February, 2019 - FORECLOSURE FRAUD

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CLASS ACTION | Connor v. Midland Credit Management, Inc., Dist. Court, SD Florida

CLASS ACTION | Connor v. Midland Credit Management, Inc., Dist. Court, SD Florida

 

JACKI LYN CONNOR, Plaintiff,
v.
MIDLAND CREDIT MANAGEMENT, INC., Defendant.

Case No. 18-23023-CIV-GOODMAN. [CONSENT CASE]
United States District Court, S.D. Florida, Miami Division.
February 20, 2019.
Jacki Lyn Connor, on behalf of herself and all others similarly situated, Plaintiff, represented by Darren R. Newhart, Consumer Law Organization, P.A., Jack Dennis Card, Jr., Consumer Law Organization, P.A. & James Lawrence Kauffman, Bailey & Glasser, LLP.

Midland Credit Management, Inc., Defendant, represented by Cory William Eichhorn, Holland & Knight LLP & Philip E. Rothschild, Holland & Knight.

ORDER ON MOTION TO DISMISS

JONATHAN GOODMAN, Magistrate Judge.

This putative class action concerns the allegedly questionable debt-collection practices of Defendant Midland Credit Management, Inc. before the now-defunct National Arbitration Forum (“NAF”) and Florida state courts. In 2009, following a lawsuit by the Minnesota Attorney General and an investigation by a U.S. House of Representatives’ Subcommittee, the NAF agreed to stop arbitrating claims. Plaintiff Jacki Lyn Connor alleges that Midland, which was not registered as a debt collector in Florida until shortly before the NAF ceased to function, used a law firm with close financial ties to the NAF to obtain, without proper notice, thousands of arbitration awards and final judgments against consumers in Florida.

Connor alleges that she became a victim of Midland’s practice in 2005 when it obtained, by default, an arbitration award against her before the NAF. Midland then had that award confirmed in Florida state court in 2007, also by default. At neither of those times was Midland registered as a debt collector under Florida law (as Midland first registered as a Florida debt collector on January 1, 2009). Several years later, in November 2017, Midland issued writs of garnishments to Connor’s employer.

On July 25, 2018, approximately ten months after the writs issued, Connor sued Midland, raising four claims: violation of 15 U.S.C. § 1692e (Count I) and § 1692f (Count II) of the Fair Debt Collection Practices Act (“FDCPA”); violation of the Florida Consumer Collection Practices Act (“FCCPA”), Fla. Stat. § 559.55 et seq. (Count III); and unjust enrichment (Count IV). Connor later amended her complaint to add a fifth claim: violation of the Federal Arbitration Act (“FAA”)(Count V).

Midland’s motion to dismiss the amended complaint raises five issues: (1) whether the Rooker-Feldman doctrine divests the Court of subject-matter jurisdiction over some of the FDCPA and FCCPA claims; (2) whether Connor’s claims are either barred by the statute of limitations or are meritless (depending on whether the claims are based on pre-registration events); (3) whether Connor is bringing an impermissible private cause of action for failure to register, which the FCCPA does not allow; (4) whether Connor’s unjust enrichment claim fails for that same reason; and (5) whether the FAA’s 90-day statute of limitations bars the claim to vacate the arbitration award.

For the reasons outlined below, the Court grants in part and denies in part the motion to dismiss as follows:

First, the Court dismisses without prejudice Count I, III, and IV as barred by the Rooker-Feldman doctrine.

Second, the Court dismisses without prejudice Count I as falling outside the FDCPA’s one-year statute of limitations. The same ruling applies to those allegations in Count II that are duplicative of Count I, but the Court otherwise denies the motion to dismiss as to Count II on limitations grounds.

Third, the Court dismisses without prejudice Count III based on the additional reason that, as pled, Connor raises an impermissible private cause of action under the FCCPA for failure to register.

Fourth, and last, the Court denies the motion to dismiss as to Count V. Although the question here is a close one, the Court declines to dismiss Count V at this time given that Connor has alleged that she and Midland never entered into an arbitration agreement.

I. Factual Background

Because this order addresses a motion to dismiss, the Court will deem all well-pled allegations to be true. The amended complaint alleges the following scenario:

Midland is in the business of buying defaulted debt for pennies on the dollar and then bringing enforcement actions against the debtors in Florida state courts or arbitration forums. [ECF No. 22, ¶ 35]. Midland exclusively used NAF to file arbitration proceedings and hired the Mann Bracken law firm to do so. [ECF No. 22, ¶ 36]. Unknown to consumers, NAF and Mann Bracken had close financial ties, and the two, in line with creditors like Midland, worked closely together to generate revenues at the expense of consumers. [ECF No. 22, ¶¶ 37-39].

In 2005, Midland initiated arbitration proceedings before the NAF for a debt it had purchased that Connor allegedly owed to Providian Bank. [ECF No. 22, ¶¶ 40-42]. Midland did not produce or provide an arbitration agreement implicating that debt. [ECF No. 22, ¶ 42]. Although Midland allegedly served Connor on July 13, 2005 with a package that included a copy of the arbitration claim, Connor denies receiving the package and does not recall having been served with the arbitration claim. [ECF No. 22, ¶ 43].

