goods or services provided, then the excess is not for services

or goods actually performed or provided.”).

B

We first address whether individual inquiries on each of

the transactions are required due to the safe harbor in

§ 2607(c)(2) and 24 C.F.R. § 3500.14(g)(2). The district

court held that the statute and the regulation require Edwards

to prove that First American overpaid for its ownership

interests in each of the title agencies, and these individual

inquiries render class action improper.

CFPB submitted an amicus brief interpretingRESPA and

its own Regulation X. CFPB contends that § 2607(c)(2) does

not apply to the transactions here because First American’s

payment for ownership interests is not a payment for goods,

facilities, or services. CFPB urges us to give deference to its

interpretation.

As a threshold matter, we must consider the proper level

of deference to be given to the agency interpretation. Our

analytical framework depends on whether the agency is

interpreting the statute or the regulation. An agency’s

interpretation of an ambiguous statute is entitled to Chevron

deference when the interpretation is promulgated in the

exercise of the agency’s formal rule-making authority. See

Chevron, U.S.A., Inc. v. Nat’l Res. Def. Council, Inc.,

2 Here, we use the terms “thing of value” and payment interchangeably.
12 EDWARDS V. FIRST AMERICAN CORP.

467 U.S. 837, 843 (1984). An agency’s interpretation of its

own ambiguous regulation is generally entitled to Auer

deference. See Auer v. Robbins, 519 U.S. 452, 461 (1997)

(holding that an agency’s interpretation of its own ambiguous

regulation is controlling unless “plainly erroneous or

inconsistent with the regulation”) (internal citation omitted).

Here, CFPB is interpreting the statute, not the regulation. 

An agency’s interpretation of the statute—when presented in

an amicus brief—is not promulgated in the exercise of its

formal rule-making authority, so no Chevron deference is

warranted. See United States v. Mead Corp., 533 U.S. 218,

226–27 (2001); Price v. Stevedoring Servs. of Am., Inc.,

697 F.3d 820, 826 (9th Cir. 2012) (en banc). Even if the

terms “goods,” “services,” and “facilities” also appear in the

regulation, see 24 C.F.R. § 3500.14(g)(1)(iv), CFPB is in fact

interpreting Congress’s words in the statute, so we give no

deference to CFPB’s interpretation. Chase Bank USA, N.A.

v. McCoy, 562 U.S. 195, 210 (2011). In addition, because the

statutory terms at issue are not ambiguous, no deference is

merited. See Chevron, 467 U.S. at 842–43; United States v.

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

We nevertheless agree with CFPB’s interpretation, which

is consistent with the language of the statute. Neither RESPA

nor Regulation X defines “goods,” “facilities,” or “services,”

see 12 U.S.C. § 2602; 24 C.F.R. § 3500.2, so we begin with

the statutory text and “end[] there as well if the text is

unambiguous.” Satterfield v. Simon & Schuster, Inc.,

569 F.3d 946, 951 (9th Cir. 2009). Here, the meanings of

“goods,” “facilities,” and “services” are plain. “Goods” are

“tangible movable personal property having intrinsic value

excluding money”; a “facility” is “something (as a hospital,

machinery, plumbing) that is built, constructed, installed, or
EDWARDS V. FIRST AMERICAN CORP. 13

established to perform some particular function or to serve or

facilitate some particular end”; and “service” is “the

performance of work commanded or paid for by another.” 

See Webster’s Third New International Dictionary (1993);

see also American Heritage Dictionary (defining “goods” as

“product that is bought and sold” or “portable personal

property”; “facility” as “[a] building, room, array of

equipment, or a number of such things, designed to serve a

particular function”; 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 ownership interests purchased by First American are

equity shares, not goods, services, or facilities. First

American contends that two of the thirty-eight transactions at

issue also contained acquisitions of facilities, such as a title

plant3and buildings. This misses the point. The purchase of

ownership interests—which are not goods, services, or

facilities—disqualified FirstAmerican’s transactions from the

exemption under § 2607(c)(2), regardless of whether the

acquisitions may have also included facilities. We conclude

that § 2607(c)(2) cannot apply to First American’s

transactions as a matter of law, so the district court erred in

relying on § 2607(c)(2) to determine the propriety of class

certification.

