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Title Insurance Case Covered by Federal Arbitration Act

Thursday, July, 21, 2011

The Federal Arbitration Act applies to a class-action lawsuit regarding title insurance companies in California, according to U.S.  District Judge Jeffrey S. White, who serves the Northern Judicial District in the state.  At issue is a claim that the largest title insurance companies in the nation, along with their affiliates, formed a de facto monopoly over the title insurance market in California. 


Federal Arbitration Act Rules out Lawsuit


Judge White relied on the recent case AT&T Mobility LLC v. Concepcion, in which the United States Supreme Court ruled that arbitration clauses in contracts formed by policyholders override any provisions of state law that would render them invalid.  According to the Federal Arbitration Act, state courts are required to treat arbitration agreements as they would any other contract, which means enforcing arbitration provisions. 


In the title insurance case, the plaintiffs alleged that kickbacks and other unethical practices between real estate agents and title insurance companies amounted to monopolistic behavior.  The plaintiffs, however, had agreed to arbitrate any disputes when they signed policy contracts.  With Judge White's ruling, they will have to arbitrate the claims they hoped to win in court. 


Civil arbitration is frequently used to decide claims between parties who are unable to come to a negotiated settlement.