### INTHE UNI TED S TATESCOU RT OFAPPEALS FORTHE FIFTH CIRCU IT

N o. 09- 10127 JOH N M I M S, i ndivi dua l l y ando n b e hal f o f a l lo t he r s s i m i l ar l y s i t uat e d; LU CYM I M S, i ndivi dua l l y ando n b e hal f o f a l lo t he r s s i m i l ar l y s i t uat e d; a nd H E L E N C O T T O N R A G L A N D , i n di vi du al l y an d on beh al f of al lot h ers s i m i l ar l y s i t uat e d P l ai n t i f fs- A pp el l ees v. S TE W ART T I TL E GUARANTYCOM PA NY D efen d a n t- A p p ell a n t

A pp ealf

rom t h e U n i t ed S t ates D i st ri ctC ou rtf or t h e N ort h ern D i st ri ctof Tex as , D al l as D ivi s i o n

B ef ore K IN G , D AV IS an d B E N AV ID E S , C i rcui tJu dg es. W . E U G E N E D AV IS, C i rcui tJu dg e: D e fe n d a n t S t e w a r t T it le G u a r a n t y (“ S t e w a r t” ) a p p e a ls t h e d is t r ic tc o u r t ’s ord er ce rti fyi n g a cl a ss i n this case all eg i n gv i olati on s of t h e R ea lE state Se t t l e m e ntPr o c e dur e Ac t( “ RE SPA” ) and r e l at e d s t at e l aw c l ai m s . Bas e d o n o ur c o n c l u s i o n t h a ti n d iv i d u a lfa c t u a li s s u e s p r e d o mi n a t e t h e R ES PA c l a i m, we r e v e r s e t h e d i s t r i c t c o u r t ’ s o r d e rc e r t i f y i n ga c l a s s o n t h a tc l a i m. A l t h o u g h we see no l egal i m ped i m en tt o t h e cer t i f i cat i on of

a cl ass o n th e s tate l aw cl ai m s, give n o urr e ve r s alof the fe de r alc l as s c e r t i f i c at i o n, w e r e m andt o a l l o w t he United States Court of App eals

Fifth Circuit 

### F I L E D December

9, 2009 Cha rl es R. F ulb ru g e II I ClerkN o. 09- 10127

2 di s t r i c tc o ur tt o c o ns i de rw he t he rt o e xe r c i s e i t s di s c r e t i o n to ret ai n pe nde nt ju r is d ic tio n o v e rth o s e cla im s . I. S tew a rt i s a ti tl e insu ra n ce u n d erw ri ter th a t us es a n etw ork of a ge n ts t o s e l la nd i s s ue t i t l e i ns ur anc e po l i c i e s . Pl ai nt i f fs a l l e ge t hatt he y ar e a m o ng num er ous c ons um er s w ho r ef i nanced t hei rhom e m or t gage s and fai l ed t o r ec eive a m an da t ory di scoun ton thei r prem i u m s f or new t i t l e i n suran ce pol i ci es acqu i red f

rom Stew ar t. R e si den t i all en ders i n T exas gen eral l y requ i re b o r r o w e r s to p u r c h a s e tit le in s u r a n c e to p r o te c t t h e le n d e ra g a in s t d e fe c ts in t i t l e t o t h e property as w el las t h e l en der’ s f i rstl i en posi t i on . W h en a borrow er ref i n an ces an exi st i n g m ort gag e, t h e n ew l en der requ i res a n ew t i t l e pol i cy f or i t s b e n e f

i t . T e x a s De p a r t m e n to f I n s u r a n c e ’ s Ra t e Ru l e R- 8 e n t i t l e s t he borrow er t o a di scoun ton a p ol i cy i ssued af t er r ef i n an ci n g i f

t h e pol i cy i s i ssued w i t hi n se ven ye ar s of t he c l os i ng of

t he pr i orm or t gage . The di sc ounts t ar t s at 40% on renew al s occurri n g w i t h i n 2 years of t h e t i m e a pri or pol i cy w as i ssued an d d ecreases by 5% f or each ad di t i on al year af t er t h e pri or pol i cy u p t o seven years. I n order t o qu al i f y f or th e d isc ou n t , R u l e R

- 8 requ i res t h at t h e preexi st i ng m or t gage ( a) be f ul l y t aken u p, r enew ed, ex t ended o rs at i sf i ed, and (b) h ave been previ ou sl y i n sured (w i t h l en der’ s t i t l e i n suran ce) . See B AS I C M ANUAL OF R UL ES , R AT ESAND F ORMSF OR T HE W RIT ING OF T I T L E I NS URANCE I N T HE S TATE OF T EXAS § III R AT E R UL E R

- 8. The pl ai nt i f

fs a l l e ge t hatt he y r e f i nanc e d t he i rl o ans w i t hi n t he di s c o unt peri od an d di d n otreceive t h e R

- 8 rei ssue credi tto w h i ch they cl ai m t h ey w ere e nt i t l ed. The y f

ur t he ra l l e ge , w i t h s am pl i ng da t a t o s upp o r tt hata l l e ga t i o n, t hatSt e w ar t , t hr o ugh i t s a ge nt s , c o ns i s t en t l y fai l e d t o pr o vi de t he r e i s s ue i n suran ce di scoun tan d that Stew artan d the agen t s s pl i tt h e i l l egal, un earn ed c h a r g e s o n th e p o lic ie s .N o. 09- 10127