On August 26, 2005, the NAF arbitrator entered, by default, an award in favor of Midland and against Connor for $2,826.02. [ECF Nos. 22, ¶ 44; 22-1, pp. 2-3]. Connor alleges that “[t]he arbitration award was void because Midland was not licensed in Florida to engage in debt collection activity.” [ECF No. 22, ¶ 45].

On July 21, 2006, Midland, as a servicing agent for MRC Receivables, filed an action in the County Court in Palm Beach County, Florida to confirm the arbitration award. [ECF Nos. 22, ¶ 46; 22-1, pp. 5-6]. Midland was unlicensed at that time, too. [ECF No. 22, ¶ 46]. Midland did not attach a copy of any arbitration award to its complaint. [ECF No. 22, ¶ 47].

On January 22, 2007, the County Court entered a default final judgment against Connor and in favor of Midland, as servicing agent for MRC, for $3,348.01, plus interest. [ECF Nos. 22, ¶ 48; 22-1, p. 8]. Midland later became a licensed consumer collection agency in Florida, effective January 1, 2009. [ECF No. 22, ¶ 51]. At no time before then was Midland licensed to collect debts in Florida. [ECF No. 22, ¶ 51].

In July 2009, the Minnesota Attorney General sued the NAF for consumer fraud, false advertising, and deceptive trade practices. [ECF No. 22, ¶ 52]. That same month, the U.S. House of Representatives’ Domestic Policy Subcommittee Majority Staff of the Oversight and Government Reform Committee issued a report critical of NAF’s arbitration practices. [ECF No. 22, ¶ 53]. The NAF settled the Minnesota lawsuit by agreeing to stop arbitrating in the United States. [ECF No. 22, ¶ 52].

Connor accuses Midland of “us[ing] the NAF, represented by Mann Bracken, to receive thousands of arbitration awards and final judgments against consumers in Florida without disclosing the institutional bias and partiality that existed in the arbitration proceedings or that Midland was not licensed to engage in debt collection activity in Florida.” [ECF No. 22, ¶ 57]. Connor also alleges that “Midland regularly initiated arbitration proceedings through the NAF, which has less strict notice and service requirements tha[n] Florida courts,” and that “Midland obtained an arbitration award from the NAF, without proper notice, and then sought enforcement of the arbitration award in Florida courts.” [ECF No. 22, ¶ 57].

On November 14, 2017, Midland filed a motion for writ of garnishment against Connor. [ECF Nos. 22, ¶ 59; 22-1, pp. 12-13]. The writ issued several days later, and Midland served the writ on Connor’s employer and garnished her wages. [ECF No. 22, ¶ 60]. According to Connor, “Midland is actively trying to garnish [her] wages based on the arbitration award and final judgment it received when it wasn’t licensed to do so.” [ECF No. 22, ¶ 62].

Connor filed this lawsuit against Midland approximately ten months after the writ of garnishment issued, on July 25, 2018. [ECF No. 1]. The original complaint contained Counts I through IV, which are discussed below. Midland moved to dismiss the complaint [ECF No. 17], and, in response, Connor filed her amended complaint, which added a fifth count, also discussed below. [ECF No. 22].

In Count I of the amended complaint, Connor alleges that Midland violated § 1692e of the FDCPA. [ECF No. 22, ¶¶ 75-81]. Connor claims that Midland “violated 15 U.S.C. § 1692e when it used deceptive and misleading methods to collect debts when it threatened to take an action (collecting on void judgments and arbitration awards) that could not be legally taken.” [ECF No. 22, ¶ 79].

In Count II of the amended complaint, Connor alleges that Midland violated § 1692f of the FDCPA. [ECF No. 22, ¶¶ 82-87]. Connor alleges that “[a]t no time did Defendant communicate the required statutory disclosures to Plaintiff that she was entitled to verification of the debt and a right to dispute the debt, disclosures required by 15 U.S.C. § 1692g.” [ECF No. 22, ¶ 86]. Connor then adds that Midland “used unfair means when it garnished the Plaintiff’s wages based on the void arbitration award and final judgment.” [ECF No. 22, ¶ 86].

Count III of the amended complaint alleges that Midland violated the FCCPA. [ECF No. 22, ¶¶ 88-93]. Connor claims that Midland “attempted to enforce, claimed, and asserted a known non-existent legal right to a debt as defined by Fla. Stat. § 559.55(6) when it attempted to collect and collected a debt that was based on a void arbitration award or judgment because Defendant was not licensed as a debt collector in Florida when the judgment was obtained.” [ECF No. 22, ¶ 90]. Connor also claims that

[b]y engaging in debt collection activity while not licensed as a debt collector and subsequently seeking to garnish Plaintiff’s and class members’ wages based on void arbitration awards and judgments, Defendant attempted to collect an amount from Plaintiff and the class that they didn’t owe, and threatened to enforce the existence of a legal right that didn’t exist.

[ECF No. 22, ¶ 92].

In Count IV of the amended complaint, Connor raises an unjust enrichment claim against Midland. [ECF No. 22, ¶¶ 94-98]. Connor alleges that “[b]y its failure to obtain a license as a debt collector in Florida prior to filing an arbitration proceeding or suit against Plaintiff and the class, Defendant has unjustly received and retained a benefit at the expense of Plaintiff and class members.” [ECF No. 22, ¶ 95].

