CAUSE NO. AMERICAN HOME MORTGAGE SERVICING, INC.
, Plaintiff, § § § § § § § § § § § IN THE DISTRICT COURT oir') ,~/,:'
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LENDER PROCESSING SERVICES, INC., and DOCX, LLC, Defendants.
DALLAS COUNTY, TEXAS
PLAINTIFF'S ORIGINAL PETITION Plaintiff American Home Mortgage Servicing, Inc. ("ARMS I") files this Original Petition against defendants Lender Processing Services, Inc. ("LPS") and its division, DOCX, LLC ("DOCX" and collectively with LPS, "Defendants"), based upon AHMSI's personal knowledge as to its own acts and upon information and belief as to all other allegations. I. PRELIMINARY STATEMENT
ARMSI brings this action seeking redress tor the millions of dollars in losses it has suffered, and continues to suffer, as a result of Defendants' unauthorized execution and notarization of assignments affecting more than 30,000 residential mortgages in Texas and throughout the Unites States. Defendants do not dispute that, without AHMSI's knowledge or consent, they improperly executed, notarized, and recorded thousands of assignments upon which AHMSI relied in the course of pursuing foreclosure proceedings on behalf of the securitization trusts that owned the loans; nonetheless, Defendants deny any legal responsibility to AHMSI, and have refused to indemnify AHMSI for the damages they have caused. As part of its residential loan servicing business, ARMSI collects mortgage, tax, and insurance payments from homeowners on mortgages held by securitization trusts. It also works
ORIGINAL PETITION -
with homeowners who default on their mortgages to find acceptable alternatives to foreclosure, such as loan modification, deeds in lieu of foreclosure, and short sales. When these efforts are not successful in curing a default, AHMSI initiates foreclosure proceedings owner of the loan. AHMSI retained Defendants to prepare, notarize, and record assignments of mortgage in connection with those foreclosure proceedings. of directors appointed various employees To facilitate Defendants' work, AHMSI's board as "Special Officers" of AHMSI, on behalf of the
providing them with the limited authority to execute assignments in accordance with the terms of the board resolutions appointing them. Defendants acted outside this limited grant of authority. Without AHMSI's knowledge
or approval and in violation of their contract with AHMSI, Defendants engaged in a practice they have described as "surrogate signing" in which persons not authorized by AHMSI's board
executed assignments explicitly authorized.
of mortgage by signing the names of the Special Officers who were Defendants then caused these unauthorized signatures to be witnessed and in the local real property records in connection
notarized, thereafter recording the assignments with the related foreclosure proceedings.
AHMSI did not learn of these practices until late 2009
when Defendants admitted the "surrogate signing" practice to AHMSI, at which time AHMSI ceased using LPS to prepare, notarize and record assignments of mortgage. Defendants' practice of "surrogate signing" mortgage assignments has forced AHMSI to
address a myriad of legal issues, problems and proceedings in venues around the country.
caused AHMSI to undertake, at substantial expense, an extensive remediation effort to identify and, where necessary, remedy any surrogate-signed assignments of mortgage.
ORIGINAL PETITION -
Despite their contractual obligations and express promises to the contrary, Defendants have refused to reimburse or indemnify AHMSI for the costs it has incurred due to Defendants' practice of "surrogate signing." Indeed, only five months after expressly promising to indemnify AHMSI, Defendants for the first time claimed that they had no duty to indemnify AHMSI, purportedly because the contract pursuant to which Defendants executed the unauthorized assignments had expired before they had executed any assignments on AHMSI's behalf. Defendants conveniently ignore that they created tens of thousands of assignments of mortgage and accepted hundreds of thousands of dollars in payment in accordance with the terms of a supposedly non-existent contract. I Because of Defendants' failure to comply with their obligations to AHMSI, AHMSI now brings this action seeking (1) a declaratory judgment that the written contract between the parties, as amended, is binding and effective; (2) an order compelling Defendants to arbitrate AH1vlSI's claims for breach of contract and indemnification; and (3) as to AHMSl's non-arbitrable claims, an award of damages sufficient to reimburse AHMSI for the millions of dollars in losses caused by Defendants executing, notarizing, and recording unauthorized, surrogate-signed assignments on behalf of AHMSI. II. A. INTRODUCTION
Discovery Control Plan-Level 3
ARMSI intends to conduct discovery under Level 3 pursuant to Texas Rule of
Civil Procedure 190.4.
