Jan 30 2014, 9:38pm CST | by Forbes
A Nevada judge has ordered the state’s attorney general to pay legal and discovery costs to Lender Processing Services after the state failed to come up with evidence supporting a lawsuit accusing the firm of defrauding homeowners, an attorney for LPS said.
The order represents an extremely rare case of a judge finding the state’s highest legal officer acted improperly, said Mitchell Berger with Berger Singerman, a Florida lawyer perhaps most famous for representing Al Gore in his post-election disputes in 2000.
“I have been practing law for 34 years,” Berger said. “I’ve been around the block. And I’ve never seen an attorney general sanctioned.”
The case also highlights the controversial practice of hiring private class-action attorneys to pursue government litigation. Nevada Attorney General Catherine Cortez Masto hired the Washington law firm Cohen Milstein in 2009 to sue LPS for allegedly violating state consumer-protection laws by engaging in “robosigning” and other illegal practices as a mortgage servicer.
Those claims were dubious, Berger said, since LPS worked for banks, not consumers. Judges have thrown out similar class-action suits by Cohen Millstein and other firms, he said. Meanwhile, LPS settled similar claims with 49 other states, but complained it couldn’t reach a similar agreement with Nevada because Cohen Milstein had an incentive to hold out for more money under its contract, which awards it 15% of any settlement. LPS petitioned the Nevada Supreme Court to reject the state’s contract with Cohen Milstein last year. That case is still pending.
The state filed the lawsuit against LPS in December 2011 but didn’t actually serve LPS until the following year, Berger said.
“It sat around without them taking any action which is not what professional attorneys general do,” he said. Perhaps the AG was expecting a settlement? ”But that’s what class action lawyers do,” Berger told me.
LPS pushed the state to supply evidence backing up its claim that LPS — now Black Knight Financial Services — violated consumer protection laws by processing loan documents improperly. While state AGs and regulators have extracted billions of dollars from lenders over robosigning and other practices, there’s little evidence borrowers who were up to date on their mortgages were hurt by them.
Judge Elizabeth Gonzalez in Las Vegas finally ordered the state and Cohen Milstein to provide evidence that LPS had violated consumer laws, Berger said, and when it failed to do so she ordered sanctions. In an order that will be entered as early as tomorrow, the judge required the state to pay LPS’s costs that Berger expects will run to a “significant six-figure number.”
“If you have a client who is being wrongfully accused in the press and you manage to get a judge to ignore the threats and order sanctions, that’s a good feeling,” he said. “The system corrects itself when a judge applies the law to the facts presented.”
After Nevada supplied 70,000 pages of mortgage documents today, he said, Judge Gonzalez ordered the state to also produce a witness who can explain how those documents support claims of consumer-law violations.
In its petition before the Nevada Supreme Court, LPS says Nevada law specifically prohibits the AG from hiring private lawyers unless they are used to defend the state in a lawsuit, or the legislature appropriates the fees to pay them. Even in cases where outside lawyers can work for the state, they are to be paid from a specific account that the contract with Cohen Milstein says won’t be used in the LPS action.
Source: Forbes Business
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