C

We next address whether individual inquiries are required

because of § 2607(a). The district court interpreted the “thing

 

3 A title plant, according to First American, is “title records assembled

and maintained for the purpose of issuing title insurance.”
14 EDWARDS V. FIRST AMERICAN CORP.

of value”4in § 2607(a), as applied to the transactions at issue,

to be the amount that First American overpaid for its

ownership interests in each of the captive title agencies. The

district court relied on decisions of our circuit, as well as

those of other circuits, to conclude that the determination of

kickback amount requires individual comparisons between

the payment and the services provided. See, e.g., Lane v.

Residential Funding Corp., 323 F.3d 739, 745 (9th Cir.

2003); Bjustrom v. Trust One Mortg. Corp., 322 F.3d 1201,

1208 (9th Cir. 2003); Schuetz v. Banc One Mortg. Corp.,

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

First Am. Title Ins. Co., 672 F.3d 525, 530 (7th Cir. 2012);

Glover v. Standard Fed. Bank, 283 F.3d 953, 963–64 (8th

Cir. 2002). As a result, it concluded that an individual

inquiry on each transaction will be required to determine

whether First American’s purchase prices of the ownership

interests exceeded their fair market value.

The cases relied on by the district court are inapplicable

here, because they interpreted the statutory exemption under

§ 2607(c)(2), which we have concluded does not apply to

First American’s transactions. See Lane, 323 F.3d at 742;

4 CFPB, in its amicus brief, offers its own interpretation of the phrase

“thing of value” under Regulation X. 24 C.F.R. § 3500.14(d). As a

general rule, an agency’s interpretation of its own ambiguous regulation,

even if presented in an amicus brief, is controlling unless “plainly

erroneous or inconsistent with the regulation.” Auer, 519 U.S. at 461

(internal citation omitted). But no Auer deference is due when the

regulation at issue is unambiguous. See Christensen v. Harris Cty.,

529 U.S. 576, 588 (2000); Bray v. Comm’r of Soc. Sec. Admin., 554 F.3d

1219, 1225 (9th Cir. 2009). Here, the regulation’s definition of a “thing

of value” is unambiguous, see 24 C.F.R. § 3500.14(d), so we decline to

give Auer deference and interpret the regulation in accordance with its

plain meaning.
EDWARDS V. FIRST AMERICAN CORP. 15

Schuetz, 292 F.3d 1012. Also, these cases adopted and

applied HUD’s two-prong test interpreting § 2607(c)(2): first,

there must be actual performance of compensable services;

and second, the total compensation must be reasonably

related to the goods or services provided. See, e.g., Schuetz,

292 F.3d at 1012 (explaining that the HUD two-part test

reflects the statutory safe harbor in § 8(c)). But the two-prong

HUD test is also inapplicable here, because no services were

provided by the title agencies to First American. We hold

that the district court abused its discretion in denying class

certification based on an erroneous interpretation of

§ 2607(a), Conn. Ret. Plans, 660 F.3d at 1175, and that cases

alleging illegal kickbacks in violation of § 2607(a) are not

necessarily unfit for class adjudication.

But the question remains: Are there individual issues here

that could predominate over common issues such that class

action certification is inappropriate? See Fed. R. Civ. P.

23(b)(3). We hold that the answer to this question is no. 

RESPA does not—as the district court held—require

Edwards to pinpoint how much money First American paid

for the referral agreement as opposed to the equity interest. 

Rather, she can state a claim under RESPA § 8(a) by alleging

that First American paid a lump sum of money to each

captive title agency(the thing of value), and—in exchange for

that money—each title agency agreed to refer First American

future insurance (business agreement).

Absent § 8(c), nothing in the statute requires Edwards to

prove First American gave money to the title agencies only in

consideration for the referral agreement. The statute merely

prohibits the exchange of a “thing of value” for a referral

agreement. 12 U.S.C. § 2607(a). It and the regulation define

“thing of value” broadly to include a wide variety of
16 EDWARDS V. FIRST AMERICAN CORP.

considerations, and an exchange of a thing of value need not

involve a transfer of money solely as a kickback. See

12 U.S.C. § 2602; 24 C.F.R. § 3500.14(d). Here, Edwards

alleges that First American paid the title agency a lump sum

of money; in return, First American obtained two items: the

title agency’s equity interest and the title agency’s agreement

to refer future title insurance business. Whether this

transaction violates RESPA § 8(a) does not require inquiry

into individual issues of payment.

