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UNITED STATES DISTRICT COURT


NORTHERN DISTRICT OF OHIO
EASTERN DIVISION

EMPIRE TITLE SERVICES, INC., CASE NO. 1:10-CV-02208-PAG

Plaintiff,
JUDGE PATRICIA A. GAUGHAN
vs.

FIFTH THIRD MORTGAGE CO., et al.,

Defendants.

DEFENDANTS’ MOTION TO DISMISS PLAINTIFF’S COMPLAINT

Pursuant to Federal Rule of Civil Procedure 12(b)(6), Defendants Fifth Third Mortgage

Company; Vista Settlement Services, LLC; Fifth Third Financial Corporation; and Fifth Third

Bank respectfully move this Court to dismiss the Complaint for failure to state a claim.

Defendants’ supporting memorandum is attached.

Respectfully submitted,

/s/ Michael E. Mumford


Brett A. Wall (0070277) Irene C. Freidel (pro hac vice)
Michael E. Mumford (0073931) Jennifer J. Nagle (pro hac vice)
BAKER & HOSTETLER LLP Brian R. Vaughn Martel (pro hac vice)
PNC Center K&L GATES LLP
1900 East Ninth Street, Suite 3200 State Street Financial Center
Cleveland, Ohio 44114-3482 One Lincoln Street
Telephone: 216.621.0200 Boston, MA 02111-2950
Facsimile: 216.696.0740 Telephone: 617.261.3100
Facsimile: 617.261.3175

Attorneys for Defendants


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UNITED STATES DISTRICT COURT


NORTHERN DISTRICT OF OHIO
EASTERN DIVISION

EMPIRE TITLE SERVICES, INC., CASE NO. 1:10-CV-02208-PAG

Plaintiff,
JUDGE PATRICIA A. GAUGHAN
vs.

FIFTH THIRD MORTGAGE CO., et al.,

Defendants.

MEMORANDUM IN SUPPORT OF DEFENDANTS’


MOTION TO DISMISS PLAINTIFF’S COMPLAINT

Brett A. Wall (0070277)


Michael E. Mumford (0073931)
BAKER & HOSTETLER LLP
PNC Center
1900 East Ninth Street, Suite 3200
Cleveland, Ohio 44114-3485
Telephone: (216) 621-0200
Facsimile: (216) 696-0740

Irene C. Freidel (pro hac vice)


Jennifer J. Nagle (pro hac vice)
Brian R. Vaughn Martel (pro hac vice)
K&L GATES LLP
State Street Financial Center
One Lincoln Street
Boston, MA 02111-2950
Telephone: (617) 261.3100
Facsimile: (617) 261.3175

Attorneys for Defendants


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TABLE OF CONTENTS

I. INTRODUCTION ............................................................................................................. 1

II. THE COMPLAINT’S RELEVANT ALLEGATIONS ..................................................... 3

III. LEGAL STANDARD........................................................................................................ 6

IV. ARGUMENT..................................................................................................................... 6

A. Empire Cannot Transform Alleged RESPA Violations, Which It Has No


Right To Pursue, Into RICO Claims ...................................................................... 6

1. Empire alleges RESPA claims dressed up as RICO claims ...................... 6

2. Empire cannot use RICO to avoid Congressionally-imposed


limitations on who can sue under a particular statute ................................ 8

B. Empire Has Offered No Factual Allegations That Would Show How the
Alleged RICO Violations Proximately Caused Empire’s Alleged Injuries......... 10

1. Empire has not, and cannot, allege any direct injury resulting from
Defendants’ purported RESPA violations ............................................... 10

a. Empire’s damages theory is too speculative................................ 11

b. Apportioning damages among the putative class is


impossible .................................................................................... 14

c. Empire’s claims create a stark risk of multiple recoveries .......... 15

2. Empire fails to allege that the various RICO violations asserted


directly caused it injury............................................................................ 16

a. Empire fails to allege that any violation of § 1962(a)


directly caused Empire to lose business....................................... 16

b. Empire fails to allege that any violation of § 1962(c)


directly caused Empire to lose business....................................... 18

c. Empire fails to allege that any violation of § 1962(d)


directly caused Empire to lose business....................................... 19

C. Empire’s RICO Claims Fail Because the Complaint Does Not Sufficiently
Allege the Predicate Offenses of Mail and Wire Fraud....................................... 20

1. Empire’s fraud allegations do not meet Rule 9(b)’s particularity


requirement .............................................................................................. 21

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TABLE OF CONTENTS
(continued)

2. Empire fails to allege any actual misrepresentations or any duty to


disclose the allegedly concealed information on HUD-1 or GFE
Forms ....................................................................................................... 23

D. Empire Does Not Allege a Viable Association-in-Fact Enterprise ..................... 25

V. CONCLUSION................................................................................................................ 27

CERTIFICATE OF COMPLIANCE........................................................................................... 28

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TABLE OF AUTHORITIES

CASES

Advocacy Org. for Patients and Providers v. Auto Club Ins. Ass’n,
176 F.3d 315 (6th Cir. 1999) ................................................................................................. 20

Am. Dental Ass’n v. Cigna Corp.,


605 F. 3d 1283 (11th Cir. 2010) ............................................................................................ 23

Anza v. Ideal Steel Supply Corp.,


547 U.S. 451 (2006)......................................................................................................... 11, 16

Ashcroft v. Iqbal,
129 S. Ct. 1937 (2009)........................................................................................... 6, 17, 18, 21

Ass’n of Wash. Pub. Hosp. Dists. v. Philip Morris, Inc.,


241 F.3d 696 (9th Cir. 2001) ........................................................................................... 11, 13

Ayers v. General Motors Corp.,


234 F.3d 514 (11th Cir. 2000) ................................................................................................. 8

Bates v. Nw. Human Servs.,


466 F. Supp. 2d 69 (D.D.C. 2006) ......................................................................................... 20

Beck v. Prupis,
529 U.S. 494 (2000)............................................................................................................... 19

Bell Atl. Corp. v. Twombly,


127 S. Ct. 1955 (2007)............................................................................................................. 6

Bender v. Southland Corp.,


749 F.2d 1205 (6th Cir. 1984) ............................................................................................... 20

Boyle v. United States,


129 S. Ct. 2237 (2009)........................................................................................................... 26

Bridge v. Phoenix Bond Indem. Co.,


128 S. Ct. 2131 (2008)........................................................................................................... 15

Brown v. First Tennessee National Bank Ass’n,


No. 1:09-CV-0679-BBM, 2009 U.S. Dist. LEXIS 127503 (N.D. Ga.
Nov. 20, 2009) ......................................................................................................................... 8

City of Cleveland v. Ameriquest Mortg. Secs., Inc.,


615 F.3d 496 (6th Cir. 2010) ................................................................................................. 11

iii
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TABLE OF AUTHORITIES
(continued)

Conte v. Newsday, Inc.,


703 F. Supp. 2d 126 (E.D.N.Y. 2010) ................................................................................... 26

Craighead v. E.F. Hutton & Co.,


899 F.2d 485 (6th Cir. 1990) ................................................................................................. 16

Dist. Telecomms. v. Dist. Cablevision, Inc.,


638 F. Supp. 418 (D.D.C. 1985) ............................................................................................ 13

Elkins v. Chapman,
36 Fed. Appx. 543 (6th Cir. 2002)......................................................................................... 19

Elsevier, Inc. v. W.H.P.R., Inc.,


692 F. Supp. 2d 297 (S.D.N.Y. 2010).................................................................................... 26

Falise v. Am. Tobacco Co.,


94 F. Supp. 2d 316 (E.D.N.Y. 2000) ..................................................................................... 17

