On March 11, the U.S. District Court for the Southern District of Ohio granted in part and denied in part motions to dismiss in a case brought by homeowners alleging that loan servicers wrongfully terminated their loan modification applications and made fraudulent misrepresentations in related communications. The court allowed claims under RESPA, the Racketeer Influenced and Corrupt Organizations Act (RICO), the Ohio Corrupt Practices Act (OCPA), and intentional and negligent fraudulent misrepresentation to proceed against the servicers, their alleged parent company, and the parent company’s alleged owner, while dismissing the civil conspiracy claim against all defendants under the intracorporate conspiracy doctrine. The ultimate success of the claims against the servicers may depend on whether two servicers are separate companies and thus cannot be liable for each other’s actions.

The court rejected arguments that the plaintiffs failed to establish borrower status under RESPA or that the parent company and its owner lacked obligations as servicers, finding instead that they were liable as principals of the servicers — a theory supported by cases imposing RESPA liability on a principal for a servicer’s actions. On the fraud claims, the court found that the plaintiffs met the heightened pleading standard under Rule 9(b) and that the parent company and its owner have a pecuniary interest in the servicers’ business sufficient to support negligent misrepresentation liability, notwithstanding the absence of a direct customer relationship with the plaintiffs. The court also found that the plaintiffs sufficiently pleaded an association-in-fact enterprise for their RICO and OCPA claims by alleging coordinated behavior among the defendants.