Boyd County ex rel. Hedrick v. Merscorp, Inc., 614 F. App'x 818

Background

Forty-one Kentucky counties sued MERS and its shareholders in federal court, alleging MERS and members assign mortgage liens among themselves without recording assignments or paying county recording fees, violating Ky. Rev. Stat. § 382.360(3).
Counties claim the assignment of promissory notes transfers mortgage interests, triggering the statutory duty for assignees to record assignments within 30 days.
Causes of action included violation of the recording statute, violation of a criminal statute against illegal liens, fraud, unjust enrichment, civil conspiracy, and requests for injunctive relief and damages/fees for past failures to record.
The district court dismissed key claims, relying heavily on this court’s decision in Christian County Clerk ex rel. Kent v. MERS, which held county clerks lack a private right of action under Kentucky law for similar recording-statute claims.
On appeal, counties advanced a novel theory that, as subdivisions of the state, they (through county attorneys) have authority to enforce mandatory recording provisions even absent an established private right of action.
The Sixth Circuit affirmed dismissal: it held existing precedent bars negligence-per-se and unjust-enrichment claims, declined to adopt the counties’ novel state-law enforcement theory, and refused to certify the question to the Kentucky Supreme Court because the counties waited until after losing in federal court.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether counties may sue under Ky. Rev. Stat. § 446.070 (negligence per se) to enforce recording statute	Counties argued they are entitled to enforce mandatory recording duties and recover for damages/fees	Defendants relied on Christian County Clerk: counties are not within the protected class for § 446.070	Held: Claim barred under Christian County Clerk; counties are not the protected class for § 446.070
Whether counties can recover under unjust enrichment for defendants’ alleged savings from not recording	Counties said counties’ recording systems and expenses benefited defendants; unjust enrichment remedy fits	Defendants argued benefits derive from state law, not the counties, and Christian County Clerk rejects such claims	Held: Unjust enrichment claim barred by Christian County Clerk reasoning
Whether counties, as state subdivisions, have an independent state-law authority to enforce recording statutes via civil suit	Counties advanced a novel theory that county attorneys can enforce statutes affecting county interests, akin to Commonwealth officers	Defendants argued no Kentucky precedent supports expanding enforcement authority to counties; no private right exists	Held: Federal court declines to create novel Kentucky-law cause of action; question better for Kentucky courts
Whether to certify the novel state-law question to the Kentucky Supreme Court	Counties asked for certification after losing in district court	Defendants opposed; argued counties should have sought state adjudication first	Held: Certification denied—plaintiffs filed in federal court and sought certification only after an adverse ruling; certification is disfavored under these circumstances

Key Cases Cited

Christian Cnty. Clerk ex rel. Kent v. Mortgage Electronic Registration Sys., Inc., [citation="515 F. App'x 451"] (6th Cir. 2013) (county clerks lack private right to enforce recording statute; precedent barring similar claims)
In re MERS Litig., 659 F. Supp. 2d 1368 (J.P.M.L. 2009) (description of MERS business model and assignment/recording practices)
Hargis v. Baize, 168 S.W.3d 36 (Ky. 2005) (explaining scope of Ky. Rev. Stat. § 446.070 negligence-per-se private right)
Combs v. Int’l Ins. Co., 354 F.3d 568 (6th Cir. 2004) (federal courts should avoid creating novel state-law causes of action that expand liability)
Town of Smyrna, Tenn. v. Mun. Gas Auth. of Ga., 723 F.3d 640 (6th Cir. 2013) (certification to state court should be sought before an adverse federal ruling)