April 25 (Bloomberg) -- NMI Holdings Inc., which raised $550 million last year to start a mortgage insurer, must face claims in a lawsuit by Arizona regulators including breach of fiduciary duty and unfair competition, a California judge ruled.
State court Judge Robert McGuiness in Oakland provisionally denied NMI’s request to dismiss eight claims in the suit. He agreed to throw out conspiracy and intentional interference claims, according to a posting yesterday on the court’s docket. He didn’t rule on the merits of the complaint.
The Arizona Department of Insurance sued NMI and its executives last year, claiming they stole trade secrets for the mortgage-insurance startup from PMI Mortgage Insurance Co., which Arizona placed into receivership. PMI Mortgage Insurance is a unit of Walnut Creek, California-based PMI Group Inc.
Six PMI executives secretly worked for NMI for several months before joining the company, providing the insurer’s analysis of the industry and information about lenders and helping to craft NMI’s marketing pitch for potential investors, according to the complaint.
McGuiness also tentatively ruled that Arizona officials must provide more details about the trade secrets alleged to have been stolen. A court hearing is scheduled for later today in Oakland. McGuiness gave NMI 10 days to respond to his tentative ruling.
“The court’s order does not imply or find that there is any factual merit to the plaintiffs’ claim,” Glen Corso, general counsel at Emeryville, California-based NMI, said in an e-mail. “NationalMI in fact denies all of plaintiffs’ material allegations.”
NMI is the second company to enter the mortgage-insurance market since the housing collapse hobbled rivals. The company said yesterday that it issued its first policy commitments this month. Government-supported Freddie Mac is accepting loans insured by NMI, while Fannie Mae will start doing so on June 1, according to a statement. Regulators in 46 states and the District of Columbia have approved it to do business, NMI said.
Germaine Marks, director of Arizona’s Department of Insurance, seeks a court order to force NMI to withdraw any applications with insurance agencies and mortgage financiers Fannie Mae and Freddie Mac that relied even partly on the material allegedly taken from PMI.
PMI filed for bankruptcy protection in November 2011 after the department took over its main unit as claims on soured mortgages drained capital. Arch Capital Group Ltd., the Bermuda-based insurer, said in February it was acquiring PMI’s mortgage-insurance platform and would hire PMI staff as part of a $300 million deal to enter the U.S. mortgage guaranty business as the housing market rebounds.
The case is Marks v. NMI Holdings Inc., RG12642872, California Superior Court, Alameda County (Oakland).
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