Fogie v. Thorn Americas, Inc.,


190 F.3d 889 (8th Cir. 1999) ................................................................................................. 17

Grantham & Mann, Inc. v. Am. Safety Products, Inc.,


831 F.2d 596 (6th Cir. 1987) ................................................................................................. 12

Greenberg v. Blake,
No. 09-civ-4347, 2010 WL 2400064 (E.D.N.Y. June 10, 2010)........................................... 26

Grider v. Texas Oil & Gas Corp.,


868 F.2d 1147 (10th Cir. 1989) ............................................................................................. 19

Hemi Group, LLC v. City of New York,


130 S. Ct. 983 (2010)......................................................................................................... 9, 10

Holmes v. Secs. Inv. Prot. Corp.,


503 U.S. 258 (1992)............................................................................................. 10, 11, 15, 16

In re Ins. Brokerage Antitrust Litig.,


618 F.3d 300 (3d Cir. 2010)................................................................................................... 26

James Cape & Sons Co. v. PCC Constr. Co.,


453 F.3d 396 (7th Cir. 2006) ................................................................................................. 13

Kramer v. Bachan Aerospace Corp.,


912 F.2d 151 (6th Cir. 1990) ................................................................................................. 18

iv
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TABLE OF AUTHORITIES
(continued)

Lerner v. Fleet Bank, NA,


318 F.3d 113 (2d Cir. 2003)................................................................................................... 13

Moll v. US Life Title Ins. Co. of N.Y.,


710 F. Supp. 476 (S.D.N.Y. 1989)......................................................................................... 24

Nugget Hydroelectric, L.P. v. Pacific Gas and Elec. Co.,


981 F.2d 429 (9th Cir. 1992) ................................................................................................. 17

Parker v. Learn Skills Corp.,


530 F. Supp. 2d 661 (D. Del. 2008)....................................................................................... 14

Powers v. Fifth Third Mortg. Co.,


N.D. Ohio No. 1:09-CV-02059.......................................................................................... 8, 15

Reese v. 1st Metro Mortg. Co.,


No. 03-2185-KHV, 2003 WL 22454658 (D. Kan. Oct. 28, 2003) ........................................ 25

Robinson v. Fountainhead Title Group Corp.,


447 F. Supp. 2d 478 (D. Md. 2006) ....................................................................................... 24

Robinson v. Fountainhead Title Group Corp.,


252 F.R.D. 275 (D. Md. 2008)......................................................................................... 18, 23

Sedima, S.P.R.L. v. Imrex Co.,


473 U.S. 479 (1985)............................................................................................................... 18

Smith v. Jackson,
84 F.3d 1213 (9th Cir. 1996) ................................................................................................... 8

Standard Chorine of Del. v. Sinibaldi,


821 F. Supp. 232 (D. Del. 1992)............................................................................................ 17

Strates Shows, Inc. v. Amusements of Am., Inc.,


379 F. Supp. 2d 817 (E.D.N.C. 2005).............................................................................. 12, 15

Toldy v. Fifth Third Mortg. Co.,


No. 1:09-CV-00377, 2010 WL 2639975 (N.D. Ohio June 29, 2010) ............................. 15, 24

U.S. ex rel. Bledsoe v. Cmty. Health Sys., Inc.,


342 F.3d 634 (6th Cir. 2003) ................................................................................................. 20

United States v. Skellers,


940 F. Supp. 1146 (N.D. Ohio 1996)..................................................................................... 23

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TABLE OF AUTHORITIES
(continued)

United States v. Turkette,


452 U.S. 576 (1981)............................................................................................................... 25

STATUTES AND REGULATIONS

12 U.S.C. § 2601.................................................................................................................... 1, 6, 7

12 U.S.C. § 2603(a) ............................................................................................................... 24, 25

12 U.S.C. § 2604(c) ............................................................................................................... 24, 25

12 U.S.C. § 2607............................................................................................................ 4, 7, 10, 15

18 U.S.C. § 1341...................................................................................................................... 7, 16

18 U.S.C. § 1343...................................................................................................................... 7, 16

18 U.S.C. § 1961............................................................................................................................ 1

18 U.S.C. § 1962................................................................................................................ 7, 16, 18

18 U.S.C. § 1964(c) ........................................................................................................... 7, 10, 16

18 U.S.C. § 2314.......................................................................................................................... 18

24 C.F.R. § 3500.7 ....................................................................................................................... 24

24 C.F.R. § 3500.8(b) .................................................................................................................. 24

RULES

Fed. R. Civ. P. 9(b) ...................................................................................................................... 20

Fed. R. Civ. P. 12(b)(6).................................................................................................................. 6

vi
I. INTRODUCTION

Defendants Fifth Third Mortgage Company, Fifth Third Bank, Fifth Third Financial

Corporation, and Vista Settlement Services, LLC (collectively, “Defendants”) respectfully

submit this brief in support of their motion to dismiss the Complaint for failure to state a claim.

Plaintiff Empire Title Services, Inc. (“Empire”) brings this lawsuit on behalf of itself and

a putative class of title agents that allegedly were “blacklisted” from providing settlement

services for Fifth Third mortgage loans. Empire alleges it was “blacklisted” because it refused to

participate in a referral and kickback scheme perpetrated against consumers by Defendants and

“co-operating settlement agents.” Empire alleges that this referral and kickback scheme violated

the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. §§ 2601, et seq.

Although Empire premises its Complaint entirely on Defendants’ alleged RESPA

violations, Empire has not brought a RESPA claim because title agents like Empire cannot sue

under RESPA. Empire has instead sued Defendants under the Racketeer Influenced Corrupt

Organizations Act (“RICO”), 18 U.S.C. §§ 1961, et seq. Empire vaguely contends that

Defendants engaged in RICO-prohibited racketeering activity by sending consumers misleading

mortgage documents that concealed Defendants’ alleged RESPA violations.

Accordingly, Defendants’ motion presents a straightforward issue: Can a title agent, like

Empire, which has no right of action under RESPA, transform alleged RESPA violations against

consumers into viable RICO claims against its competitors? The answer is “no” for at least four

reasons.

First, the Complaint seeks to evade Congress’s chosen remedial scheme for RESPA

violations. Congress empowered and incentivized consumers to enforce RESPA by granting

them a private right of action, including treble damages and attorneys’ fees. Congress also

provided for civil and criminal enforcement by state and federal officials. In sharp contrast,
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II. THE COMPLAINT’S RELEVANT ALLEGATIONS 1

Defendant Fifth Third Mortgage (“FTM”) is a lender that provides home and other loans

to borrowers in various states, including Ohio. (Compl. p. 7, ¶ 7.) 2 Defendant Fifth Third Bank

(“FTB”) is FTM’s sister company and employs mortgage-loan officers who work for FTM. (p.

7, ¶ 9.) Defendant Fifth Third Financial (“FTF”) is the parent company of FTM and FTB. (p. 7,

¶ 10.) (This memorandum refers to FTM, FTB, and FTF collectively as the “Fifth Third

Defendants.”)

The settlement services necessary to close a mortgage loan generally include tasks such

as escrowing funds; preparing loan documents; performing title searches; issuing title-insurance

commitments, policies, and endorsements; and closing loans. (¶ 19.) In many states, third-party

settlement agents who are also licensed title agents offer to provide all of the services necessary

to close a mortgage loan, including issuing title policies, title commitments, and policy

endorsements. (See id.) Hundreds, if not thousands, of such agents exist in Ohio alone. (See ¶¶

14, 57.)

