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JUDICIAL DISTRICT
DALLAS COUNTY, TEXAS

CAUSE NO. J.l:..Lo-LJLj 0

/ l l" "r-
IN THE DISTRICT
Plaintiff,
v.
Defendants.
AlVlERICAN HOl\1E MORTGAGE
SERVICING, INC.,
LENDER PROCESSING SERVICES,
INC., and DOCX, LLC,
PLAINTIFF'S ORIGINAL PETITION
Plaintiff American Home Mortgage Servicing, Inc. ("AHMSI") files this Original
Petition against defendants Lender Processing Services, Inc. ("LPS") and its division,
LLC C'DOCX" and collectively with LPS, "Defendants"), based upon AHMSI's personal
knowledge as to its own acts and upon information and belief as to all other allegations.
1. PRELIlVlINARY STATEMENT
AHMSI brings this action seeking redress for the millions of dollars in losses it has
suffered, and continues to suffer, as a result of Defendants' unauthorized execution and
notarization of assignments affecting more than 30,000 residential mortgages in Texas and
throughout the Unites States. Defendants do not dispute that, 'without AHMSI's knowledge or
consent, they improperly executed, notarized, and recorded thousands of assignments upon
which AHMSI relied in the course of pursuing foreclosure proceedings on behalf of the
securitization trusts that owned the loans; nonetheless, Defendants deny any legal responsibility
to AHMSI, and have refused to indemnify AHMSI for the damages they have caused.
As part of its residential loan servicing business, AHNISI collects mortgage, tax, and
insurance payments from homeowners on mortgages held by securitization trusts. It also works
PLAINTIFF'S ORIGINAL PETITION- Page 1
with homeowners who default on their mortgages to find acceptable alternatives to foreclosure,
such as loan modification, deeds in lieu of foreclosure, and short sales. When these efforts are
not successful in curing a default, AHMSI initiates foreclosure proceedings on behalf of the
owner of the loan.
AHMSl retained Defendants to prepare, notarize, and record assignments of mortgage in
connection with those foreclosure proceedings. To facilitate Defendants' work, AHMSI's board
of directors appointed various employees of Defendants as "Special Officers" of AHMSI,
providing them with the limited authority to execute assignments in accordance with the terms of
the board resolutions appointing them.
Defendants acted outside this limited grant of authority. Without AHMSI's knowledge
or approval and in violation of their contract with AHMSI, Defendants engaged in a practice they
have described as "surrogate signing" in which persons not authorized by ARMSI's board
executed assignments of mortgage by signing the names of the Special Officers who were
explicitly authorized. Defendants then caused these unauthorized signatures to be witnessed and
notarized, thereafter recording the assignments in the local real property records in connection
with the related foreclosure proceedings. ARMSI did not learn of these practices until late 2009
when Defendants admitted the "surrogate signing" practice to AHMSI, at which time AHMSI
ceased using LPS to prepare, notarize and record assignments of mortgage.
Defendants' practice of "surrogate signing" mortgage assignments has forced AHMSI to
address a myriad of legal issues, problems and proceedings in venues around the country. It also
caused AH1vlS1 to undertake, at substantial expense, an extensive remediation effort to identify
and, where necessary, remedy any surrogate-signed assignments of mortgage.
PLAINTIFF'S ORIGINAL PETITION - Page2
Despite their contractual obligations and express promises to the contrary) Defendants
have refused to reimburse or indemnity AHMSI for the costs it has incurred due to Defendants)
practice of "surrogate signing." Indeed, only five months after expressly promising to indemnify
AH1vlSI, Defendants for the first time claimed that they had no duty to indemnify AHMSI,
purportedly because the contract pursuant to which Defendants executed the unauthorized
assignments had expired before they had executed any assignments on AHMSrs behalf
Defendants conveniently ignore that they created tens of thousands of assignments of mortgage
and accepted hundreds of thousands of dollars in payment in accordance with the terms of a
supposedly non-existent contract. 1
Because of Defendants' failure to comply with their obligations to AHMSI, ARMSI now
brings this action seeking (1) a declaratory judgment that the written contract between the parties,
as amended, is binding and effective; (2) an order compelling Defendants to arbitrate AHIvISI's
claims for breach of contract and indemnification; and (3) as to ARMSI's non-arbitrable claims,
an award of damages sufficient to reimburse ARMSI for the millions of dollars in losses caused
by Defendants executing, notarizing, and recording unauthorized, surrogate-signed assignments
on behalf of AHMSI.
