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Ellie, DocMagic Settle Lawsuit

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A three-year-old lawsuit against Ellie Mae Inc. alleging that the mortgage technology giant cut off a document preparation firm from its transaction platform then attempted to deal directly with the company’s clients has been settled.

A complaint was originally filed against the Pleasanton, Calif.-based firm in U.S. District Court for the Northern District of California on Aug. 28, 2009, by DocMagic Inc.

Carson, Calif.-based DocMagic claimed more than $5 million in damages under California civil Code 3294 because Ellie terminated it from the ePASS network then encouraged clients to utilize its own competing loan documentation system.

“Ellie Mae took drastic steps to prevent hundreds of current DocMagic/Encompass users from accessing DocMagic products through unfair and anticompetitive behaviors, including sabotaging its clients by preventing access to DocMagic through alternative (non-ePASS) Web service calls,” the original complaint states.

DocMagic alleged that Ellie, a Mortgage Daily advertiser, monopolized the market and abused its monopoly to push out DocMagic — violating Section 2 of the Sherman Act, 15 U.S.C. 2. and the Cartwright Act, Cal. Bus. Bus. & Prof. Cod 16700 et seq.

But Ellie claimed that DocMagic was terminated from the network because it wouldn’t agree to renew its contract under new terms of an updated agreement.

Now, a settlement has been reached between the two companies.

A joint announcement Wednesday from DocMagic and Ellie indicated that a settlement agreement was executed resolving pending litigation.

“This settlement ends the legal disputes and renews the former relationship between the two companies, with DocMagic agreeing to make its services available to lenders through the Ellie Mae Network,” the statement said. “This agreement will enable the companies to focus resources on innovation and on enhancing the experience available to our mutual customers.”

The announcement indicated that the settlement calls for all pending litigation to be dropped.

Terms of the agreement were not disclosed.

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