In 2006, FTF created Vista Settlement Services, LLC (“Vista”) to perform settlement

services for lenders, including FTM. (¶ 22.) Vista is licensed to act as a title-insurance agent

and to perform other mortgage-loan settlement services in Ohio and other states. (p. 7, ¶ 13.) As

a licensed title-insurance agent, Vista can issue title commitments, title policies, and policy

endorsements on behalf of several title-insurance carriers. (p. 7, ¶¶ 13–14.) Empire is also a

licensed title agent and is one of Vista’s competitors. (p. 6, ¶ 6.)

1
Defendants dispute many of the factual allegations in the Complaint, but recognize that for
purposes of this motion, well-pled factual allegations are taken as true.
2
Citations to the Complaint containing both a page and a paragraph number are intended to
avoid confusion resulting from Empire’s having designated certain paragraphs of the
Complaint with the same number.
3
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Empire alleges that the Fifth Third Defendants created Vista solely to capture one of the

most lucrative settlement services—issuing title insurance commitments, policies, and

endorsements. (¶ 5.) To guarantee that Vista captured this business, Empire alleges the

Defendants engaged in an “illegal referral scheme” in violation of RESPA, whereby FTM’s loan

officers referred settlement work only to certain “co-operating settlement agents” who agreed “in

advance” to refer “all title insurance premium generating business” to Vista. (p. 4, ¶7.) If an

agent refused to “refer” the title business to Vista, Empire alleges that FTM “blacklisted” the

agent and directed settlement work to “co-operating settlement agents.” (¶¶ 6, 11, 12.) In return

for referring business to cooperating agents, Empire alleges FTM’s loan officers “are paid 10%

or more of Vista’s revenue generated by the issuance of title commitments, title insurance

policies and any Fifth Third required title insurance endorsements.” (¶ 7.) Empire appears to

allege that the above-described conduct violates Sections 8(a) and/or (b) of RESPA. See 12

U.S.C. § 2607(a), (b) .

Empire further suggests that Defendants violated Section 8 because Vista does not fall

within RESPA’s safe harbor for affiliated business arrangements. Section 8(c) of RESPA

provides that referrals between affiliates do not violate Section 8 so long as certain requirements

are met. See 12 U.S.C. § 2607(c)(4)(A) . Empire appears to allege that Defendants fall outside

this safe harbor, and thus violated Section 8, by failing to disclose to borrowers the relationship

between Vista and the Fifth Third Defendants “as required by Federal law.” (Compl. ¶ 41.) In

addition, Defendants allegedly unlawfully “required” borrowers to use Vista. (¶ 47.) The

Complaint further vaguely implies that Defendants violated Section 8 because Vista is not a bona

fide provider of settlement services because it “perform[s] no additional services” when it issues

title insurance products. (¶¶ 35, 72,)

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Empire alleges that Defendants’ purported RESPA violations injured consumers because

(1) FTM’s borrowers were ostensibly required to use Vista (¶ 47); (2) cooperating agents

allegedly inflated their settlement fees to FTM’s borrowers to make up for the revenue they were

not receiving from the title-insurance-premium generating work; and (3) Vista’s title charges to

FTM’s borrowers were “unearned or excessive” and “paid at the expense and to the detriment of

borrowers.” (¶¶ 44, 45.)

Empire’s allegations regarding its own injuries are less clear. Empire does not allege that

it incurred any out-of-pocket damages. Nor does Empire allege that it received any fraudulent

documents from Defendants or that Defendants concealed anything from it. Instead, Empire

alleges that because it “declined to engage in Defendants’ referral scheme,” FTM stopped

referring settlement business to it. (¶ 54.) Accordingly, Empire claims it “lost income”

amounting to “thousands of dollars” that “would have been obtained in settling Fifth Third

Mortgage transactions.” (Id.) Yet, Empire does not identify any particular transaction that it (or

any other member of the putative class) would have obtained but for the alleged unlawful

referrals to Vista. Nor does it offer any way to identify such a transaction.

Based on these alleged facts, Empire seeks to represent a putative class of title agents

who, like Empire, allegedly used to provide settlement services for FTM loan transactions, but

“stopped receiving referrals of title business” after FTM allegedly began “requiring” that

customers use Vista. (¶ 55.) On behalf of itself and this class, Empire asserts six RICO claims

predicated on the alleged RESPA violations described above. Empire contends that Defendants’

conduct violated three different RICO provisions—Sections 1962(a), 1962(c), and 1962(d)—and

it alleges two different RICO-enterprise configurations. (¶¶ 68–69.) Under the first (applicable

to Counts I, III, and V), Vista is the alleged racketeering enterprise. Under the second

(applicable to the even-numbered counts), Vista, the Fifth Third Defendants, and the cooperating

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settlement agents ostensibly comprise an association-in-fact enterprise. For each count, Empire

and the putative class seek “amounts they would have received as profits from Fifth Third

Mortgage transactions they were not referred due to the Defendants’ fraudulent scheme.” (E.g.,

p. 27, ¶ A.)

III. LEGAL STANDARD

A Rule 12(b)(6) motion should be granted when, even accepting the allegations of a

complaint as true, a plaintiff fails to provide “grounds of entitlement to relief,” amounting to

“more than labels and conclusions.” Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955, 1964-65

(2007). “A formulaic recitation of the elements of a cause of action will not do,” and “[f]actual

allegations must be enough to raise a right to relief above the speculative level.” Id. at 1965.

Further, “[t]hreadbare recitals of a cause of action’s elements, supported by mere conclusory

statements, do not suffice.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1940 (2009). This standard “does

not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions.” Id.

IV. ARGUMENT

A. Empire Cannot Transform Alleged RESPA Violations, Which It Has No Right To


Pursue, Into RICO Claims.

Empire’s lawsuit is, at its core, an attempt to use fraud-predicated civil-RICO claims to

enforce RESPA, a statute that provides Empire no private right of action and is not a predicate

offense under RICO. In doing so, Empire seeks to end-run RESPA’s remedial scheme providing

only consumers and the government, not settlement-service providers, with a right of action. For

this reason, all of Empire’s RICO claims should be dismissed.

1. Empire alleges RESPA claims dressed up as RICO claims.

RESPA is a consumer protection statute that governs the provision of settlement

procedures in real estate transactions. 12 U.S.C. § 2601(a), (b). Congress chose to enforce

RESPA in two ways: (1) by imposing criminal penalties for conduct that violates its provisions,
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and (2) by granting consumers (i.e., borrowers) and the government a right of action to enforce

certain provisions, including Section 8, through civil suits. Id. § 2607(d)(1), (2), (4). Congress

did not provide for civil suits by title agents or other settlement-service providers like Empire.

Indeed, Congress enacted RESPA to protect consumers, not the settlement-service industry. See

id. § 2601(a), (b).

RICO, by contrast, targets organized crime. It criminally prohibits conducting the affairs

of an organization—called an “enterprise”—through a pattern of racketeering activity. 18 U.S.C.

§ 1962(c). RICO also prohibits using racketeering proceeds to acquire or maintain an interest in

an enterprise. Id. § 1962(a). Conspiring to violate these provisions is also a crime. Id.

§ 1962(d). Although RICO falls within the federal criminal code, it grants a private right of

action to anyone whose “business or property” is injured “by reason of” a RICO violation. Id.

§ 1964(c).

Congress defined “racketeering activity” to include a discrete list of federal criminal

statutes. Id. § 1961(1)(B. These predicate offenses include actions indictable under the federal

mail and wire fraud statutes. Id. § 1961(1)(B). Although violating RESPA is a criminal offense,

RESPA is not among the predicate offenses defined as “racketeering activity” under RICO. Id.

The Complaint’s core allegation is that the manner in which the Fifth Third Defendants

refer business to Vista “entailed wholesale violations of RESPA” harming borrowers. (Compl.