I Given their position concerning the contract, AHMSI believes that Defendants will reject AHMSI's demand to arbitrate that is based on an express arbitration provision in that contract. Nonetheless, AHMSI has served Defendants with a demand for arbitration that is attached hereto as Exhibit A.
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Parties 2. Plaintiff ARMSI is a Delaware corporation trusts that own the loans. that services residential mortgages
primarily for the securitization maintains its headquarters Texas 75019. 3.
ARMSI is registered in Texas and
and principal place of business at 1525 S. Beltline Road, Coppell,
Defendant LPS is a Delaware corporation that provides-either document processing default
through its affiliates-mortgage performance companies. headquarters 32204. analytics,
services, settlement services, mortgage to lenders and mortgage servicing its
services in Texas
LPS registered and principal
to do business
in March 2009 and maintains Avenue, Jacksonville, registered
place of business at 601 Riverside through
LPS may be served with process
Corporation, which is located at 350 North 4.
Street, Suite 2900, in Dallas, Texas 75201.
Defendant DOCX is a Georgia limited liability company that provides document DOCX is a division of LPS, Florida 32204.
processing services for lenders and mortgage servicing companies.
and its principal place of business is at 601 Riverside Avenue, Jacksonville, DOCX may be served with process by serving the Texas Secretary of State.
Jurisdiction and Venue
5. The Court has jurisdiction over the subject matter of this action under Sections
24.007 and 24.008 of the Texas Government Code. 6. The Court has personal jurisdiction over LPS (a) because it has engaged in
continuous and systematic activities within the State of Texas, and (b) because this action arises from and relates to LPS's contacts with the State of Texas. releases, assignments, and other mortgage-related
In particular, LPS processed lien
documents that it, or its agents, filed in county
recording offices throughout the state, including in Dallas County.
The Court has personal jurisdiction over DOCX (a) because it has engaged in
continuous and systematic activities within the State of Texas, and (b) because this action arises from and relates to DOCX's contacts with the State of Texas. In particular, DOCX processed lien releases, assignments, and other mortgage-related documents that it, or its agents, filed in county recording offices throughout the state, including in Dallas County. 8, Venue is proper in this Court under (a) Section 15.002(a)(1) of the Texas Civil
Practice and Remedies Code because Defendants recorded a substantial number of assignments in Dallas County, or, alternatively under (b) Section lS.002(a)(4) because AHMSI resides in Dallas County. III. A. FACTUAL BACKGROUND
AHMSI's Residential Loan Servicing Business 9. AHMSI is engaged in the business of servicing home loans, the majority of which
are held in residential mortgage-backed securitization trusts. When an individual takes out a loan to buy a home, the originating lender will often pool the loan with others and sell its interest in the loans to investors through the creation of securitization trusts. As part of this process, an agent of the trust, known as a "servicer," obtains the right to service the pool of loans and agrees to act as the trust's agent in doing so. 10. As the servicer, AHMSI provides a wide array of services to the securitization
trusts, including, but not limited to, collecting principal, interest, tax, and insurance payments from homeowners and, when necessary, initiating foreclosure proceedings on behalf of the trust that owns the loan. B. Defendants Agreed To Execute Assignments for AHMSI 11. DOCX began providing document processing services to AHMSI in April 2008
when a Professional Services Agreement (the "PSA") between predecessors Option One
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Mortgage Corporation ("Option One") and DOCX, was assigned by Option One to ARMS I as part of a larger asset acquisition. 12. (Exhibit B.)
