Merscorp Mortgage Registry Has Racketeering Suit Dropped
April 26, 2011, 1:17 PM EDT
By Thom Weidlich

April 26 (Bloomberg) — Merscorp Inc., which runs an electronic registry of mortgages, had a civil-racketeering lawsuit against it voluntarily dismissed.

The plaintiffs, who accused the company and its Mortgage Electronic Registration Systems of forcing false foreclosures in New York state, reached an undisclosed settlement with the Steven J. Baum PC foreclosure law firm in Amherst, New York. U.S. District Judge Jack B. Weinstein in Brooklyn closed the case April 14.

“The plaintiffs settled with another defendant and voluntarily dismissed the case against us,” Janis Smith, a Merscorp spokeswoman, said in an e-mail. “The case was without any merit against both Merscorp Inc. and Mortgage Electronic Registration Systems.”

Steven Baum, his firm and Merscorp, based in Vienna, Virginia, were sued last August by Manhattan lawyer Susan Chana Lask representing two home-loan borrowers in Brooklyn and Rock Hill, New York. Other suits accusing MERS and its members of conspiracy in the way MERS operates have been filed in federal courts. A suit in Florida was dismissed by the judge in February. That decision has been appealed. A Kentucky case was voluntarily dismissed in February.

“The parties involved in the matter have settled it amicably,” Earl Wells, a spokesman for Baum, said in an e-mail.

Foreclosure Fees

The New York borrowers accused Baum of filing “tens of thousands of foreclosures” involving mortgages that weren’t properly assigned and of overcharging on foreclosure fees. Baum denied the allegations. MERS allows banks to sell mortgages among each other without having to register the transfers in county records.

The suit sought class-action status on behalf of homeowners in the state with similar circumstances.

“The settlement was amicable for the parties who have faith in Attorney General Schneiderman’s and, from what we understand from media reports, the Department of Justice investigation, which are the best departments to handle this matter for the public,” Lask said in an e-mail.

Eric Schneiderman, New York’s attorney general, subpoenaed Baum’s firm this month, asking for documents submitted on behalf of the firm in court and to parties representing individuals in foreclosure, according to a person familiar with the matter who declined to be identified because the matter isn’t public. Wells has said the law firm is “cooperating fully” with the attorney general’s office.

Federal Prosecutors

The probe was reported April 9 in the New York Times, which said federal prosecutors in Manhattan have also requested information about the firm’s practices, citing an unnamed lawyer who has litigated against it.

The dismissal of the Brooklyn case allows the possibility that one of the plaintiffs, Jeffrey Miller, could re-file a lawsuit against MERS, Lask said.

In November, Baum sued Lask in state court in Buffalo for defamation over comments she made, including in a press release announcing her lawsuit, on a YouTube video and in a Buffalo News article. The parties agreed to dismiss that suit, which was moved to federal court in Buffalo, on April 14.

In a March 30 letter to U.S. Magistrate Judge James Orenstein in Brooklyn, Brett A. Scher, a lawyer for Baum, said Lask was trying to improperly tie settlements of the two cases.

‘Conflict of Interest’

“We advised plaintiffs’ counsel that her attempt to link the settlement of the two actions together was a conflict of interest,” he wrote. In the defamation suit, “plaintiffs’ counsel — not her clients (the plaintiffs in this action) — are the defendants.”

“If Mr. Baum is serious, then he will globally close all matters, make me whole regarding the action he filed upstate,” Lask told Scher in a March 28 e-mail, according to his letter. “One cannot be closed without the other.”

In his letter, Scher, who didn’t represent Baum in the defamation case, quoted an e-mail from Lask that day saying that he was first to raise settling the two cases together. He denied that in the letter.

Scher said in the letter that Lask attempted “to put her own financial interests ahead of her clients.”

“Litigation is contentious, so whatever Mr. Scher wrote at times regarding the case or getting personal about me, I wrote as much about him and his clients at other times as we both had our positions,” Lask said in her e-mail. “It’s a docket, not a determination.”

Scher didn’t immediately return a call for comment.

Attorneys General

All 50 U.S. state attorneys general are investigating whether banks, loan servicers and law firms properly prepared documents to justify hundreds of thousands of foreclosures.

A complaint in one lawsuit in which Baum’s firm is accused of charging homeowners illegally for attending foreclosure- settlement conferences says it is “believed to be the largest foreclosure mill in the state of New York.” The firm is seeking to have that complaint dismissed.

The cases are Campbell v. Baum, 10-cv-3800, U.S. District Court, Eastern District of New York (Brooklyn), and Baum v. Lask, 11-cv-197, U.S. District Court, Western District of New York (Buffalo).

–With assistance from Karen Freifeld and David McLaughlin in New York. Editors: Mary Romano, Glenn Holdcraft