The legal battle between the title insurance industry and the state’s Department of Financial Services continued on Tuesday, as attorneys for both sides made brief arguments before the Appellate Division of the New York State Supreme Court.
The parties are continuing to fight over strict new regulations that DFS had imposed on title insurance companies in an attempt to crack down on excessive schmoozing in the industry. Title insurance companies had filed suit against DFS over these regulations in February, arguing that they would decimate their business.
The parties previously argued before New York State Supreme Court Judge Eileen Rakower in June, and she ruled in favor of the title insurance industry in July, annulling what she described as the state’s “absurd” regulations.
DFS filed an appeal of the ruling in August, and both sides rehashed their arguments before a panel of judges Tuesday afternoon.
Steven Wu, arguing for New York State, stressed that DFS was acting within its authority to regulate the title insurance industry. He said the rules only represented an attempt to ensure that real estate companies and executives decide which title insurance company to go with based on the merits, not based on who can offer them the best trip to the Bahamas.
“The problem posed with these types of inducements is that they have independent effects on the decision making of the real estate professionals,” he said.
Gibson Dunn’s Mylan Denerstein, who argued on behalf of the title insurance companies, maintained that the state’s language was far too broad in terms of what it considered corrupt or unsavory business practices.
“I’m not suggesting there’s no other valuable thing that could be considered a quid pro quo,” she said. “In this case, taking somebody out to lunch and establishing a relationship, that’s not a quid pro quo.”
Although Rakower had more aggressive questions for the state than the title insurance industry during the arguments in her courtroom, the panel of judges on Tuesday sharply interrogated each side, repeatedly interrupting both attorneys with questions and clarifications.
The state and title insurance industry will both now await the Appellate Court’s ruling on whether Rakower’s decision will be upheld or overturned.