Count V of the amended complaint alleges that Midland violated the FAA. [ECF No. 22, ¶¶ 99-107]. Connor alleges that “[t]he institutional bias and partiality on the part of NAF, Mann Bracken, and Defendant was not disclosed to the Plaintiff or Class Members and was concealed by Mann Bracken, the NAF and Defendant at all times.” [ECF No. 22, ¶ 101]. Connor further alleges that Midland “provided no evidence that Plaintiff entered into an enforceable arbitration agreement with Providian” and that there was no such agreement attached to the NAF’s arbitration award or to the state-court complaint to confirm the award. [ECF No. 22, ¶¶ 101, 103]. Moreover, Connor alleges that Midland “obtained the arbitration awards from the NAF when it was unlicensed and through corrupt, fraudulent and undue means.” [ECF No. 22, ¶ 105].

In Count V, Connor requests that the Court “vacate all arbitration awards Defendant received before it obtained a license to engage in debt collection activity in Florida under the FAA[.]” [ECF No. 22, ¶ 99]. Alternatively, Connor asks “that the Court vacate all arbitration awards Defendant obtained using the NAF with Mann Bracken as its counsel in Florida under the FAA[.]” [ECF No. 22, ¶ 100].

In her prayer for relief, Connor further requests, among other things: (1) “actual damages, including but not limited to forgiveness of all amounts not owed,” (2) statutory damages, (3) “a judgment permanently enjoining Defendant from charging and/or collecting debt in violation of the FCCPA,” and (4) “a judgment permanently enjoining Defendant from charging and/or collecting debt in violation of the FDCPA.” [ECF No. 22, p. 19].

II. Legal Standard

When considering a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), the Court must accept all the complaint’s allegations as true, construing them in the light most favorable to the plaintiff. Pielage v. McConnell, 516 F.3d 1282, 1284 (11th Cir. 2008). A pleading need only contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). “[T]he pleading standard Rule 8 announces does not require detailed factual allegations, but it demands more than an unadorned, the-defendant-has-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quotation omitted). A plaintiff must articulate “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

“A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. “The plausibility standard is not akin to a `probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id.Thus, a pleading that offers mere “labels and conclusions” or “a formulaic recitation of the elements of a cause of action” will not survive dismissal. See Twombly, 550 U.S. at 555. “Rule 8 marks a notable and generous departure from the hyper-technical, code-pleading regime of a prior era, but it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions.” Iqbal,556 U.S. at 679.

III. Analysis

Midland seeks to dismiss the amended complaint with prejudice based on five grounds. First, Midland argues that the Rooker-Feldman doctrine divests the Court of subject-matter jurisdiction over Counts I, III, and IV. [ECF No. 26, pp. 5-8]. Second, Midland argues that Connor’s claims are either barred by the applicable statutes of limitations or are meritless, depending on whether the claims are based on events that took place before or after Midland registered as a consumer collection agency in 2009. [ECF No. 26, pp. 8-10]. Third, Midland argues that there is no private cause of action under the FCCPA for failure to register. [ECF No. 26, p. 10]. Fourth, Midland argues that Connor cannot circumvent the fact that there is no private cause of action under the FCCPA for failure to register by asserting an unjust enrichment claim that seeks the same relief. [ECF No. 26, p. 11]. Fifth, Midland argues that the 90-day statute of limitations under the FAA bars the claim to vacate an arbitration award. [ECF No. 26, p. 12].[1]

A. The Rooker-Feldman doctrine bars Connor’s first FDCPA claim (Count I), the FCCPA claim (Count III), and the unjust enrichment claim (Count IV).

The Rooker-Feldman doctrine, when applicable, bars federal-court jurisdiction. It applies to “cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review.” Exxon Mobil Corp. v. Saudi Basic Indus. Corp.,544 U.S. 280, 284 (2005). Under the doctrine, “[i]t is well-settled that a federal district court lacks jurisdiction to review, reverse, or invalidate a final state court decision.” Harper v. Chase Manhattan Bank, 138 F. App’x 130, 132 (11th Cir. 2005)(citing Dale v. Moore, 121 F.3d 624, 626 (11th Cir. 1997)).

But the Eleventh Circuit has recently recognized that “the Supreme Court [has] concluded that the inferior federal courts had been applying Rooker-Feldman too broadly” and thus it “expressly limited Rooker-Feldman’s applicability.” Target Media Partners v. Specialty Mktg. Corp., 881 F.3d 1279, 1285 (11th Cir. 2018)(citing Exxon Mobil, 544 U.S. at 280, 283). As a result, the Eleventh Circuit has “since declined to apply [its] previous test for Rooker-Feldman analysis and ha[s] instead hewn closely to the language of Exxon Mobil.” Target Media Partners, 881 F.3d at 1285 (citing Nicholson v. Shafe, 558 F.3d 1266, 1274 (11th Cir. 2009)).

That previous test, called the Amos test, had four factors:

(1) the party in federal court is the same as the party in state court; (2) the prior state court ruling was a final or conclusive judgment on the merits; (3) the party seeking relief in federal court had a reasonable opportunity to raise its federal claims in the state court proceeding; and (4) the issue before the federal court was either adjudicated by the state court or was inextricably intertwined with the state court’s judgment[.]

Nicholson, 558 F.3d at 1272 (internal citations omitted) (quoting Amos v. Glynn County Bd. of Tax Assessors, 347 F.3d 1249, 1266 n.11 (11th Cir. 2003)).

