The foreclosure paperwork and processing mess has been unfolding on the front pages of the nation’s news papers for several weeks now. While the situation has created a lot of uncertainty, the one thing that seemed probable was that litigation would follow. But while the likelihood for lawsuits seemed high, it did not necessarily follow that there would be D&O claims arising out of the mess.However, at least one D&O claim has now arisen out of the foreclosure muddle.


According to their November 23, 2010 press release (here), plaintiffs’ lawyers have filed a securities class action lawsuit in the Middle District of Florida against Lender Processing Services, Inc. and certain of its directors and officers. The complaint, which can be found here, alleges that the defendants failed to disclose that


(i) that the Company had engaged in improper and deceptive business practices; (ii) that the Company’s subsidiary Docx had been falsifying documents through the use of robo signers; (iii) that the Company had engaged in improper fee sharing arrangements with foreclosure attorneys and/or law firms, including, but not limited to, undisclosed contractual arrangements for impermissible legal fee splitting, which are camouflaged as various types of fees; (iv) as a result of the Company’s deceptive business practices, the Company reported misleading financial results; and (v) further, as a result of the foregoing, at all relevant times, the Company’s financial outlook lacked a reasonable basis.


On October 4, 2010, after the company released a statement responding to what it described as "mischaracterization of its services," the company’s share price declined.


It remains to be seen whether or not there will be further securities suits growing out of the foreclosure mess (although I have to say the possibility of additional lawsuits growing out of this situation seems likely.)


The one thing that has definitely become clear is that the plaintiffs’ securities bar is riding in the wake of the business headlines. Toyota has a problem with sudden acceleration? Wham, in comes the securities class action lawsuit. Massey Energy has a coal mining catastrophe? Pow, in comes the securities lawsuit. BP suffers a massive oil spill? The next thing that follows is a securities class action claim. The same goes for the disclosures of possible student loan fraud at for-profit education companies, as basically every company in the industry has now been hit was a suit. I am sure if the plaintiffs’ lawyers could figure out how to file a securities suit against the North Koreans for launching missles against South Korea on Monday, the would do that too.


It has pretty much gotten to the point that the way to determine who will be sued next is simply to read the newspapers. And by that indicator, we can probably expect to see more securities suits arising out of the foreclosure mess.