The New York State Court of Appeals, in a 6-1 decision, ruled that the attorney general's office is not barred by federal law and thus is able to pursue claims alleging fraud and violations of real estate appraisal independence rules against First American Corp. and its former eAppraiseIT LLC unit.
Since the suit was originally filed by then-AG (now current Gov.) Andrew Cuomo, eAppraiseIT became part of CoreLogic after that company was split off from First American.
A statement from CoreLogic said, "CoreLogic is disappointed by the court's decision, as we believe appraisal management services for federal savings associations was an area of exclusively federal control in 2006-2007 and that state agencies may not make the claims asserted in the complaint.
"We note that this decision only concerned jurisdiction, and the court made no determination regarding the merits of the attorney general's claims. CoreLogic looks forward to being fully vindicated when this case is ultimately tried.
"We also note that, after four years of investigation and discovery, the attorney general recently dropped all damages claims against eAppraiselT and First American/CoreLogic, thereby conceding that no consumers were harmed by any conduct of eAppraiselT or First American/CoreLogic."
A request for comment from First American was not returned by press time.
After Cuomo first filed this suit in 2007, First American tried to move it to the Federal District Court for the Southern District of New York. But a ruling there sent the case back to the state court system.
When the defendants moved to get the case dismissed from the state court, both the trial court and lower level appellate court ruled against them, saying that Congressional intent was for both state and federal oversight of appraisal management companies.
The Court of Appeals ruling concurs with this opinion, holding that the Financial Institution Reform, Recovery and Enforcement Act "governs the regulation of appraisal management companies and explicitly envisioned a cooperative effort between federal and state authorities to ensure that real estate appraisal reports comport with Uniform Standards of Professional Appraisal Practice," according to the decision written by Judge Carmen Ciparick.
The one dissenting judge, Susan Read, wrote in her opinion, "This suit is pre-empted because, in substance, and particularly on the allegations before us, it challenges a thrift's lending practices. The complaint details alleged collusion between thrift managers and appraisers, the precise activity that Congress found would undermine sound real estate loans. Even if it were theoretically possible for a lawsuit in this vein not to be preempted, it cannot be the case here, where the sole relevance of the alleged misrepresentations is how they affected loans and lending."
The case itself involves work done by eAppraiseIT in New York for Washington Mutual. Allegedly WaMu was dissatisfied with property valuations, claiming they were coming in too low.
According to the legal filings, WaMu allegedly began to pressure First American and eAppraiseIT and eventually, eAppraiseIT capitulated. The attorney general's office said WaMu provided a handpicked panel of appraisers known for inflating values which eAppraiseIT used.