II. INTRODUCTION
A. DiscoveryControl Plan-Level 3
1. ARMSI intends to conduct discovery under Level 3 pursuant to Texas Rule of
Civil Procedure 190.4.
J Given their position concerning the contract, AHMSI believes that Defendants will reject AHMSI's
demand to arbitrate that is based on an express arbitration provision in that contract. Nonetheless, AHMSI has
served Defendants witha demandfor arbitrationthat is attached heretoas Exhibit A.
PLAINTIFF'S ORIGINALPETJTION - Page 3
B. Parties
2. Plaintiff AH1'lS1 is a Delaware corporation that services residential mortgages
primarily for the securitization trusts that own the loans. AHMSI is registered in Texas and
maintains its headquarters and principal place of business at 1525 S. Beltline Road, Coppell,
Texas 75019.
3. Defendant LPS is a Delaware corporation that provides-either independently or
through its affiliates-mortgage document processing services, settlement services, mortgage
performance analytics, and, mortgage default services to lenders and mortgage servicing
companies. LPS registered to do business in Texas in March 2009 and maintains its
headquarters and principal place of business at 601 Riverside Avenue, Jacksonville, Florida
32204. LPS may be served with process through its Texas-based registered agent, CT
Corporation, which is located at 350 North St. Paul Street, Suite 2900, in Dallas, Texas 75201.
4. Defendant DOCX is a Georgia limited liability company that provides document
processing services for lenders and mortgage servicing companies. DOCX is a division of LPS,
and its principal place of business is at 601 Riverside Avenue, Jacksonville, Florida 32204.
DOCX may be served with process by serving the Texas Secretary of State.
C. .Jurisdiction and Venue
5. The Court has jurisdiction over the subject matter of this action under Sections
24.007 and 24.008 of the Texas Government Code.
6. The Court has personal jurisdiction over LPS (a) because it has engaged in
continuous and systematic activities within the State of Texas, and (b) because this action arises
fromand relates to LPS's contacts with the State of Texas. In particular, LPS processed lien
releases, assignments, and other mortgage..related documents that it, or its agents, filed in county
recording offices throughout the state, including in Dallas County.
PLAINTIFF'S ORIGINALPETITION - Page4
7. The Court has personal jurisdiction over DOCX (a) because it has engaged in
continuous and systematic activities within the State of Texas, and (b) because this action arises
from and relates to D O C X ~ s contacts with the State of Texas. In particular, DOCX processed
lien releases, assignments, and other mortgage-related documents that it, or its agents, filed in
county recording offices throughout the state, including in Dallas County.
8. Venue is proper in this Court under (a) Section 15.002(a)(1) of the Texas Civil
Practice and Remedies Code because Defendants recorded a substantial number of assignments
in Dallas County, Of, alternatively under (b) Section 15.002(a)(4) because AHMSI resides in
'Dallas County.
III. FACTUAL BACKGROUND
A. AHl\'lSI's Residential Loan Servicing Business
9. AHMSI is engaged in the business of servicing home loans, the majority of which
are held in residential mortgage-backed securitization trusts. When an individual takes out a
loan to buy a home, the originating lender will often pool the loan with others and sell its interest
in the loans to investors through the creation of securitization trusts. As part of this process, an
agent of the trust, known as a "servicer," obtains the right to service the pool of loans and agrees
to act as the trust's agent in doing so.
IO. As the servicer, AHMSI provides a wide array of services to the securitization
trusts, including, but not limited to, collecting principal, interest, tax, and insurance payments
from homeowners and, when necessary, initiating foreclosure proceedings on behalf of the trust
that owns the loan.
B. Defendants Agreed To Execute Assignments for AHMSI
11. DOCX began providing document processing services to AHMSI in April 2008
when a Professional Services Agreement (the "PSA") between predecessors Option One
PLAINTIFF'S ORIGINAL PETITION - Page 5
Mortgage Corporation ("Option One") and DOCX, was assigned by Option One to AHMSI as
part of a larger asset acquisition. (Exhibit B.)