Option One originally had entered into the PSA with DOCX over two years DOCX had agreed to process lien releases and related documents,
earlier, on January 9, 2006.
including assignments of mortgage, for Option One pursuant to a "Description of Services and Fees"-also known as a "Statement of Work"-which was attached as Exhibit A to the PSA.
(lei. at 8-13.)
13. judgments Among other things, in performance the PSA required DOCX to "use its best efforts and to "provide such
of all Services and duties under this Agreement,"
Services in an efficient, timely and professional manner, in accordance with industry and state regulatory standards," and "to comply with all applicable federal, state and local laws, rules,
regulations and requirements in regard to all Services provided under this Agreement." 16.) 14. Notwithstanding
(Id., ~ 1,
the PSA's stated one-year term (which expired on January 9,
2007), Option One and DOCX continued performing under the Statement of Work until April 30, 2008, when Option One assigned its contractual rights and obligations to ARMS!.
time, DOCX began processing lien releases and related documents, including At that certain
assignments of mortgage, for ARMS I, as it had done for Option One. At no time did Defendants claim that the assignment of the PSA from Option One to AHMSI was ineffective or otherwise invalid. 15. Citing both the PSA and its assignment by Option One to AHMSI, on August 1,
2008, the PSA was amended to include additional assignment processing services ("Amendment
(Exhibit C.) Amendment
1 also contained a "Statement of Work" by which Defendants
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agreed to prepare and execute assignments of mortgage on AHMSI's behalf and to record the assignments in the appropriate jurisdiction. Lorraine Brown, President of Document Solutions, a division ofa division [sic] ofLPS, formally executed Amendment 1 on October 10,2008. (Id.) 16. Though AHMSI never signed Amendment 1, its board of directors promptly
approved the corporate resolution required by Amendment 1 to provide Defendants with signature authority to execute documents pursuant to Amendment 1. In particular, on August 13, 2008, AHMSI's board of directors authorized certain employees of Defendants, whom the board had already appointed as "Special Officers" of AHMSI in a July 1, 2008 resolution, to act as "duly authorized signator[ies]" for the purpose of executing assignments of mortgage on AHMSI's behalf. (Exhibit D.) The resolution charged the Special Officers with the limited authority to execute any and all reasonable and necessary documents required in connection with the assignment of mortgages or deeds of trust in connection with the repurchase of the loan secured thereby or upon the repayment thereof in connection with the refinancing thereof, including the execution of the assignment of the related promissory note and the execution of any endorsements or allonges thereto.
Importantly, the authority of each authorized Special Officer was "specifically
and strictly limited" to acting "solely in his or her capacity as an authorized signatory" of AHMSI.
The resolution did not permit any delegation or designation of the Special
Officer's authority to other employees. 18. AHMSI's board provided other similar resolutions, including a Unanimous
Written Consent dated October 27, 2009 that appointed employees or contractors of LPS and DOCX as Special Officers of AHMSI for purposes of processing assignments and other mortgage-related documents. (Exhibit E.)
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1 formalized what AHMSI and Defendants had been doing, and
continued to do, under the PSA. Before initiating a foreclosure action for a particular property, AHMSI's local foreclosure counsel would review a title report to determine whether an
assignment of mortgage needed to be recorded in the local land records at some point during a foreclosure proceeding in order to memorialize the transfer of ownership from the originating trust. If so, foreclosure counsel would request an assignment on
lender to the securitization
LPS's computerized foreclosure tracking system known as "LPS Desktop."
Upon receiving this requirements
request, Defendants prepared the assignment based on the relevant jurisdiction's and, through the system, notified local counsel that it was ready for review.
If local counsel
approved, the Special Officers appointed by AHMS! were authorized to sign for the assignor, and Defendants' representatives then notarized the completed assignments. When completed,
Defendants would send the executed assignment documents, as well as the recording fee, to an abstractor in the relevant jurisdiction, who would hand-carry the items to the county recorder Defendants employed this for AHMSI throughout the
with instructions to return the recorded assignments to Defendants. process to prepare, execute and record thousands of assignments United States, including in Texas, 20.
