Wednesday, February 15, 2012

Shareholders and robosigning: Is Wells Fargo ruling a portent?

Reuters Legal:

The big question for the other banks that signed the nationwide foreclosure settlement, though, is whether Illston's robosigning ruling improves the prospects for shareholder derivative suits against them. JPMorgan Chase, for example, was just hit with a Manhattan State Supreme Court robosigning derivative complaint filed by Robbins Geller, one of the plaintiffs' firms in the Wells Fargo case. Earlier this month, shareholders in a consolidated derivative class action against Bank of America in Manhattan federal court voluntarily dismissed their robosigning-based case, but said they planned to refile in Delaware Chancery Court. Two derivative suits against Citigroup alleging flawed foreclosure practices were consolidated in Manhattan federal court in December, but the docket indicates no activity since then.

But those banks, according to the plaintiffs' allegations in the Wells suit, were quicker to renounce robosigning than Wells Fargo. JPMorgan Chase and Ally Financial were the first to halt foreclosures to investigate robosigning allegations, doing so in September 2010. Bank of America followed in October. Wells Fargo was still insisting at the time that its foreclosure practices were sound. According to the shareholder complaint, Wells continued to permit robosigning of foreclosure documents well into 2011, after it told shareholders it was cooperating with the government investigation.


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