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First American case at top court may limit home-buyer suits

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The U.S. Supreme Court considered putting new limits on consumer lawsuits against title-insurance companies, hearing arguments on a suit that seeks hundreds of millions of dollars from First American Financial Corp.

The suit accuses First American (NYSE: FAF) of operating an illegal title-insurance kickback scheme. The question for the high court is whether consumers suffered any injury that would entitle them to go to court.

The one-hour session on Monday suggested that at least some, and perhaps a majority, of the nine justices are skeptical that the Constitution permits the lawsuit in the absence of indications that consumers paid higher fees.

The suit, filed in federal court in California, centers on First American’s ownership stake in thousands of title agencies across the country. The company is accused of acquiring those interests in exchange for promises that the agencies would refer customers to a First American unit that sells title insurance.

The suit seeks class-action status.

First American, based in Santa Ana, Calif., is the second-largest U.S. title insurer after Fidelity National Financial Inc.

The justices will rule by June in the case, First American Financial v. Edwards, 10-708.

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