This conclusion comports with our understanding of

contract law. There is a “presumption that when parties enter

into a contract, each and every term and condition is in

consideration of all the others, unless otherwise stated.” Am.

Sav. Bank, F.A. v. United States, 519 F.3d 1316, 1324 (Fed.

Cir. 2008) (quoting Stone Forest Indus., Inc. v. United States,

973 F.2d 1548, 1552 (Fed. Cir. 1992)). Although the contract

terms were silent on how much of First American’s monetary

consideration was attributed to the referrals, the law does not

require every term of the contract to have a separately stated

consideration. Sarnoff v. Am. Home Products Corp.,

798 F.2d 1075, 1080 (7th Cir. 1986), superseded on other

grounds by Gardynski-Leschuck v. Ford Motor Co., 142 F.3d

955, 958 (7th Cir. 1998). The undivided monetary

consideration paid by First American must be treated in law

as consideration for both the equity interests and referrals. 

See Restatement (Second) of Contracts § 80, cmt. a (Am. Law

Inst. 1981) (“A single performance or return promise may

thus furnish consideration for any number of promises.”); 3

Williston on Contracts § 7:51 (4th ed.) (discussing that one

consideration may support several promises). An example

clarifies: Assume that if one buys a bottle of water and a

bottle of soda from a grocery store, and pays $5 in total, the

payment is for both the water and the soda, and value is being
EDWARDS V. FIRST AMERICAN CORP. 17

given for both. We decline to conclude that in this assumed

case, value has been given for only one and not for the other. 

In other words, Edwards need only prove the existence of an

exchange involving a referral agreement. Such proof does

not require inquiry into individual facts across all thirty-eight

captive title agencies.

Moving on to the commonality inquiry under Rule

23(a)(2),5 we ask whether the proposed class members share

a common question of law or fact, the answer to which “will

resolve an issue that is central to the validity of each one of

the [class members’] claims.” Wal-Mart, 131 S. Ct. at 2551. 

We have previously held that there was an overwhelming

common question of fact concerning the Tower City class. 

Edwards I, 385 F. App’x. at 631. There is also a common

question of fact concerning some of the transactions here:

whether First American’s pattern of conducts in entering into

similar transactions with the title agencies violates RESPA.6

The district court erred in concluding that the common

issue does not predominate over individual issues for the

proposed class members. “The Rule 23(b)(3) predominance

inquiry tests whether proposed classes are sufficiently

cohesive to warrant adjudication byrepresentation.” Amchem

Prod., Inc. v. Windsor, 521 U.S. 591, 623 (1997). Common

issues predominate over individual issues when the common

issues “represent a significant aspect of the case and they can

5 The district court did not address the commonality issue under Rule

23(a)(2) but seemed to have concluded that there was a common issue.

 

6 We hold in Part V that First American’s transactions with the newlyformed title agencies do not share common issues of fact with the

transactions with the preexisting title agencies. See infra Part V.
18 EDWARDS V. FIRST AMERICAN CORP.

