Posted on Wednesday, November 17, 2010
The expected litigation frenzy against mortgage lenders that used "robo-signing" tactics — mass signing and approval of foreclosure documents without verification — has launched, with class actions in Florida and Maine and a lawsuit by Ohio’s attorney general filed this month, all against GMAC Mortgage.
Other purported class actions involving robo-signing have been filed in federal courts in Indiana, Kentucky, Maryland and New Jersey in recent weeks. Lawyers expect many more to follow.
Gary Mason, a partner at Washington-based Mason who filed a purported class action in the Middle District of Florida, predicts that there will be a multidistrict litigation. "I’m quite certain that there will be enough lawsuits," Mason said.
"Courts are realizing that this has infected the integrity of the judicial system and are more sympathetic to homeowners who are challenging the foreclosure proceedings," Mason said.
The suit he filed, Huber v. GMAC, claims that GMAC engaged in "systematically fabricating evidence in the form of fraudulent affidavits" in Florida foreclosure proceedings. The plaintiffs want the court to declare the affidavits null and void. Geoffrey Huber and three other plaintiffs are named in the suit, filed on Nov. 4.
Although he’s sure there will be more cases, Mason said "it’s difficult to predict how a wrongful foreclosure action is going to fare." The cases seem to be trying on different legal claims, he said.
The legal claims in the Huber case include violations of constitutional rights under color of law, abuse of process, violation of the Florida Deceptive and Unfair Trade Practices Act and unclean hands.
"I don’t think there’s much precedent for many of the causes of action being alleged, particularly not in the context of a class action," Mason said.
The lawsuit in Maine, Archibald v. GMAC Mortgage was first filed in state court then transferred to the District of Maine on Nov. 4. Steven Archibald and five other named plaintiffs sued GMAC for "submitting false representations" regarding foreclosure actions in Maine’s state and federal courts. The plaintiffs claim GMAC employees never fully read the affidavits and certifications they signed.
The Archibald plaintiffs claim that "robo-signing should lead to cancellation of any summary judgment or any other kind of judgment that was based on a false and fraudulent affidavit," said Charles Delbaum, a staff attorney at the National Consumer Law Center. The center is co-lead counsel on the case.
The legal claims in the Archibald case include violations of the Maine Unfair Trade Practices Act, abuse of process, fraud on the court and breach of good faith and fair dealing.
The plaintiffs are seeking a preliminary and final injunction against GMAC foreclosures in Maine. They also want the court to order the company to meet the legal requirements for future filings of mortgage paperwork.
"We’re not contending the process couldn’t be done again if in fact the paperwork is available," Delbaum said.
Ohio’s attorney general, Richard Cordray, has also gotten in on the act. He filed State of Ohio v. GMAC Mortgage in state court, and it was removed to the Northern District of Ohio on Nov. 5. The lawsuit claims that GMAC, its parent company Ally Financial and GMAC Mortgage foreclosure team leader Jeffrey Stephan committed fraud by signing and causing the filing of "hundreds of false affidavits and assignment of notes," in Ohio courts.
Cordray is seeking a preliminary and permanent injunction against GMAC and Ally to stop them from finishing foreclosures with faulty affidavits. He is also seeking actual damages for consumers: civil penalties of $25,000 for each violation of the state sales law, plus punitive damages.
"These so-called ‘robo-signed’ affidavits disrespect the courts and the private property rights of homeowners," stated Cordray, in a press release about the lawsuit. "As we seek to uncover the extent to which GMAC used such tactics, we are taking this action...to make sure that these faulty affidavits are no longer used in foreclosure proceedings."
Lawyers for GMAC either referred questions to the company or did not respond to requests for comment. Ally Financial also did not respond to requests for comment.
Shari Qualters reports for the National Law Journal, an ALM Media affiliate of the Daily Business Review.