See Bertul liv . Indep ende nt Asso c. of Contine ntalPilo ts , 24 2 F .3d 2 90, 294n .11 (5th 1 Cir. 2 001 ) (“[S]tanding is an inherent prerequisite to the class certificationin quiry . . de spite the limited n ature of a Rule 23(f) appeal.” Bert u ll iapp lie d Article I IIstan ding an alysis to the 3 O n t h ese fact s, the pl ai n t i f fs all ege, i n add i t i on t o vari ou s s t ate l aw cl ai m s, a v iola tion of § 8 (b ) of th e R e a l E sta te S e ttlem e n t P ro c e d u r e s A ct (“R E S P A”), w h i ch provides: N o p erso n sh a l lgive a n dn o p e r s o n s h a l lacce p t an y p ortion , sp l i t, o r p e rc e n ta g e o f a n yc h a rg e m a d e o r r e ce ive dforth e re n d e rin gof a realesta t e set t l em en tservi ce i n conn ect i on w i t h a t ran sact i on i n vol vi n g a federal l y- rel ated m ort gag e l oan ot h er t h an f or s ervi ces a c tu a llyp e r fo r m e d . 1 2 U .S .C . § 2 6 0 7 (c ). S tew a rt f

i l ed a m oti on to dism i ss a rg u i n g th a t t h e p l a i n ti ffs fa i l ed to state a vi o l at i o n o f

RE SPAa s a m at t e ro f l aw. The di s t r i c tc o ur tde ni e d t he m o t i o n. Mi m s v. S t ew artTi t le G u ar. Co. , 5 2 1 F .S u p p .2d 5 6 8 (N .D . T e x . 2 0 0 7 ). P la in tiffs t h en m oved f

or c l ass c ert i f

i cat i on . Th e di st ri ctcou rtg ran t ed t h e m ot i on f or c l ass c e r t i f i c at i o n f

o rb o t h t he fe de r ala nd s t at e l aw cl ai m s, w i t h m o di f i c at i o ns n a r r o w in gth e p r o p o s e dcla s s . Mi m s v. S t ew artTi t le G u ar. Co. , 524 F. R . D . 482 ( N . D . T ex. 200 8) . Stew art t h en f i l ed a P et i t i on f

or Perm i ssi on t o A pp ealun der F e d e r a l R u le o f C iv il P r o c e d u r e 2 3 (f). T h is co u r t g r a n te dth e p e tit io n . II . S t ew artargu es f

i rstt h at t h e di st ri ctcourterr ed i n cer t if ying t he pl ai n t i f

fs’ p r o p o s e dR ES P A c l a s s wh e n t h e n a me dp l a i n t i f fs l a c k s t a n d i n gt o a s s e r tac l a i m. A l th ou gh S tew a rt referen ces A rti cl e III st a n d i n ga n dci tes th e a p p rop ri a te fa c t o r s f

r o m L u ja n v . D efe n d e rs of Wild lif e , 5 04 U . S. 5 55 , 5 60 ( 19 92 ) , t he s ub s t a nc e o f

i t s a r g um e nt i s t ha tt he p l a i nt i f fs fa i lt o s t a t e a c l a i m u nd e rRESPA o n th e m e r its . If

th e d e fe n d a n ts w e r e a c tu a llych a lle n g in gth e p la in tiffs ’A r tic le I I I s t an di n g, t hi s c o ur tc o ul d c l e ar l y ad dr e s s t hati s s ue b e f o r e de c i di ng t he p ro p rie tyof cla ss ce rtifica tion . T h e re is n o se rio u s q u e stio n th a t th e p la in tiffs 1N o. 09- 10127

pl aintiff s’claim s.) 4 h ave s t an di n g t o bri n g t h i s cl ai m . T h ey h ave all e g e d a n i nj u ry- i n - fact (o v e r p a y m e n t o f p r e m iu m s fo rtit le in s u r a n c e is s u e du p o n re fin a n c in gth e ir m o r t ga ge ) , c aus at i o n (t he de fe nda nt s o ve rbi l l e d f o rt he prem i um s ) a nd r e dr e s s ab i l i t y (i f

pl ai nt i f

fs a r e s uc c e s s f

ul , t he y w i l lb e r e f unde d t he o v e r p a y m e n t). St e w ar t ’ s a r gum e nta sks t hi s c o ur tt o a ddr e s s , no tAr t i c l e I I I s t and i ng h o w e v e r , b u t w h e th e r th e p la in tiffs ’ a lle g a tio n s s ta te a c la im u n d e rR E S P A . W e m a yn o t r e a c h th a t is s u e b e c a u s e o u rre v ie w o f a n a p p e a l u n d e rR u le 2 3 (f) is l i m i t ed a nd d o e s no tpe r m i ta g e ne r ali nqui r y i nt o t he m e r i t s o f t he pl ai n t i f

fs’ c l ai m . Thi s c our taddr es se d t he s c ope of i t s j uri sdi c t i on i n a R ul e 2 3(f ) appeal i n R egentsof

t h e Un i vers i ty of

Calif ornia v. C redi tS u i sseFi rstB ost on . R u l e 23(f

) st ates t h at "[ a] courtof app eal s m ay i n i t s di scr et i on perm i tan app ealf

rom an order of

a di st rict cou rtgran t i n g or d e n y i n gcla s s a c tio n ce r tific a tio n u n d e rth is ru le if a p p lic a tio n is m a d e t o i twi t hi n t e n d a y s a f t e re nt r yo f

t he o r d e r . " FED. R. CI V. P. 23(f ) . Th e t extof

t he r ul e m akes pl ai n t hatt he s ol e o r dert hatm ay be appeal ed i s t he c l as s c er t i f i c at i on; " no o t heri ss u es m ay be ra i sed . " B ell , 42 2 F . 3 dat 31 4 . T h e fact tha t a n is s u e i s releva n t t o bo t h c l as s c e r t i f

i c at i o n and t he m e r i t s , ho w e ve r , do e s no tpr e c l ude revi ew of

t h at i ssue.

