Mortgage Electronic Registration Systems (MERS), the operator of an electronic registry of mortgages, and lenders won a U.S. appeals-court ruling upholding dismissal of claims by Arizona borrowers challenging their lending and foreclosure procedures.

The federal court in San Francisco ruled Wednesday that a district court properly threw out a lawsuit filed by three borrowers alleging conspiracy and fraud.

In addition to MERS, defendants included Bank of America and JPMorgan Chase.

"The plaintiffs' claims that focus on the operation of the MERS system ultimately fail because the plaintiffs have not shown that the alleged illegalities associated with the MERS system injured them or violated state law," the three-judge appeals panel said.

MERS, a unit of Reston, Va.-based Merscorp, bills itself as a provider of "support services to the mortgage industry," specifically tracking the servicing rights and ownership interests in mortgage loans.

The company lets banks electronically register their sales of home loans so they can avoid trudging down to the county records office.

The Arizona borrowers, who are Hispanic and didn't speak or read English, had executed deeds naming MERS as the "beneficiary" and "nominee" for the lender.

After the borrowers defaulted on the loans, MERS recorded documents assigning its interest in the deeds to a bank appointed by the lender as trustee to foreclose on the properties, which were sold at auction, the ruling says.

The borrowers sued, alleging that MERS members conspired to commit fraud by using the registry as a sham beneficiary, promoting predatory lending practices and making it impossible for borrowers or regulators to track when their loans changed hands.

The Arizona district court dismissed the case without giving the plaintiffs an opportunity to amend the suit to add wrongful foreclosure claims related to MERS' procedures.

"This is a very good opinion for MERS," said Janis Smith, a company spokeswoman.

"The court found that borrowers were in no way injured by any action taken by MERS," Smith said.

Robert Hager, a Reno, Nev.-based lawyer for the borrowers, said that while "these particular plaintiffs were denied relief because of the particular facts and because they're in Arizona, there's a great deal of good analysis and law about MERS and the recording system in general that will help" other plaintiffs in the San Francisco-based appeals court.

Dozens of lawsuits claiming MERS itself is a fraud have been consolidated for pretrial proceedings in federal court in Phoenix.