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TCF National Bank v. Market Intelligence, Inc.

United States District Court, D. Minnesota

October 14, 2014


Brian Melendez, DYKEMA GOSSETT, PLLC, Minneapolis, MN, for plaintiff.

Glenn R. Reichardt, K&L GATES LLP, Washington, DC and Donald G. Heeman, FELHABER LARSON, Minneapolis, MN 55402, for defendants.


JOHN R. TUNHEIM, District Judge.

TCF National Bank ("TCF") brings this action against Market Intelligence, Inc. ("Market") and other alleged potential successors in liability to Market (collectively, "Defendants") regarding a service TCF purchased from Market as a less-expensive alternative to appraisals, known as a Field Asset Verification ("FAV"). TCF brings this action seeking to recover damages for what it claims are losses caused by the shortcomings of Market's FAVs. The Court has previously issued two rulings in this case. In July 2012, the Court issued an order dismissing without prejudice several of TCF's claims but permitting others to proceed. TCF then amended its complaint and Defendants again moved to dismiss. In a January 2013 order, the Court denied the motion on all claims. There are now six claims before the Court: (1) fraudulent inducement, (2) negligent appraisal, (3) breach of contract, (4) breach of the covenant of good faith and fair dealing, (5) fraud, and (6) consumer fraud.

Defendants now move for summary judgment on all claims, arguing both that all claims are barred by the six-year statute of limitations under Minnesota law and that Defendants are entitled to summary judgment on the merits for each of the six claims. TCF also moves for summary judgment, but only on its claims for fraudulent inducement, fraud, and consumer fraud and on Defendants' affirmative defenses. Also before the Court is Defendants' motion to exclude the testimony of TCF's expert witness. The Court concludes that all of TCF's claims are barred by the statute of limitations, as the evidence indicates that TCF was aware of the inadequacies of FAVs by at least 2004, which is more than six years before it filed its complaint in 2011, and there is no evidence upon which a reasonable jury could conclude that TCF is entitled to any tolling of the statute of limitations. The Court will thus grant Defendants' motion for summary judgment, deny TCF's motion for partial summary judgment, and deny as moot Defendants' motion to exclude TCF's expert.



Plaintiff TCF is a national banking association which loans money to consumers for residential mortgages in Minnesota and other states. (Aff. of Douglass Hiatt ¶ 2, May 1, 2014, Docket No. 61.) Defendant Market Intelligence, Inc. was a company incorporated in Massachusetts, but ceased to exist in 2004 when it merged into Market Intelligence, LLC, which ceased to exist in 2005 when merged into its parent company, Fidelity National Information Solutions, Inc. (Decl. of Brian Melendez, Ex. I at 6, May 1, 2014, Docket No. 62.) Defendant Lender Processing Services, Inc. is a wholly owned subsidiary of Fidelity National Information Services, Inc., and Defendant LSI Appraisal, LLC is a wholly owned indirect subsidiary of Lender Processing Services, Inc. ( Id. ) These mergers and corporate identities are not material to the instant dispute.


TCF initially began purchasing FAVs from Market for its consumer mortgage lending activities in Illinois in 2000. ( See Ex. to Mem. in Supp. of Defs.' Mot. for Summ. J. ("Defs.' Ex."), Ex. 25 (Dep. of Mark Rohde ("Rohde Dep.")) 19-20, May 1, 2014, Docket No. 74; id., Exs. 1-2.)[1] In late 2001, Timothy Meyer, then-director of consumer lending for TCF in Minnesota, spoke with Mark Rohde, who held a similar role with TCF in Illinois, about TCF's experience in Illinois. ( See Defs.' Ex., Ex. 28 (Dep. of Timothy B. Meyer ("Meyer Dep.")) 5, 9-11.) Based on this discussion, Meyer recommended to his superiors in December 2001 that TCF order FAVs from Market for use in Minnesota. ( Id. at 29-30.)

Meyer then negotiated an Agreement to Purchase Services ("Agreement") between TCF and Market on June 11, 2002. ( Id. at 31-32; see also Melendez Decl., Ex. D ("Agreement to Purchase Services").) He does not remember with whom he spoke at Market before signing the contract. (Meyer Dep. 12-13, 31.) The record indicates that, before entering into the Agreement, TCF ordered 13 test FAVs for properties in Minnesota in December 2001. (Decl. of Lisette C. Howells ¶ 3(c), May 1, 2014, Docket No. 75.)

