LAS VEGAS (Legal Newsline) - The Nevada Attorney General's Office has been sanctioned by a district judge, and Attorney General Catherine Cortez Masto has been ordered to pay legal and discovery costs to Lender Processing Services after the State failed to come up with evidence supporting a lawsuit accusing the firm of defrauding homeowners.
LPS recently changed its name to Black Knight Financial Services.
Clark County District Judge Elizabeth Gonzalez ordered the state to pay legal costs that could amount to $1 million to LPS, which was accused by Masto of consumer fraud and engaging in an illegal "robosigning" scheme.
Masto hired law firm Cohen Milstein Sellers & Toll to sue LPS for allegedly violating state consumer-protection laws.
Mitchell Berger, an attorney with Berger Singerman who represented LPS, said the order is a rare case of a judge finding the state's highest legal officer acted improperly.
"I have been practicing law for 34 years," Berger said in an article on Forbes.com. "I've been around the block. And I've never seen an attorney general sanctioned."
Gonzales issued the decision on Jan. 30. Masto had filed the lawsuit in December 2011, as well as criminal charges against two employees.
On Jan. 31, Masto issued a statement declaring that she was fighting for the people of Nevada against a company she accused of deceptive trade practices and "widespread problems in the execution and notarization of mortgage documents."
"Nevada has borne the costs and continues to bear the scars from the reckless conduct of too many unscrupulous players in the mortgage market," the statement said.
Masto made claims in 2009 that LPS also engaged in other illegal practices as a mortgage servicer.
Berger said the claims were dubious, since LPS worked for banks and not consumers.
"Judges have thrown out similar class-action suits by Cohen Milstein and other firms," Berger said.
Berger said the state filed the lawsuit against LPS in December 2011 but did not actually serve LPS until the following year.
"It sat around without them taking any action, which is not what professional attorneys general do," Berger said.
Berger said Nevada supplied 70,000 pages of mortgage documents in which Gonzalez ordered the State to also produce a witness who could explain how the documents supported claims of consumer-law violations.
"If you have a client who is being wrongfully accused in the press and you manage to get a judge to ignore the threats and order sanctions, that's a good feeling," Berger said. "The system corrects itself when a judge applies the law to the facts presented."
Robo-signing is the practice of pushing foreclosure documents through the system without going through legally prescribed steps and having paperwork signed by people who lack the legal authority to do so.
From Legal Newsline: Kyla Asbury can be reached at email@example.com.