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Big Banks Win Dismissal of Class Actions

OAKLAND, Calif. (CN) - Two classes of homeowners failed to prove that Citibank and JP Morgan Chase banks conspired with property inspection companies to charge excessive fees, a federal judge ruled.

In dismissing both class actions on Jan. 6, U.S. District Judge Yvonne Gonzalez Rogers wrote that the homeowners could not show "the existence of an association-in-fact enterprise united for the as-alleged common purpose."

Lead plaintiff Gloria Stitt, who sued Citibank, and Diana Ellis, who sued Morgan Chase, both in July 2012, claimed the banks colluded with subsidiaries, affiliates and vendors to profit from inspections that they routinely assessed on delinquent homes. Stitt claimed that Citibank ordered unnecessary monthly property inspections through a vendor called Safeguard. One class member's home allegedly was inspected more than 30 times in three years.

But Judge Gonzalez Rogers found that the classes failed to show a RICO conspiracy between the banks and vendors.

"Plaintiffs' allegation that Safeguard 'conducted the inspections according to policies and procedures developed collaboratively with Citi,' does not render plausible plaintiffs' claim that the members of the Citi Enterprise associated for the alleged, and fraudulent, common purpose," the judge wrote.

In dismissing the action against Chase, Rogers found: "Plaintiffs have offered no factual allegations to render plausible their claim that the enterprise members actually knew of the alleged fraudulent common purpose, or that they 'formed' the enterprise to participate in performing 'unnecessary property inspections" - much less that they "devised a scheme to defraud borrowers ... by means of false pretenses.' "

She added: "Indeed, aside from these conclusory allegations, the [first amended complaint] is notably lacking in the way of substantive allegations concerning the third-party enterprise members. Instead, the FAC focuses entirely on the Chase defendants' intent, knowledge, and actions. For example, it was Chase that assessed fees for inspections, allegedly concealed the true nature of those fees, and that undertook to implement a computerized automated mortgage loan management system that requested property inspections that were allegedly unnecessary."

Rogers said the plaintiffs proved only that the vendors had contracts with Chase and Citi. She said it was too late to grant either class leave to amend.

"At this late juncture, near the close of discovery, leave to amend is not permitted," Rogers wrote. "Although plaintiffs have had well over a year to engage in discovery intended to uncover facts supporting their RICO theory, the FAC offers even less in the way of substantive allegations of fraud and wrongdoing than did the original complaint."

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