For more than a year, Defendants provided assignment processing
which they were compensated Amendment
by AHMS! in accordance with the terms and rates provided in
l's Statement of Work. At no time during that period did Defendants suggest that
the PSA or Amendment 1 thereto had expired or was otherwise invalid. C. Defendants AHMSI 21. Acted Outside Their Autbority
In Executing Certain Assignments
Without AHMSI's knowledge or consent and by their own admission, Defendants
allowed employees other than those appointed as Special Officers of AHMSr to execute certain
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assignments on the Special Officers' behalf Instead of signing their own names, the surrogates signed the names of the Special Officers, meaning that the person whose name appeared on the assignment documentation was not the person who appeared before the witness or notary. Notaries working under Defendants' direction and control improperly notarized the assignments containing signatures of surrogates rather than the Special Officers authorized by AHMSI to sign the documents. The delegation of signing authority to surrogates exceeded the scope of the Defendants' authority under AHMSI's corporate resolutions. As a consequence, the assignments executed by the surrogates did not comply with Defendants' contractual obligations. 22. On November 12, 2009, Clay Cornett, the president of LPS Loan Servicing Division, contacted Norton Wells, AHMSI's chief operating officer, to
request another corporate resolution appointing Special Officers and ratifying the actions previously taken by those officers. Shortly thereafter, Sheryl Newman, chief litigation counsel for LPS, sent Wells a proposed resolution that deviated from prior AHMSI resolutions in at least one notable respect. Unlike prior resolutions, which ratified "all actions previously taken by the officers hereby appointed," LPS's proposed resolution sought to ratify "all actions previously taken by the foregoing officers and/or their designees." 23. (Exhibit F (emphasis added).)
It was not unusual for an officer or employee of LPS, such as Mr. Cornett or Ms.
Newman, to contact AHMSI concerning the mortgage assignment services performed by Defendants pursuant to the PSA. By way of example only, on November 12, 2009, Deon
Kammerath from LPS emailed Norton Wells and Jim Davis at AHMSI to tell them that Dave Holt had recently been named President of DOCX and that Mr. Holt would be in contact with them in short order. (Exhibit G.)
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16, 2009, AHMSI's
board approved the resolution requested by
LPS, but consistent with previous resolutions, the board ratified "all actions previously taken by
the Special Officers hereby appointed" (Exhibit R.) Because the resolution
that were "consistent "specifically
with the foregoing resolution."
and strictly limited" the authority of the
Special Officers to the ministerial act of executing mortgage assignments arid other designated documents, the delegation of that signature authority to surrogates, without AHMSI's knowledge or consent, was not consistent contractual obligations to AHMSI. 25. had executed practice. In late November 2009, Defendants for the first time advised ARMSI that they assignments of mortgage through their now discontinued "surrogate signor" with the resolution, nor was it consistent, with Defendants'
The scope of this unauthorized Altogether,
practice, however, was tar greater than Defendants admission, Defendants' agents surrogate-
signed more than 30,000 assignments of mortgage relating to properties in an 50 states and the District of Columbia. 26. On December 2, 2009, LPS announced that, effective December 31, 2009, it
would no longer execute documents on behalf of its clients, including ARMSI.
Defendants Breached Their Contractual and Other Common Law Duties To
AHMSI 27. By processing surrogate-signed assignments, Defendants violated their
obligations under the PSA.
