From: Charles Cox [mailto:firstname.lastname@example.org]
Sent: Monday, April 23, 2012 6:22 AM
To: Charles Cox
Subject: Eighth Circuit affirms dismissal of RICO suit over alleged inflated appraisals
Eighth Circuit affirms dismissal of RICO suit over alleged inflated appraisals
· April 17 2012
The Eighth Circuit affirmed a lower court’s dismissal of plaintiffs’ lawsuit over an alleged “inflated appraisal fee scheme.” Plaintiffs filed a putative class action alleging violations of the Racketeer Influenced and Corrupt Organizations Act, the Real Estate Settlement Procedures Act, and several state laws. Plaintiffs alleged the defendants “skimmed the difference” between the actual cost of the appraisal and that which was disclosed and charged in the HUD-1 settlement statement. Plaintiffs maintained that defendants required appraisers into performing appraisals at below market rate, but did not pass along the reduced appraisal fees to plaintiffs. The lower court held that plaintiffs lacked standing under RICO and the state anti-racketeering statute because the alleged RICO violations did not cause plaintiffs to suffer any “concrete financial loss.” More specifically, the lower court held that the plaintiffs would have been in the same financial position in the absence of the alleged RICO violations. The Eighth Circuit agreed.
Notably, the Eighth Circuit affirmed the lower court’s dismissal of plaintiffs’ Section 8(a) RESPA claim, noting that the company which arranged real-property appraisals did not appraise properties, but simply hired an appraiser on an approved list and “merely forwarded the appraisal” to the lender. The Eighth Circuit held further that plaintiffs would have to allege “more than the mere fact of a referral and the possibility of improper control to sustain a claim under Section 8(a).” The Eighth Circuit also agreed with the lower court’s dismissal of plaintiffs’ Section 8(b) RESPA claim, pointing to its ruling in Haug v. Bank of America, N.A., 317 F.3d 832 (8th Cir. 2003), in which it held that Section 8(b) is an anti-kickback provision which “unambiguously requires at least two parties to share a settlement fee in order to violate the statute.” Like the allegations in Haug, plaintiffs’ allegations were about marking up the appraisal fee, and “an overcharge, standing alone, does not violate Section 8(b) of RESPA.”