12. Option One originally had entered into the PSA with DOCX over two years
earlier, on January 9, 2006. oocxhad agreed to process lien releases and related documents,
including assignments of mortgage, for Option One pursuant to a "Description of Services and
Fees"-aIso known as a "Statement of Work"-which was attached as Exhibit A to the PSA.
(It!. at 8-13.)
13. Among other things, the PSA required DOCX to "use its best efforts and
judgments in performance of all Services and duties under this Agreement," to "provide such
Services in an efficient, timely and professional manner, in accordance with industry and state
regulatory standards," and "to comply with all applicable federal, state and local laws, rules,
regulations and requirements in regard to all Services provided under this Agreement." (ld., ~ 1,
16.)
14. Notwithstanding the PSA's stated one-year term (which expired on January 9,
2007), Option One and DOCX continued performing under the Statement of Work until April
30, 2008, when Option One assigned its contractual rights and obligations to AH1YfSI. At that
time, DOCX began processing lien releases and related documents, including certain
assignments of mortgage, for AHMSI, as it had done for Option One. At no time did Defendants
claim that the assignment of the PSA from Option One to AHtvlS1 was ineffective or otherwise
invalid.
15. Citing both the PSA and its assignment by Option One to AH1YlSI, on August 1,
2008, the PSA was amended to include additional assignment processing services ("Amendment
I"). (Exhibit C.) Amendment 1 also contained a "Statement of Work" by which Defendants
PLAINTifF'S ORIGINALPETITION- Page6
agreed to prepare and execute assignments of mortgage on AHMSI's behalf and to record the
assignments in the appropriate jurisdiction. Lorraine Brown, President of Document Solutions, a
division ofa division [sic] of LPS, formally executed Amendment 1 on October 10,2008. (Id.)
16. Though AI-HvlS1 never signed Amendment 1, its board of directors promptly
approved the corporate resolution required by Amendment 1 to provide Defendants with
signature authority to execute documents pursuant to Amendment 1. In particular, on August 13,
2008, AHMSfs board of directors authorized certain employees of Defendants, whom the board
had already appointed as "Special Officers" of ARMSI in a July 1, 2008 resolution, to act as
"duly authorized signator[ies]" for the purpose of executing assignments of mortgage on
AHMSI's behalf. (Exhibit D.) The resolution charged the Special Officers with the limited
authority to
execute any and all reasonable and necessary documents required
in connection with the assignment of mortgages or deeds of trust in
connection with the repurchase of the loan secured thereby or upon
the repayment thereof in connection with the refinancing thereof,
including the execution of the assignment of the related promissory
note and the execution of any endorsements or allonges thereto.
(Id.)
17. Importantly, the authority of each authorized Special Officer was "specifically
and strictly limited" to acting "solely in his or her capacity as an authorized signatory" of
AHMSI. (Id.) The resolution did not permit any delegation or designation of the Special
Officer's authority to other employees.
18. AH1vISI's board provided other similar resolutions, including a Unanimous
Written Consent dated October 27, 2009 that appointed employees or contractors of LPS and
DOCX as Special Officers of AHMSI for purposes of processing assignments and other
mortgage-related documents. (Exhibit E.)
PLAINTIFF'S ORIGINALPETITION- Page7
19. Amendment 1 formalized what AHMSI and Defendants had been doing, and
continued to do, under the PSA. Before initiating a foreclosure action for a particular property,
AHIVISI's local foreclosure counsel would review a title report to determine whether an
assignment of mortgage needed to be recorded in the local land records at some point during a
foreclosure proceeding in order to memorialize the transfer of ownership from the originating
lender to the securitization trust. If so, foreclosure counsel would request an assignment on
LPS's computerized foreclosure tracking system known as "LPS Desktop." Upon receiving this
request, Defendants prepared the assignment based on the relevant jurisdiction's requirements
and, through the system, notified local counsel that it was ready for review. If local counsel
approved, the Special Officers appointed by ARMSI were authorized to sign for the assignor,
and Defendants' representatives then notarized the completed assigrunents. When completed,
Defendants would send the executed assignment documents, as well as the recording fee, to an
abstractor in the relevant jurisdiction, who would hand-carry the items to the county recorder
"with instructions to return the recorded assignments to Defendants. Defendants employed this
process to prepare, execute and record thousands of assignments for AHMSI throughout the
United States, including in Texas.