For example, in paragraph
16 of the PSA Defendants
agreed "to comply with all applicable requirements
federal. state and local laws, rules, regulations (Exhibit B ~ 16.)
in regard to all Services provided under this Agreement."
addition, in Paragraph
1 of the PSA, "DOCX represents and warrants that it shall use its best
efforts and judgment in performance of all Services and duties under this Agreement and shall
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provide such Services ... Defendants'
in accordance with industry and state regulatory standards."
practice of employing unauthorized surrogates to sign the names of the appointed
Special Officers while the witnesses and the notaries attested that the surrogates appearing before them were the persons whose names appeared on the assignments did not comply with these provisions of the PSA. And many of these surrogate-signed assignments have been or are now
being challenged in foreclosure actions, causing harm to AHMSI. 28. Because of Defendants' breach of their obligations to AHMSI, thousands of
foreclosure actions were delayed or restarted while AHMSI identified the affected assignments and undertook remedial action, as appropriate. AHMSI has incurred millions of dollars in direct
and indirect costs as a result, including, but not limited to, legal fees and costs associated with correcting the surrogate-signed assignments, and amending the foreclosure pleadings. 29. Defendants also have breached their obligation to indemnify ARMSI for any
losses or expenses it incurred as a result. Paragraph 8 of the PSA provides in relevant part; [Defendants] shall indemnify, defend, and hold harmless [AHMSI], its officers, agents, employees, affiliates, authorized personnel and authorized users from and against all losses, damages, liabilities, costs, and expenses (including but not limited to attorneys' fees) relating to or resulting from any pending or threatened action, suit, claim, demand, or proceeding, whether or not well grounded, any judgment or decision against [AHMSI], or any settlement agreement arising out of ... (ii) the negligent acts or omissions or willful misconduct of (Defendants] and/or its employees; (iii) any failure of [Defendants J to perform any of its covenants or obligations under this Agreement; (iv) any acts by [Defendants] or [their] employees, subcontractors and/or agents beyond the scope of authority under this Agreement (Exhibit B ~ 8.) 30. Further, because the use of surrogate signers deviated from AHMSI's limited
delegation of signature authority and thereby exposed AHMSI to additional litigation and/or potential liability, Defendants had an affirmative obligation to inform AHMSI of the practice
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Page I !
when it was first implemented.
Instead, Defendants waited until thousands of surrogate signed
assignments had been executed, notarized and recorded before informing AHMSI of the issue.
AHMSI Has Undertaken Substantial Remediation Efforts
31. AHMSI has undertaken significant efforts to identify the loans that were affected surrogate-signing practice, and to determine what corrective action, if any, was For example, some jurisdictions required AHMSI to file
by Defendants' necessary
in each jurisdiction.
corrected assignments and to amend the foreclosure pleadings, while others required AHMSI to restart pending foreclosure actions altogether or, if the foreclosure had already been completed, to rescind the foreclosure and restart the process. AHMSI has incurred millions of dollars in
expenses and other costs in connection with these remediation efforts.
Defendants Have Refused To Indemnify AHMSI for Its Losses
32. As discussed, paragraph 8 of the PSA requires Defendants to indemnify AHMSr assignments. In addition, after disclosing their expressly promised to
for the costs incurred by their surrogate-signed "surrogate signing" practices to AHMSI
in late 2009, Defendants
indemnify AHMSI for whatever losses it suffered as a result ofthe surrogate signing practices. 33. On February 22,2010, AHMSI made a written demand for indemnification upon
LPS, which stated: You [LPS] have agreed, in accordance with, but not limited to, the indemnification duties contained in Paragraph 8 of the PSA, to indemnify, defend and hold harmless AHMSI, its officers, agents, employees, affiliates, investors, authorized personnel and authorized users from and against all losses, damages, liabilities, costs and expenses (including but not limited to attorneys' fees) relating to or resulting from any pending or threatened action, suit, claim, demand or proceeding, whether or not well grounded, any judgment or decision against AHMSI, or any settlement agreement arising out of the material breaches described herein, whether those breaches be characterized as negligent acts or omissions, willful misconduct or failure to perform the obligations arising out of the PSA.
