SAN FRANCISCO-Document provider DocMagic here has filed a lawsuit against origination vendor Ellie Mae for allegedly violating antitrust and intellectual property laws that has both sides exchanging nasty allegations against the other.
DocMagic had both an integration agreement into Ellie Mae's ePASS Network and an agreement whereby Ellie Mae would act as a reseller of the DocMagic product line through Ellie Mae Docs. DocMagic says Ellie Mae cut it off from a market worth $200 million by denying DocMagic use of ePASS.
DocMagic claims Ellie Mae agreed to let it into the ePASS system for a fee, but suddenly terminated the agreement, taking "drastic steps" to deny DocMagic customers access, "including sabotaging its clients by preventing access to DocMagic through alternative [non-ePASS] Web service calls," asserted DocMagic in a prepared statement.
Further, DocMagic claims Ellie Mae has been encouraging its customers to "use Ellie Mae's competing mortgage loan document system," and is prohibiting people from bypassing the ePASS Network to connect to DocMagic. Ellie Mae recently acquired a competing document provider, Online Documents. DocMagic wants Ellie Mae enjoined from monopolizing the online mortgage document market, and punitive damages for antitrust violations.
In responding to these claims, Ellie Mae has outlined a different chain of events that the vendor says clearly document the agreements between both parties were set to expire on Sept. 1, 2009. Further, Ellie Mae says on April 28, 2009, DocMagic notified Ellie Mae that it was opting to end its reseller agreement with Ellie Mae. On May 21, 2009, DocMagic was also informed that Ellie Mae had decided not to renew the outdated terms of its ePASS Agreement with DocMagic. Ellie Mae proposed new terms for their agreement with DocMagic. However, DocMagic did not respond, according to Ellie Mae, and instead decided to stop servicing mutual clients and file the lawsuit.
"We've been a reseller of both DocMagic and DocuTech," said Jonathan Corr, chief strategy officer at Ellie Mae. "We also have integrations to 10 other doc providers. This lawsuit is about two businesses that decided not to work together anymore and one company making unsubstantiated comments that are just not true."
Mr. Corr says ePASS users were given 30-days notice that the connection to DocMagic from ePASS would be severed. Further, Mr. Corr says there was an orderly, 60-day transition period planned to move Ellie Mae Docs clients that used DocMagic through the reseller agreement to whatever solution they choose. Ellie Mae denies that it is trying to steal those clients from DocMagic or hinder their ability to choose which document provider they want to do business with.
The terms Ellie Mae extends its integration partners have long been characterized by some as one-sided. Several integration partners have complained that the click-through fees and other charges that Ellie Mae imposes are hefty. In response, Mr. Corr said, "We're not a not-for-profit. I think the cost to integration partners is modest and the benefits are huge for them. We're diversifying the cost to allow folks to run their business with our technology and do business with our partners at the same time. It's an ecosystem."
Nonetheless, lenders like Sunwest Bank are hurting as these two vendors squabble and trade insults. Sunwest uses Ellie Mae as its LOS and used to get its docs from DocMagic through ePASS. That link has now been severed and Sunwest is not happy. "We're a small community bank. DocMagic has provided us with special docs because we have special compliance needs," said William R. Owen, senior vice president at Sunwest Bank. "With new regulations coming out sometimes weekly, it's another gotcha. I need to know that when I'm dealing with a title company, I'm getting it right. We tried Ellie Mae Docs, but there were errors. That's not to say Ellie Mae can't get docs right, that just wasn't our experience and DocMagic has proven they do it right.
"Right now I can't order docs from DocMagic through ePASS like I used to. We have to retype manually here at Sunwest to continue dealing with DocMagic. It's not the way you want to do it. There could be errors. It's better to do docs through the LOS. So, right now we are working through DocMagic to automate the process again. However, it's not comfortable and we are looking at other LOS systems as a result."
Mr. Corr estimates that up to 100 mutual clients may still need somekind of assistance.