. . . A l t hough w e m ay notconductan i ndependenti nqui r y i nt o t he l egal or fact u alm eri tof

t h i s c ase as t h ou gh w e w ere r evi ew i n g a m ot i on und erFeder alR ul e o f C ivi lPro c edur e 1 2(b) ( 6) or 5 6 , w e m ay ad dress argum en t s t h at i m pl i cat e t h e m eri t s of pl ai n t i f

fs' cause of ac t i o n i ns o fara s t ho s e a r gum e nt s a l so i m pl i c at e t he m e r i t s o f t he c l as s c e r t i f

i c at i o n de c i s i o n. R egentsof

t h e Un i v. of

Cal. v. C redi tS u i sseFi rstB ost on , 48 2 F . 3 d37 2 , 38 0 ( 5 th Ci r . 2 00 7) . I n R eg en ts , t he pl ai nt i f fs f i l e d s ui ta ga i ns ts e ve r alb ank s a l l e gi ng t h at t h e ban ks en t ered i n t o partnershi ps an d tr an sa ctio n s w i t h E n ron Cor p o r a t i o n t h a t a l l o we d En r o n t o m i s s t a t e t h e i r f i n a n c i a l s t a t e m e n t s . TheN o. 09- 10127

5 di s t r i c tc o ur tc e r t i f

i e d ac l as s o f pe r s o ns w ho pur c has e d Enro n s e c ur i t i e s dur i ng t he c e r t ai n t i m e per i o d d ur i ng w hi c h t he s e t r ans ac t i o ns w e r e r e po r t e d. The cl a ss certifi ca ti on de ci sion rested on the distri ct cou rt’ s con cl u sion ( 1 ) th a t a deceptive actun der rul e 10b

- 5( c) i n cl u des pa rt i ci pa t i n g i n a t ran sact i on w h ose pri nci palpurpo se and ef fec ti s t o c r eat e t he false a ppear ance of r eve nues, ( 2) t hat r ul e 10 b- 5( a) ’ s pr o hibi t i o n ag ai ns t s c he m e s t o de f r aud give s r i s e t o j o i nta nd s e v e r a l lia b i lityfo rd e fe n d a n ts w h o co m m it in d iv id u a l a c ts o f d e c e p tio n in f ur t he r anc e o f

t he s c he m e a n d ( 3) t hatpl ai nt i f fs w e r e e nt i t l e d t o r e l y o n t he c la s s w id e p r e s u m p tio n o f r e lia n c e fo ro m is s io n s a n dfr a u do n th e m a r k e t. I d. at 37 8. Thi s c o ur t r e ve r s e d t he o r de rc e r t i f yi ng t he c l as s b e c aus e i tf o und t hatt he d is tr ic t c o u r t e r r e db y i n c lu d in gin its d e fin itio n o f “d e c e p tiv e a c t” n o t o n ly fai l u re to sati sf

y a du t y t o d i scl ose m ater i alinf orm ati on to the plai n t i f f, bu tal so fa ilu r e to s a tis f

y t h a t d u tyb ym e a n s o f a s c h e m e o ra c t. I d. at 384 . A n act ca n n ot be de cep tive u n d er § 1 0 (b) w h ere the a ctor, l i k e t h e ba n k s, h a dn o d u ty to d is c lo s e . Id . a t 3 8 6 . W i th ou t a “de cep tive act” or straigh tf orw a rd fa i l u re to di sc l os e, t he pl ai nt i f fs w er e no tent i t l ed t o th e p resum pt i on o f r el i ance on an om i ssi on un der t h e f rau d-on- t h e- m arket t h eory, w h i ch w as cr iti ca l to cl ass c e r tific a tio n . W ith o u t a c la s s w id e p r e s u m p tio n o f r e lia n c e , t h e p la in tiffs w o u ld be l ef tto p rove i n di vi du alrel i an ce on t h e defen da n t s’condu ctprecl u di n g cl ass c e r tific a tio n . I

d. a t 3 8 3 . T h e r e fo r e cla s s ce r tific a tio n w a s im p r o p e ra n dth is court reversed. In doi n g so, t h i s court by necessi t y consi dered the defend an t s’ ar gum e n t s a g a i n s tc l a s s c e r t i f i c a t i o n t h a ta l s o i m p l i c a t e dt h e me r i t s o f t he pl ai n t i f fs’cause of

act i on , bu tonl y t o t h e ext en tt h e m erits a ffec t ed w h et h er c la s s is s u e s w o u ldp r e d o m in a te th e litig a tio n . S t ew ar tr e l i e s o n W

ash i ngt on v. C S CC redi tS ervi cesI n c. , 1 9 9 F. 3 d263 ( 5t h Ci r . 2 00 0) , t o sup po r ti t s co nt e nt i o n t hatt hi s co ur tca n c o ns i de rw he t he rt he pl ai n t i f fs h a v e st ated a cl ai m i n an app ealof cl ass c ert i f

i cat i on . Th at r el i an ce i s m i spl ac e d. I n W ash i ngt on , th e p la in tiffs b r o u g h t a cla im u n d e rth e F a irN o. 09- 10127

6 C red i t R ep ortingA ct (“F C R A”) . T h e d i stri ct co u rt ce rti fi ed a clas s b a sed o n i ts i n t erm edi ate r u l i n g t h at t h e “ pl ai n t i f f can bri n g an act i on [u n der t h e F C R A ] f or fai l ur e t o ‘ m ai nt ai n [ t he ] r e as o nab l e pr o c e dur e s ’r e qui r e d b y § 1 68 1e ( a) w i t ho ut fi r st sho w i ng t hat a r epo r t w as di sc l os ed i n vi ol at i on of § 1681b. ” Id . at266. T h i s court f

i rst ad dressed t h i s cruci al i ssue bef ore ad dressi n g t h e m eri t s of cl ass c e r tific a tio n . Id . T h e inq u i ryw a s p h ra sed as a qu estion of “i n d ivid u a lstan d i n g”, b u t ad d ress ed the m erits of t h e p l a i n ti ffs’cl a i m s, n ot trad i ti on a lA rti cl e III st an di n g u n der Luj an . I d. a t 2 6 5 . H o w e v e r , W ash i ngt on do es n ot su p p ort a concl u si on t h at t h i s c ou rtm ay a d d re ss t h e m eri t s of al lapp eal s of