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(Exhibit J.) 34. LPS responded to AHMSI's demand on May 19, 2010. It admitted that, because certain assignments executed by DOCX "contained a
of "a change in a business process," notarization error." LPS endeavored
(Exhibit K.) LPS also claimed that DOCX had corrected the error and that concerns, "notwithstanding the
to work with AHMSI to address AHMSI's
expiration of the terms of the agreement between the parties:'
(Jd.) For the first time, LPS
claimed that the PSA was not legally binding even though the parties had performed under the contract for over a year, even though Defendants had executed Amendment term of the PSA ended, and even though AHMSI had repeatedly referenced resolutions and in other communications without objection from Defendants. 1 after the stated it in corporate
that time LPS had accepted payment from AHMSI pursuant to the fee schedule articulated by the PSA. DOCX Nevertheless, "to promptly in response to AHMSI's review any request formal demand, LPS only agreed on behalf of made by ARMSI for defense, indemnity or
on a case by case basis, with respect to any demand tor actual losses sustained by (Jd) from LPS for the (Exhibit L
AHMSI that are directly related to the change in business process." 35.
At various times in late 2010, AHMSI sought reimbursement assignments
damages ARMSI sustained due to the surrogate-signed (group exhibit).)
In response, LPS acknowledged that certain assignments processed by DOCX
"may have contained errors in their execution" and that LPS corrected those errors, but denied that DOCX provided the services under any contract. (Exhibit M.) Specifically, LPS noted that
the PSA "expired within one year per its terms and was expressly limited to lien release services."
(Id) It further noted that "there is no documentation indicating the initial term of the
agreement was extended nor that the agreement was expressly assigned to ARMSI."
ORIGINAL PETITION -- Page 13
thus concluded that "there exists no contractual right to indemnity."
(Id) Although denying any
contractual obligation to reimburse AHMSI, LPS stated that it would consider reimbursement of only direct damages "upon receipt of appropriate documentation evidencing the amount of such
damages and details connecting those damages to the services provided." (Id.) LPS also refused to consider any reimbursement 36. Notwithstanding of consequential damages. Defendants' contractual obligations and their repeated promises
to indemnify AHMSI, Defendants have not reimbursed AHMSI for any of its losses arising from their "change in a business process." (Exhibit K.)
Defendants Have Refused to Arbitrate AHMSI's Claims
37. Paragraph 18 of the PSA requires the parties to arbitrate "[a]ny disputes arising (Exhibit B
under [the] Agreement."
Given that Defendants have denied the existence of
the contract, it is clear that they will not agree to arbitrate the claims that: (1) Defendants breached the tenus of the amended PSA, including that they were contractually obligated to
indemnify AHMSI. Attached as Exhibit A hereto is AHMSI's letter demanding arbitration. 38. Because Defendants refuse to acknowledge the existence of the contract under
which AHMSI demands arbitration, AHMS! seeks (1) a judgment declaring the amended PSA, including its arbitration clause, valid and enforceable at the relevant time of performance; (2) an order compelling Defendants to arbitrate AHMSI's breach of contract and indemnification
claims; or, as to all claims not subject to binding arbitration, and (3) an order granting AHMSI relief in the form of full indemnity of all costs and expenses resulting from the acts or omissions cited above, as well as, any and all other direct, indirect, special andlor consequential damages to which ARMSI may be entitled at law or in equity.
