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State ex rel. Saporta v. Mortgage Electronic Registration Systems, Inc.

Court of Appeals of Illinois, Third District

December 19, 2016

STATE OF ILLINOIS, ex rel. STEPHEN T. SAPORTA, Relator-Appellant,
v.
MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., a Subsidiary of MERSCORP, INC., a Delawar corporation; DOE DEFENDANTS A-ZZZ, et al., an Illinois municipal corporation, et al. Defendants, and STATE OF ILLINOIS, Appellee.

         Appeal from the Circuit Court of the 12th Judicial Circuit, Will County, Illinois. Circuit No. 11-L-447 The Honorable John Anderson, Judge, presiding.

          Justices Carter and Wright concurred in the judgment and opinion.

          OPINION

          McDADE JUSTICE

         ¶ 1 The plaintiff, the State ex rel. attorney Stephen T. Saporta (Relator), filed a qui tam action[1] against Mortgage Electronic Registration Systems, Inc. (MERS) and unnamed defendants, including entities that originated and/or serviced certain home loans, alleging that the defendants knowingly made false statements in certain mortgage documents in order to avoid paying millions of dollars in mortgage assignment fees to the State's counties. The State elected not to take over the Relator's action, but later filed a motion to dismiss the action, which the circuit court granted. On appeal, the Relator argues that the circuit court erred when it (1) granted the Attorney General's motion to dismiss; (2) ruled that the Attorney General's motions to reconsider and for a protective order were moot; and (3) denied his motion to disqualify the Attorney General due to a conflict of interest. We affirm.

         ¶ 2 FACTS

         ¶ 3 The Relator filed this qui tam action on June 3, 2011, claiming, inter alia, that the "Defendants filed with the County Recorder of Deeds Offices of this state purported 'Mortgage' documents with what purported to be self-executing language of assignment in order to avoid payment in full of all recording fees reflecting the establishment and/or transfer of secured interests in real property in the State." The complaint alleged that the mortgage documents contained language that designated MERS as the legal nominee of the lenders, their successors, and their assigns. The complaint also alleged that the Relator requested information from the State's county recorders in April 2011, 18 counties either objected to the request or failed to respond, 76 counties reported not collecting separate recording fees from these mortgage documents, and only 8 counties reported that they collected separate recording fees from these mortgage documents. Further, the complaint alleged that the defendants' knowing failure to pay these recording fees violated section 3(a)(1)(G) of the Illinois False Claims Act (Act) (740 ILCS 175/3(a)(1)(G) (West 2010)).

         ¶ 4 The Attorney General notified the circuit court by motion on January 13, 2014, that the State was declining to take over the case from the Relator. Citing to the Act, the Attorney General also requested, inter alia, that all of the pleadings, orders, and notices of appeal filed in the case be served upon it. Two days later, the circuit court granted the Attorney General's motion and granted the various requests aimed at protecting the State's interest in the case.

         ¶ 5 On June 25, 2014, the circuit court entered an order at the Relator's request that required the State to turn over its investigative file related to MERS' business practices for an in camera inspection.

         ¶ 6 Within three weeks of receiving that order, the Attorney General filed a motion to dismiss the Relator's case. The Attorney General also filed a motion for entry of a protective order and reconsideration of the court's June 25, 2014, order.

         ¶ 7 On March 25, 2015, the Relator filed a motion to disqualify the Attorney General. The motion alleged that some potential defendants, including banks, sponsored an awards dinner on March 24, 2011, that honored the Attorney General. The Relator claimed that this created a conflict of interest such that the Attorney General should be precluded from intervening in the case. A press release from the Neighborhood Housing Services of Chicago, Inc., was appended to the motion and stated, in relevant part, that the Attorney General "was honored with the NHS Community Advocacy Award for her work on initiating and drafting key legislation aimed at protecting homeowners from predatory lending and mortgage fraud." The dinner had taken place over two months prior to the filing of the qui tam complaint and four years prior to the filing of the Relator's motion to disqualify.

         ¶ 8 The circuit court denied the Relator's motion on March 31, 2015. The court ruled that the motion to disqualify was untimely because the Relator stated he had known of the alleged conflict for years. The court stated that the Relator therefore had waived the issue, and that even without the waiver, the motion was without merit.

         ¶ 9 On the same day, the circuit court granted the Attorney General's motion to dismiss and ruled that the Attorney General's motions for entry of a protective order and reconsideration were accordingly moot.

         ¶ 10 The ...


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