Friday, September 16, 2011

Update on FDIC v. CLGX (CoreLogic -- eAppraiseIT): FDIC Reiterates Threat that Appraisers Are the Legal Agents of AMCs in a Late-Filed Brief

The FDIC is now contending that independent contractor appraisers are the legal agents of appraisal management companies (AMCs) in both of its cases against LSI Appraisal and CoreLogic.  Based on this contention, the FDIC asserts that the AMCs should be liable for all damages attributable to the alleged negligence of their panel appraisers.  The FDIC first asserted this argument in a brief filed in its case against Lender Processing Services and its AMC LSI Appraisal (see the update on that case here). It is now making the same argument in its case against CoreLogic, parent of the AMC formerly known as eAppraiseIT.  In sum, the FDIC's contention is that an AMC "is vicariously 'responsible and liable' for the torts committed by the individual appraisers it retain[s] as a matter of black letter principal/agency law."  While this is just one of many claims by the FDIC against the AMCs, this issue would have the most wide-ranging impact on the appraisal industry, if the FDIC prevails on it.

The FDIC failed to make this claim in its original complaint filed against each AMC on May 9, 2011 and also failed to make the argument in its opposition brief to each company's motion to dismiss. While the FDIC's arguments are being raised for the first time in "sur-replies" which do not have to be considered by the Court, it is still apparent that the FDIC will try to pursue liability of the AMCs on the basis that appraisers are the legal agents of AMCs (among other theories). 

[Remainder of post deleted.  Questions about FDIC/AMC matters should be directed to peter@liability.com.]