|Caption of 11-14-11 Order|
In a November 14 ruling in the FDIC’s lawsuit against CoreLogic and its various subsidiaries, Judge Carter dismissed the FDIC’s gross negligence claim (with leave for the FDIC to amend) based on the economic loss rule for the same reasons he previously dismissed the FDIC’s similar claim against LSI Appraisal (see post about LSI’s motion here). He also granted CoreLogic’s motion to dismiss the FDIC’s alter ego-type claims and dismissed small parts of the FDIC’s contract claims, again with leave to amend. The result of this is that the only defendants now in this lawsuit, subject to any future attempted amendment by the FDIC, are CoreLogic Valuation Services (formerly known as eAppraiseIT) and First American Solutions, which entered into a performance guaranty with WaMu for eAppraiseIT’s obligations. The parent corporation CoreLogic, Inc. is out of the case, again subject to the FDIC’s attempt to amend its original complaint in order to state a valid claim.
This is a significant setback for the FDIC. It came out with a bold lawsuit and aggressively pleaded allegations about gross negligence but is now relegated to breach of contract claims and constrained by the potential impact of the limitation of liability language in eAppraiseIT’s contract with WaMu. This first round loss for the FDIC, however, was entirely predictable based on the applicable law and the approach taken by the FDIC in its pleading. One reaction by the FDIC to this setback may be to bring in new allegations about hundreds of additional appraisals, rather than just the 194 it has addressed in its current complaint. I do know that the FDIC is busy re-reviewing many appraisals right now that eAppraiseIT and LSI Appraisal delivered during the 2005-2007 time period — one entertaining aspect of that effort is that, in at least one situation, the FDIC mistakenly asked the same appraiser to review his own appraisal that is the subject of one of its lawsuits and whose appraisal the FDIC has labeled as grossly negligent.
|FDIC v. CLGX, Excerpt from Judge Carter’s 11-14-11 Order|
A full copy of the Court’s order is here.
I may offer a more detailed look at the current status of the FDIC’s cases against LSI Appraisal (Lender Processing Services’ subsidiary) and CoreLogic in the near future.