¶ 48; see also ¶ 3.) Aware that it cannot sue under RESPA, and that RESPA is not a predicate

offense under RICO, Empire has simply recast these “wholesale violations of RESPA” as

racketeering activities of mail and wire fraud under 18 U.S.C. §§ 1341 and 1343. To do so,

Empire alleges that Defendants or others acting at their behest mailed, emailed, or faxed various

documents that fraudulently concealed Defendants’ alleged RESPA violations. Empire’s

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allegations are thus no more than a thinly veiled attempt to manufacture for itself a right of

action for alleged RESPA violations allegedly directed at consumers. 3

2. Empire cannot use RICO to avoid Congressionally imposed limitations on


who can sue under a particular statute.

Courts have rejected similar attempts to use RICO to skirt Congress’s chosen method of

enforcing a statute. In Smith v. Jackson, the Ninth Circuit held that the district court properly

dismissed the plaintiffs’ RICO counts because the complaint “d[id] no more than allege

copyright infringement under the label of mail and wire fraud, and copyright infringement is not

a predicate act under RICO.” 84 F.3d 1213, 1217 (9th Cir. 1996), superseded by statute.

Similarly, in Ayers v. General Motors Corp., the plaintiffs alleged that the defendants

committed RICO predicates of mail and wire fraud by failing to disclose defects in certain auto

parts. 234 F.3d 514, 516 (11th Cir. 2000). The mail and wire fraud allegations, in turn, relied on

the National Traffic and Motor Vehicle Safety Act, which imposes a duty to tell consumers about

safety defects. Id. at 521. The court held that while the Safety Act includes various

administrative remedies for violations, it does not confer a private right of action upon

consumers. Id. at 522. Accordingly, the court dismissed the RICO claims, concluding that

“Congress did not intend for a violation of the Safety Act’s notification requirements to be the

basis for a private civil RICO action.” Id.; see also id. at 524.

Likewise, in Brown v. First Tennessee National Bank Ass’n, No. 1:09-CV-0679-BBM,

2009 U.S. Dist. LEXIS 127503 (N.D. Ga. Nov. 20, 2009), the court dismissed a borrower’s civil-

RICO claims against a mortgage lender that were, at bottom, based on alleged violations of

3
No better evidence of this exists than the Powers case, cited by Empire in the Complaint.
(¶ 73.) In Powers, Empire’s counsel represents a putative class of borrowers pursuing
RESPA claims against the very same defendants in this case. See Powers v. Fifth Third
Mortg. Co., N.D. Ohio No. 1:09-CV-02059. A copy of the Powers complaint is attached
hereto as Exhibit A.

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Department of Veteran’s Affairs (“VA”) regulations. The borrower claimed that the lender had

defrauded a putative class of veteran-borrowers by leading them to believe they were being

charged only lawful charges, when in fact, they were not. To carry out the scheme, the borrower

alleged that the lender mischaracterized settlement charges on HUD-1 forms to disguise that it

was charging fees prohibited under VA regulations. The borrower further alleged that the bank

falsely certified to the VA that it had not imposed charges exceeding those permissible under VA

regulations. Id. at *4–5, *11–12.

Based on these allegations, the borrower asserted civil-RICO claims predicated on mail

and wire fraud, claiming the bank sent deceptive HUD-1 statements and VA certifications

through the mails and wires. In dismissing the RICO counts, the court concluded that

adjudicating the mail and wire fraud predicates would necessarily require the court to determine

whether the lender in fact violated the VA regulations. Because the alleged fraud was “bound up

in the violation of VA regulations,” the plaintiff’s RICO claims were nothing more than “an

attempt to enforce the VA regulations, for which Congress has not afforded a private cause of

action.” Id. at *34, 35. Accordingly, the court held that “[i]t is inconsistent with the legislative

intent to permit [plaintiff] to bring a class action RICO suit that seeks to enforce the VA

regulations.” Id. at *43. See also Hemi Group, LLC v. City of New York, 130 S. Ct. 983, 994-95

(2010) (Ginsberg, J., concurring) (concluding that RICO does not “allow [a plaintiff] to end-run

its lack of authority to” sue under a different statute).

The same principle applies here. At bottom, Empire seeks to enforce RESPA under the

guise of RICO. Whether the Defendants fraudulently concealed that they violated RESPA or

otherwise misrepresented any matters prohibited under RESPA necessarily turns on whether any

of the Defendants actually violated RESPA. The RICO claims are thus “bound up” in the

alleged RESPA violations.

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RESPA, however, does provide a right of action for title agents like Empire. Instead,

Congress gave only consumers and state and federal officials the right to enforce RESPA’s

prohibitions through private suits and/or criminal proceedings. 12 U.S.C. § 2607(d)(1), (2), (4).

This, combined with the fact that Congress did not define “racketeering activity” to include

RESPA violations, demonstrates that Congress did not intend to allow commercial entities like

Empire to bring RICO claims based on alleged RESPA violations. Accordingly, the Court

should dismiss all of the RICO counts.

B. Empire Has Offered No Factual Allegations That Would Show How the Alleged
RICO Violations Proximately Caused Empire’s Alleged Injuries.

To plead a viable RICO claim, a plaintiff must plead three elements: (1) a RICO

violation; (2) “injury to his business or property,” 18 U.S.C. § 1964(c); and (3) proximate cause,

which requires a “direct relation” linking the first two elements. Holmes v. Secs. Inv. Prot.

Corp., 503 U.S. 258, 268 (1992). Pleading “but for” causation is not sufficient. Hemi Group,

130 S. Ct. 989 (citing Holmes). Nor is “[a] link that is too remote, purely contingent, or

indirect.” Id. (internal quotation marks and alterations omitted).

The Court should dismiss all of Empire’s RICO counts because proximate cause is

altogether lacking. Empire’s theory is that Defendants directly injured borrowers by requiring

them to use Vista and inflating their settlement charges through an alleged “referral scheme,”

which Defendants carried out by sending allegedly fraudulent documents to borrowers. But

Empire’s claimed harm—losing business referrals from FTM—is wholly speculative and has

nothing to do with the alleged RICO violations.

1. Empire has not, and cannot, allege any direct injury resulting from
Defendants’ purported RESPA violations.

Supreme Court precedent confirms that the harm Empire alleges is too indirect to support

a RICO claim. In defining RICO’s proximate-cause standard, Holmes identified three problems

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that arise when, as here, an alleged harm is too attenuated from the alleged violation. First, it is

difficult to determine the amount of the plaintiff’s injury attributable to the violation, as distinct

from other, independent factors. Second, apportioning damages among different plaintiffs is

excessively complicated. Third, parties who are more directly injured often sue, creating a risk

of multiple recovery. 503 U.S. at 269–70. As Holmes recognized, “the need to grapple with

these problems is simply unjustified by the interest in deterring injurious conduct, since directly

injured victims can generally be counted on to vindicate the law as private attorneys general.”

Id.

Courts have applied this analysis as a three-prong test for determining whether a plaintiff

has sufficiently pled proximate cause. See, e.g., Anza v. Ideal Steel Supply Corp., 547 U.S. 451,

459–60 (2006); City of Cleveland v. Ameriquest Mortg. Secs., Inc., 615 F.3d 496, 503–06

(6th Cir. 2010); Ass’n of Wash. Pub. Hosp. Dists. v. Philip Morris, Inc., 241 F.3d 696, 701–02

(9th Cir. 2001). Empire fails all three prongs.

a. Empire’s damages theory is too speculative.

It is impossible to calculate Empire’s damages because its alleged injury is inherently

speculative. Specifically, Empire seeks lost revenues that it claims it would have received from

closing FTM loan transactions if FTM referred title work to Empire, and not to its affiliate Vista.

