Attorneys for the Texas counties that encompass Houston and San Antonio are making plans to file lawsuits against Merscorp Inc.
And in the case of Harris County—the sprawling region of more than 4 million residents that includes Houston and other smaller municipalities and unincorporated areas—the county attorney wants to hire the same Dallas-based law firm and Houston-area attorney that are working with the
According to an agenda published on its website, the Harris County Commissioners Court will meet in a closed-door executive session Tuesday to review a request to authorize County Attorney Vince Ryan to file a lawsuit against Merscorp, its subsidiary Mortgage Electronic Registration System, Inc. “and other responsible parties to recover sums owed to the county for failure to pay filing fees.”
The Bexar County Commissioners Court, whose jurisdiction includes San Antonio, will hear a similar request from county DA Susan Reed's office during a scheduled Nov. 1 meeting, Cliff Herberg, the first assistant DA for the county, confirmed. The office will seek permission to pursue litigation, as well as to hire the Texas law firm Beirne, Maynard & Parsons as outside counsel.
“The system they set up, they failed to pay millions of dollars of fees owed to our county clerk in Harris County,” Terence O'Rourke, the first assistant attorney for Harris County, told Mortgage Technology. “So they owe us money. Millions. And we estimate conservatively $10 million; it could be a lot more than that.”
The Harris County Attorney's office said its initial estimate projects that there are 269,000 deeds of trust with MERS listed as beneficiary, out of 1.5 million total records, but chief of staff Robert Soard said the estimate will likely increase after it gets better information from the clerk's office. The typical mortgage assignment fee in Harris County is $20.
Merscorp spokeswoman Janis Smith said officials from Harris and Bexar counties have not contacted MERS about what issues they may have with its operation.
“Nothing has been filed by these counties, and the only information we have is speculative and learned from various press accounts we've seen,” Smith, the Merscorp vice president of corporate communications, told Mortgage Technology in an email Monday.
O'Rourke said his office will initiate discussions with Merscorp after it receives the authority from the commissioners court to file a lawsuit.
“For us it's a lot easier to begin the discussion when we have the authority to bring suit,” he said. “We always believe in settlement, but you can't settle if you don't have the authority to litigate.”
O'Rourke said the county attorney's office wants to use outside counsel because of the complexity of a case against MERS and because of the expense of litigation.
“We have to be prepared to have this thing cost millions of dollars to litigate,” he said.
The county attorney wants to retain the Dallas-based law firm Malouf & Nockels and Houston-based attorney Mark White, which are both already representing Dallas County. The proposal calls for the county commissioners to authorize a 25% contingent fee contract for the outside counsel.
“Let's just say for example if we were to ask for $10 million, then Malouf would get $2.5,” O'Rourke said. “I think it's going to be significantly higher, but we try to use a number that's conservative.”
Should Harris County move forward with hiring Malouf & Nockels to file a suit against MERS, attorney Stephen Malouf said the county's claims are the same as the ones made by Dallas County.
With the same legal strategy and preparation required for both cases, Malouf's firm stands to generate more revenue by filing virtually identical lawsuits for both Dallas and Harris counties than it could representing Dallas County alone. Malouf said the firm has circulated its Dallas County petition to other Texas county clerks and is offering help to officials in other states, but isn't using the Dallas case to drum up business in other jurisdictions.
“We're happy to be in Dallas and if other counties feel like we can be helpful, then we're happy to assist,” he said. “But the contact has been made on the counties that we've met with or spoken to, they've initiated the contact.”
Should a wave of Texas counties file suits against MERS, Malouf said it's possible that they could all be consolidated into one case.
“If a lot of different cases get filed in different places in Texas, whether it's in the federal courts or the state courts, those can all be consolidated into a single judge's court and I would expect that to happen,” Malouf said. “If you've got essentially the same claims being made then it makes sense for the same judge to hear them.”