20. For more than a year, Defendants provided assignment processing services tor
which they were compensated by ARMSI in accordance with the terms and rates provided in
Amendment l' s Statement of Work. At no time during that period did Defendants suggest that
the PSA or Amendment 1 thereto had expired or was otherwise invalid.
c. "Defendants Acted Outside Their Authority In Executing Certain Assignments for
AHlVISI
21. Without AHMSI's knowledge or consent and by their own admission, Defendants
allowed employees other than those appointed as Special Officers of AHMSI to execute certain
PLAINTIFF'S ORIGINAL PETITION - Page8
assignments on the Special Officers' behalf. Instead of signing their own names, the surrogates
signed the names of the Special Officers, meaning that the person whose name appeared on the
assignment documentation was not the person who appeared before the witness or notary.
Notaries working under Defendants' direction and control improperly notarized the assignments
containing signatures of surrogates rather than the Special Officers authorized by AHMSI to sign
the documents. The delegation of signing authority to surrogates exceeded the scope of the
Defendants' authority under AHMSI's corporate resolutions. As a consequence, the assignments
executed by the surrogates did not comply with Defendants' contractual obligations.
22. On November 12, 2009, Clay Cornett, the president of LPS Loan Servicing
Solutions-Default Division, contacted Norton Wells, AHMSI's chief operating officer, to
request another corporate resolution appointing Special Officers and ratifying the actions
previously taken by those officers. Shortly thereafter, Sheryl Newman, chief litigation counsel
for LPS, sent Wells a proposed resolution that deviated from prior AHMSI resolutions in at least
one notable respect. Unlike prior resolutions, which ratified "all actions previously taken by the
officers hereby appointed," LPS's proposed resolution sought to ratify "all actions previously
taken by the foregoing officers and/or their designees." (Exhibit F (emphasis addedj.)
23. It was not unusual for an officer or employee of LPS, such as Mr. Cornett or Ms.
Newman, to contact ARMSI concerning the mortgage assignment services performed by
Defendants pursuant to the PSA. By way of example only, on November 12, 2009, Deon
Kammerath from LPS emailed Norton Wells and Jim Davis at AHMSI to tell them that Dave
Holt had recently been named President of DOCX and that Mr. Holt would be in contact with
them in short order. (Exhibit G.)
PLAINTIFF'S ORIGINAL PETITION - Page9
I
24. On November 16, 2009, AHMSI's board approved the resolution requested by
!
LPS, but consistent with previous resolutions, the board ratified "all actions previously taken by
I
the Special Officers hereby appointed" that were "consistent with the foregoing resolution."
(Exhibit H.) Because the resolution "specifically and strictly limited" the authority of the
Special Officers to the ministerial act of executing mortgage assignments and other designated
documents, the delegation of that signature authority to surrogates, without AHMSI's knowledge
or consent, was not consistent with the resolution, nor was it consistent, with Defendants'
contractual obligations to AHMSI.
25. In late November 2009, Defendants for the first time advised AHMSI that they
had executed assignments of mortgage through their now discontinued "surrogate signor"
practice. The scope of this unauthorized practice, however, was far greater than Defendants
initially represented. Altogether, by Defendants' admission, Defendants' agents surrogate-
signed more than 30,000 assignments of mortgage relating to properties in all 50 states and the
District of Columbia.
26. On December 2, 2009, LPS announced that, effective December 31, 2009, it
would no longer execute documents on behalf of its clients, including AHMSL (Exhibit 1.)
D. Defendants Breached Their Contractual and Other Common Law Duties To
AHMm I
27. By processing surrogate-signed assignments, Defendants violated their
contractual obligations under the PSA. For example, in paragraph 16 of the PSA Defendants
agreed "to comply with all applicable federal, state and local laws, rules, regulations and
requirements in regard to all Services provided under this Agreement." (Exhibit B ~ 16.) In
addition, in Paragraph 1 of the PSA, "DOCX represents and warrants that it shall use its best
efforts and judgment in performance of all Services and duties under this Agreement and shall
PLAINTIFF'S ORIGINAL PETITION - Page 10
provide such Services ... in accordance with industry and state regulatory standards." (ld. 11.)