But Empire does not allege that it had any contractual or property right to that business; it merely

had an expectancy interest in servicing future FTM transactions. Nor does Empire allege any

method for determining which transactions it—rather than Vista, a cooperating settlement agent,

or a different member of the putative class—would have received. Moreover, whether Empire

suffered any harm depends on the actions of independent third parties (i.e., the borrowers

themselves) that break the causal chain. In such a situation, both the amount of damages and

whether Empire suffered any damaged are too speculative to support recovery.

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To recover under RICO for a lost business opportunity, the plaintiff must demonstrate

that it would have received the business in question and must offer a reasonable method for

calculating its lost profits. When plaintiffs fail to do either, courts reject their claims. For

instance, in Strates Shows, Inc. v. Amusements of America, Inc., 379 F. Supp. 2d 817 (E.D.N.C.

2005), the plaintiff alleged that it was not awarded certain government contracts because of the

defendant’s racketeering activity. The court concluded that such a lost business opportunity was

too speculative and dismissed the plaintiff’s RICO claims accordingly. It reasoned that without a

“definite pre-existing contractual right” to obtain the business, the plaintiff’s “expectancy

interest” was not sufficiently concrete to support a RICO claim. Id. at 828.

The Sixth Circuit rejected a similar “lost business opportunity” RICO claim in Grantham

& Mann, Inc. v. American Safety Products, Inc., 831 F.2d 596 (6th Cir. 1987). There, the

plaintiff alleged that the defendant prevented the plaintiff from obtaining an exclusive

distributorship in a new territory, and based its damages calculation on its sales performance in

two other territories. The Sixth Circuit rejected that theory as too speculative. The court

concluded that it was inappropriate to assume that the plaintiff would achieve the same success

in a new territory that it had enjoyed in existing territories, or that it would be successful at all.

Accordingly, the court found the plaintiff’s theory too speculative as to both the amount and the

fact of damages, and dismissed the RICO claim. Id. at 602–03, 605–06.

Empire’s Complaint suffers the same defects. It merely alleges that before FTM began

referring title insurance work to Vista, Empire provided settlement services on approximately ten

to fifteen FTM transactions per month. (Compl. ¶ 50.) But Empire identifies no contractual or

other entitlement that would have required FTM to refer any title or other settlement business to

Empire for the same number of FTM’s transactions each month—or any at all. Moreover,

Empire does not allege any method for determining which transactions it would have received,

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as opposed to Vista or the myriad other competing title agents. This omission alone merits

dismissal of Empire’s claims. James Cape & Sons Co. v. PCC Constr. Co., 453 F.3d 396, 403–

04 (7th Cir. 2006) (affirming judgment on the pleadings because the plaintiff did not allege what

portion of its decreased market share resulted from the alleged scheme).

Empire’s damages theory is too speculative also because it fails to factor in decisions

made by borrowers, who have the right to determine which entities perform the work necessary

to close their loan transactions. Courts have recognized that when independent actors are present

in the causal chain, damages are too speculative to support recovery. In Association of

Washington Public Hospital Districts v. Philip Morris, Inc., 241 F.3d 696 (9th Cir. 2001),

several hospitals claimed that the defendant tobacco companies concealed nicotine’s harmfulness

from the public, which led to more smoking, which led to unreimbursed expenses for treating

tobacco-related illnesses. The court concluded that the hospitals’ damages “were entirely

speculative in nature” because their claims “would involve proof, ultimately, of how smokers

themselves would have changed their behavior in the absence of the defendants’ wrongdoing.”

Id. at 702; see also Lerner v. Fleet Bank, NA, 318 F.3d 113, 124 (2d Cir. 2003) (damages theory

was too speculative because it depended on the state bar’s disciplining the wrongdoer if the

defendants had not concealed his misdeeds); Dist. Telecomms. v. Dist. Cablevision, Inc., 638 F.

Supp. 418, 422 (D.D.C. 1985) (plaintiff’s claimed harm—losing a bid for a cable franchise—was

speculative because the city council had discretion in awarding the franchise).

Similarly, in this case, FTM’s borrowers represent an independent step in the causal

chain. Borrowers have the right to decide which settlement agents will provide services in

connection with their transactions. While Empire alleges amorphously that no borrowers

received disclosures that RESPA required FTM to provide, Empire can only hypothesize what

the borrowers may have done if they had received the various disclosures or representations

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Empire believes they should have received. Tellingly, Empire does not allege that any borrowers

would have selected Empire to provide services for their transactions if they had known that

Defendants were allegedly unlawfully referring business to Vista or that Vista was an affiliate of

the Fifth Third Defendants. Instead, it alleges only that the borrowers would not have paid Vista.

(Compl. ¶ 86.) Empire entirely fails to explain how such a refusal would have redounded to its

benefit.

The Complaint thus lacks any method for pinpointing which transactions Empire lost.

Such unspecified “general allegations of lost sales” cannot support a RICO claim when the

plaintiff does not specifically identify any revenue that it lost or, in fact, was entitled to in the

first place. Parker v. Learn Skills Corp., 530 F. Supp. 2d 661, 678 (D. Del. 2008). Accordingly,

the Court should dismiss all of Empire’s RICO claims.

b. Apportioning damages among the putative class is impossible.

It is also impossible to apportion damages among the putative class. As discussed above,

Empire lacks any method for determining which loans it would have performed settlement

services for had FTM not referred the work to Vista. Nor does it offer any method for

apportioning the loans—and thus damages—among the putative class. To place a particular loan

transaction in the putative class’s damages pool, Empire would first have to prove that but for the

alleged RESPA violations, (1) Vista would not have provided title-insurance services for that

transaction; (2) neither would have the “co-operating settlement agent” that closed the

transaction; and (3) neither would have any of the other “co-operating settlement agents.” This

inquiry would entail questioning every borrower to determine whether each would have chosen a

different settlement agent(s) to perform the title-related and other necessary closing services.

Even then, Empire would have no way of determining which class member(s) (i.e., the

alleged non-cooperating agents) would have gotten the business and would therefore be entitled

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to the damages arising from that transaction. Proceedings would devolve into hundreds, if not

thousands, of “trial[s] within a trial,” as the putative class members fought among themselves to

determine who should have closed each particular loan transaction. See Strates Shows, 379 F.

Supp. 2d at 830. The Complaint offers no proposal for avoiding this problem and should be

dismissed accordingly.

c. Empire’s claims create a stark risk of multiple recoveries.

Empire’s claims also threaten to saddle Defendants with multiple recoveries because a

putative class of consumers, who are the only individuals who have a right to sue if there were in

fact RESPA violations taking place (which there are not), have already sued Defendants. See

Powers, supra; Toldy v. Fifth Third Mortg. Co., N.D. Ohio No. 1:09-cv-00377-LW. These

consumers are quite capable of vindicating their rights to the extent they were abridged and,

indeed, are represented by the same counsel representing Empire in this action. See Holmes, 503

U.S. at 269-70 (“directly injured victims can generally be counted on to vindicate the law as

private attorneys general, without any of the problems attendant upon suits by plaintiffs injured

more remotely”). Cf. Bridge v. Phoenix Bond Indem. Co., 128 S. Ct. 2131, 2144 (2008)

(concluding that plaintiffs had adequately alleged proximate cause because, among other things,

“no more immediate victim is better situated to sue”).

Problematically, the putative classes in Powers and in this case seek the same damages.