cl ass c er t i f i c at i on dec i si ons , bec ause a l at er dec i si on of t hi s c our t r ec ognized t hat W ash i ngt on w as i n a di f ferent proc edu ralpost u re t h an t h i s c ase. S ee B e rtu lli , 2 4 2 F .3 da t 2 9 4 . W

ash i ngt on w a s a p p e a le du n d e r2 8 U .S .C . § 1 2 9 2 (b ), n o t R u le 2 3 ( f ) . T h e c o u r tc e r t if

ie dfo ra p p e a l “ a llis s u e s fa ir lyp r e s e n t e d ” in th e c o u r t ’s o rd e r, s o t h i s c ou rt ’ s app el l ate r evi ew w as not l i m i t ed to i ssues of cl ass c e r tific a tio n . Id . A c c o r d in g l y , u n d e rth e s ta n d a r dru le a p p lic a tio n to a p p e a ls u n d e rR u le 23(f ) , t he m er i t s of

t he pl ai nt i f

fs’c l ai m s und er§ 8(b) of R E SP Am ay o nl y be c o n s id e r e din th is ca s e if re le v a n t t o th e cla s s ce r tific a tio n q u e s tio n . II I. Thi s c o ur tr e vi e w s t he c ert i f i c at i o n o f

a c l as s f

o ra bus e o f

di s c r e t i o n. S t i rm an v. Exxon Corp . , 2 8 0 F . 3 d 5 5 4 , 5 6 1 ( 5 t h C i r . 2 0 0 2 ) . We r e v i e w de no vo wh e t h e rt h e d i s t r i c tc o u r ta p p l i e dt h e c o r r e c tl e g a ls t a n d a r dt o g r ant c e r tific a tio n . W

a s h ing to n , 1 9 9 F . 3 dat 26 5 -67 . W h ere a d i stri ct co u rt b a ses i ts l egal an al ysi s on an err on eou s un derst an di n g of t h e governing l aw , i tha s abused its d is c r e tio n . R eg en ts , 4 82 F . 3d a t3 80. U n der F ed. R . C iv. P . 23(b) ( 3) , a cl ass act i on m ay be m a in ta ined i f “ t h e courtf

i n ds t h at questi on s of l aw or fact c o m m o n to c l a s s m e m b e r s p r e d o m in a te o v e ra n yq u e s tio n s a ffe c tin go n lyN o. 09- 10127

7 in d iv id u a l m e m b e r s , a n dth a t a cla s s a c tio n is s u p e r io rto o th e ra v a ila b le m et h ods f

or fai rl y an d ef

f i ci en t l y adj u di cat i n g t h e con t roversy. ” S t ew artargu es t h a tt h e d i s t r i c tc o u r tfa i l e dt o u n d e r t a k e a r i g o r o u s a n a l y s i s o f t h e c l a s s c l a i ms t o deter m i n e i f

cl ass i ssues predom i n ate and t h e cl ass acti o n is the su peri or m e th o db yw h ic h to tr yp la in tiffs ’cla im s . IV . U n derst an di n g S t ew art ’ s argum en tagainstcl ass c ert i f i cat i on requi res som e backg roun d on R E S P A . Plai n t i f fs’federalcl ai m s asser ta v iola t i on of S ect i on 8(b) of

R E S P A , w h i ch st ates: N o p erso n sh a l lgive a n dn o p erso n sh a l lac c e p t a n y po rti on , sp l i t, o r p e rc e n ta g e of a n yc h a rg e m a d e o r re ce ive dfo r th e re n d e rin gof a realest ate s et t l em en tservi ce i n con n ect i on w i t h a t ran sact i on i n vol vi n g a federal l y- rel ated m ort gag e l oan ot h er t h an f or s ervi ces a c tu a llyp e r fo r m e d . 12 U . S. C. § 2 60 7(b) . Thi s pr ovi si on was de s i gne d t o pr o hibi tki c kb ac k a nd ref erralf ee arrang em en t s t h at h ad i n creased cl osi n g cost s t o realest ate buyers. I tpr o hibi t s a pe r s o n who p e r f o r m s a s e t t l e m e nts e r vi c e f r o m g ivi ng o rr e ba t i ng anypo r t i o n o f

t he c har ge t o a ny o t he r pe r s o n who d i d no tpe r f o r m a s e t t l e m e nt s e r v ic e . Haugv . Ba n k of Am, N. A. , 3 1 7 F .3 d8 3 2 , 8 3 6 ( 8 th C ir . 2 0 0 3 ); Krzal i cv. R epu bl i c Tit le Co. , 3 1 4 F . 3 d8 7 5 , 8 8 0 ( 7 t h C i r . 2 0 0 2 ) . S e c t i o n 8 (c ) o f R ESPA c o nt ai ns s e ve r alex cepti o ns t o t he g e ne r alr ul e a nd s pe c i f i c al l y al l o w s t he pa ym en tof

a fee “by a ti t l e com pa n y t o i t s du l y ap poi n t ed ag en tf or s ervi ces a c tu a llyp e r fo r m e din th e is s u a n c e o f a p o lic yo f tit le in s u r a n c e .” 1 2 U .S .C . § 2 6 0 7 (c )(1 )(B ). T h e “ rea l e sta te set t l em en tservi ce” at i ssue i n t h i s c ase i s t h e provi si on of t i t l e i n suran ce. Th e charge (t h e t i t l e i n su ra n ce prem i u m ) i s s pl i tbetw een S t ew artan d i t s agen t s w h o act u al l y sel lt h e t i t l e i n suran ce orrei ssue i n suran ce. T h e qu est i on i n t h i s case n arrow s t o w h et h er S t ew art cha rges a fee an d sh aresN o. 09- 10127

