50 F. Supp. 3d 327
E.D.N.Y.2014Background
- FDIC, as receiver for AmTrust Bank, sued title agents Atlas Abstract Agency Corp. and Liberty Land Abstract, Inc., alleging they issued inaccurate pre-closing title commitments that enabled a mortgage-fraud/flip scheme and caused AmTrust to fund defective loans.
- AmTrust made 20 mortgage loans in late 2008–early 2009; Atlas was involved in three loans (Willoughby Ave., Jackson Heights, Hempstead); Liberty was involved in two (Pacific St., Rosedale).
- Alleged core misconduct: title commitments misrepresented record ownership or effective dates (so loans appeared to meet AmTrust’s "seasoning" requirement), and Atlas/Liberty either prepared, ratified, or failed to correct those commitments.
- Discovery produced conflicting title documents, alternate Schedule A forms, and internal AmTrust underwriting documents (UFR, NOLA) suggesting underwriters reviewed title commitments in some cases.
- Magistrate Judge Orenstein recommended—and the district court adopted—that Atlas wins on breach-of-contract, breach-of-fiduciary-duty, negligent-supervision (partial), and negligence as to the Hempstead property, but Atlas’s motions be denied as to negligence (Willoughby, Jackson Heights), fraud, and conspiracy; Liberty’s and FDIC’s cross-motions were denied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Negligence — Atlas (Willoughby & Jackson Heights) | Atlas prepared/ratified or failed to correct inaccurate title commitments that AmTrust relied on for seasoning, causing loss | Atlas says it did not prepare or communicate the documents (or they were altered by others) and any reliance/proximate cause fails | Denied: factual disputes (who prepared/updated documents, whether underwriters reviewed and relied) preclude summary judgment |
| Negligence — Atlas (Hempstead) | Title errors caused loss | Atlas argues no liability for failures alleged re Hempstead | Granted in part: Atlas wins on negligence re Hempstead (and on breach/fiduciary duty & contract related to Hempstead) |
| Fraud — Atlas & Liberty | Title commitments were materially false, conveyed (directly or via agents), and AmTrust reasonably relied to its detriment; scienter can be inferred | Defendants argue no direct communication to AmTrust, no reliance, and lack of scienter | Denied: sufficient circumstantial evidence of misrepresentations, communication via agents, and disputed reliance/scienter for jury to decide |
| Conspiracy — Atlas & Liberty | Tacit or express agreement inferred from interdependent acts to effect flips and share proceeds | Defendants stress absence of direct agreement or contacts | Denied: circumstantial evidence and interdependence permit reasonable inference of an agreement for jury determination |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standard)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (summary judgment — genuine issue for trial standard)
- In re World Trade Ctr. Lower Manhattan Disaster Site Litig., 758 F.3d 202 (2d Cir.) (elements of negligence)
- Crigger v. Fahnestock & Co., 443 F.3d 230 (2d Cir.) (elements of fraud)