Defendants' practice of employing unauthorized surrogates to sign the names of the appointed
Special Officers while the witnesses and the notaries attested that the surrogates appearing before
them were the persons whose names appeared on the assignments did not comply with these
provisions of the PSA. And many of these surrogate-signed assignments have been or are now
being challenged in foreclosure actions, causing harmto AHMSL
28. Because of Defendants' breach of their obligations to AHMSI, thousands of
foreclosure actions were delayed or restarted while AHMSI identified the affected assignments
and undertook remedial action, as appropriate. AHIvfSI has incurred millions of dollars in direct
and indirect costs as a result, including, but not limited to, legal fees and costs associated with
correcting the surrogate-signed assignments, and amending the foreclosure pleadings.
29. Defendants also have breached their obligation to indemnify AHMSI for any
losses or expenses it incurred as a result. Paragraph 8 of the PSA provides in relevant part:
[Defendants] shall indemnify, defend, and hold harmless [ARMSI],
its officers, agents, employees, affiliates, authorized personnel and
authorized users from and against all losses, damages, liabilities,
costs, and expenses (including but not limited to attorneys' fees)
relating to or resulting from any pending or threatened action, suit,
claim, demand, or proceeding, whether or not well grounded, any
judgment or decision against [ARMSI], or any settlement
agreement arising out of ... (ii) the negligent acts or omissions or
willful misconduct of [Defendants] and/or its employees; (iii) any
failure of [DefendantsJ to perform any of its covenants or
obligations under this Agreement; (iv) any acts by [Defendants] or
[their] employees, subcontractors and/or agents beyond the scope
of authority under this Agreement.
(Exhibit B ~ 8.)
30. Further, because the use of surrogate signers deviated from AHMSI's limited
delegation of signature authority and thereby exposed AHMSI to additional litigation and/or
potential liability, Defendants had an affirmative obligation to inform AHMSI of the practice
PLAINTIFF'S ORIGINAL PETITION - Page II
when it was first implemented. Instead, Defendants waited until thousands of surrogate signed
assignments had been executed, notarized and recorded before informing ARMSI of the issue.
E. AHMSI Has Undertaken Substantial Remediation Efforts
31. ARMSI has undertaken significant efforts to identify the loans that were affected
by Defendants' surrogate-signing practice, and to determine what corrective action, if any, was
necessary in each jurisdiction. For example, some jurisdictions required AHMSI to file
corrected assignments and to amend the foreclosure pleadings, while others required ARMSI to
restart pending foreclosure actions altogether or, if the foreclosure had already been completed,
to rescind the foreclosure and restart the process . AHMSI has incurred millions of dollars in
expenses and other costs in connection with these remediation efforts.
F. Defendants Have Refused To Indemnify AHMSI for Its Losses
32. As discussed, paragraph 8 of the PSA requires Defendants to indemnify AHMSI
for the costs incurred by their surrogate-signed assignments. In addition, after disclosing their
"surrogate signing" practices to ARMS I in late 2009, Defendants expressly promised to
indemnify ARMSI for whatever losses it suffered as a result of the surrogate signing practices.
33. On February 22,2010, ARMSI made a written demand for indemnification upon
LPS, which stated:
You [LPS] have agreed, in accordance with, but not limited to, the
indemnification duties contained in Paragraph 8 of the PSA, to
indemnify, defend and hold harmless ARMSI, its officers, agents,
employees, affiliates, investors, authorized personnel and
authorized users from and against all losses, damages, liabilities,
costs and expenses (including but not limited to attorneys' fees)
relating to or resulting from any pending or threatened action, suit,
claim, demand or proceeding, whether or not well grounded, any
judgment or decision against AHMSI , or any settlement agreement
arising out of the material breaches described herein, whether those
breaches be characterized as negligent acts or omissions, willful
misconduct or failure to perform the obligations arising out of the
PSA.
PLAINTIFF'S ORIGINAL PETITION - Page 12
(Exhibit J.)
