The United States Trustee for Region 5 filed a post-trial brief on February 1, 2011 seeking sanctions against Lender Processing Services for abuse of legal process, providing materially misleading testimony.  The brief is a useful document for attorneys seeking sanctions against servicers for bad faith conduct to prevent an abuse of process under 11 USC 105(a).

Click here to read the United States Trustee's brief

The bankruptcy court is proving to be one of the few venues where Californians may seek redress of servicer misrepresentations.  California state courts are requiring that for plaintiffs to recover damages or other relief, they must prove harm or prejudice resulting from the lender's misconduct.  The bankruptcy courts appear more concerned with the integrity of the judicial process.

California courts by disregarding the effect of falsified affidavits, declarations, bogus notices and other common servicer and trustee activities in the absence of proved harm to the borrower risk harm instead to the integrity of the judicial process.  If the courts are perceived as tolerating falsified documents, materially misleading testimony and other affronts to basic notions of a legitimate judicial process, it is natural to consider that the public may expect the courts to use the same standard in other areas of judicial administration.

There are countless examples of regulatory violations that are prosecuted and where fines are imposed in the absence of any evidence that a person was harmed.  California courts justify their increasing reliance on the concept of prejudice as a prerequisite to a borrower obtaining relief in a dispute with a servicer or lender because the borrower is often seeking the court to exercise its equitable powers and case law suggests that powers of equity should not be exercised for a vain or pointless purpose.

But with this restraint from using equitable power where clear evidence of abuse of process lies, California marches toward a system rife with rampant fraud, perjured testimony and falsified documents.  Increasingly, the bankruptcy courts appear as the last refuge for Californians that does not take kindly to falsified documents and perjured testimony.