New Yorkʼs title industry has been given the green light to party on.
Manhattan Supreme Court last week overturned the state Department of Financial Services regulation that had banned title companies from entertaining clients with lunches, vacations and parties later billed to customers as “marketing costs.”
“The Court’s thorough decision was very clear,” said Mylan Denerstein, a partner at Gibson Dunn, who represented the New York State Land Title Association (NYSLTA) in its challenge of the DFS regulation. “These sweeping regulations exceeded the scope of DFS’s statutory authority and should never have been adopted.”
The NYSLTA went to court claiming the DFS regulations would have barred the entire title insurance industry in New York State from engaging in what it called “traditional industry marketing practices.”
The regulation also would have imposed an across-the-board, industry-wide five percent rate reduction on title insurance premiums, forbid certain title insurance agents from receiving pick-up fees and gratuities.
According to the DFS, “Consumers are often encouraged at the closing to pay gratuities and required to pay pick-up fees to title insurance closers.”
In its challenge to the new rules, NYSLTA argued the move would hurt the industry and lead to small businesses closing and people losing their jobs.
According to the brief prepared by Gibson Dunn, the move “was not justified by any record of misconduct by the industry.”
In her ruling issued July 5, Judge Eileen Rakower agreed that the DFS overstepped its authority and said that the regulation would be better handled in the legislature instead of through a state agency.
Denerstein said, “As Judge Rakower explained, the regulations are internally ‘irreconcilable and irrational,’ and the notion that the legislature intended to ban the industry’s ordinary marketing activities is an ‘absurd proposition.’”
But the DFS argued that the regulation was needed for consumers and would appeal the decision. “DFS remains steadfast in our belief that Regulation 208 is a necessary supervisory tool to ensure appropriate market conduct and to protect New York consumers,” said superintendent Maria T. Vullo in a statement.
“We remain certain of our legal opinion and are confident we will prevail on appeal.”
Gibson Dunn & Crutcher LLP associates Akiva Shapiro and David Coon also represented NYSLTA in the action.