34. LPS responded to AH:N[SI's demand on May 19, 2010. It admitted that, because
of "a change in a business process, H certain assignments executed by DOCX "contained a
notarization error." (Exhibit K.) LPS also claimed that DOCX had corrected the error and that
LPS endeavored to work with AH"tv1S1 to address AHtvlsr s concerns, "notwithstanding the
expiration of the terms of the agreement between the parties." (ld.) For the first time, LPS
claimed that the PSA was not legally binding even though the parties had performed under the
contract for over a year, even though Defendants had executed Amendment 1 after the stated
term of the PSA ended, and even though AHMSI had repeatedly referenced it in corporate
resolutions and in other communications without objection from Defendants. Moreover, during
that time LPS had accepted payment from AHMSI pursuant to the fee schedule articulated by the
PSA. Nevertheless, in response to AHMSrs formal demand, LPS only agreed on behalf of
DOCX "to promptly review any request made by AH.rvISI for defense, indemnity or
reimbursement on a case by case basis, withrespect to any demand for actual losses sustained by
AHMSI that are directly related to the change in business process." (Id)
35. At various times in late 2010, AHMSI sought reimbursement from LPS for the
damages AHMSI sustained due to the surrogate-signed assignments of mortgage. (Exhibit L
(group exhibin.) In response, LPS acknowledged that certain assignments processed by DOCX
"may have contained errors in their execution" and that LPS corrected those errors, but denied
that DOCX provided the services under any contract. (Exhibit M.) Specifically, LPS noted that
the PSA "expired within one year per its terms and was expressly limited to lien release
services." (Id) It further noted that "there is no documentation indicating the initial term of the
agreement was extended nor that the agreement was expressly assigned to AHMSI." (ld.) LPS
PLAINTIFF'S ORIGINAL PETJTION -- Page 13
thus concluded that "there exists no contractual right to indemnity." (Id) Although denying any
contractual obligation to reimburse AHMSI, LPS stated that it would consider reimbursement of
only direct damages "upon receipt of appropriate documentation evidencing the amount of such
damages and details connecting those damages to the services provided." (Id.) LPS also refused
to consider any reimbursement of consequential damages.
36. Notwithstanding Defendants' contractual-obligations and their repeated promises
to indemnify AHMSI, Defendants have not reimbursed ARMSI for any of its losses arising from
their "change in a business process." (Exhibit K.)
G. Defendants Have Refused to Arbitrate AHMSl's Claims
37. Paragraph 18 of the PSA requires the parties to arbitrate "[ajny disputes arising
under [the] Agreement." (Exhibit B ~ 18.) Given that Defendants have denied the existence of
the contract, it is clear that they will not agree to arbitrate the claims that: (1) Defendants
breached the terms of the amended PSA, including that they were contractually obligated to
indemnify AHMSI. Attached as Exhibit A hereto is AH:NISI's letter demanding arbitration.
38. Because Defendants refuse to acknowledge the existence of the contract under
which AHMSI demands arbitration, AH1tlS1 seeks (1) a judgment declaring the amended PSA,
including its arbitration clause, valid and enforceable at the relevant time of performance; (2) an
order compelling Defendants to arbitrate AHIvlSI's breach of contract and indemnification
claims; Of, as to all claims not subject to binding arbitration, and (3) an order granting AHMSI
relief in the form of full indemnity of all costs and expenses resulting from the acts or omissions
cited above, as well as, any and all other direct, indirect, special and/or consequential damages to
which AHIvISI may be entitled at law or in equity.
COUNTI-DECLARATORYJUDGMENT
39. AHN1S1 repeats the preceding allegations.
PLAINTIFF'S ORIGINALPETITION- Page 14
40. AHMSI brings this count against Defendants for declaratory judgment
41. Under Sections 37.001 to 37.011 of the Texas Civil Practice and Remedies Code,
AHMSI seeks a declaration that the PSA, as amended, including the arbitration and
indemnification clauses, was valid and enforceable at the time of performance because the
parties mutually assented to its terms by their continued dealings and course of performance.
42. There is an actual and justiciable controversy regarding these issues because
Defendants deny that the amended PSA is legally binding on the grounds that (1) the PSA had
already expired by the time Defendants performed assignment processing services for AHMSI
and (2) Amendment 1, which governs assignment processing services, was never signed by
AHMSI.
