Chultem v. Ticor Title Insurance Co. (IL)

Summary: The attorney agents of defendant title companies did not violate RESPA in that they did perform services to earn their payment from the title companies; the reasonableness of the amount paid to the attorney agents is irrelevant.

Chultem v. Ticor Title Insurance Co., 2015 IL App (1st) 140808.

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Facts: Plaintiffs are class members who purchased, sold or mortgaged real property and paid for a title insurance policy from the defendant title companies. A portion of the premium paid for the policy was then shared by the title company with an attorney agent in exchange for allegedly performing title services. The title companies typically paid an attorney agent 70% to 80%, and at all times more than 50%, of the premium collected for the title insurance policy. Plaintiffs claimed that because the attorney agents received pro forma commitments, they did not perform “core title services” and the title company's payment to agents were unearned and, in reality, an illegal kickback under the Real Estate Settlement Procedures Act (RESPA).

The trial court rejected plaintiffs' assertion that the attorney agents must perform all of the core title services to avoid violating section 2607 of RESPA, and that under Freeman v. Quicken Loans, Inc., 132 S. Ct. 2034 (2012), it was irrelevant whether an attorney agent was overpaid for their services when performing less than all core title services. Accordingly, the trial court ruled that the title companies' payments to attorney agents under their attorney agent programs did not violate RESPA's prohibition against either kickbacks for referral fees or fee splitting because the evidence offered at trial established that attorney agents provided title services independent of the services provided as counsel for the seller. Therefore, the trial court found for the defendant, because the plaintiffs could not demonstrate a RESPA violation, which necessarily precluded a finding of a violation of the Title Act and Consumer Fraud Act.

Plaintiffs appealed.


Holding: Affirmed. On appeal, plaintiffs claimed that the trial court erred in entering judgment in favor of the title companies on the basis that RESPA sections 2607(a) and (b) were not violated where an attorney agent performed any service in connection with the issuance of a title insurance policy in exchange for a portion of the payment received by the title company from consumers in a real estate transaction. Plaintiffs claimed that the payments made to the attorney agents were illegal because they did not earn their compensation. The appellate court disagreed.

Citing Freeman as controlling precedent, the court reaffirmed the trial court’s ruling. Freeman recognized that “a service provider could avoid [RESPA] liability by providing just a dollar's worth of services in exchange for [a] $1,000 fee” because RESPA is not a price control statute and is not concerned with the “value, amount or quality of services” rendered. Therefore, the court stated, the only reasonable interpretation of section 2607(b) was that it prohibited fee-splitting with a party where no services are provided in return for the fee, which was consistent with RESPA's underlying purpose of preventing the abusive practice of paying a party merely for the referral of business. Consequently, adopting Freeman's rationale, the relevant inquiry was whether any service was performed by the attorney agent in return for the fee paid by the title company so that the compensation paid to the attorney agent was not unearned or merely a kickback. As the title companies offered evidence supporting a finding that the attorney agents performed actual title settlement services, and the record further revealed that a non-attorney agent did not perform the same clearing and waiver services at closing nor were they exposed to potential liability associated with the waiver of exceptions, the court found that the attorney agents’ actions satisfied the minimum threshold of requiring actual services. Moreover, plaintiffs did not contend that attorney agents under the programs provided no services in exchange for their compensation. Therefore, the trial court’s ruling was not against the manifest weight of the evidence, and was affirmed.

Additionally, the court found that while Freeman instructed analysis as to whether the fee paid by the title company was earned by an attorney agent in that the attorney agent in fact rendered services in exchange for the fee, the reasonableness of the amount of the fee was irrelevant. Therefore, as the attorney agents performed services to earn the payments made by the title companies, and the court need not consider the reasonableness of the amount paid to the attorney agent.


Dissent. Justice Pucinski stated that the case should have been reversed and remanded on the following grounds.

First, the language of RESPA sections 8(a) and (b) was not clear and unambiguous, permitting HUD to define key terms regarding pro forma agreements and whether actual services were rendered by attorney agents under Chevron deference. Under this view, Justice Pucinski found that the HUD’s interpretation of pro forma agreements indicated that, because the attorney agents did not provide any services related to generating title commitment agreements and did not hold any power to alter the commitment agreements once issued, any payment to attorney agents related to the pro forma agreements was an illegal kickback.

Second, even if the language of section 8(a) and (b) was clear and unambiguous, the interpretation of the majority was contrary to congressional intent and found no support in case law. Justice Pucinski argued that Congress wanted to stop any practice among title companies which gouged clients by adding unnecessary costs for title policies, and one of those practices was lining up attorneys as title agents who would make referrals of business. Specifically in this case, “the add-ons to attorney agents were exactly the kind of kickbacks for referrals that Congress intended to stop, specifically because the attorney agents were not necessary for the title company to do its work since the title company already did all the work and prepared the pro forma commitment. The money to the attorney was not an overcharge; it was an add-on for a totally superfluous, duplicative and unnecessary line item.”

Third, Freeman was inapplicable based on there being a substantially different factual question in dispute. According to Justice Pucinski, “Freeman answered whether there could be a split of charges when only one entity or person is involved-and looked at an entirely different regulation in which HUD ruled that it was not limited to situations in where there were at least two persons splitting an unearned fee, that is in yield spread premiums.” Conversely, the case at issue addressed whether the title company could add on a fee for a title agent/attorney who receives a pro forma commitment. Since there were two entities addressed in this question, Freeman should have been inapplicable given its potentially narrow holding.


By: ATG Underwriting Department | Posted on: Mon, 01/18/2016 - 3:42pm