8 t hatfe e w i t h i t s a ge nt s “ o t he rt han f o rs e r vi c e s a c t ual l y pe r f o r m e d. ” Ther e i s no q u e s tio n th a t b o th S te w a r t a n dits a g e n ts p e r fo r m s e r v ic e s in r e tu r n fo rth e tit le i ns ur anc e pr e m i um . The pl ai nt i f fs a r gue t hatb e c aus e Te xas l aw se t s t he pr e m i um r at e t hat St e w ar tm us tc har ge a nd t he di s c o unto n t hatpr e m i um St e w ar tm us ta l l o w o n r e i s s u e p ol i ci es , o nl y t he di s c o unt e d p o r t i o n o f t he pre m i um i s f

or “ se r vi c es ac t ual l y per f or m ed. ” Th ey ar gue t hatt he di sc ountt hat w as i m pr o pe r l y w i t hhe l d i s a c har ge f o rw hi c h no s e r vi ces are pe r f o r m e d, a nd th e r e fo r e a v io la tio n o f § 8 (b ) o f R E S P A . T h e pl ai n t i f

fs’argu m en tt h u s r est s on t h e t h eory tha tthe t i t l e i n suran ce pr e m i um c an be spl i t b e t w e e n t he a m o unta l l o w e d un de rRul e R- 8 af t e rt he ap propri ate di scoun t i s ap pl i ed an d the am ou n ti n excess of t h at am ou n t ; t h ey a rg u e t h at t h i s exces s am ou n trepresents a charge f or w h i ch n o servi ces w ere act u al l y perf

orm ed. I n i t s r u l i n g on Stew art ’ s m ot i on to d ism i ss, t h e di st ri ct c our tac c ept ed pl ai nt i f fs’ar gum entt hatfee s c harge d by at i t l e a gentt hat e xc e e de d t he v al ue of the agent ’ s s e r vi c e s w e r e i n t he na t ur e o f ki c kb ac ks a nd g a v e ris e to a cla im u n d e r§ 8 (b ): A l th ou gh P l a i n ti ff

’ s all eg a ti on s ar e v a gu e, th ey ca n be fa i rl y re a dto suppor tt he f

ol l ow i ng ar gum ent : S tew ar tc harge d ex c es sive pr e m i um s . St e w ar t ga ve , and t i t l e a ge nt s a c c e pt e d, a po r t i o n o f t he exc es sive pre m i um s. The por t i on ac c ept ed byt he t i t l e a ge nt s w as excessivea nd n o t“f

o rservi ces act u al l y perf orm ed, ” bu ti n st ead w ere i n t h e na t u re of

ki ckba cks or ref

erralfees. Mi ms , 521 F. R . D . 2d 568 , 571- 72 ( N . D . T ex. 2007) , c i t i ng Boul w ar ev . Cr o s s land Mo r tgageCor

p. , 291 F . 3d261 , 265 ( 4t h Ci r . 2 00 2) , a nd Pa tin o v. L a w y er s Title I ns . Cor p. , N o. 3: 06-C V

- 147 9- B , sl i p op. at 6 ( N . D . T ex. Jan . 11 20 07). H ow ever, t he di s t r i c tc o ur tdi d no tf i nd a n a ut o m at i c v i o l at i o n o f § 8 (b) r e l at e d t o t he excess cha rge. R ather i tf ou n d that “Stew art ’ s spli tw i t h the ti t l e agen t s m ay n ot h a v e b e e n forse rv ice s a ctu a ll yp e rfo rm e d , a n dh e n ce inv iola tion of se ctio n 8 (b ),N o. 09- 10127

The Secon d Circuit has rej ected thi s agency rule in the context of f acts similar tothis 2 case (and distinguish able from those in O’Sullivan) base d on its conclusio n that section8(b) did not impose pricecontrols and does not prohibit “overch arges.” Kruse , 383 F.3d at 55-5 6. The Thir d C ircuit declined to reachthe question w he the ri tshould defer to the agency interpretationbecau se it found that Section8 doe s not provi de acause of actionfor overch arges . Santi ago , 4 1 7F .3 d at 3 8 7 . Th e FourthC ircuith a s decidedac a se indi stinguish able fro m thi s one and hel dt hat becau se the title insurer and its a ge nts perfor me d se rvice s in return forthe char ges they coll ect ed, therewasno violatio n of RESPA § 8 (b) b ec au seit isnotap ricec ontrolst atute . Arthu r v. Ticor Tit le I nsu rance Co. of F

lorida , 5 6 9F .3 d 1 5 4(4 C ir . 2 0 0 9). Arth ur also rej ected the idea that the charge s can be brokeninto th multiple piece s (theportionvalid under state insurance l aw and the excess) b ased on HUD regulation s an d policystatem en t s . Citing ca ses from multiple circuit s, Arth ur states that “Section 8(b) does not prohibit charging ‘too much’ for services actu ally perfo r m ed ; in s tead theyh ave held that an allegatio n that services were not performed is necessary for liab ility toatt achun der Section8 (b). ” Id. at15 9-16 0. Bec ause of the limitedn ature of our review of the district court’s class certificationdecision , we need not resolve the merits of whetherthis regulationis entitled to deference on the facts of this ca se which does not involve an allegation of akickb ack . 9 i f t h e t i t l e agen t ’ s c om pen sati on w as not r eas o n a b le in rel ati on t o t h e servi ces th eype rform ed . ” Mi ms , 5 2 1 F .R .D . 2 da t 5 7 3 . Pl ai nt i f fs’t heor y (w hi c h w as ac c ept ed by t he di st r i c tc our t) t hatfee s c an be spl i tbetw een fees reason able i n rel ati on t o t h e servi ces perf orm ed an d those th a t a r e n o t c o m e s fr o m a H U D in te r p r e ta tio n o f R E S P A . Asi n gl e servi ce provi der . . . m ay be l i able u n der S ect i on 8(b) w h en i tcharges a fee t h at exc eeds t h e reasonab l e val u e of goods, faci l i t i es, o r s e r v i c e s p r o v i d e d . HU D’ s r e g u l a t i o n s a s n o t e d s t a t e : “ I f t he pa ym en tof a th i n g of val u e bears no rel ati on shi p to t h e goods or s e r vi c e s pr o vi de d, t he n t he e xc e s s i s no tf or serv i c e s o rg o o ds a c tu a llyp e r fo r m e do rp r o v id e d .” Kruse v. W

