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MERS Prevails in Arkansas Federal Appeals Court

 September 2012 Dismissal of Recording Fee Case Stands

FOR IMMEDIATE RELEASE

CONTACT: Janis Smith
Phone: 703-738-0230
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Reston, Virginia, January 2, 2014 —MERSCORP Holdings, Inc. today announced that the United States Court of Appeals for the Eighth Circuit Court ruled on December 31st in pdf Mayme Brown v. Mortgage Electronic Registration Systems, Inc, (MERS) et al (132 KB), affirming the U.S. District Court’s dismissing all of the Clerk’s claims against MERS finding that because Arkansas does not impose any requirements to record documents, MERS did nothing wrong and it did not avoid paying recording fees for mortgage assignments. The Circuit Court also affirmed dismissal of the unjust enrichment claims, finding that “without a duty to record, however, the Lenders have retained nothing of value to which they are not entitled, and there is nothing they could be required to restore to the County.”

The Circuit Court found that Brown’s illegal-exaction claim was a class action under the Class Action Fairness Act of 2005 (CAFA) being alleged by all Arkansas taxpayers, and that as the Clerk of the Court, Brown was not a “taxpayer” who could bring this action.

In the District Court, Judge Susan O. Hickey, in September of 2012, dismissed the class action suit filed on behalf of Hot Spring County and all of the circuit clerks in Arkansas. Citing long-standing Arkansas law, Judge Hickey held that “Arkansas’s statutes ‘do not require assignments to be recorded.’ In fact, existing law is to the contrary.” She further described the original intent behind mortgage land recording: “The purpose of recording is simply to give constructive notice to subsequent purchasers.” Judge Hickey also dismissed the notion that counties are unjustly deprived of recording fees. “Because they had no duty to record their mortgages,” Judge Hickey wrote, “Defendants have not deprived Plaintiff or her proposed class of anything to which they are entitled.”

The Eighth Circuit Court of Appeals affirmed the District Court’s decision in its entirety, and held, “We agree with the district court’s thorough analysis of Arkansas law, and we hold that dismissal of the state law claims was appropriate.” The Circuit Court also said, “it was both fair to the parties and a proper application of comity for the district court to decide the issue. The causes of action are not novel, and there is little basis for dispute as to the resolution of Brown’s state law claims as they involved well-understood and settled principles of Arkansas Law.”

“This is an excellent decision for MERS, as it puts this case to rest by emphasizing that MERS’ role as mortgagee and lenders’ use of the MERS® System is legal under Arkansas law and consistent with the purpose of the state’s recording statute,” said Janis L. Smith, MERSCORP Holdings Vice President of Corporate Communications.

MERS has prevailed in similar lawsuits brought by county recorders in Minnesota, North Carolina, Rhode Island, Michigan, Oklahoma, Iowa, Florida, Arkansas, Illinois, Missouri, Massachusetts and Kentucky.

For descriptions of cases and other materials pertaining to MERS’ business model and role in U.S. housing, please visit www.mersinc.org.

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MERSCORP Holdings, Inc. is a privately held corporation that owns and manages the MERS® System and all other MERS® products. It is a member-based organization made up of about 3,000 lenders, servicers, sub-servicers, investors and government institutions. Mortgage Electronic Registration Systems, Inc. (MERS) serves as the mortgagee in the land records for loans registered on the MERS® System, and is a nominee (or agent) for the owner of the promissory note. The MERS® System is a national electronic database that tracks changes in mortgage servicing and beneficial ownership interests in residential mortgage loans.

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