Now, the Eleventh Circuit applies Rooker-Feldman “to bar only those claims asserted by parties who have lost in state court and then ask the district court, ultimately, to review and reject a state court’s judgments.” Target Media Partners,881 F.3d at 1285-86. But to see if that is the case, the Eleventh Circuit continues to apply “an inquiry similar to the one that preceded Exxon Mobil,” namely, “whether a claim was either (1) one actually adjudicated by a state court or (2) one `inextricably intertwined’ with a state court judgment.” Target Media Partners, 881 F.3d at 1286 (citing Casale v. Tillman, 558 F.3d 1258, 1260 (11th Cir. 2009)). An “inextricably intertwined” claim is one that asks the Court to “effectively nullify the state court judgment, or it succeeds only to the extent that the state court wrongly decided the issues[.]” Id. (quoting Casale, 558 F.3d at 126). But a claim is not considered “inextricably intertwined” where “there was no `reasonable opportunity to raise’ that particular claim during the relevant state court proceeding.” Id.(quoting Casale, 558 F.3d at 126).

The Rooker-Feldman doctrine applies to FDCPA claims, even when those claims “seek money damages instead of an outright overturning of the state court judgments.” Severe v. Shapiro, Fishman & Gache, LLP, No. 14-CIV-80345, 2014 WL 5341886, at *4 (S.D. Fla. Oct. 6, 2014). But district courts in the Eleventh Circuit that have applied the Rooker-Feldman doctrine to FDCPA claims “have recognized a distinction between FDCPA claims seeking to overturn state court judgments and FDCPA claims seeking to hold defendants liable for violations of the statute occurring during collection efforts preceding any judgment.” Collins v. Erin Capital Mgmt., LLC, 991 F. Supp. 2d 1195, 1203 (S.D. Fla. 2013) (collecting cases); see also Severe, 2014 WL 5341886, at *4 (“Rooker-Feldman does not preclude jurisdiction when a plaintiff asserts violations of the FDCPA which do not implicate the validity of a previous state court judgment or related debt, but focus on, e.g., allegedly improper debt collection methods.”); Solis v. Client Servs., Inc.,No. 11-23798-CIV, 2013 WL 28377, at *3 (S.D. Fla. Jan. 2, 2013) (“[T]he mere existence of a final judgment will not preclude independent claims relating to the judgment if the district court is not required to determine the validity of the state-court judgment in order to grant relief to the independent claim.”).

For instance, in Collins, the plaintiff alleged that the defendant violated the FDCPA when it failed “to register as a debt collector and obtain the relevant Florida license before initiating garnishment actions.” Id. at 1204 (emphasis added). The CollinsCourt found that “[a]t least part of the relief sought in this litigation is precisely the type of impermissible case brought by state-court losers complaining of injuries caused by state-court judgments rendered before this case commenced and inviting the Court’s review and rejection of the state-court judgments.” Id. The Collins Court also noted that “the entry of a default judgment against Collins—as opposed to a full trial—is of no consequence.” Id.

The Collins Court, however, also found that the plaintiff had asserted “violations [that] do not implicate the validity of the judgment or debt, but rather focus on the methods used by Erin Capital [the defendant] in collecting the debt.” Id. As the Collins Court explained: “even where Collins incurred a valid debt that Erin Capital was entitled to collect, Erin Capital still may violate the FDCPA if it failed to register with the state before instituting collection actions.” Id. (emphasis added).

Similarly, in Solis, the Court found that to the extent the plaintiff was asking the Court to vacate the state-court judgment upholding the validity of a debt, the Rooker-Feldman doctrine barred that claim. Solis, 2013 WL 28377, at *3. But the plaintiff’s independent claims (that the defendant had falsely represented the character, amount, or legal status of the debt, and had failed to provide written validation of the debt before resuming collection activities) were permissible. Id. at *4; compare Gallaher v. Estates at Aloma Woods Homeowners Ass’n, Inc., 316 F. Supp. 3d 1358, 1363 (M.D. Fla. 2018) (rejecting argument that FDCPA claim violated the Rooker-Feldman where the plaintiffs did not deny that they owed a debt but complained of the defendant’s steps in collecting the debt) with Severe,2014 WL 5341886, at *4 (finding that “broad base attack[s]” on state-court foreclosure judgment “fall squarely within the province of Rooker-Feldmanbecause they seek relief from this Court which requires adjudging that the state court’s final judgment of foreclosure was invalid”).

The Rooker-Feldman doctrine has likewise been applied to FCCPA and unjust enrichment claims (as well as myriad other causes of actions). See Laney v. Slaten, 687 F. App’x 805, 809 (11th Cir. 2017) (affirming dismissal of FDUTPA and FCCPA claims based on the Rooker-Feldman doctrine where the allegations concerned the same conduct at issue in the state-court proceedings); Cavero v. One W. Bank FSB, 617 F. App’x 928, 930 (11th Cir. 2015) (affirming dismissal of RESPA, TILA, FDCPA, FCCPA, and FDUTPA claims where plaintiffs alleged that bank and law firm had conspired to “wrongfully foreclose” on their property); Symonette v. Aurora Loan Servs., LLC, No. 14-15220, 2015 WL 7144369, at *1 (11th Cir. Nov. 16, 2015) (holding that Rooker-Feldman doctrine barred district court from considering claims for, among other things, unjust enrichment related to allegedly wrongful foreclosure of home); Solis, No. 11-23798-CIV, 2013 WL 28377, at *4 (finding that Rooker-Feldman doctrine applied equally to FCCPA claim and FDCPA claim that sought the same relief).

