Boyd County ex rel. Hedrick v. Merscorp, Inc.
2013 U.S. Dist. LEXIS 167134
| E.D. Ky. | 2013Background
- Forty-one Kentucky county plaintiffs sue mortgage-related defendants over alleged failure to record mortgage assignments to avoid recording fees.
- Plaintiffs allege MERS-created system enables transfer of mortgage interests without proper county-recordation and fee collection.
- Plaintiffs assert violations of KRS 382.360 and KRS 434.155, plus common law claims of fraud, unjust enrichment, and civil conspiracy.
- Court previously stayed proceedings; upon Christian County decision, stayed proceedings were lifted and defendants moved to dismiss.
- Court dismisses First Amended Complaint for failure to state a claim, citing lack of private right of action under Kentucky recording statutes and failure to plead elements of fraud/unjust enrichment/conspiracy.
- Plaintiffs moved for reconsideration and for certification of a Kentucky Supreme Court question, which the court denied as unfounded in law and not determinative.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Private right of action under KRS 382.360 | Plaintiffs rely on statute to recover recording-fee losses | Christian County controls; clerks/counties lack private right | No private right of action under KRS 382.360 for counties/counties clerks |
| Effect of KRS 434.155 on civil liability | Statute criminalizes illegal liens; supports civil action | Criminal statute cannot support civil damages absent explicit authorization | KRS 434.155 cannot ground civil liability |
| Extra-statutory private remedies (other statutes) | Other statutes create rights for counties | No private rights under cited statutes; Christian County controls | No private right of action under the cited statutes |
| Fraud claim viability | Defendants misrepresented mortgage interests | Plaintiffs plead no particularized facts; MERS recognized as mortgagee; no fraud shown | Fraud claim dismissed for lack of particularity and failure to plead elements |
| Unjust enrichment and civil conspiracy viability | Defendants benefited from alleged recording-fee avoidance | Benefits derivable from Kentucky law; clerks did not confer benefits on defendants | Unjust enrichment and civil conspiracy claims dismissed |
Key Cases Cited
- Conley v. Gibson, 355 U.S. 41 (U.S. 1957) (liberal pleading standard; dismissal only if no set of facts supports relief)
- Monette v. Electronic Data Systems Corp., 90 F.3d 1173 (6th Cir. 1996) (review standard for failure to state a claim)
- Roth Steel Prods. v. Sharon Steel Corp., 705 F.2d 134 (6th Cir. 1983) (focus on whether plaintiff can support claims with evidence)
- MERS v. Roberts, 366 S.W.3d 405 (Ky. 2012) (recording statutes’ scope and private rights under Kentucky law)
- Farmers Bank & Trust Co. v. Willmott Hardwoods, Inc., 171 S.W.3d 4 (Ky. 2005) (fraud elements and pleading requirements in Kentucky)
- Marx v. Centran Corp., 747 F.2d 1536 (6th Cir. 1984) (private rights and civil actions inferred from bare criminal statutes)
- Alexander v. Sandoval, 532 U.S. 275 (U.S. 2001) (absence of Congressional intent to create private right of action)