Under RESPA, a successful claimant is permitted to recover three times the amount paid for

settlement services. 12 U.S.C. § 2607(d)(2). The Powers putative class seeks a trebled recovery

of all moneys they paid for settlement services in FTM transactions utilizing Vista. In this case,

Empire seeks the amount that Vista and the cooperating settlement agents received for settlement

services (i.e., the amounts that borrowers paid) trebled. See 18 U.S.C. § 1964(c) (providing for

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treble damages under RICO). This lawsuit thus threatens Defendants with sextuple liability.

Accordingly, Empire’s RICO counts should be dismissed. E.g., Holmes, 503 U.S. at 269.

2. Empire fails to allege that the various RICO violations asserted directly
caused it injury.

Examining Empire’s RICO claims individually bolsters the conclusion that they are too

indirect to support liability. “[T]he central question” in determining whether allegations meet

RICO’s proximate-cause standard, “is whether the alleged [RICO] violation led directly to the

plaintiff’s injuries.” Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 461 (2006). Empire cannot

establish proximate cause because none of the alleged RICO violations led directly to its alleged

loss of business.

a. Empire fails to allege that any violation of § 1962(a) directly caused


Empire to lose business.

Counts I and II of the Complaint allege that Defendants violated RICO § 1962(a). That

subsection prohibits using or investing “any income derived, directly or indirectly, from a pattern

of racketeering activity” to acquire or maintain an interest in an enterprise. 18 U.S.C. § 1962(a).

The predicate racketeering activities underlying Empire’s § 1962(a) claims are alleged violations

of the criminal mail and wire fraud statutes, 18 U.S.C. §§ 1341, 1343. (Compl. ¶¶ 94, 104.)

Pleading an injury proximately caused by a § 1962(a) violation requires a plaintiff to

identify “a separate and traceable injury” from any harm occasioned by the predicate acts.

Craighead v. E.F. Hutton & Co., 899 F.2d 485, 494 (6th Cir. 1990). That injury must “stem[]

directly from the defendants’ alleged use or investment of their illegally obtained income.” Id.

Here, the Complaint fails to explain how Empire suffered any separate “investment

injury.” Instead, the Complaint rests solely on the conclusory allegation that Empire and the

putative class “have been injured in their property by reason of the operation of the enterprise in

this unlawful manner.” (Compl. ¶¶ 98, 122) But this allegation is no more than a legal

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conclusion, precisely the type that is “simply too conclusory” to withstand dismissal under Iqbal.

129 S. Ct. at 1949. See also Nugget Hydroelectric, L.P. v. Pacific Gas and Elec. Co., 981 F.2d

429, 437–38 (9th Cir. 1992) (conclusory allegations that the defendant used the racketeering

proceeds in a way that harmed the plaintiff do not establish proximate cause for a § 1962(a)

violation).

The only injury Empire identifies is being “blacklisted” because it refused to agree “in

advance” to the alleged required referrals to Vista. (Compl. ¶ 6.) But that injury hardly stems

from Defendants’ having invested the alleged racketeering proceeds. Nor is it sufficient to

allege, as Empire may do, that reinvesting the proceeds from the Vista referrals harmed Empire

by allowing the enterprise to continue operating. (¶ 87.) See, e.g., Fogie v. Thorn Americas,

Inc., 190 F.3d 889, 896 (8th Cir. 1999) (rejecting argument that reinvesting profits into an

enterprise constitutes injury sufficient to sustain a § 1962(a) claim); Falise v. Am. Tobacco Co.,

94 F. Supp. 2d 316, 349 (E.D.N.Y. 2000) (same); Standard Chorine of Del. v. Sinibaldi, 821 F.

Supp. 232, 246 (D. Del. 1992) (same).

Because Empire fails to plead any discrete injury stemming directly from Defendants’

investment of alleged racketeering proceeds, it cannot meet RICO’s proximate-cause standard,

and Counts I and II should be dismissed.

b. Empire fails to allege that any violation of § 1962(c) directly caused


Empire to lose business.

Counts III and IV allege that Defendants violated RICO § 1962(c), which prohibits

controlling an enterprise’s affairs through a pattern of racketeering activity. To meet the

proximate-cause standard, the plaintiff must allege injury resulting from the racketeering acts

themselves. Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 497 (1985) (“Any recoverable

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damages occurring by reason of a violation of § 1962(c) will flow from the commission of the

predicate acts.”); Kramer v. Bachan Aerospace Corp., 912 F.2d 151, 154 (6th Cir. 1990).

To support the § 1962(c) claims, the Complaint alleges racketeering acts of mail and wire

fraud: specifically, sending misleading loan documents to FTM’s borrowers. It further alleges

that, in reliance upon these representations, the borrowers paid the amounts that Vista charged.

(Compl. ¶¶ 72, 86.) But the Complaint never alleges that the predicate acts themselves directly

caused Empire to lose business. Instead, Empire alleges that its injury flowed from (1) its refusal

to refer the title insurance portion of settlement work to Vista, and (2) the Fifth Third

Defendants’ decision to “blacklist” Empire in return. (¶¶ 6, 54.) The alleged harm (i.e., being

“blacklisted”), however, neither was a racketeering act nor is closely related to the alleged acts of

mail and wire fraud against borrowers.

Empire alleges another predicate act in support of its § 1962(c) claims: “multiple

instances of interstate transport of money converted or fraudulently obtained in violation of

18 U.S.C. § 2314.” (¶ 127c.) Yet, Empire alleges no supporting facts whatsoever, contrary to

Iqbal. In Robinson v. Fountainhead Title Group Corp., 252 F.R.D. 275 (D. Md. 2008), a

putative class of borrowers, represented by Empire’s counsel, similarly attempted to base a §

1962(c) claim on the conclusory allegation that the defendants engaged in “[m]ultiple instances

of interstate transport of money converted or fraudulently obtained in violation of 18 U.S.C. §

2314.” The court, however, refused to consider this allegation because the plaintiffs “d[id] not

explain how or where these interstate transports occurred.” Id. at 279 n.4. The same pleading

deficiency exists here.

Because Empire has not alleged facts that directly connect any of the alleged racketeering

activities to its alleged loss of business, it cannot meet RICO’s proximate-cause standard for its

§ 1962(c) claims. Accordingly, the Court should dismiss Counts III and IV.

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c. Empire fails to allege that any violation of § 1962(d) directly caused


Empire to lose business.

Empire’s final two claims (Counts V and VI) attempt to allege a violation of RICO §

1962(d), which prohibits conspiring to violate one of RICO’s other subsections. Empire alleges

that Defendants conspired to violate subsection (a). (Compl. ¶¶ 140, 147 (alleging that

Defendants conspired “to use or invest income derived from” the racketeering acts of mail and

wire fraud “to operate, maintain control of, and maintain an interest in the enterprise”).)

However, Empire fails to allege that this purported conspiracy proximately caused its injuries.

This is so for at least two reasons.

As shown above, Empire’s claim under subsection (a) fails. Because its § 1962(d) claim

is purely derivative of that claim, the § 1962(d) claim fails as well. Elkins v. Chapman, 36 Fed.

Appx. 543, 544 (6th Cir. 2002) (plaintiff’s RICO-conspiracy claim necessarily fails when his

substantive-RICO claims fail); Grider v. Texas Oil & Gas Corp., 868 F.2d 1147, 1151 (10th Cir.

1989) (same). Moreover, a plaintiff cannot plead a RICO-conspiracy claim unless he was

injured by a racketeering act. Beck v. Prupis, 529 U.S. 494, 495–96 (2000). As discussed above,

Empire’s alleged injuries, if any, resulted from ostensibly being “blacklisted,” which is not a

racketeering act under RICO. For these reasons, Empire cannot establish proximate cause for its

RICO-conspiracy claims, and the Court should dismiss Counts V and VI.