COUNT 2-0RDERCOMPELLINGARBITRATION
43. AHMSI repeats the preceding allegations.
44. AHMSI brings this count against Defendants for an order compelling them to
arbitrate AHMSI's breach of contract and indemnification claims, as well as any other claims
encompassed by the PSA's arbitration clause, pursuant to Section 171.021 of the Texas Civil
Practice and Remedies Code.
45. There is a binding agreement to arbitrate under Paragraph 18 of the PSA because
the parties have mutually assented by their course ofperfonnance to all of the P S A ~ s terms.
46. AHMSI's breach of contract and indemnification claims fall within the PSA's
arbitration clause.
47. AHIvlS1 expects that Defendants will refuse to arbitrate under the PSA because
they deny its existence. Specifically, they assert that the PSA had already expired at the time of
performance and that Amendment 1 to the PSA was not signed by AHMSI. Nonetheless,
AHIvISI served Defendants with an arbitration demand that is attached as Exhibit A hereto. To
PLAINTIFF'S ORIGINAL PETITION - Page 15
the extent that Defendants refuse to arbitrate as AHMSI expects, AHlYfSI will .promptly file a
motion to compel arbitration.
COUNT 3-BREACH OF CONTRACT
48. AHMSI repeats the preceding allegations.
49. To the extent that the Court determines that AHMSI's breach of contract claim is
not subject to arbitration, AHMSI brings this count, pled in the alternative, against Defendants
for breach ofthe PSA and Amendment 1 thereto.
50. At all relevant times, the PSA and Amendment 1 thereto 'were valid and
enforceable contracts.
51. AHMSI is a proper party to sue for breach of the PSA and Amendment 1 thereto
because Option One assigned its interests in the PSA to AHMSI on April 30,2008.
52. AHMSI performed its obligations under the PSA and Amendment 1 thereto.
53. Defendants breached their obligations under the PSA and Amendment 1 thereto
by engaging in a practice of "surrogate signing" assignments of mortgages, which assignments
were improperly notarized and recorded in local real property records in connection with
foreclosure proceedings brought by AHMSI in its role as the servicer ofthe relevant loan.
54. Defendants' surrogate-signed assignments of mortgage have damaged ARMSI
by, among other things, requiring AHMSI to engage in an expensive remediation program to
address the implications of the surrogate-signed assignments.
COUNT 4-NEGLIGENT PERFORMANCE OF AN UNDERTAKING
55. AHMSI repeats the preceding allegations.
56. Should the Court find that the amended PSA was not binding on the parties at the
time Defendants executed and notarized assignments on AHMSI's behalf using surrogate
PLAINTIFF'S ORIGINALPETITION - Page 16
58. ARMSI relied upon Defendants to execute assignments on AHMSI's behalf.
59. Because demonstrating the chain of title is necessary for successfully completing
foreclosure actions, Defendants knew or should have known that the proper execution of
mortgage assignments was necessary to protect AHMSI's (and its clients') interests in the
distressed properties.
60. Defendants failed to exercise reasonable care by using, without AHMSI's
knowledge or consent, unauthorized surrogates to execute tens of thousands of mortgage
assignments. Because AHMSI had not appointed the surrogates to execute the assignments on
its behalf and because their signatures were not correctly witnessed or notarized, the surrogate-
signed assignments necessitated extensive remediation efforts at great expense to AHIvISI.
61. Defendants' negligence was the proximate cause of the substantial losses A H ~ f S I
has sustained. Accordingly, AHMSI seeks monetary damages from Defendants in an amount to
be determined by the trier of fact.
62. To the extent Defendants' acts were willful, wanton, malicious, and without
lawful justification or excuse, AHMSI seeks punitive damages in an amount to be determined by
the trier of fact.
COUNT 5-NEGLIGENT SUPERVISION
63. AHMSI repeats the preceding allegations.
64. AHNlS1 brings this count against Defendants tor negligent supervision.
PLAINTIFF'S ORIGINALPETITION- Page 17
65. Defendants owed AHMSI a legal duty to control the Special Officers employed
by Defendants to execute mortgage assignments on AHMSl's behalf.