39. AHMSI repeats the preceding allegations.
ORIGINAL PETITION - Page
AHMSI brings this count against Defendants for declaratory judgment. Under Sections 37.001 to 37.011 of the Texas Civil Practice and Remedies Code,
AHMSI seeks a declaration that the PSA, as amended, including the arbitration and indemnification clauses, was valid and enforceable at the time of performance because the parties mutually assented to its terms by their continued dealings and course of performance. 42. There is an actual and justiciable controversy regarding these issues because
Defendants deny that the amended PSA is legally binding on the grounds that (1) the PSA had already expired by the time Defendants performed assignment processing services for ARMSI and (2) Amendment 1, which governs assigmnent processing services, was never signed by AHMSI. COUNT 2-0RDER 43. 44. COMPELLING ARBITRATION
AHMSI repeats the preceding allegations. AHMSI brings this count against Defendants for an order compelling them to
arbitrate AHMSI's breach of contract and indemnification claims, as well as any other claims encompassed by the PSA's arbitration clause, pursuant to Section 171.021 of the Texas Civil Practice and Remedies Code. 45. There is a binding agreement to arbitrate under Paragraph 18 of the PSA because
the parties have mutually assented by their course of performance to all of the PSA's terms. 46. AHMSI's breach of contract and indemnification claims fall within the PSA's
arbitration clause. 47. AHMSI expects that Defendants will refuse to arbitrate under the PSA because
they deny its existence. Specifically, they assert that the PSA had already expired at the time of performance and that Amendment 1 to the PSA was not signed by AHMSL Nonetheless, AHMSI served Defendants with an arbitration demand that is attached as Exhibit A hereto. To
ORIGINAL PETITION -
the extent that Defendants refuse to arbitrate as AHMSr expects, AHMSI willpromptIy file a motion to compel arbitration. COUNT 3-BREACH 48. 49. OF CONTRACT
AHMSI repeats the preceding allegations. To the extent that the Court determines that AHMSI's breach of contract claim is
not subject to arbitration, AHMSI brings this count, pled in the alternative, against Defendants for breach of the PSA and Amendment 1 thereto. 50. At all relevant times, the PSA and Amendment 1 thereto were valid and
enforceable contracts. 51. AHMSI is a proper party to sue for breach of the PSA and Amendment 1 thereto
because Option One assigned its interests in the PSA to AHMS! on April 30, 2008. 52. 53. AHMSI performed its obligations under the PSA and Amendment 1 thereto. Defendants breached their obligations under the PSA and Amendment 1 thereto
by engaging in a practice of "surrogate signing" assignments of mortgages, which assignments were improperly notarized and recorded in local real property records in connection with foreclosure proceedings brought by AHMSI in its role as the servicer of the relevant loan. 54. Defendants' surrogate-signed assignments of mortgage have damaged AHMSI
by, among other things, requiring AHMSI to engage in an expensive remediation program to address the implications of the surrogate-signed assignments. COUNT 4-NEGLIGENT 55. 56. PERFORMANCE OF AN UNDERTAKING
AHMSI repeats the preceding allegations. Should the Court find that the amended PSA was not binding on the parties at the
time Defendants executed and notarized assignments on AHMSl's behalf using surrogate
ORIGINAL PETITION -
in the alternative,
performance of a voluntary undertaking.
behalf 58. 59. foreclosure
Defendants voluntarily undertook to execute mortgage assignments on AHMSI's
AHMSI relied upon Defendants to execute assignments on AHMSI's behalf. Because demonstrating actions, Defendants the chain of title is necessary for successfully completing
should have known that the proper execution (and its clients')
mortgage assignments distressed properties.
to protect AHMSI's
interests in the
Defendants or consent,
failed to exercise unauthorized
care by using, without
to execute tens of thousands
Because AHMSI had not appointed the surrogates to execute the assignments on
its behalf and because their signatures were not correctly witnessed or notarized, the surrogatesigned assignments necessitated extensive remediation efforts at great expense to AHMSI. 61. has sustained. Defendants' negligence was the proximate cause of the substantial losses AHMSI
Accordingly, AHMSI seeks monetary damages from Defendants in an amount to
be determined by the trier of fact. 62. To the extent Defendants' acts were willful, wanton, malicious, and without
lawful justification or excuse, AHMSI seeks punitive damages in an amount to be determined by the trier of fact.
AHMSI repeats the preceding allegations. AHMSI brings this count against Defendants for negligent supervision.
