U.S. District Judge Bruce Jenkins, who presides over the case, issued a strong ruling in favor of the homeowners' and the state's position. The assistant attorneys general conducting the state's case hoped to keep it alive for a final ruling by Jenkins before a likely appeal to the 10th Circuit Court of Appeals for a definitive decision that would guide other similar lawsuits.
Shurtleff leaves office on Monday and has announced he'll join the international law firm of Troutman Sanders LLP. On its website, the firm says it "regularly represents Bank of America."
A combative Shurtleff said Wednesday there was no connection between his action in the Utah foreclosure case and the clients of his new law firm. He portrayed his decision as one that saved state resources by not pursuing a case in which the original plaintiffs had settled.
Shurtleff acknowledged that assistant attorneys general who work on foreclosure matters disagreed with his decision. He said he made the decision and signed the document so they wouldn't have to take an action they disagreed with.
"There's no reason to continue [to be], at taxpayer expense, involved in a case where the plaintiff has settled," Shurtleff said.
Bates, who represented the Bells in the lawsuit, said Shurtleff's actions took him completely by surprise because the state had previously declined to agree to a settlement.
"To me this appears to be some type of a midnight pardon," Bates said. "It certainly sends a confusing message to the public and to the courts and the 10th Circuit as to why the chief law enforcement agency in the state is dismissing its claims in defense of the laws of the state."
By signing the settlement, Shurtleff has weakened the state's legal position on foreclosures by ReconTrust because the state was an actual plaintiff in the case where in other active cases it has merely filed "friend of the court" briefs that don't carry the same weight, Bates said.
Shurtleff's signing of the dismissal also appears to put a fence of sorts around Jenkins' ruling, said Bates, who called the judge's decision "overwhelming and persuasive."
Shurtleff said Jenkins' ruling was already before the 10th Circuit as part of an appeal in another foreclosure case.
The Bells had sued Bank of America in 2011, arguing that Countrywide Financial, which BofA acquired in 2008, had engaged in predatory lending practices when it provided them a loan to refinance their Holladay home under terms they did not qualify for and could not afford. They asserted ReconTrust illegally began foreclosure proceedings on their property when they went into default.
In the wake of Jenkins' unfavorable ruling and because of a nationwide settlement between states, the federal government and banks, BofA agreed to reduce the Bells' original loan of about $3 million by $1.1 million to make the new loan amount equal to the present value of the property, according to court documents. The Bells agreed to settle, but the Dec. 17 motion seeking approval of the settlement said the state would not sign on. Then, 11 days later, an attorney for BofA filed the dismissal document in court with Shurtleff's signature on behalf of the state of Utah.
The Bells' and others' lawsuits have argued that ReconTrust violated a state law by carrying out thousands of foreclosures on its own instead of going through a Utah-based attorney or title company as state law requires.
Bank of America's attorneys said that because it is a national bank, it is governed by national banking laws and regulations. The regulations mean ReconTrust is guided by the laws of the state in which it carries out its business in this case Texas where the company is located, the attorneys said.
Two other federal judges in Utah have sided with ReconTrust and agreed the company was carrying out foreclosures legally in Utah because it was governed by Texas and not Utah law.
Jenkins, in his strongly worded ruling in March, stated that federal law was intended to mean that the banks had to follow the law of the states in which they were operating. Rules issued by the Controller of the Currency and relied on by ReconTrust were not valid, the judge wrote.
That ruling set up a split on the Utah federal bench over the question, throwing a definitive ruling into the 10th Circuit Court of Appeals.
One such case is scheduled for oral argument before the 10th Circuit this month, but Bates and another attorney are seeking to consolidate it with another lawsuit against ReconTrust and to postpone oral arguments so both cases could be heard at once.
Attorneys for Bank of America did not return emails seeking comment.