el ls F argo Hom e Mortgage, I n c. , 3 8 3 F .3d 4 9 , 5 5 -5 6 n .4 (2 dC ir. 2 0 0 4 ), c itin gP o lic yS ta te m e n t, 6 6 F e d . R e g . a t 5 3 ,0 5 9 (q u o tin g2 4 C .F .R . § 3 5 0 0 .1 4 (g)(2 )). T h is co u r t h a s d e fe r r e dto H U D ’ s in te r p r e ta tio n a s re fle c te din 24 C . F . R . § 3500 . 14(g) ( 2) , “ as a broad agen cy rul e, i n sofar as i tprovi des a m e c h a n is m fo rd e te c tin gk ic k b a c k s w h e r e th e 8 (c ) e x c e p tio n is in v o k e d .” O ’ S u l l i van v. Cou n t ryw i d e Hom e Loa n s, I n c. , 3 1 9 F .3d 7 3 2 , 7 4 0 (5 th C ir. 2 0 0 3 ). 2N o. 09- 10127

10 G ive n o url i m i t e d j ur i s di c t i o n i n thi s R ul e 2 3(f ) a ppe al , w e ha ve no au t h ori t y t o revi ew t h e di st ri ct court’ s concl u si on t h at t h e pl ai n t i f fs hav e st ated a cl ai m f

or t h ese al l eged overcharges u n der t h i s t h eory. B u t a cc e p tin gf or purpos es of

t hi s appealt he di st r i c tc our t ’ s t heor y of l i abi l i t y und erR E SP A§ 8(b) set forth i n i ts ru l i n g on th e m oti on to d i sm i ss, th a t l i a b i l i ty th eo ry l ea d s u s to c o nc l ude t hat i t s c l as s c e r t i f i c at i o n de c i s i o n i s a n a bus e o f di s c r e t i o n, b e c aus e t he di st ri ctcourt ’ s l i abil i t y m odel f or vi ol ati on s of R E S P A § 8(b) requ i res an i n qu i ry i n to the fa cts of ea ch i n d ivid u a lcl a ss m em b er’ s ti tl e insu ra n ce tra n sa cti on . In i t s den i alof

Stew art ’ s m ot i on t o di s m i s s , th e di st ri ctcourtaccept ed the pl ai n t i f fs’ argu m en tt h at t h e fee f or re iss u e t i t l e i n suran ce c an be di vi ded t w o port i on s: t h at port i on au t h ori zed byt h e rat e rul e w h i ch i s f or servi ces act u al l y perf orm ed and t he e xc es s c harge . T h e di st r i c tc our tdi d notf i nd t hatt he e xc es s c harge s t a n d in ga lo n e r e p r e s e n t e da v io la t io n o f § 8 (b ). R a t h e r it fo u n dth a t“S t e w a r t ’s s pl i tw i t h t he t i t l e age nt s m ayno tha ve b e e n f o rs e r vi c e s a c t ual l y pe r f o r m e d, a nd h en ce i n vi ol ati on of sec t i on 8 (b ), if t h e t i t l e agen t ’ s c om pen sati on w as not r e as o nab l e i n r e l at i o n t o t he s e r vi c e s t he y pe r form e d. ” I n o t he rw o r ds , t he d i s t r i c tc o ur tc o nc l ud e di n t he m o t i o n t o d i s m i s s t ha tt o e s t a b l i s h a RE SPA vi ol ati on , t h e pl ai n t i f f i n each i n di vi du alcase m u stest abli sh that t h e agen tf rom w hom he pur c hase d t he poli c y c harge d an unrea so nabl e f ee . H ow eve r , i n i ts cl ass c ert i f

i cat i on order, t h e di st ri ctcou rt re sted i t s deci si on on p l ai n t i f fs’ al l egati on s t h at as a m att er of fact , n ei t h er the t i t l e agen tnor S t ew artprovi ded s e r v ic e s in a n yo f th e tr a n s a c tio n s to ju s tifyth e e x c e s s ch a r g e a n dth a t t h is c o nt e nt i o n was c ap ab l e o f b e i ng t e s t e d o n ac l as s - w i de b as i s w i t ho ut i n d iv i d u a l i z e di nq u i r i e s i n t o t h e c i r c u ms t a n c e s o f e a c h t r a n s a c t i o n . No e x p la n a tio n w a s p r o v id e dto co n n e c t t h e tw o ru lin g s . T h e O ’ Sul l i v an ca se pre viou sly ci ted ba rs th i s ou tcom e. In O ’ Su l l i van v. Cou n t ryw i d e Hom e Loa n s, I n c. , t h e di st ri ctcourtco n sid ered w h et h er c l ass cert i f i cat i on w as proper un der a si m i l ar factpatt ern i n w h i ch the pl ai n t i f fs w ereN o. 09- 10127