In this case, Midland argues that the Rooker-Feldman doctrine bars Count I (FDCPA claim), Count III (FCCPA claim), and Count IV (unjust enrichment claim) of the amended complaint. [ECF No. 26, p. 7]. Midland asserts that (1) Connor was a state-court loser; (2) the state-court proceedings ended in a final judgment, which she never appealed; (3) Connor could have raised those claims in state court but never did; and (4) that the claims are “inextricably intertwined” with the state-court judgment because their validity depends on the judgment being deemed void. [ECF No. 26, p. 7]. In short, Midland argues that the relief Connor “seeks related to these counts would require the Court to effectively overturn the underlying judgments — a textbook example of claims that are barred by Rooker-Feldman.” [ECF No. 26, p. 8].

The Court agrees. The gravamen of Connor’s amended complaint is that the 2005 arbitration award against her and the 2007 state-court judgment confirming that award are void because Midland was not licensed to collect debts in Florida. [SeeECF No. 22, ¶¶ 1, 3, 4, 45, 49, 70(d), 79, 86, 90]. Indeed, the general allegations concerning the allegedly wrongfully issued writs of garnishments appear under a heading that reads: “Midland Violated Federal and State Debt Collection Laws By Garnishing Plaintiff’s Wages Based on a Void Arbitration Award and Final Judgment.” [ECF No. 22, p. 11 (italics and underlining added)]. Moreover, under the class-action allegations, Connor expressly sets forth that one of the issues to be decided is “whether any arbitration award or final judgment Defendant received while unlicensed is void as a matter of law[.]” [ECF No. 22, ¶ 70(d)].

Connor’s specific allegations in Counts I, III, and IV further prove the point. Under Count I, Connor alleges that Midland “violated 15 U.S.C. § 1692e when it used deceptive and misleading methods to collect debts when it threatened to take an action (collecting on void judgments and arbitration awards) that could not be legally taken.” [ECF No. 22, ¶ 79 (emphasis added)]. In Count III, Connor alleges that Midland violated the FCCPA “when it attempted to collect and collected a debt that was based on a void arbitration award or judgment because Defendant was not licensed as a debt collector in Florida when the judgment was obtained.” [ECF No. 22, ¶ 90 (emphasis added)]. And in Count IV, Connor alleges that Midland was unjustly enriched “[b]y its failure to obtain a license as a debt collector in Florida prior to filing an arbitration proceeding or suit against Plaintiff and the class.” [ECF No. 22, ¶ 95 (emphasis added)].

Moreover, Connor’s request for relief asks the Court to effectively overturn the state-court judgment and nullify its effect. Specifically, as part of the actual damages, the request asks for “forgiveness of all amounts not owed.” [ECF No. 22, p. 19]. And she also asks for “a judgment permanently enjoining Defendant from charging and/or collecting debt in violation of” the FCCPA and FDCPA. Id.Consequently, Counts I, III, and IV run afoul of the Rooker-Feldman doctrine.

Connor’s counter-arguments fail to persuade for several reasons. First, Connor argues that she does not meet the first prong of the Amos test because the plaintiff-in-fact in the state-court case was “MRC Receivables Corp,” with Midland acting as MRC’s servicing agent. [ECF No. 29, p. 12]. But this is a non-issue because the Eleventh Circuit has since abrogated the Amos test. Target Media Partners, 881 F.3d at 1285. Moreover, Connor does not explain, and the Court does not understand, how the agent/plaintiff-in-fact distinction is legally significant. At bottom, the Rooker-Feldman doctrine concerns “state-court losers complaining of injuries caused by state-court judgments[.].” Exxon Mobil, 544 U.S. at 284(emphasis added). Connor is the state-court loser here.

Second, Connor alleges that she did not have a reasonable opportunity to bring her claims in state court because she did not receive notice of either the arbitration proceeding or the state-court proceeding. [ECF No. 29, p. 13]. Connor submits that her allegations that she did not receive notice of those proceedings must be taken as true when analyzing a motion to dismiss. [ECF No. 29, p. 13]. In addition, Connor attaches to her opposition response the return of summons from state court, which she claims contains a service date error that highlights her service concerns (i.e., the process server allegedly noted that he received the summons several days before it actually issued). [ECF Nos. 29, p. 13; 29-1].

The service issues, however, do not change the result. As one court within the Eleventh Circuit succinctly put it when also addressing an argument concerning lack of service of process, “the Eleventh Circuit has never recognized an exception to the Rooker-Feldman for judgments that are void ab initio.” Lewis v. Scott, Parnell & Assocs., P.C., No. 16-CV-00290-PCH, 2016 WL 8078309, at *4 (M.D. Ala. Dec. 16, 2016) (citing Ware v. Polk Cty. Bd. of Cty. Comm’rs, 394 F. App’x. 606, 609 (11th Cir. 2010) (“We have not yet recognized an exception to the Rooker-Feldman doctrine in cases where the state court that issued the underlying state court judgment lacked jurisdiction.”)). Thus, “a claim of faulty service does not allow a party to avoid the Rooker-Feldman doctrine.” Flatau v. Sherman Fin. Grp., LLC, No. 5:14-CV-245(MTT), 2015 WL 8773299, at *4 (M.D. Ga. Dec. 14, 2015); see also In re Knapper, 407 F.3d 573, 581 (3d Cir. 2005) (concluding that plaintiff’s federal claim is inextricably intertwined with the state adjudications and therefore barred by Rooker-Feldman when plaintiff’s “due process attack on the state court judgments asserts that the state lacked personal jurisdiction over her because of defective service of process”).

