Judge Declines to Rule on Chase Bank Fees

OAKLAND, Calif. (CN) — A federal judge declined to rule after a hearing Tuesday in which she asked for more information about fraud and unjust enrichment claims accusing JP Morgan Chase of conspiring with property inspectors to charge delinquent homeowners excessive fees.

U.S. District Judge Yvonne Gonzalez Rogers refused to certify a class last year, and during oral arguments Tuesday on Chase's motion for summary judgment asked the attorneys to focus on the fraud and unjust enrichment claims

Lead plaintiff Diana Ellis and two other homeowners who defaulted on their mortgages say Chase lied to mortgage holders by charging "miscellaneous fees" without indicating the fees would be used to inspect delinquent properties.

In the July 2012 lawsuit and a similar but separate case against Citibank, the plaintiffs claimed the banks conspired with property inspection companies to charge excessive fees, and that the fees were unauthorized.

Gonzalez Rogers dismissed both cases in January 2015, finding the plaintiffs failed to prove that Chase and Citibank colluded with the inspection companies.

Referring to Chase's miscellaneous fees on Tuesday, Gonzalez Rogers told plaintiffs' attorney Mark Pifko: "What you are trying to do is impact the manner in which they conduct their business, aren't you?"

Pifko acknowledged that, saying Chase's "miscellaneous fees" language is fraudulent and should be removed from its mortgage statements.

Chase attorney Robert Wick countered that Chase had not committed fraud or misrepresented the purpose of the fees.

"It's a pure nondisclosure claim," Wick said.

Pifko disagreed, saying Chase disguised the nature of the fees.

"When someone receives a statement about [the fees], they won't know what is going on, and they won't be able to ascertain the truth," Pifko said. "You trust [that] the bank sending you these statements is telling you the truth."

Wick said Chase has the right to charge the fee, and that nearly every federal judge who has considered similar issues, including judges on the Ninth Circuit, have agreed.

"It can't possibly be fraud, considering Ninth Circuit opinion," Wick said.

He added that plaintiff Ronald Lazar's fraud claim is barred because he never paid an inspection fee.

Turning to the unjust enrichment claim, Wick said Chase used the fees to reimburse itself after paying its property inspectors, not to enrich itself.

In its motion for summary judgment, Chase said the plaintiffs' mortgage agreements stipulate that they must pay property inspection fees if they default on their loans, which defeats their unjust enrichment claims.

In plaintiffs' opposition to the summary judgment motion, they said that Gonzalez Rogers rejected the bank's argument in Chase's first motion for dismissal, ruling that a loan agreement doesn't matter when the claims are not for breach of that agreement.

In its own motion, Chase said it inspected Ellis' home 26 times during the nearly six years she was delinquent on her mortgage. It charged her for eight inspections, two of which were later waived, for a total of $63.15.

Chase said it periodically inspects delinquent properties to ensure they're being maintained.

Pifko is with Baron & Budd in Encino; Wick with Covington & Burling in Washington, D.C.

The court minutes of the Tuesday hearing say only that the motions were submitted and held.

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