Gomez v. Wells Fargo Bank, N.A.

• Decision Date: 12 April 2012
• Docket Number: No. 10–3179.,10–3179.
• Citation: 676 F.3d 655
• Parties: Grant A. GOMEZ and Lanie L. Gomez, on behalf of themselves and all others similarly situated, Appellants, v. WELLS FARGO BANK, N.A. and Valuation Information Technologies, LLC, doing business as Rels Valuation, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

676 F.3d 655

Grant A. GOMEZ and Lanie L. Gomez, on behalf of themselves and all others similarly situated, Appellants,

v.WELLS FARGO BANK, N.A. and Valuation Information Technologies, LLC, doing business as Rels Valuation, Appellees.

No. 10–3179.

United States Court of Appeals, Eighth Circuit.

Submitted: Oct. 20, 2011.Filed: April 12, 2012.

Craig R. Spiegel, argued, Seattle, WA, Steve Berman, Seattle, WA, Vincent J. Esades, Scott W. Carlson, Minneapolis, MN, on the brief, for Appellants.

Elizabeth Ferrick, argued, St. Louis, MO, Charles A. Newman, St. Louis, MO, Alan Hall MacLin, Brent R. Lindahl, Minneapolis, MN, on the brief, for Appellee Valuation Information Technologies d/b/a Rels Valuation.

David L. Permut, argued, Washington, DC, Aaron Daniel Van Oort, Ellen B. Silverman, Minneapolis, MN, Brooks Russell Brown, Los Angeles, CA, Richard Wyner, Washington, DC, on the brief, for Appellee Wells Fargo Bank, N.A.Before RILEY, Chief Judge, SHEPHERD, Circuit Judge, and WEBBER, ¹ District Judge.RILEY, Chief Judge.

Grant A. Gomez and Lanie L. Gomez (the Gomezes) sought to establish a nationwide class of thousands of borrowers who allegedly paid inflated appraisal fees in connection with real estate transactions financed by Wells Fargo Bank, N.A. (Wells Fargo). The Gomezes appeal the district court's ² dismissal of their claims contending the appraisal practices of Wells Fargo and Valuation Information Technology, LLC d/b/a Rels Valuation (Rels, and collectively, appellees) unjustly enriched Rels and violated the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et seq. ; the Real Estate Settlement Procedures Act of 1974 (RESPA), 12 U.S.C. § 2601 et seq. ; California's Unfair Competition Law (UCL), Cal. Bus. & Prof.Code § 17200 et seq. ; and Arizona's anti-racketeering statute, Ariz.Rev.Stat. § 13–2314.04 (AZRAC). We affirm.

I. BACKGROUNDA. Facts³

The Gomezes are a married couple from Scottsdale, Arizona who mortgaged and refinanced their home through Wells Fargo. Wells Fargo is a national banking association that provides mortgages through Wells Fargo Home Mortgage. Rels is an Iowa limited liability company headquartered in Minnesota. Rels, which arranges real-property appraisals, is a joint venture of Wells Fargo Foothill (WFF), an affiliate of Wells Fargo, and First American Real Estate Solutions (First American), a subsidiary of First American Corporation. WFF owns 49.9% of Rels, and First American owns 50.1%.

In March 2006, the Gomezes purchased a home in Scottsdale, Arizona with a loan from Wells Fargo and executed a mortgage on the property in Wells Fargo's favor. On March 2, 2006, the Gomezes signed a HUD–1 ⁴ settlement statement disclosing the Gomezes would incur an appraisal fee of $375, to be paid to Rels as Wells Fargo directed.

On March 1, 2007, the Gomezes refinanced the Scottsdale property through Wells Fargo and executed another mortgage. In connection with that refinancing, Wells Fargo sent the Gomezes a HUD–1 Good Faith Estimate disclosing Wells Fargo had a business relationship with Rels and estimating the appraisal fee would be between $50 and $650. On March 5, 2007, the Gomezes signed the HUD–1 settlement statement for the refinancing, which indicated the Gomezes would pay Rels an appraisal fee of $495.

The Gomezes maintain the settlement statements they received were misleading because they did not disclose Rels would not perform the actual appraisal and that the actual cost of the appraisal would be much less than the amount charged. The Gomezes allege Rels paid the actual appraisers no more than $200 and “skimmed the difference” at closing.

In what they describe as an “Inflated Appraisal Fee Scheme” between Wells Fargo and Rels, the Gomezes allege “Wells Fargo required [the Gomezes] and [c]lass members to use Rels Valuation, both to reap the significant profits derived from the appraisals on Wells Fargo loans and to control the appraisal process and guarantee that Wells Fargo could close whatever loans it wanted to, irrespective of the actual market values of the properties on which it was lending.” The Gomezes describe the scheme as follows.

