Antitrust Law Daily Wrap Up, ANTITRUST—NDIll: Home Owners Fail to Assert Sherman Act Claim Against Mortgage Banks over Alleged Fraudulent Mortgage Assignment, (Mar 20, 2013)

By Tobias J. Gillett, J.D., LLM.

Illinois home owners have failed to assert a claim that Bank of America, N.A. and the Bank of New York Mellon violated the Sherman Act by agreeing to execute fraudulent mortgage assignments because the home owners did not adequately allege that the defendants had a “conscious commitment to a common scheme” or how the home owners’ alleged injury had resulted from the defendants’ purportedly anticompetitive conduct, the federal district court in Chicago has ruled (Pirard v. Bank of America, March 19, 2013, Guzman, R.).

The home owners obtained a mortgage to buy a house. After they purportedly defaulted, the Bank of New York Mellon filed a foreclosure action on the house. The home owners then file suit, alleging that the Bank of New York Mellon and Bank of America had improperly signed and recorded their mortgage, forged documents, improperly collected on their debt, and violated the federal antitrust laws, among other claims. The banks moved to dismiss their antitrust claim.

Although the home owners alleged that the defendants had a “combination or conspiracy” to “record false title documents, send and collect on false bills, prevent the customers from making payments, refuse to modify the loans and initiate baseless foreclosure actions,” an antitrust plaintiff had to establish that the defendants “had a conscious commitment to a common scheme designed to achieve an unlawful objective.”

The home owners’ pleadings failed to satisfy these requirements, in the court’s view. Although the plaintiff alleged that a Bank of America employee drafted and signed a forged assignment, that Mortgage Electronic Registration Systems, Inc. (MERS) provided its name as a false assigner, and that Bank of New York Mellon acted as a “strawman plaintiff and assignee,” these allegations did not demonstrate a “conscious commitment to a common scheme,” according to the court.

The additional allegation that the mortgage industry established MERS “to evade county recording fees, [to] avoid the need to record publicly mortgage transfers, and to facilitate the rapid sale and securitization of mortgages en masse” did not raise a reasonable expectation the discovery would reveal evidence of an illegal agreement. The allegation that Bank of America assigned the mortgage from MERS to Bank of New York Mellon “seven years after the trust received everything that was transferred to it” also did not provide support for a “combination or conspiracy” among the defendants.

Moreover, the court found that the home owners had not shown how their injury, a reduced value for their property, had resulted from the defendants’ allegedly anticompetitive conduct. The home owners did not demonstrate “how the purported agreement to execute a fraudulent assignment reduces competition,” and their claim that an agreement to execute such assignments led to an anticompetitive impact on the “output of the mortgage industry” and increased costs for buyers to obtain credit was “completely speculative and unsupported by fact.” Therefore, the court dismissed the home owners’ antitrust claim.

The case is No. 12 C 2901.

Attorneys: Robert Lee Stone (Property Rights Law Group, P.C.) for Leonard D. Pirard. Gary Steven Caplan (Reed Smith LLP) for Bank of America, N.A.

Companies: Bank of America, N.A.; Bank of New York Mellon Corp.

Cases: Antitrust IllinoisNews