Alert September 07, 2010

Federal District Court Dismisses Lawsuit Alleging RICO and RESPA Violations Based on Alleged Appraisal Fee Mark-up Where Fee Paid Was the Market Rate

A Minnesota federal court dismissed a class action lawsuit filed by homeowners against Wells Fargo Bank, N.A and Rels Valuation, an appraisal management company. Plaintiffs alleged that defendants violated RICO, RESPA, California’s Unfair Competition Law and various other Arizona state laws by overcharging consumers for appraisals. Although plaintiffs conceded that they were charged only “market rates” for their appraisals, they alleged an overcharge based on the theory that appraisal fees charged to them was in excess of that paid to the field appraiser. The court rejected this theory and dismissed all of Plaintiffs’ claims. As to the RICO, Arizona RICO and California Unfair Competition Law claims, the court held that plaintiffs lacked statutory standing to pursue them, because the admission that they paid the market rate precluded any finding of concrete financial harm. The court reasoned that allowing plaintiffs’ claims to proceed would open the door to lawsuits whenever any service provider receives a pricing concession from a wholesaler. As to plaintiffs’ RESPA claims, the court rejected the contention that the companies engaged in fee-splitting by sharing profits of a joint venture. It also rejected plaintiffs’ theory that a lender’s control over the appraisal process is a “thing of value” within the meaning of RESPA, noting that RESPA grants lenders control over the appraisal practice by allowing them to require the use of certain appraisal companies. Goodwin Procter partners David Permut and Brooks Brown represented Wells Fargo. Click here for Gomez v. Wells Fargo Bank, N.A., et al. (No. 09-1818 JRT/FLN) (August 30, 2010).