11 c h a r g e d a do cu m en t pre p a ra ti on fee i n rea lesta te cl osin gs . 31 9 F . 3 d73 2 ( 5 th C i r. 200 3) . Th e O ’ Sul l i v an pl ai nt i f

fs al l ege d t ha t th ey pai d m or t gage prepa rat i on fees t o la w f i rm s s el ect ed byC ou n t ryw i de, t h ei r m ort gag e broker. T h e ya ls o a lle g e dth a t C o u n tr y w id e a c c e p te dk ic k b a c k s fr o m th e la w fir m s in v io la tio n o f R E S P As e c t i o n s 8 ( a ) a n d(b ). Id . at 737. C ou n t ryw i de contend ed t hati t s em pl oye es pr ovi de s om e s ervi c es i n t h e pr epar at i on o f t he m or t gage t r a n s a c t i o n s b ye n t e r i n gd a t a a b o u te a c h t r a n s a c t i o n i n t o a s o f t w a r e p r o g r a m. I d. at736- 737. The pr ogr am pr od u ces a n i ni t i als etof c l os i ng doc um ent s t hat are t h en revi ew ed byt h e att orneys. T h eref ore, i targu ed that i n i n di vi du alcases a reasona bl e rel ati on shi p exi st ed betw een t h e val u e of t h e al l eged servi ces p r o v i d e d a n dth e p a y m e n ts it r e c e iv e d . Id . T h e d i stri ct cou rt rej ected th is ap proach an d f

ou n d that t h e pl ai n t i f fs c ou l d sh ow t h at “t h e pract i ce i t sel f ” bears n o re a s o n a b le re la tio n s h ip to th e v a lu e o f C o u n tr y w id e ’ s s e r v ic e s in to to . Id . at 7 3 7 . T h is co u r t d e c e r tifie dth e cla s s o n i t s c o n c lu s io n th a t in d iv id u a l a n a ly s is w a s re q u ir e ds ta tin g : Th e o n l ywa yt h e o v e r a l lp r a c t i c e mayb e pr o v e n t o v i o l a t e RES PA , c o ns i s t e nt l y w i t h t he H U D l i ab i l i t y s t and ar d, is t o e xa m i ne t he reasona bl en ess of

pay m en t s f

or good an d servi ces . T h i s i n qu i ry m u stbe perf

orm ed on a t ran sact i on - b y- t ran sact i on basi s, becau se a si n gl e f

i n di n g of

l i abil i t y on an u n reasona bl e rel ati on shi p betw een good s and servi ces does n otnecessi t ate t h e concl u si on t h at s u ch u n r e a s o n a b le n e s s e x is ts o n a cla s s w id e b a s is . 3 1 9 F .3 da t 7 4 2 . I n o t h e rwo r d s i f

we a c c e p tt h e d i s t r i c tc o u r t ’ s t h e o r yo f l i a b i l i t y , t h e HUD l i a b i l i ty stan d a rd req u i res a n i n q u i ry i n to th e reas on a b l en ess of t h e p a ym en ts f or goods an d servi ces. U n der O ’ Sul l i v an , t hat i nqui r y m us tb e pe r f o r m e d o n a tran sa cti on -by -t ra n s a c tio n ba sis. S i n ce th i s ca se se ek s to certi fy a class w i th R E S P Al i abil i t y based on the H U D l i abil i t y st an da rd, i ti s c l ear t h at c l ass i ssues do n otpredom i n ate and cl ass c ert i f i cat ion o n th e R E S P Acl ai m w as i m proper.N o. 09- 10127

12 V . W e m u sta l so ad dress cl ass cert i f i cat i on forthe pl ai n t i f fs’stat e l aw cl ai m s. T h e pl ai n t i f

fs r ai se t h ree st ate l aw cl ai m s – f or m on ey h ad an d received , unj u st en ri chm en t , an d i m pl i ed contract . A l lrely on t h ei r ass ert i on of t h e ri gh tt o a rei ssue d isco u n t. Stew artargu es t h at i n def i n i n g t h e cl ass t h e di st ri ctcourt i m properl y rel i ed on cl assw i de i n ferences i gn ori n g i n di vi du al i zed i s s ue s r e l ati ng to th e e lig ib ilityfo rth e d is c o u n t t h a t is th e b a s is fo ra ll o f p la in tiffs ’cla im s . F i rst , Stew art t ak es i ssue w i t h t h e di st ri ct court’ s cl ass defi n i t i on . W h en th e p la in tiffs m o v e dforcla ss ce rtifica tion , th e yp ro p o se da cla ss of Al lpe r s o ns w ho , w i t hi n s e ve n y ear s o f t he da t e o f

a n e xi s t i ng m ort gag e on theirresi den t i alreal property i n T exas, ref i n an ced or o t he r w i s e rep l ac e d t he i re xi s t i ng m o r t ga ge a nd wer e c har ge d a pre m i um f

ora new l endert i t l e i nsur ance pol i c y under w r i t t en by D efen da n tStew artT i t l e G u aran t y C om pa n y, an d di d n otrec eive a refi n a n ce cre d i t. Mi ms , 254 F . R . D . at 486 . T h e proposed cl ass w as al so l i m i t ed to borrow ers obtai n i n g pol i ci es w i t h i n f ou r years pri or t o the f i l i n g of the l aw sui t . T h e di st ri ct c o ur tf o und t hi s de f

i ni t i o n t oo b r o adb e c aus e i tw o ul d i nc l ude i ndivi dua l s w ho w er e n ot el i gibl e f

ort he R

- 8 c r edi t . The di st r i c tc our tnar r ow ed t he c l as s by f o l l o w i ng St e w ar t ’ s U nde r w r i t i ng G ui de l i ne s w hi c h a l l o w i t s a ge nt s t o a s s um e t h at a r ef

i n an ced m ort gag e w as i n sured b y a pri or t itl e p o li cy, an d theref ore e lig ib le fo rth e R -8 cr e d it, “if (1 ) it h a s aG F n u m b e r , (2 ) it is re tu r n e dto a tit le com p a n y, or ( 3 ) i t i s a fi rst- l i en i n fa vo r of an i n sti tu ti on a ll en d er.” Id . at484. AG F nu m ber indic ates t h at a t i t l e a gen th as op en ed a f i l e t o potenti al l y cond u ct a r e ale s t at e t r ans ac t i o n a nd t hata t i t l e s e ar c h m ay hav e be e n pe r f o r m e d o n a g iv e n p ie c e o f p r o p e r ty . St e w ar ta r gue s t hatt hi s de f i ni t i o n v i o l at e s i t s r i ghtt o due pr ocess a nd R u l e 2 3 becau se, a s the di st ri ctcou rta ckn ow l edg ed, the l egal requ i rem en t s f orN o. 09- 10127