66. Defendants breached that duty by failing to exercise reasonable supervisory
control over the execution of assigrunents by the Special Officers. In particular, Defendants
knew that the Special Officers were using, without AHMSI's knowledge or consent,
unauthorized surrogates to execute mortgage assignments on AHMSI's behalf. The Special
Officers' conduct constitutes negligent performance of a voluntary undertaking. Defendants
knew or should have known that the use of unauthorized surrogates to execute mortgage
assignments could harm AHMSI. Nevertheless, Defendants made no effort to prohibit or
prevent the Special Officers from using surrogates until thousands of surrogate-signed
assignments had already been executed and processed.
67. Defendants' negligent failure to supervise the Special Officers they employed was
the proximate cause of the substantial losses AHMSI has sustained. Accordingly, AHMSI seeks
monetary damages directly from Defendants in an amount to be determined by the trier of fact.
68. To the extent Defendants' acts were willful, wanton, malicious, and without
lawful justification or excuse, AHMSI seeks punitive damages in an amount to be determined by
the trier of fact.
COUNT 6-QUASI-CONTRACT FOR UNJUST ENRICHMENT
69. AHMSI repeats the preceding allegations.
70. Should the Court find that the amended PSA was not binding on the parties at the
time Defendants executed and notarized assignments on AHMSI's behalf utilizing surrogate
signors, AHMSI brings this count, in the alternative, requesting that the Court enforce a quasi-
contract between the parties because Defendants have been unjustly enriched.
PLAINTIFF'S ORIGINAl. PEnnON - Page 18
71. ARMSI compensated Defendants for processing assignments that had been
executed and notarized utilizing unauthorized surrogate signors. Because ARMSI paid
Defendants for processing these assignments, Defendants knowingly received a benefit to which
they were not entitled.
72. Defendants voluntarily accepted and retained that benefit.
73. It would be unconscionable for Defendants to retain the benefit without
compensating ARMSI. Accordingly, AHMSI is entitled to recover the value it paid Defendants
for executing and processing the surrogate-signed mortgage assignments.
74. Defendants were also unjustly enriched based upon their acceptance of AHMSI's .
extensive remediation efforts. Defendants avoided the costs of taking their own corrective
action.
75. Defendants voluntarily accepted and retained the benefit of AHMSI's remediation
efforts without compensating AHMSI.
76. It would be unconscionable for them to retain the benefit without compensating
AHMSI. Accordingly, ARMSI is entitled to recover some or all of the costs it incurred to
remedy the surrogate-signed assignments processed by Defendants.
IV. JURY DEMAND
77. AHMSI demands a jury trial and tenders the appropriate fee with this Original
Petition.
V. CONDITIONS PRECEDENT
78. All conditions precedent to AHMSI's claims for relief have been performed or
have occurred.
VI. PRAYERFOR RELIEF
WHEREFORE, ARMSI respectfully requests that this Court:
PLAINTifF'S ORIGINAL PETITION - Page 19
A. Declare that the PSA, as amended, including the arbitration clause, was valid and
enforceable at the time of performance because the parties mutually assented to its terms by their
continued dealings and course of performance,
B. Compel Defendants to arbitrate AHMSI's breach of contract and indemnification
claims, as well as any other claims encompassed by the arbitration clause.
C. Award AHMSI general damages, special or consequential damages, exemplary
damages, punitive damages, and pre-judgment and post-judgment interest on its non-arbitrable
claims.
D. If necessary, disregard DOCX's status as a limited liability company and hold
LPS liable for damages and any other obligations incurred by DOCX.
E. Award AHMSI reasonable attorneys' tees and court costs.
F. Award all other relief, in law or in equity, to which AHMSI is entitled.
DATED: August 23, 2011
M I I Y S U b m ~
[//]/
Weston C. Loegering ...
State Bar No. 12481550
Keith C. McDole
State Bar No. 13533740
Evan P. Singer
State Bar No. 24037501
JONES DAY
2727 N. Harwood Street
Phone: 214-220-3939
Fax: 214-969-5100
.'
.'
DU-6364226v6
PLAINTIFF'S ORIGINAL PETITION - Page 20
Attorneys for Plaintiff American Home
Mortgage Servicing, Inc.