Indeed, challenging a default judgment based on lack of service of process is the very definition of trying to nullify the judgment. And there is no reason why Connor could not have raised that challenge in state court when she allegedly learned of the default judgment through the writs of garnishment. Florida Rule of Civil Procedure 1.540(b)(4) provides that a party may set aside a judgment that is void at any time. See, e.g., Reyes v. Aqua Life Corp., 209 So. 3d 47, 51 (Fla. 3d DCA 2016) (“Judgments entered without notice are void, and relief from a void judgment may be granted at any time.”).

Third, Connor argues that because this case concerns an “illegally obtained arbitration award,” it is distinguishable from other cases, such as Collins, that have barred similar claims based on the Rooker-Feldman doctrine. [ECF No. 29, p. 14]. But the involvement of an arbitration award does not invalidate the Rooker-Feldman doctrine. See generally Laney, 687 F. App’x at 805 (holding that Rooker-Feldman doctrine barred FDUTPA and FCCPA claims against defendant’s attempts to collect an arbitration award judgment debt). In fact, a defect in the arbitration award could have served as a defense to the state-as court proceeding to confirm that award. After moving to set aside the default judgment void for lack of service of process, Connor could have also argued that the arbitration award is itself void based on either lack of service or lack of an arbitration agreement, two grounds that she raises before this Court.

Fourth, pointing to the distinction cases have drawn in FDCPA claims (i.e., “seeking to overturn state court judgments” versus “seeking to hold defendants liable for violations of the statute occurring during collection efforts”), Connor argues that her claims fall in the latter camp. [ECF No. 29, pp. 14-15]. She is incorrect, however. Midland became a licensed consumer collection agency in Florida effective January 1, 2009, and it did not issue writs of garnishment (i.e., engage in collection efforts) until November 2017. [ECF Nos. 22, ¶¶ 51, 59; 22-1, pp. 12-13]. So this is not a situation where the defendant failed “to register as a debt collector and obtain the relevant Florida license before initiating garnishment actions,” which would have been a permissible, independent claim. Collins, 991 F. Supp. 2d at 1204 (emphasis added). Rather, Connor’s theory is that Midland’s lack of registration in 2007 rendered the default judgment void; therefore, her claim is impermissible because it depends on the state-court judgment’s validity.

Notably, Midland did not seek to dismiss Count II of the amended complaint under Rooker-Feldman, even though it also raised an FDCPA claim, because it is based on issues separate from the judgment itself. In Count II, Connor alleges that Midland failed to “communicate the required statutory disclosures to Plaintiff that she was entitled to verification of the debt and a right to dispute the debt, disclosures required by 15 U.S.C. § 1692g.” [ECF No. 22, ¶ 86]. These alleged violations do not depend on whether the judgment is valid. As such, the contrast between Count II (which does not run afoul of Rooker-Feldman) and Counts I, III, and IV (which do) further informs the Court’s conclusion.[2]

In sum, the Court dismisses Counts I, III, and IV as barred under the Rooker-Feldman doctrine. The dismissal, however, will be without prejudice. Connor should be given the opportunity to allege, if she can, consistent with her (and her attorney’s) obligations under Federal Rule of Civil Procedure 11, any other “claim for relief that is independent of the state-court proceedings.” Brooks v. Trefry, No. 15-60770-CIV, 2015 WL 12712063, at *2 (S.D. Fla. July 22, 2015) (recommending dismissal of complaint that ran afoul of the Rooker-Feldman doctrine without prejudice so that the plaintiff could cure the deficiency).

B. The one-year statute of limitations bars FDCPA claims that are based on Midland’s lack of registration in 2005 or 2007. Lack-of-registration claims for actions taken after January 1, 2009, when Midland became registered, would not constitute violations. But claims based on lack of disclosures during garnishments in November 2017 are not time-barred.

Midland argues that “all” of Connor’s claims are barred by “the state statute of limitations.” [ECF No. 26, p. 8]. Midland, however, provides argument only as to the one-year statute of limitations under the FDCPA, which reads as follows: “An action to enforce any liability created by this subchapter may be brought . . . within one year from the date on which the violation occurs.” 15 U.S.C. § 1692k(d); [seeECF No. 26, pp. 8-9]. Only Counts I and II raise FDCPA claims, so the Court will analyze whether the violations alleged in those counts were timely asserted under the statute of limitations.[3]

In Count I, Connor alleges one violation: that Midland “violated 15 U.S.C. § 1692e when it used deceptive and misleading methods to collect debts when it threatened to take an action (collecting on void judgments and arbitration awards) that could not be legally taken.” [ECF No. 22, ¶ 79]. In Count II, Connor also seems to allege one violation: that Midland failed to “communicate the required statutory disclosures to Plaintiff that she was entitled to verification of the debt and a right to dispute the debt, disclosures required by 15 U.S.C. § 1692g.” [ECF No. 22, ¶ 86]. But then Connor adds in Count II that Midland “used unfair means when it garnished the Plaintiff’s wages based on the void arbitration award and final judgment.” [ECF No. 22, ¶ 86].

