Washington Federal Court Dismisses Suit Alleging that Real Estate Listing Website Received Kickbacks from Agents

The U.S. District Court for the Western District of Washington recently dismissed a putative class action alleging that a real estate listing website paid illegal kickbacks to agents and defrauded homebuyers through a RICO scheme, because the complaint did not allege that the plaintiffs paid any of the settlement costs and did not allege fraud with the legally required level of detail.

According to the complaint, real estate agents paid a 40% referral fee to the listing website for preferred lead placement so that the website would route prospective homebuyers to these agents.  The defendants also allegedly steered homebuyers to use the listing website’s mortgage loan company, which purportedly offered less favorable loan terms.  The plaintiffs claimed, among other violations, that this conduct violates RESPA and constitutes a RICO enterprise to engage in fraud.

The court dismissed the complaint in its entirety.  As to the RESPA claim against the listing website, the court concluded that the plaintiffs lacked the statutorily required injury because the complaint did not allege that any plaintiff paid out-of-pocket for any settlement service.  Nor did the complaint allege that any of the plaintiffs’ property costs were inflated because of the claimed kickbacks.

As to the RICO claims against both defendants, the court concluded that the complaint did not allege that they engaged in fraudulent conduct with the greater level of detail required for fraud claims.  And as to the real estate agents specifically, the court also determined that the complaint failed to distinguish an illegal RICO enterprise to defraud homebuyers from the defendants’ ordinary, lawful business relationships in the real estate industry.

The court, however, granted the plaintiffs leave to amend, so they may file an amended complaint to attempt to address the identified deficiencies with the now-dismissed complaint.