ORIGINAL PETITION - Page 17
Defendants owed AHMSI a legal duty to control the Special Officers employed
by Defendants to execute mortgage assignments on AHMSI' s behalf 66. Defendants breached that duty by failing to exercise reasonable supervisory In particular, Defendants
control over the execution of assignments by the Special Officers,
knew that the Special Officers were using, without AHMSI's knowledge or consent, unauthorized surrogates to execute mortgage assignments on AHMSI's behalf. The Special Officers' conduct constitutes negligent performance of a voluntary undertaking. Defendants knew or should have known that the use of unauthorized surrogates to execute mortgage assignments could harm AHMSI. Nevertheless, Defendants made no effort to prohibit or
prevent the Special Officers from using surrogates until thousands of surrogate-signed assignments had already been executed and processed. 67. Defendants' negligent failure to supervise the Special Officers they employed was
the proximate cause of the substantial losses AHMSI has sustained. Accordingly, AHMSI seeks monetary damages directly from Defendants in an amount to be determined by the trier of fact. 68. To the extent Defendants' acts were willful, wanton, malicious, and without
lawful justification or excuse, ARMSI seeks punitive damages in an amount to be determined by the trier of fact. COUNT 6-QUASI-CONTRACT 69. 70. FOR UNJUST ENRICHMENT
AHMSr repeats the preceding allegations. Should the Court find that the amended PSA was not binding on the parties at the
time Defendants executed and notarized assignments on AHMSI's behalf utilizing surrogate signors, AHMSI brings this count, in the alternative, requesting that the Court enforce a quasicontract between the parties because Defendants have been unjustly enriched.
ARMSI compensated Defendants for processing assignments that had been Because ARMSI paid
executed and notarized utilizing unauthorized surrogate signors.
Defendants for processing these assignments, Defendants knowingly received a benefit to which they were not entitled. 72. 73. Defendants voluntarily accepted and retained that benefit. It would be unconscionable for Defendants to retain the benefit without
compensating ARMS!. Accordingly, AHMSI is entitled to recover the value it paid Defendants for executing and processing the surrogate-signed mortgage assignments. 74. Defendants were also unjustly enriched based upon their acceptance of AHMSI's Defendants avoided the costs of taking their own corrective
extensive remediation efforts. action. 75.
Defendants voluntarily accepted and retained the benefit of AHMSI's remediation
efforts without compensating AHMSI. 76. ARMSI.
It would be unconscionable for them to retain the benefit without compensating
Accordingly, AHMSI is entitled to recover some or all of the costs it incurred to
remedy the surrogate-signed assignments processed by Defendants. IV. 77. Petition. V. 78. have occurred. VI. PRAYER FOR RELIEF CONDITIONS PRECEDENT JURY DEMAND
AHMSI demands a jury trial and tenders the appropriate fee with this Original
All conditions precedent to AHMSI's claims for relief have been performed or
WHEREFORE, ARMSI respectfully requests that this Court:
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Declare that the PSA, as amended, including the arbitration clause, was valid and
enforceable at the time of performance because the parties mutually assented to its terms by their continued dealings and course of performance. B. Compel Defendants to arbitrate AHMSI's breach of contract and indemnification
chums, as well as any other claims encompassed by the arbitration clause. C. Award AHMS! general damages, special or consequential damages, exemplary
damages, punitive damages, and pre-judgment and post-judgment interest on its non-arbitrable claims. D. If necessary, disregard DOCX's status as a limited liability company and hold
LPS liable for damages and any other obligations incurred by DOCX. E. Award AHMSI reasonable attorneys' fees and court costs. Award all other relief, in law or in equity, to which ARMSI is entitled.
DATED: August 23,2011
hd_/~/l/ . ...
Weston C. Loegenng State Bar No. 12481550 Keith C. McDole State Bar No. l3533740 Evan P. Singer State Bar No. 24037501 JONES DAY 2727 N. Harwood Street Phone: 214-220-3939 Fax: 214-969-5100
Attorneys for Plaintiff American Home Mortgage Servicing, Inc.
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