13 e l i gibi l i t y f

o rt he R- 8 c r e di ta r e no ti de nt i c alt o St e w ar t ’ s U nde r w ri t i ng G u i del i n es and t h eref ore t h e cl ass as def

i n ed m ay i n cl u de p l ai n t i f fs w h o are not i n factel i gibl e f

o r th e d i scoun t . B ecau se t h i s c l ass def i n i t i on i s based on S t ew art ’ s ow n cr i t eri a f or al l ow i n g t h e R

- 8 dis coun t , w e f i n d n o abu se of di sc r et i on i n def

i ni ng t he c l as s t hi s w ay. W e a gr ee w i t h t he di st r i c tc our tt hat est abli shi n g prerequ i si t e s f o rc l as s m e m be r s hi p i s s uf f i c i e nte vi de nce f

rom w h i ch th e j u ryco u l din fer e n ti tl em en t to th e R -8 c red i t, w h i ch S tew a rt i s f ree to reb u t. Cl as s c e r t i f

i c at i o n i s notpr e c l ude d s i m pl y be c aus e a c l as s m ayi nc l ude pe r s o ns w h o h a v e n o t b e e n inju r e db yth e d e fe n d a n t ’ s co n d u c t. K oh en v . Pa cific I nv e s t m e ntMa nage m e ntCo . , LLC , 5 71 F. 3d6 72 , 6 77 ( 7t h Ci r . 2 00 9) . I n K o he n, th e S ev en th C i rcu i t aff i rm ed c l as s c er t if

i c at i on i n a ca se a l l eg i n g th a t de fen d a n ts c o rn ere d th e m a rk et i n a p a rti cu l a r futu res con tract. T h e cl a ss i n clu d e d a ll per so ns w ho bo ught a f ut ure s c ont r ac ton t he C hi c ago B oar d of Trade i n 10- year U .S . T r e a s u r yn o te s d u r i n ga p a r tic u la rtim e p e r io d . I d. at 674 Th e court ac kno w l e dg e d t hatb as e d on t he i ndivi dua lcha r ac t e r i s t i c s of t he i rt r ad e s dur i ng t h e t i m e peri od, som e pu rchasers m ay n otha ve been ha rm ed byt h e al l eged m ani pul at i on, butc onc l uded t hatt he c l as s as def i ned w as s uf

f i c i ent l y nar r ow as to e x c lu d e t h e lik e lih o o dt h a t m a n yp la in tiffs w e r e im p r o p e r lyin c lu d e d . Id . at 678 . T h e di st ri ctcourtw as not r equ i red t o deter m i n e t h at ever y cl ass m em ber h a ds u ffe r e dd a m a g e s a s a p r e r e q u is ite to cla s s ce r tific a tio n . I d. a t 6 7 6 . S t ew artal so argues t h at because of t h e equ i t able n ature of t h e pl ai n t i f

fs’ s t at e l aw c l ai m s a n i ndivi dua l i z e d fac t ualinqui r y i s r e qui r e d i nt o t he c i r c um st ance s of eac h t r ansac t i on m aki ng c l as s c er t i f i c at i on o n t hes e i ss ues an a b u s e o f d is c r e tio n . W e d is a g r e e . G r a n tin gth e R

- 8 to e lig ib le b o r r o w e ris m an da t o r y. U nde rTe xa s l aw, di s c l o s ur e o f t he di s c o unta nd waive ra re ir r e le v a n t b e c a u s e th e ra te ru le s e ts t h e m a x im u m a m o u n t, n e t o f th e a p p lic a b le d is c o u n t, th a t S te w a r t a n do th e rtit le in s u r e r s m a ych a r g e fo rre is s u e tit leN o. 09- 10127

14 i nsur ance . Acc or di ngl y, t he di st r i c tc our tdi d not a b u se i t s di sc r et i on by c e r tify in gth e cla s s a s to th e s ta te la w cla im s . N ot w it h st an di n gou r a ffi rm a n ce of th e ce rtifica tion of th e st ate c l ass, given o urr e ve r s alo f

t he fe de r al c l as s c e r t i f i c at i o n, t he di s t r i c tc o ur ts ho ul d o n r e m and c ons i derw het hert o c ont i nue t o e xer c i se i t s di sc r et i onar y s uppl em ent al j uri sdi c t i on o vert hos e c l ai m s. See 28 U . S. C . § 1367(c ) ( “ Th e di st r i c tc our t s m ay dec l i ne t o exe r c i se suppl em ent al j uri sdi c t i on ove r a c l ai m under subs ec t i on ( a) [a llo w in gs u p p le m e n ta lj u r i s d ic tio n ] if –. . . (2 ) th e cla im s u b s ta n tia lly pre dom i nat es ov ert he c l ai m orc l ai m s ove rw hi c h t he di st r i c tcour thas or i gi nal j ur i s di c t i o n. ” ) . Ther e i s o bv i o us l y a s t r o ng ar gum e nt t hat t he c l as s a c t i o n o n t he st ate l aw cl ai m s w i l lpredom i n ate overt h e i n di vi du alfederalcl ai m s. V I. Fort he f

o r e go i ng r e as o ns , w e r e ve r s e t he di s t r i c tc o ur t ’ s o r de rc e r t i f yi ng a cl ass on the R E S P Acl ai m an d rem an d thi s c ase t o t h e di st ri ctcourtt o consi der w he t he r , i n l i ghtof

t hi s opi ni o n, i ts ho ul d e xe r c i s e pe nde ntj ur i s di c t i o n o ve rt he st ate l aw cl ai m s. R E V E R S E D a n dR E M A N D E D .