Libeling Lenders Leads to Litigation

Harper J. Dimmerman, Esq. on 02/06/2009

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In the immortalized words of Shylock, “If it will feed nothing else, it will feed my revenge.” (The Merchant of Venice, William Shakespeare). According to some, this very well may be the rationale of a self-proclaimed computer nerd and mortgage securitization expert, who created a website devoted exclusively to revealing the unsavory and allegedly criminal business practices of Orix. The site, targeting this Dallas-based financial-servicing goliath, is aptly named Predatorix.com, a clever little play on a consumer phenomenon near and dear to the hearts of legions of disgruntled borrowers coast to coast.

According to an msnbc.com piece, this Renaissance techie, Cyrus Rafizadeh, who can also claim the distinction of being a law student, is the key Defendant in what can only be characterized as a libel suit of epic proportions. Eight years and several forests later, this martyr in the eyes of many, is finally getting his proverbial day in court. Originally, a suit was commenced by Mr. Rafizadeh’s company after Orix had foreclosed upon a family apartment building; that company owned shares in the securitized mortgage trust which held the loan. Allegedly Orix “engineered the default” in a scheme to reap windfall profits, as it was paid approximately four times as much to service loans in default as performing loans. Naturally Orix vigorously disputes the veracity of these claims, perceiving them to be little more than the vengeful and blatantly false accusations of an embittered borrower.

With the surplus of cyber opinions and the exponential growth of consumer skepticism, it should come as little surprise that Mr. Rafizadeh’s plight is not an entirely unique one. Aaron Krowne, the founder of the website known as the Mortgage Lender Implode-O-Meter is no stranger to defamation claims. His site tracked those lenders that have gone belly-up since 2006. Apparently The Loan Center of California, Inc. had “imploded,” at least according to a former employee of the bank who was responsible for what ultimately turned out to be a gross misstatement of the facts. As far as former disgruntled employees go, that’s not altogether surprising. Although Mr. Krowne managed to escape liability in that case, he was still out a healthy chuck of change thanks to an anonymous email posting.

I know of at least one recent instance of a commercial lender bringing suit against a customer for libel, right here in Philadelphia County. And as the local economy continues to take a pounding, the Internet is poised to become a bastion of whining and bashing. So for all of you lawyers out there harnessing the power of blogging, trying to tap into public sentiment for the sake of marketing, beware of overly opinionated potential clients who spew damaging sentiment against big business. An army of thousand-dollar-an-hour litigators might just be waiting in the wings, ready to pummel and keep the First Amendment up against the ropes.