Alert June 15, 2010

Court Dismisses Lawsuit Alleging Lender and Appraisal Management Company Owe Appraisers Common Law Duty of Fair Procedure Prior to Removal from Approved Vendor List

The U.S. District Court for the Northern District of California dismissed with prejudice a class action lawsuit filed by appraisers against lender Wells Fargo Bank, N.A. and its appraisal management company, Rels Valuation. The appraisers alleged that the companies owed appraisers a common law duty of fair procedure prior to removing them from an approved vendor list. The Court determined that lenders and appraisal management companies are not “gatekeeper organizations” with the substantial power to significantly impair an individual’s ability to work in the appraisal field such that they have a duty to provide fair procedure under California law. The Court rejected the argument that the appraisers’ loss of income following their removal from the approved list demonstrated sufficient power to attach a duty of fair procedure, noting that neither the lender nor the appraisal management company regulated the appraisal industry and the removal did not affect the appraisers’ ability to perform appraisals for other lenders. The Court also dismissed the appraisers' common law conspiracy claim based on the same conduct. Notably, the Court dismissed the lawsuit with prejudice because the appraisers had amended their complaint after the Court dismissed their prior claims for a violation of the Racketeer Influenced and Corrupt Organizations Act, California’s unfair competition law, and common law interference.  David Permut and Brooks Brown represented Wells Fargo. Click here for Sound Appraisal, et al. v. Wells Fargo Bank, N.A., et al. (No. C 09-01630 CW).