be resolved for all members of the class in a single

adjudication.” 7AA Charles Alan Wright & Arthur R. Miller,

Federal Practice and Procedure § 1778 (3d ed. 1998). Here,

Edwards contends that First American utilized a nationwide

scheme of buying minority interests in the title agencies in

order to secure remittance streams from the agencies’ future

referrals. Edwards points to evidence showing this common

scheme, including several memoranda submitted to First

American’s board of directors asking for approval of these

transactions (referred to by the parties as the “Smoking Gun

Memos”). Some of these Smoking Gun Memos described

First American’s common strategy to purchase certain title

agencies’ minority interests to secure their exclusive

agreement to provide future referrals, and other Smoking Gun

Memos revealed that the primarymotivation underlying these

transactions was not to gain returns from the ownership

interests but to lock up remittance streams from future

referrals. For example, in the documentation for the purchase

of a minority interest in Doral Title, LLC, First American

presented to its board a justification reciting in part, “[b]uying

a minority interest now will ensure that we capture the

Company’s u/w remittance streams.” Similarly, in

connection with purchase of a minority interest in Equity

Land Title LLC, First American told its board that “the u/w

remittance stream is the primary source of our economic

returns for this investment.” Pointing in the same direction,

on purchase of minority share of Equity Title Insurance

Agency, Inc., First American presented to its board that “[a]s

a condition to closing the proposed transaction, [First

American] and Equity will execute an exclusive agency

agreement.” Besidesthe Smoking Gun Memos, Edwards also

points to the standard contract terms that First American

imposed on the captive title agencies to prohibit the agencies
EDWARDS V. FIRST AMERICAN CORP. 19

from issuing policies for First American’s competitors,

subject to limited exceptions.

We emphasize that at this stage of the litigation we are

making no conclusions on whether the evidence cited

above—including the Smoking Gun Memos and the alleged

standard contract terms imposed byFirst American—resolves

the merits of Edward’s underlying RESPA claims. Our focus

now is to decide whether the issues relating to the alleged

common scheme predominate over individual issues for the

proposed class, so that the case should be certified for class

adjudication. See Stockwell, 749 F.3d at 1111–12 (holding

that a common contention need not be one that will prevail on

the merits) (internal citation and quotation omitted). We cite

First American’s alleged practices not as bearing on the

merits but as bearing on First American’s common

scheme—as alleged in the complaint—that predominates over

individual issues for certain class members. This common

scheme, if true, presents a significant aspect of First

American’s transactions that warrant class adjudication:

Whether First American paid a thing of value to get its

agreement for exclusive referrals. We vacate the district

court’s denial of class certification in part as to these

transactions that involved the common scheme presented to

First American’s board of directors.7

7 We do not hold that common issues predominate over individual issues

on claims of the entire proposed class relating to all thirty-eight title

agencies. As explained in Part V, we affirm in part the denial of

certification as to the newly-formed agencies. See infra Part V. As to the

preexisting title agencies, we remand for the district court to decide in the

first instance which of these title agencies’ transactions with First

American fit into the common scheme, including the transactions

approved by First American’s board of directors pursuant to the “Smoking

Gun Memos.”
20 EDWARDS V. FIRST AMERICAN CORP.

IV

First American showed that on some occasions someone

other than the captive title agencies—such as lenders,

mortgage brokers, realtors, and other title agencies—

affirmatively influenced the home buyers’ choice of First

American as their title insurance underwriter. The district

court held that the third parties’ influences constituted

individual issues that render class adjudication improper. We

disagree. Other sources of referral do not defeat the

predominant common question of fact, i.e., whether the title

agencies have contractual obligations to refer their customers

to First American.

For a referral to violate RESPA, it need not be the

exclusive or even the primary reason that influenced a home

buyer’s choice of a real estate service provider. See 24

C.F.R. § 3500.14(f)(1) (defining a referral as “any oral or

written action directed to a person which has the effect of

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 all of those who

affirmatively influenced the selection of a title insurance

provider). Here, Edwards contends that First American used

standard, written contracts to impose an obligation on the

captive title agencies to refer future title insurance business,

subject to some limited exceptions. If this is true, the title

agencies’ contractual obligations affected the entire class of

home buyers as a result of First American’s standard terms. 

See Fed. R. Civ. P. 23(b)(3) advisory committee note (“[A]

fraud perpetrated on numerous persons by the use of similar

misrepresentations may be an appealing situation for a class

action . . . .”). Even if other service providers may have also

influenced the home buyers’ decision to choose First
EDWARDS V. FIRST AMERICAN CORP. 21

American, there remains a predominant, common question of

whether the title agencies’ contractual obligations

affirmatively influenced the home buyer’s choice of First

American.

V

The district court denied certification on the additional

ground that the different types of title agencies will require

individual, case-by-case proof on First American’s liability. 

First American contends that in the proposed class, there are

three unique types of title agencies, so that separate inquiries

on each type will be required.