Much of the dispute surrounding the merits of TCF's claims centers on what Market represented was involved in an FAV. The Agreement defined an FAV as follows:

The FAV is a residential real property evaluation derived from a process that combines an external data source value (previous appraisal, automated estimate, prior sales price, etc.) with a "drive-by" exterior inspection of the subject property by an agent licensed in residential real estate in the state in which the property is located. The agent, who may be an appraiser but is usually a real estate agent, also provides at least one comparable sale, and other local market data. This product is intended primarily for use in consumer/home equity lending and the second mortgage market. The Field Asset Verification is not an appraisal and does not include either (a) a physical inspection of the interior of the subject property, or (b) photographs of the interior or exterior of the property, although photographs will be provided on request as will additional market data such as active listings.

(Agreement to Purchase Services 3-4 (emphasis added).) The Agreement also distinguished between appraisals and other "evaluation" products, which included FAVs:

Evaluation shall mean the act or process of estimating value; an estimate of market value of residential real estate based upon some or all of the following: information obtained from TCF and/or the owner of the subject property, available public records, available market data, and/or a field inspection conducted by a real estate professional who may or may not be an appraiser. Evaluations are not appraisals and do not necessarily comply with USPAP.... While these estimates of market value are derived from sources that MI believes to be reliable, in no case does MI represent or warrant that an evaluation represents actual market value.

( Id. at 2 (emphasis added).)


In supports of its claims that Market induced TCF into purchasing FAVs on the basis of misrepresentations as to their quality, TCF points to several representations and pieces of marketing materials upon which it claims to have relied in agreeing to purchase FAVs from Market.

A. The Hybrid Approach

TCF focuses most significantly on one piece of marketing material called "The

Hybrid Approach to Collateral Evaluation: Artificial Intelligence and Street Smarts" ("The Hybrid Approach"). ( See Melendez Decl., Ex. A ("The Hybrid Approach").) TCF points to one portion of The Hybrid Approach in particular:


Market Intelligence understands that our clients rely on our property evaluation and appraisal products to make important financial decisions. The estimates of market value which we provide are an integral part of both the loss mitigation process, and collateral underwriting for consumer lending. Quality is a function of teamwork, all hands in the organization working together focused on the same goal; serving the client. Quality Control begins with the careful selection and supervision of our field agents and continues through a 100% review process by qualified real estate analysts and appraisers.... The Market Intelligence Quality Control Policies and Procedures Manual, which thoroughly outlines the Market Intelligence Property Evaluation Quality Assurance Program and the Market Intelligence Appraisal Quality Assurance Program, is available upon request.

( Id. at 17 (emphasis added).) TCF's arguments rely most significantly on the portion in emphasis - that qualified real estate agents and appraisers were involved in a quality review process for FAVs. It also points to another, similar statement in The Hybrid Approach:

All evaluations and appraisals are reviewed for quality as part of the MI process. Field work is reviewed and signed off by a qualified real estate appraiser. Random audits of field data are also conducted as part of an ongoing review process.

( Id. at 4.) The Hybrid Approach also contains language stating that "[w]ith over 15, 000 appraisers and real estate professionals, and its proprietary vendor management system, [Market] can deliver a wide range of collateral evaluation products within competitive time frames, " and includes a chart comparing different valuation products, in which "FAV drive-by" is distinguished from "Appraiser drive-by." ( Id. at 2, 5.)

TCF points to deposition testimony indicating that, in contrast to the statement in The Hybrid Approach that its "estimates of market value" are put "through a 100% review process by qualified real estate analysts and appraisers, " (The Hybrid Approach 17), FAVs were not reviewed or quality-checked by a licensed real estate appraiser. Market's manager of quality control for evaluation products testified in her deposition as follows:

Q: [W]as there any point in the FAV review process for the FAVs that were produced by TCF that involved an appraiser?
A: Not - for the FAVs for TCF, not in the - they - you know, no appraisal license. These were not the appraisal product. They were an alternative ...

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