A lawsuit filed by Geauga County, Ohio against MERS will be heard by a state court, after a federal court judge rejected MERS's attempt to get the case moved to federal court.
The suit was originally filed in state court by Geauga County. MERS and 23 MERS member institutions named as defendants in the Geauga County suit had moved to have the case heard in Federal Court instead. A MERS filing in federal district court argued that the only Ohio-based defendant named in the suit, Home Savings and Loan of Youngstown, Ohio, was fraudulently included in the lawsuit merely as a frivolous ploy to have the case heard in state court rather than federal court, in the belief that a state court would be more likely to be friendly to their claims.
MERS additionally argued that the case against Home Savings was legally distinct from the case against the defendants not based in Ohio.
Alternatively, MERS proposed that the case against Home Savings could be split from the case against the rest of the defendants, with the Home Savings case tried in state court and the case against the rest of the defendants, including MERS, sent to federal court.
But Federal Court Judge James S. Gwin refused those requests in a ruling earlier this week and sent the case back to the Ohio courts. While Gwin expressed skepticism regarding some of Geauga County's ploys to keep the case in state court-- in particular, an amended complaint filed by Geauga County which added additional Ohio-based defendants, calling the move by Geauga County "a poorly disguised attempt to defeat the [federal] court's jurisdiction"-- Gwin found that the inclusion of Home Savings as a defendant was sufficient to remand the case to the state court.
According to Gwin, Geauga County's decision to include Home Savings would be frivolous if there were reasonable basis to predict recovery of damages from Home Savings even if Geauga County's alleged claims were found to have merit. But Gwin found that there was no significant legal difference in Geauga County's case against Ohio-based defendants and non-Ohio defendants, in that Geauga County was arguing that in both instances the county was arguing that all the institutions, both in-state and out-of-state, had an obligation under Ohio law to record mortgage assignments.
A federal court recently ruled against two Kentucky counties in a similar suit against MERS, ruling that Kentucky law only provided property interest-holders a right of action under the state's recording laws. County suits against MERS in several other states have yet to be decided.
While the remand to state court was a win for Geauga County, the lawsuit faces numerous legal hurdles that must be cleared before it would be certified as a class action. MERS and the other defendants have challenged Geauga county's petition on a number of legal grounds, including that Geauga County is not authorized to represent other Ohio counties, and that the other counties have no recourse to opt out of the Geauga county suit. MERS claims that Geauga County's attempts to recruit other counties to join the suit have failed.