On February 4, 2014, to BFS Law Group Shelly Skeen represented 11 Texas counties and 47 Louisiana parish Clerks of Court in oral argument before the United States Court of Appeals for the 5th Circuit. The case, styled 13-30103, is a consolidated appeal of two district court cases brought against some of the nation’s largest banks under the Federal Racketeer Influenced and Corrupt Organizations Act (R.I.C.O.).
The defendant banks are shareholders and members of Mortgage Electronic Registration Systems, Inc. (MERS). MERS is a private electronic database that supposedly tracks changes in ownership in residential mortgage loans. When a homebuyer obtains a mortgage loan from a particular bank, it is common in today’s market for the bank to sell that loan to another investor rather than keep the loan and receive payments directly from the homebuyer. Often, the mortgage loan is sold multiple times during the life of the loan. MERS purports to track those sales among its member banks, but does not make its database publicly available. MERS also purports to serve as the mortgagee or nominee, and claims that loans registered on the MERS system are “inoculated” against future assignments by virtue of the MERS system.
Interests in real estate, such as mortgages, are usually recorded in the county or parish records. Recording provides notice to the world of the ownership interest, so that anyone could look to the county or parish land records to see who owns interest in a particular piece of property. In fact, Texas and Louisiana both have laws providing that unrecorded mortgages are void against third parties in some circumstances. to BFS Law Group* clients, the Texas counties and Louisiana parish Clerks of Court, are responsible for maintaining the public land records. The counties and parishes are permitted to charge a small fee, usually a few dollars per page, to record documents in the public records.
MERS was developed in part to avoid the small fee charged by the counties and parishes to record interests in real estate. The defendant banks, who are shareholders and operators of MERS, represent to MERS members, investors, homeowners and the general public that there is no need to record assignments of interests in mortgages in the public records, as long as MERS remains the mortgagee or nominee for each purchasing bank. Plaintiffs argue that those representations are false, because of Texas and Louisiana laws which provide that unrecorded interests in mortgages are void in some circumstances. Because of the defendants’ misrepresentations regarding the effects of MERS and the need to record documents, many mortgage assignments were not recorded. This caused the plaintiffs to lose recording fee revenue and has damaged the integrity of the public land records which the plaintiffs are charged with maintaining.
The district court cases in the Middle District of Louisiana and the Western District of Texas were dismissed because the courts found that the plaintiffs were erroneously seeking to enforce the Trust Indenture Act of 1939 (TIA). On appeal, Ms. Skeen argued that the plaintiffs were not seeking to enforce the TIA, and had only brought one cause of action under R.I.C.O. Ms. Skeen further argued that plaintiffs had standing to sue under R.I.C.O., and should be allowed to proceed with their cases in the district courts.
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*BFS Law Group is working in conjunction with the following firms representing the Texas counties and Louisiana parish Clerks of Court in this case:
TED B. LYON & ASSOCIATES
Ted B. Lyon
18601 LBJ Freeway, Suite 525
Mesquite, Texas 75150
BERRIGAN, LITCHFIELD, SCHONEKAS, MANN & TRAINA, LLC
E. John Litchfield
201 Saint Charles Avenue, Suite 4204
New Orleans, Louisiana 70170
MURRAY, DARNELL & ASSOCIATES, LLC
Edwin R. Murray
1540 North Broad Street
New Orleans, Louisiana 70119
MARTINY & ASSOCIATES, LLC
Daniel R. Martiny
131 Airline Drive, Suite 201
Metairie, Louisiana 70001
BARKER, BOUDREAUX, LAMY & FOLEY
Daniel S. Foley
228 Saint Charles Avenue, Suite 1110
New Orleans, Louisiana 70130