WASHINGTON — While the rest of the country was waiting for the Supreme Court's health care decision Thursday morning, bank lawyers were anticipating the release of a second decision with important implications for the industry.
As it turned out, the former ruling was a bombshell, and the latter was a dud.
In a lawsuit involving the Real Estate Settlement Procedures Act, the court essentially decided not to issue a ruling — an unusual move given that it happened after the court had already heard oral arguments in the case.
"The court was basically just saying, 'We shouldn't have taken this case in the first instance,'" explained Eric Magnuson, a lawyer at Nutter McLellen & Fish LLP in Boston.
The question before the Supreme Court in the case, First American Financial Court v. Edwards, was whether the plaintiff could sue over alleged title insurance kickbacks if she did not suffer any actual harm.
The plaintiff argued that the mere fact that there was a violation of the law was enough to allow her lawsuit to go forward, and the lower courts agreed with her.
But the defendant countered that the plaintiff would have paid the same price for title insurance, as the result of an Ohio law, whether or not the alleged kickback took place or not, and that the lawsuit should be thrown out because the plaintiff did not suffer any harm.
The case's potential implications went well beyond Respa. According to briefs filed in the case, among the banking-related laws that might have been impacted by the Supreme Court's ruling are the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Truth in Lending Act, and the Electronic Fund Transfer Act.
That last law is the statute under which a slew of recent lawsuits related to the disclosure of ATM fees have been filed.
The plaintiffs in those cases allege that various banks and credit unions were in violation of a legal requirement that ATMs have a physical placard notifying users of any fees, in addition to an on-screen notification of the fees.
Because the plaintiffs saw the on-screen notice that they would be charged $3 or so, they would have a hard time convincing a court that they suffered any harm from the fact that the physical placard was missing. Instead, they're arguing that it doesn't matter if they suffered harm; it's enough that the financial institution violated the law.
In a two-sentence ruling issued Thursday, the Supreme Court did not explain why it erred when it decided to hear the title-insurance case in the first place. That vacuum led to speculation among lawyers, with one theory being that the justices were unable to reach any agreement in the case.
"The big takeaway is: lower courts are left without any additional guidance," Magnuson said.
In the context of the ATM lawsuits, banks and credit unions are not planning to wait for the courts to clarify the legal issues. They are asking Congress to repeal the legal requirement for physical placards, and they got a boost Wednesday when the House Financial Services Committee voted unanimously to do just that.