Federal Court Dismisses Civil RICO Claims Against Wholesale Mortgage Lender

A federal district court recently dismissed civil RICO enterprise and conspiracy claims brought by a handful of borrowers in a putative class action complaint against a large wholesale mortgage lender, its CEO, and its holding companies.   

Borrowers alleged that the lender offered a contractual ultimatum to independent mortgage brokers, which, as a condition of continued business with the lender, prohibited them from conducting business with its two largest competitors.  Borrowers alleged that, in addition to commissions, the lender offered discounts, gifts, and other incentives to brokers who entered this contract.  According to the complaint, defendants successfully orchestrated this scheme to increase their profitability and market share by deceiving borrowers about the independence of brokers and suppressing their ability to shop for competitive mortgage rates and terms.

The court found that the borrowers failed to allege that the defendants’ conduct was the proximate cause of their injuries under RICO because it was the brokers, and not defendants, who allegedly falsely represented their independence and commitment to shopping for the best mortgage rates on the borrowers’ behalf.  For the same reasons, the court also found that plaintiffs did not allege that defendants had the requisite intent to commit predicate acts involving honest services, mail, and wire fraud.  Additionally, the court found that plaintiffs failed to allege that defendants met the necessary intent or employer elements necessary to sustain predicate offenses under various state bribery laws and the Travel Act.

In addition to their RICO claims, Plaintiffs claimed a violation of RESPA’s anti-kickback provision, state law claims under various state consumer protection acts, and state common law claims for aiding and abetting a breach of fiduciary duty, civil conspiracy, and unjust enrichment.  The court dismissed the RESPA claims as untimely for all except two borrowers, in addition to the state law claims, except for borrowers alleging claims under Florida’s Deceptive and Unfair Trade Practices Act.