Instructive here is Collins, which concerned the application of the statute of limitations to similar FDCPA claims. In Collins, the defendant argued that “class members whose wage garnishment claims were filed before August 3, 2011 fall outside the FDCPA’s one-year statute of limitations as [that] case was filed on August 4, 2012.” Collins, 991 F. Supp. 2d at 1213. The defendant also argued that it was “entitled to summary judgment with respect to any class members with wage garnishment actions filed after August 27, 2012—the date [the defendant] Erin Capital obtained the requisite Florida license.” Id. The Court agreed, granting “summary judgment with respect to any Class Plaintiffs with claims arising before August 3, 2011 or after August 27, 2012.” Id.

As already discussed, the violation alleged in Count I concerns Midland’s failure to register as a debt collector under Florida law before 2005 (when it obtained an arbitration award) and before 2007 (when it obtained a state-court judgment confirming that award). Connor did not file this lawsuit until July 25, 2018, many years after those alleged violations. [ECF No. 1]. Therefore, FDCPA claims based on Midland’s failure to be registered before 2005 or 2007 would be barred by the statute of limitations. And the same would apply to the “unfair means” allegation under Count II to the extent that allegation is duplicative of Count I.[4] Moreover, Connor would not have cognizable claims for lack of registration for any actions Midland took after January 1, 2009, because Midland was already registered as of that date.

On the other hand, the alleged violation for failing to provide the required statutory disclosures during garnishment proceedings [ECF No. 22, ¶ 86], would not be barred by the statute of limitations. Midland filed a motion for writ of garnishment against Connor on November 14, 2017. [ECF Nos. 22, ¶ 59; 22-1, pp. 12-13]. Reading the amended complaint in the light most favorable to Connor, she is alleging that Midland failed to provide the necessary disclosures during that time. As such, the one-year statute of limitations would not have run until November 2018, and Connor filed this lawsuit several months before that, in July 2018. [ECF No. 1].

In short, FDCPA claims based on Midland’s lack of registration in 2005 or 2007 are barred by the one-year statute of limitations. Moreover, lack-of-registration claims for actions taken after January 1, 2009, when Midland did register itself, would not constitute violations. But claims based on lack of disclosures during garnishments filed by Midland in November 2017 are not barred by the statute of limitations.

As before, the dismissal is without prejudice. Connor may add any other legitimate FDCPA violations that do not violate the statute of limitations (and that, of course, do not violate the Rooker-Feldman doctrine, as discussed previously).

C. There is no private cause of action under the FCCPA for failure to register under § 559.553, and Connor cannot circumvent that principle by instead alleging a violation of § 559.72(9) or an unjust enrichment claim.

In Count III, Connor brings a direct FCCPA claim. Connor alleges that Midland

attempted to enforce, claimed, and asserted a known non-existent legal right to a debt as defined by Fla. Stat. § 559.55(6) when it attempted to collect and collected a debt that was based on a void arbitration award or judgment because Defendant was not licensed as a debt collector in Florida when the judgment was obtained. Id. § 559.72(9); §559.553.

[ECF No. 22 ¶ 90].

Section 559.72(9) states that in collecting consumer debts, no person can “[c]laim, attempt, or threaten to enforce a debt when such person knows that the debt is not legitimate, or assert the existence of some other legal right when such person knows that the right does not exist.” Fla. Stat. § 559.72(9). Section 559.553 states that “[a] person may not engage in business in this state as a consumer collection agency or continue to do business in this state as a consumer collection agency without first registering in accordance with this part, and thereafter maintaining a valid registration.” Fla. Stat. § 559.553(1).

Midland argues that the Court should dismiss Count III because the FCCPA does not provide a private cause of action for failure to register. [ECF No. 26, p. 10]. Midland relies on two cases: LeBlanc v. Unifund CCR Partners, 601 F.3d 1185 (11th Cir. 2010) and Carrero v. LVNV Funding, LLC, No. 11-62439-CIV, 2014 WL 6433214 (S.D. Fla. Oct. 27, 2014). In Leblanc, the Eleventh Circuit held that “[s]ection 559.553 of the FCCPA does not itself provide a private right of action.” 601 F.3d at 1191. In Carrero, the district court, addressing § 559.72(9) in particular, dismissed an FCCPA claim where the plaintiff alleged that the defendant’s “filing of a state court lawsuit when it was not registered under Fla. Stat. § 559.553 violates § 559.72.” Carrero, 2014 WL 6433214, at *2.[5]

The Undersigned agrees with Midland. Like the plaintiff in Carrero, Connor is alleging that Midland’s failure to register under § 559.553 is a violation of § 559.72(9). [ECF No. 22 ¶ 90]. But § 559.553 does not provide a private cause of action, LeBlanc, 601 F.3d at 1191, and a plaintiff cannot circumvent that fact but recasting a § 559.553 requirement into a § 559.72(9) violation, Carrero, 2014 WL 6433214, at *2. Therefore, as pled, Count III raises a non-existent claim.

