A class action suit filed on behalf of all Texas counties by Dallas County against MERS and MERS member banks has cleared an initial legal hurdle, as the federal judge hearing the case rejected MERS's motion to dismiss the case on several of the county's claims.

Dallas County's claim that banks illegally avoided recording fees through the creation and use of MERS will go to trial as U.S. District Judge Reed O'Connor ruled that the county had presented enough evidence to go forward.  He dismissed some claims, including an allegation that MERS filed false liens, for which the county was attempting to collect $10,000 per occurrence.  Claims on allegations in which the county is seeking collection of unpaid fees and an injunction stopping the banks' use of MERS in the future were allowed to go forward, according to a report in Bloomberg News.

“As of today, the system they are so proud of is a complete and total failure,” said Stephen Malouf, an attorney for Dallas County at the dismissal hearing. “It has made the property recording system in the U.S. spaghetti.” 

Dallas County's original suit against MERS, filed last September, sought over $58 million in back fees for unrecorded mortgage assignments.  The lawsuit has since been amended, and according to statements by county district attorney Craig Watkins, the back fees could amount to up to $100 million in Dallas County alone, although Dallas County does not specify the amount of back fees being sought in the suit itself.  MERS claims that there is no duty to record mortgage assignments under Texas law.