Antitrust Law Daily Wrap Up, RICO—S.D. Ohio.: Consumer adequately alleges fraud by auto financing company, (Jan 11, 2016)

By Greg Hammond, J.D.

A consumer sufficiently claimed that an auto financing company and insurance company formed a scheme to defraud her, used the mails to further the scheme, acted with an intent to deprive her of money and property, and that the actions proximately caused her to suffer injury, the federal district court in Columbus, Ohio, has determined. The financing company’s motion for judgment on the pleadings, with regard to the consumer’s Racketeer Influenced and Corrupt Organizations Act (RICO) claim, was therefore denied (Rose v. Friendly Finance Corp., January 8, 2016, Kemp, T.).

The consumer alleged that Friendly Finance Corp. provided her and purported class members with automobile loans. Friendly, however, improperly added the cost of auto insurance, procured through American Modern Home Insurance Co., to the consumer’s and class members’ loan balances—a practice known as forced placed insurance. Friendly moved, in part, for judgment on the pleadings with regard to the consumer’s RICO claim.

The court denied the motion, rejecting Friendly’s argument that the consumer failed to adequately set forth allegations of fraud, a scheme, or intent to deceive. In particular, the consumer claimed that Friendly, in conjunction with American Modern, sent letters falsely indicating that it obtained an insurance policy for her and representing that the premium for the policy had been added to her loan balance. Friendly, however, allegedly failed to obtain any insurance policy, and there was no premium for any policy obtained for her. Friendly and American Modern therefore formed a scheme to defraud the consumer, used the mails to further their scheme, and acted with an intent to deprive her of money and property, the consumer alleged. Further, the actions proximately caused her to suffer injury by inflating her loan amount, lengthening the term of her loan and ultimately repossessing her vehicle, according to the consumer.

The court concluded that, at the current stage of litigation and accepting the consumer’s allegations as true, the consumer satisfied the heightened pleading requirements of Federal Rule of Civil Procedure 9(b). Specifically, the consumer specified the allegedly fraudulent statements, identified the speaker, pleaded the when and where the statements were made, explained why the statements were fraudulent, alleged that she suffered financial injury and injury to her property, and charged that Friendly’s conduct proximately caused her to suffer such injury.

The case is No. 2:15-cv-1032.

Attorneys: Troy John Doucet (Doucet & Associates Co., LPA) for Monica S. Rose. Kimberly Smith Rivera (McGlinchey Stafford PLLC) and James Scott Wertheim (Miller Goler Faeges Lapine LLP) for Friendly Finance Corp. Mark Alan Johnson (Baker & Hostetler LLP) for American Modern Home Insurance Co.

Companies: Friendly Finance Corp.; American Modern Home Insurance Co.

Cases: RICO OhioNews