First, First American contends that its transactions with

twelve of the thirty-eight title agencies are affiliated business

arrangements (“ABA”) that are exempt from RESPA

violations under § 2607(c)(4). An ABA exemption under

§ 2607(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 disclosed the affiliated

relationship; (2) it does not require the person referred to use

any particular service provider; and (3) the only thing of

value received from the arrangement 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 determine if each of the twelve

agencies fits the ABA exemption.

When defendants opposing class certification raise a legal

defense that may defeat commonality, the district court

cannot assume its validity but should make a threshold

determination on the legal merits. The district court need not

take evidence to determine the legal merits of defendants’
22 EDWARDS V. FIRST AMERICAN CORP.

defense, because otherwise it would defeat the purpose of

class certification. But if an alleged defense is invalid as a

matter of law, the defense will not give rise to individual

issues and thus cannot be a valid basis for denying class

certification.

First American’s defense on the basis of § 2607(c)(4) is

invalid as a matter of law. Section 2607(c)(4) exempts a

transaction from a RESPA violation when a person who

partially owns a settlement service provider refers business to

the service provider, and the owner receives nothing other

than a return of the service provider’s shares. But here, First

American—the partial owner of the title agencies—did not

refer business to the title agencies. To the contrary, the

service provider (i.e., the title agencies) referred business to

the partial owner (i.e., First American). In addition, in these

transactions, First American did not receive any payments

from the title agencies as a return on its ownership interests. 

No individual inquiries on the twelve title agencies’ ABA

status will be required, because § 2607(c)(4) cannot apply to

these transactions as a matter of law.

Second, First American contends that certain agencies are

majority-owned by First American, and First American

cannot refer business to itself. First American cites the

Supreme Court’s decision in Freeman, 132 S. Ct. at 2043–44,

which held that to establish a violation of § 2607(b), a

plaintiff must demonstrate that a charge for settlement

services was divided between at least two persons. But

Freeman is inapplicable here: First American and its

majority-owned title agencies are not the same person, but

separate legal entities. No separate inquiries are necessary

merely because First American is the majority owner of

certain captive title agencies.
EDWARDS V. FIRST AMERICAN CORP. 23

Third, the district court concluded that First American’s

transactions with the newly-formed title agencies do not raise

common issues sufficient for class action adjudication. We

agree and affirm the district court’s denial of certification as

to the newly-formed title agencies. First American contends

that twelve of the thirty-eight title agencies were not

preexisting when First American decided to purchase their

ownership interests. Instead, First American and third party

investors formed and invested in these title agencies, and the

investors’ ownership interests were proportional to their

capital investments.

Edwards alleges in the complaint that First American

engaged in a nationwide scheme of securing referral

agreements by offering to purchase ownership interests of

various title agencies. However, First American’s

transactions with these newly-formed agencies represent a

different set of facts from the nationwide scheme alleged in

the complaint. We conclude that these transactions do not

share common questions of fact between First American and

the transactions with the preexisting title agencies and thus do

not require common proof to resolve the validity of each of

the class members’ claims. Wal-Mart, 131 S. Ct. at 2551.

VI

Having concluded that common issues did not

predominate over individual issues for the proposed class, the

district court declined to address the remaining prerequisites

of class certification, including whether a class action is a

superior method of adjudication, whether Edwards and her

counsel are adequate, and whether the putative class is

ascertainable. Edwards urges us to consider these questions

in the first instance on appeal and certify the proposed class. 
24 EDWARDS V. FIRST AMERICAN CORP.

We decline to do so. Although we have concluded that

common issues predominate over individual issues for a sub

class of home buyers referred by the title agencies that were

subject to First American’s common scheme, the remaining

prerequisites of class certification are best addressed by the

district court, which is “in the best position to consider the

most fair and efficient procedure for conducting any given

litigation.” Stockwell, 749 F.3d at 1116–17 (internal citation

omitted).

We affirm the district court’s denial of class certification

in part as to the newly-formed title agencies, vacate the

district court’s denial of class certification in part as to the

remaining title agencies, and remand for further proceedings.

Each party shall bear its own costs on appeal.

AFFIRMED IN PART, VACATED IN PART, AND

REMANDED.