C. Empire’s RICO Claims Fail Because the Complaint Does Not Sufficiently Allege
The Predicate Offenses of Mail and Wire Fraud.

Empire’s RICO claims also fail because the Complaint does not adequately allege

racketeering activity. Under Rule 9(b), “a party must state with particularity the circumstances

constituting fraud or mistake.” Fed. R. Civ. P. 9(b). This requirement applies to RICO claims

predicated on mail and wire fraud. Advocacy Org. for Patients and Providers v. Auto Club Ins.

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Ass’n, 176 F.3d 315, 322 (6th Cir. 1999); Bender v. Southland Corp., 749 F.2d 1205, 1216 (6th

Cir. 1984); Brutz v. Stillwell, No. 1:09-CV-2564, 2010 WL 1924471 (N.D. Ohio May 12, 2010).

To satisfy Rule 9(b), “a plaintiff must at a minimum allege the time, place, and content of

the misrepresentation,” as well as “the fraudulent scheme; the fraudulent intent of the defendants;

and the injury resulting from the fraud.” Advocacy Org., 176 F.3d at 322. Additionally, the

plaintiff must identify who made the alleged misrepresentations. Ambiguous assertions that

“defendants” did so are insufficient. Bates v. Nw. Human Servs., 466 F. Supp. 2d 69, 90–92

(D.D.C. 2006) (dismissing RICO complaint plagued by “unmitigated vagueness regarding which

defendant played which role in the fraudulent conduct”); see also U.S. ex rel. Bledsoe v. Cmty.

Health Sys., Inc., 342 F.3d 634, 643 (6th Cir. 2003) (dismissing claims under the False Claims

Act because the complaint did not specify which defendants engaged in which complained-of

practices).

Empire’s fraud allegations are too nonspecific to meet this standard. The Complaint

further fails to allege any affirmative misrepresentations or any duty to disclose to borrowers any

of the allegedly concealed information on the only two mortgage forms that Empire identifies.

For these reasons, Empire has not alleged racketeering activity, and the Court should dismiss all

six of its RICO claims.

1. Empire’s fraud allegations do not meet Rule 9(b)’s particularity


requirement.

Rather than plead the specifics of the alleged fraud, Empire offers only three vague

allegations of affirmative misrepresentations:

 Paragraph 44 alleges that “The unearned or excessive fees allocable or payable to


Vista are reflected on false and misleading HUD-1 Settlement Statements.”

 Paragraph 71 alleges that “the Defendants” sent mailings “that fraudulently


misrepresented the relationship between the Co-Conspirators.”

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 Paragraph 72 alleges that FTM’s customers received packages “from Defendants”


containing “documents falsely characterizing the referral fee paid to Vista as a fee for
services and/or naming Vista as a bona fide entity performing services in the
transaction and charging for those services.”

Empire similarly offers vague allegations of concealment, which are the mirror image of

the alleged misrepresentations. According to Empire, Defendants concealed from borrowers:

 “the affiliation between Fifth Third and Vista” (¶ 41);

 that Vista allegedly paid kickbacks, referral fees, and/or fee splits to the Fifth Third
Defendants and to FTM’s mortgage-loan officers (¶¶ 42, 43, 72, 79);

 that Vista’s charges were disguised referral fees or kickbacks (¶ 72);

 that the referrals to Vista were illegal (¶¶ 48, 72); and

 Vista’s “true nature” (¶¶ 71, 80).

The Complaint alleges Defendants conveyed these misrepresentations or omissions to

borrowers through various documents. These documents ostensibly include HUD-1 Settlement

Statements, Good Faith Estimates, unspecified “title insurance documents,” and “other”

unidentified “loan closing documents” and “correspondence” that Defendants or cooperating

settlement agents mailed, emailed, or faxed to borrowers. (¶¶ 71, 72.)

The shortcomings of these allegations are overwhelming. To start, allegations about

Vista’s “true nature” or the “illegality” of the alleged referrals are vague and conclusory, and

therefore insufficient under Iqbal. Moreover, the Complaint fails to specify the who, when, or

how of the alleged misrepresentations. Empire’s allegations also do not indicate what each

Defendant should have said, let alone in what documents those statements should have appeared.

Most notably, the Complaint does not allege with particularity how any of the alleged

misrepresentations or omissions injured Empire. The Complaint alleges only that if the omitted

information had been disclosed, borrowers “would have refused to conduct business with Vista,

would not have paid the fees required and imposed by Defendants in the name of Vista, and

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would have sought to secure their rights under the law.” (¶ 86.) How any of these actions would

redound directly to Empire’s benefit remains a mystery.

The Complaint’s many infirmities are perhaps best evidenced in the discussion of the

Powers loan transaction, the only borrower transaction specifically mentioned in the Complaint.

According to Empire, in the course of that transaction, “the [cooperating] settlement agent,

delivered to the Powers a packet of loan documents, including a false and misleading HUD-1

Settlement Statement and other loan documents and disclosures.” (¶ 75.) Empire alleges that the

HUD-1 statement reflected that the Powers paid Vista’s title fees. (¶ 76.) “[Upon information

and belief,” Empire alleges that the Fifth Third Defendants split those fees among themselves

and FTM’s loan officers as kickbacks or referral fees, and concealed that fact from the Powers.

(¶¶ 77, 79.)

The Complaint does not allege the relevant dates or times the various documents were

sent or even that any documents were actually mailed or wired to the Powers. Instead, it simply

alleges that the documents were “delivered” or “provided” to the Powers. (¶¶ 75, 79.)

Moreover, Empire does not allege which Defendant made any of the allegedly misleading

statements or omissions in the HUD-1. Nor does Empire specify how the HUD-1 was

misleading, leaving Defendants to speculate as to what the form should have stated or how

Vista’s charges to the Powers should have been reflected. Empire’s generic reference to “other

documents and disclosures” is simply too amorphous to give Defendants notice of what Empire

is complaining about.

Further, Empire offers no reason to believe that this transaction caused it any injury.

Empire plainly states that “in the usual transaction that was free of affiliated business

arrangements like Vista,” the “settlement agent” would have received the fees that Vista charged.

(¶78.) Yet, affiliated business arrangements are not illegal under RESPA, as Empire itself

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acknowledges. (¶¶ 37-39.) Moreover, Empire alleges that a different settlement agent—

Centennial Title—provided settlement services for the Powers transaction. (¶ 74.) This

inevitably invites the question: How was Empire harmed when Vista received fees that allegedly

should have gone to Centennial? For all of these reasons, the Complaint cannot satisfy Rule

9(b), and should be dismissed.

2. Empire fails to allege any actual misrepresentations or any duty to disclose


the allegedly concealed information on HUD-1 or GFE Forms.

More fundamentally, Empire’s fraud allegations fail because Empire fails to allege any

actual fraud on the only two documents specifically identified in the Complaint: the HUD-1

form and Good Faith Estimate (“GFE”). When mail and wire fraud allegations are premised on

misrepresentations, there must be actual misrepresentations by the defendant. Am. Dental Ass’n

v. Cigna Corp., 605 F. 3d 1283, 1291–92 (11th Cir. 2010) (affirming dismissal of RICO claims

because the complaint failed to “identify[] any actual fraud”). To the extent a plaintiff premises

his fraud allegations on omissions, the plaintiff must allege a duty to disclose the omitted facts.

United States v. Skellers, 940 F. Supp. 1146, 1149 (N.D. Ohio 1996).

