Monday, December 12, 2011

FYI: Maine Sup Ct Upholds Limited Sanctions in Alleged "Robo-Signing" Case

The Maine Supreme Judicial Court recently held that the limited sanctions
imposed by a lower court against Fannie Mae, in connection with the
alleged submission of a foreclosure affidavit in bad faith, were within
the lower court's discretion, and therefore rejected a borrower's
contention that more severe contempt sanctions should be imposed. A copy
of the opinion is attached.

Fannie Mae instituted foreclosure proceedings against a borrower, naming
the loan servicer as a party in interest. Fannie Mae moved for summary
judgment, relying in part on an affidavit prepared by an employee of the
servicer. The borrower deposed that employee, who testified that he "does
not read the affidavits he signs, reviews only the computations of amounts
owed, does not review the exhibits to affidavits, and does not execute the
affidavits before a notary."

Fannie Mae filed a motion for a protective order to prevent the testimony
from becoming public. The borrower filed a motion alleging that the
affidavit was presented in bad faith under Maine's equivalent of Fed. R.
Civ. P. 56(h), sought attorney fees and costs, and asked the court to hold
both Fannie Mae and the servicer in contempt for submitting the affidavit.

The lower court denied Fannie Mae's motion for a protective order, found
that the affidavit was submitted in bad faith, and awarded $23,779.36 in
attorney fees and costs to the borrower. The attorney fees and costs
awarded covered the costs incurred in demonstrating that the affidavit was
submitted in bad faith, but not the costs incurred in opposing Fannie
Mae's motion for a protective order. Finally, the lower court determined
that the award of costs was a sufficient sanction for Fannie Mae, and
declined to hold either Fannie Mae or the servicer in contempt. The
borrower appealed.

Like Fed. R. Civ. P. 56(h), Maine Rule of Civil Procedure 56(g) provides
that where a summary judgment affidavit was submitted in bad faith, "the
court shall forthwith order the party employing [the affidavit] to pay the
other party the amount of the reasonable expenses which the filing of the
affidavits caused the other party to incur...and any offending party or
attorney may be adjudged guilty of contempt."

Although the Court noted that the affidavit at issue here is "a disturbing
example of a reprehensible practice," it nevertheless affirmed the
judgment of the lower court. The Court did so because "the decision of
whether or not [to hold a party in contempt] rests in the considerable
discretion of the trial court." Therefore, the Court held that
"[a]lthough the [lower] court would have acted well within its discretion
in granting a much more burdensome sanction at a much greater cost to
Fannie Mae and/or [the servicer], we conclude that the sanction it did
impose was also within its discretion."

In so holding, the Court was influenced by its observation that "no court
in the nation - state or federal - has ever issued a finding of contempt
and additional resulting sanctions pursuant to the state or federal
version of Rule 56(g)."

Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874

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