Thursday, June 26, 2014

FDIC Settles Case Against CoreLogic Valuation Services, fka eAppraiseIT, for Less than 10% of Its Original Demand

Call this one a loss for the FDIC.

In May 2011, the Federal Deposition Insurance Corporation filed suit against CoreLogic Valuation Services, formerly known as eAppraiseIT, in connection with appraisal services managed by eAppraiseIT for failed lender Washington Mutual.  (See post about the initial lawsuit filing here.)  The FDIC's lawsuit at that time concerned 194 allegedly flawed appraisals (mainly, desk reviews), cherry-picked by the FDIC's experts from approximately 260,000 individual appraisal services managed by eAppraiseIT for WaMu in 2006 and 2007.  The FDIC demanded more than $129 million in damages relating to those appraisals and filled its complaint with allegations about "gross negligence." 

Over time, the Court whittled down the FDIC's claims.  Notably, in response to successful motions filed by eAppraiseIT's attorneys at Irell & Manella, LLP, Judge Carter dismissed the FDIC's gross negligence claim against eAppraiseIT, dismissed parts of the FDIC's remaining breach of contract claim, and dismissed a variety of CoreLogic affiliates that the FDIC had also dragged in.  (See post about those setbacks for the FDIC here.) With a trial that was set to start on June 27, the FDIC recently agreed to settle the case for $12 million.  Perhaps the FDIC and its legal team feared a poor result at trial because the settlement can only be described as meager. Indeed, $12 million is likely less than the FDIC spent on its attorneys fees and costs with the two large law firms it engaged to pursue the case.  A full copy of the settlement agreement is available at this link (at the bottom of the page at the link).