Wells Fargo sends a good-faith estimate to a prospective borrower, disclosing Wells Fargo will require an appraisal from an approved appraiser. Wells Fargo then specifies Rels, which “contacts independent appraisers to perform the appraisal ... at a very low rate.” Because of Wells Fargo's dominant market position, Rels demands appraisers charge “a reduced fee that is far below the market rates the appraiser had been charging.” Some independent appraisers have informed Wells Fargo and Rels the rates are “so low that a proper appraisal cannot be performed,” but Wells Fargo “insists on a vastly reduced rate, sacrificing quality for price.” If the appraiser refuses to lower its rates, it is removed from Wells Fargo's list of approved appraisers.

Despite requiring appraisers to charge Rels “far under the prevailing market rate,” “Rels Valuation does not pass on the reduced appraisal fees to the home buyer.” Rather, “Wells Fargo maintain[s] market rates to its borrowers.” “While some Wells Fargo customers are told of the affiliated relationship between Wells Fargo and Rels Valuation, none know ... the appraisal fee set forth on the HUD–1 Settlement Statement” far exceeds the actual cost of the field appraisal. Neither Rels nor Wells Fargo discloses Rels's “markup to the borrower, and Rels Valuation performs no additional appraisal services beyond merely forwarding the appraisal to Wells Fargo or the escrow provider for the transaction.”

According to the Gomezes, in exchange for increased referrals, Rels “gives Wells Fargo visibility into the appraisal process and substantial control over the outcome of the appraisal.” The Gomezes argue Wells Fargo also benefits “through the profits rolled up to the parent company of Wells Fargo and Rels.” The Gomezes claim this “scheme” harmed them and the putative class members by causing them to pay too much for appraisals and often depriving them of the benefit of an accurate appraisal.

B. Prior Proceedings

On January 30, 2009, the Gomezes filed a class-action complaint against Wells Fargo and Rels in the United States District Court for the District of Arizona. On March 17, 2009, the Gomezes amended the complaint. See Fed.R.Civ.P. 15(a)(1). On April 20, 2009, with leave of court, the Gomezes filed a six-count second amended class-action complaint (complaint).

In Count I of the complaint, the Gomezes alleged Wells Fargo and Rels engaged in a pattern of racketeering and conspiracy in violation of RICO, 18 U.S.C. § 1962(c) and (d). In Count II, they asserted Rels violated Section 8(b) of RESPA, 12 U.S.C. § 2607(b), by marking up third-party appraisal fees. In Count III, they alleged Wells Fargo and Rels violated Section 8(a) of RESPA, 12 U.S.C. § 2607(a) and (c), because Rels allegedly gave Wells Fargo “control over the appraisal process and results” in exchange for appraisal referrals. In Count IV, they claimed Rels was unjustly enriched by the alleged markup of appraisal fees. In Count V, they alleged Wells Fargo's appraisal practices constituted unfair competition under the UCL. And in Count VI they asserted appellees engaged in a pattern of unlawful racketeering activity in violation of AZRAC.

On May 4, 2009, Wells Fargo and Rels individually moved to dismiss all claims against them pursuant to Fed.R.Civ.P. 12(b)(1), 12(b)(6), and 9(b). The next day, they jointly moved to transfer the case to the District of Minnesota. On July 2, 2009, the Arizona district court granted the appellees' joint motion and transferred the case. In September 2009, Rels and Wells Fargo filed renewed motions to dismiss for lack of subject matter jurisdiction and for failure to state a claim.

On August 30, 2010, the district court granted, with prejudice, Wells Fargo's and Rels's motions to dismiss for failure to state a claim with respect to Counts I, II, III,⁵ V, and VI. Noting the Gomezes' allegations admitted Wells Fargo charged borrowers market rates for appraisals, the district court concluded the Gomezes lacked statutory standing under RICO, AZRAC, and the UCL because the Gomezes did not suffer a “concrete financial loss.” The district court dismissed the Gomezes' RESPA Section 8(a) claim because the Gomezes failed to show Rels gave Wells Fargo a “thing of value,” and their RESPA Section 8(b) claim because they did not allege unlawful fee splitting. Declining to exercise supplemental jurisdiction over the Gomezes' unjust enrichment claim, the district court dismissed Count IV without prejudice. The Gomezes appeal.

II. DISCUSSIONA. Standard of Review

We review the district court's dismissal of the Gomezes' complaint de novo, accepting as true the factual allegations contained in the complaint and granting the Gomezes the benefit of all reasonable inferences that can be drawn from those allegations. See Lustgraaf v. Behrens, 619 F.3d 867, 872–73 (8th Cir.2010). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 677–78, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

B. RICO and AZRAC

“Section 1962 of the RICO Act makes it ‘unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity.’ ” Nitro Distrib., Inc. v. Alticor, Inc., 565 F.3d 417, 428 (...