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Robosigning Scandal: Maine Supreme Court condemns practice, declines to impose more penalities

On December 6, 2011, Maine’s highest court ruled that GMAC would not be subject to contempt of court penalties for its role in a national robo-signing scandal for foreclosures.  But the Court’s ruling did not excuse GMAC’s behavior.

The case of Fannie Mae v. Bradbury began in 2009 when Fannie Mae started a foreclosure proceeding against Nicoll Bradbury relating to her Denmark, Maine home.  Fannie Mae owned the loan which was being serviced by GMAC. 

As part of the foreclosure, GMAC submitted an affidavit to the Maine District Court in Bridgton to establish the execution and recording of the note.  Later, under oath, the GMAC employee whose signature appeared on the note testified that he neither read the affidavit he signed, nor did he sign the affidavit before a notary.  GMAC indicated that this practice was common as part of other court-filed affidavits in foreclosure proceedings.

GMAC’s admission became national news as part of a “robo-signing” scandal. 

After learning of GMAC’s robo-signing practices, Bradbury’s lawyer Tom Cox brought a motion for sanctions against plaintiff Fannie Mae and requested a contempt finding against GMAC, who was a party to the case but not the plaintiff.  The District Court agreed to impose sanctions against Fannie Mae and ordered payment of attorneys fees and costs related to its “bad faith” in submitting an improperly signed document.  The District Court, however, declined to impose additional contempt penalties against GMAC.  This decision not to penalize GMAC was the primary issue on appeal before Maine’s highest court.

The Law Court’s December 6th decision ultimately agreed with GMAC that further contempt penalities should not be awarded.  The Court’s primary reason was this:  the Court believed that a finding of contempt was within the discretion of the trial court, and the Law Court found no reason to overturn the lower court’s discretion in NOT awarding penalties against GMAC.

But the Law Court did not endorse GMAC’s actions – far from it.  Rather, the Court called GMAC’s affidavit a “disturbing exampe of a reprehensible practice” and that submission of the affidavit to the court was “ethically indefensible.”  The Court also noted that the lower court would have been “well within its discretion” to impose more burdensome penalties on Fannie Mae or GMAC.

So, while the Court accepted the trial court’s decision not to impose more penalties, the Court also signaled its willingness to approve additional penalties – if imposed by the trial court.

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