In the analogous case of Robinson, the plaintiff borrowers (represented by Empire’s

counsel) offered similar allegations for their RICO claims against a title company and one of its

affiliates. 252 F.R.D. at 280. Like Empire, the plaintiffs alleged that the defendants sent

“HUD-1[s], correspondence, [and] other loan closing documents” that fraudulently

misrepresented the relationship between [the] conspirators and concealed the true nature of

services provided by [a] sham entity.” Id. Also like Empire, the plaintiffs alleged that the HUD-

1 was “false and misleading.” The court dismissed the RICO claims because the HUD-1

imposes no duty to disclose an affiliated business arrangement. Id. at 281. Nor does it impose a

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duty to comment on the reasonableness of any payments made by the borrower or on the amount

of work the entity being paid performed. Id. at 281.

Indeed, RESPA’s statutory and regulatory provisions confirm that there is no duty to

disclose any affiliated business relationships on a HUD-1 or GFE. 12 U.S.C. §§ 2603(a),

2604(c); 24 C.F.R. §§ 3500.7(d), 3500.8(b). 4 Nor does RESPA impose any duty to disclose on a

HUD-1 form or GFE any of the other information allegedly concealed by Defendants, including

any purported violations of RESPA’s anti-kickback and referral provisions. See id.; see also

Moll v. US Life Title Ins. Co. of N.Y., 710 F. Supp. 476, 479 (S.D.N.Y. 1989) (dismissing RICO

claims predicated on mail and wire fraud because defendant title company had no duty to

disclose that a portion of the plaintiffs’ title premiums were distributed to attorneys who

allegedly referred the business).

But even if such a duty did exist, RESPA provides no private right of action to enforce its

HUD-1 or GFE disclosure requirements. See, e.g., Robinson v. Fountainhead Title Group Corp.,

447 F. Supp. 2d 478, 492 (D. Md. 2006) (citing Reese v. 1st Metro Mortg. Co., No. 03-2185-

KHV, 2003 WL 22454658 (D. Kan. Oct. 28, 2003)). Given that consumers do not even have a

right of action to enforce these requirements, it is most strained for Empire to suggest that it can

create one for itself under the guise of RICO. See pp. 6-10, supra.

In any event, Section 4 of RESPA, which sets forth the requirements for HUD-1

disclosures, merely provides that the settlement agent shall “itemize all charges imposed upon

the borrower . . . in connection with the settlement.” 12 U.S.C. § 2603(a). Under Section 5, the

4
Rather, RESPA provides that affiliate relationships must be disclosed on a specific form
known as an Affiliated Business Arrangement Disclosure Statement (“ABA Disclosure”). In
fact, FTM provided each of its borrowers with an ABA Disclosure explicitly describing the
relationship between the Fifth Third Defendants and Vista, and notifying borrowers that they
are free to shop around for an alternative provider of title insurance services. See Toldy v.
Fifth Third Mortgage Co., 2010 WL 2639975, *3 (N.D. Ohio June 29, 2010).

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lender must, before closing, provide the borrower with “the amount or range of charges for

specific settlement services the borrower is likely to incur in connection with the settlement.” Id.

§ 2604(c). Here, the Complaint does not allege that any HUD-1 failed to itemize the borrower’s

settlement charges or that any GFE failed to provide the likely amount or range of charges. Nor

does the Complaint allege that Vista’s stated charges on any HUD-1 were not in fact charged to

the borrower.

Because Defendants misrepresented nothing on any HUD-1 of GFE for which

Defendants were under a duty to disclose, Empire’s allegations—even if true—do not amount to

predicate acts of mail and wire fraud. Accordingly, Empire’s RICO counts should be dismissed.

D. Empire Does Not Allege a Viable Association-in-Fact Enterprise.

The Court should dismiss Counts II, IV, and VI for an additional reason: Empire has not

adequately alleged an association-in-fact enterprise. An association-in-fact enterprise is “a group

of persons associated together for a common purpose of engaging in a course of conduct.”

United States v. Turkette, 452 U.S. 576, 583 (1981). To show an association-in-fact, a plaintiff

must allege “[an] ongoing organization, formal or informal, and . . . that the various associates

function as a continuing unit.” Id. More specifically, an association-in-fact enterprise must have

a structure bearing three features: (1) “a purpose,” (2) “relationships among those associated

with the enterprise,” and (3) “longevity sufficient to permit these associates to pursue the

enterprise's purpose.” Boyle v. United States, 129 S. Ct. 2237, 2244 (2009).

A complaint that merely lists the purported members and then calls them an enterprise is

not sufficient. Conte v. Newsday, Inc., 703 F. Supp. 2d 126, 134 (E.D.N.Y. 2010). Nor is a

complaint that alleges merely that the members engaged in parallel unseemly conduct. In re Ins.

Brokerage Antitrust Litig., 618 F.3d 300, 374 (3d Cir. 2010); Elsevier, Inc. v. W.H.P.R., Inc., 692

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F. Supp. 2d 297, 306–07 (S.D.N.Y. 2010). Instead, a plaintiff must “allege a separate entity.”

Greenberg v. Blake, No. 09-civ-4347, 2010 WL 2400064, *5–*6 (E.D.N.Y. June 10, 2010).

Empire fails to meet this standard. Empire alleges that the Defendants and the “co-

operating settlement agents” formed an association-in-fact enterprise “[t]hrough the agreements

between and among [FTF, FTM, FTM]’s individual loan officers, and the settlement agents.”

(¶ 69.) But Empire does not identify the so-called cooperating settlement agents, much less

describe their relationships with Defendants or even the specific Defendant(s) with which they

allegedly associated.

Empire merely alleges that FTM adopted a policy regarding the referral of settlement

services and some settlement agents agreed to comply with it. Such business arrangements—

even if they led to parallel behavior—do not constitute a “separate entity” and thus cannot

amount to an association-in-fact enterprise. Greenberg, 2010 WL 2400064, at *5–*6.

Accordingly, the Court should dismiss Counts II, IV, and VI.

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V. CONCLUSION

For the above reasons, Defendants respectfully request that their motion to dismiss be

granted.

Dated: December 3, 2010 Respectfully submitted,

/s/ Michael E. Mumford


Brett A. Wall (0070277)
Michael E. Mumford (0073931)
BAKER & HOSTETLER LLP
PNC Center
1900 East Ninth Street, Suite 3200
Cleveland, Ohio 44114-3482
Telephone: 216.621.0200
Facsimile: 216.696.0740

Irene C. Freidel (pro hac vice)


Jennifer J. Nagle (pro hac vice)
Brian R. Vaughn Martel (pro hac vice)
K&L GATES LLP
State Street Financial Center
One Lincoln Street
Boston, MA 02111-2950
Telephone: 617.261.3100
Facsimile: 617.261.3175

Attorneys for Defendants

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CERTIFICATE OF COMPLIANCE WITH LOCAL RULE 7.1(f)

Pursuant to Local Rule 7.1(f), the undersigned counsel for Defendants hereby certifies

that as of December 3, 2010 this case has not yet been assigned to a case track. Although the

Court has yet to issue a track assignment, the parties have proposed that this case be placed on a

complex track. Accordingly, Defendants have adhered to the 30-page limitation requirement for

dispositive motions filed in complex cases. In the event the Court assigns this case a standard

track, Defendants respectfully request leave to file the foregoing brief in excess of the 20-page

limitation.

/s/ Michael E. Mumford


One of the Attorneys for Defendants

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CERTIFICATE OF SERVICE

I hereby certify that on December 3, 2010, a copy of the foregoing Defendants’ Motion to

Dismiss Plaintiff’s Complaint was filed electronically. Notice of this filing will be sent to

counsel for all parties by operation of the Court’s electronic filing system. Parties may access

this filing through the Court’s system.

/s/ Michael E. Mumford


One of the Attorneys for Defendants

503128560

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