Judgment Could Cost New Century Millions

The plaintiffs, Encore Credit Corp. (formerly known as Park Place Capital Corp.), Sprint Funding Corp. and two other individuals, contended that Christopher Lappi, the former chief information officer at Sprint, conspired with New Century and its attorneys, Morrison & Foerster LLP, by allowing them to access and view Sprint’s data contained on backup disks that he failed to return to Sprint after his termination, according to court documents provided by the plaintiff’s attorney.

The lawsuit stemmed from prior litigation that has since been settled between Encore and New Century — both real estate investment trusts based in Irvine, Calif.

The plaintiffs’ attorney, Robert K. Sall of the Sall Law Firm in Laguna Beach, Calif., told MortgageDaily.com that the prior litigation matter involved “claims of defamation and unfair business practices…but both parties walked away.”

However, Encore continued to pursue Lappi in a subsequently filed lawsuit.

The jury in that trial found Lappi did conspire with New Century and its attorneys by allowing them to access and view the data, according to the Special Verdict filed with the Orange County court clerk’s office. The jury awarded the co-plaintiffs more than $11.4 million in damages.

“New Century strongly disagrees with the jury’s verdict that the company engaged in any sort of wrongdoing,” a company spokesman told MortgageDaily.com in an e-mail statement. “New Century is advised that Mr. Lappi intends to appeal the judgment once it is final.”

But while New Century and its attorneys were not participants in the civil trial because of the prior settlement, it is still responsible for the judgment against Lappi, according to a statement from the plaintiff’s attorney, because of an indemnification agreement it previously executed with Lappi.

“We are evaluating our obligations, if any, related to the indemnification of Mr. Lappi,” the New Century spokesman added. “Regardless of the outcome related to the indemnification, New Century does not believe this matter will have a material impact on its business, results of operations or financial position.”

Encore Credit parent company ECC Capital Corp.’s spokesperson said, “We are pleased with the verdict and are confident it will stand.”