In her opposition response, Connor counters that she “has not alleged a violation of Fla. Stat. § 559.553,” but only of § 559.72(9). [ECF No. 29, pp. 18-19]. But that is obviously incorrect. In paragraph 90 of her amended complaint, under Count III, Connor quite clearly says that Midland violated the FCCPA “because [it] was not licensed as a debt collector in Florida when the judgment was obtained,” and then she cites to both § 559.72(9) and § 559.553. [ECF No. 22 ¶ 90 (emphasis added)]. In addition, the out-of-state cases Connor cites to are unpersuasive in light of the binding Eleventh Circuit authority and the highly persuasive, intra-district case presented by Midland (not to mention the fact that the issue concerns a Florida statute, making non-Florida cases less persuasive).

Therefore, the Court dismisses without prejudice Count III of the amended complaint. If Connor can, in good faith, allege other direct violations of § 559.72, then she may do so. The Court also notes that an FDCPA claim may be premised on a failure to register under the FCCPA. Carrero, 2014 WL 6433214, at *3 (“In LeBlanc, the Eleventh Circuit reasoned that a violation of the FCCPA might serve as the basis for a lawsuit under the FDCPA.”). But Connor will still have to contend with the Rooker-Feldman doctrine and statute-of-limitations issues already outlined.

In the same vein, the Court dismisses without prejudice Count IV, which raises an unjust enrichment claim. In Count IV, Connor alleges that Midland was unjustly enriched “[b]y its failure to obtain a license as a debt collector in Florida prior to filing an arbitration proceeding or suit against Plaintiff and the class.” [ECF No. 22, ¶ 95 (emphasis added]. In Carrero, the district court followed an earlier ruling in a different case in which it had “declined to extend the already amorphous boundaries of unjust enrichment actions to allow for a de facto private action for violation of FCCPA.” Carrero, 2014 WL 6433214, at *5. The Court here finds that logic persuasive and rules the same way.

D. The Court will not, at this time, dismiss Count V based on the FAA’s 90-day statute of limitations.

Section 12 of the FAA states that “[n]otice of a motion to vacate, modify, or correct an award must be served upon the adverse party or his attorney within three months after the award is filed or delivered.” 9 U.S.C. § 12 (emphasis added). Thus, “[p]arties generally have three months after the award is filed or delivered to challenge the award in federal district court.” Durr v. Adams Beverages, Inc., 710 F. App’x 358, 360-61 (11th Cir. 2017).

In this case, Midland argues that Count V, which raises a claim to vacate the 2005 arbitration award, is time-barred under § 12. Specifically, Midland obtained the arbitration award against Connor on August 26, 2005. [ECF Nos. 22, ¶ 44; 22-1, pp. 2-3]. Moreover, taking as true the allegation that Connor did not have notice of the arbitration proceeding or the state-court action, she at least learned of the award sometime in November 2017, when writs of garnishments issued. [ECF Nos. 22, ¶¶ 51, 59; 22-1, pp. 12-13]. But Connor did not file this lawsuit until July 2018. [ECF No. 1]. So Connor’s claim to vacate the arbitration award would seem to be several months, if not several years, too late.

However, Connor argues that § 12 does not bar her claim because she did not participate in the arbitration proceedings and because there was no arbitration agreement in the first place. [ECF No. 29, pp. 6-8]. She relies heavily on MCI Telecommunications Corp. v. Exalon Industries, Inc., 138 F.3d 426 (1st Cir. 1998),where the First Circuit held “that, as a general matter, section 12, as well as section 2 and the other enforcement provisions of the FAA, do not come into play unless there is a written agreement to arbitrate.” Id. at 430. In that case, a company obtained an arbitration award by default against another company in August 1995, and the losing company never requested that the arbitrator vacate, modify, or correct the award. Id. at 428. A year later, the arbitration award winner moved to enforce the award in U.S. district court. Id. The arbitration loser responded, denying that an arbitration award existed in the first place. Id.

The award winner, citing to § 12 of the FAA, countered that its opponent’s “failure to challenge the award within three months after it was filed or rendered barred it from contesting its validity before the district court.” Id. The district court agreed, but the First Circuit reversed that decision. Id. at 428-30. The First Circuit reasoned that there was “no indication that Congress intended for a party to be found to have waived the argument that there was no written agreement to arbitrate if that party failed to raise the argument within the time period established by section 12.” Id. at 430. Thus, the First Circuit concluded:

A party that contends that it is not bound by an agreement to arbitrate can therefore simply abstain from participation in the proceedings, and raise the inexistence of a written contractual agreement to arbitrate as a defense to a proceeding seeking confirmation of the arbitration award, without the limitations contained in section 12, which are only applicable to those bound by a written agreement to arbitrate.

Id.

Connor also relies on Buczek v. Trans Union LLC, No. 05-80834 CIV, 2006 WL 3666635 (S.D. Fla. Nov. 9, 2006), where the district court, relying on MCI, held that a car company was free to disregard an arbitration award where the underlying car lease did not contain an arbitration award. Id. at *2. Instead, the plaintiff had sent a “unilateral, contractually unauthorized invocation of arbitration,” apparently adopting a debt-confirmed management scheme taught by seminars sponsored by the National Arbitration Council (“NAC”). Id. The Court rejected and condemned that tactic, joining other district courts that had done the same. Id.

In addition, Connor argues that if the 90-day limitations period does apply, then the deadline should have been equitably tolled. [ECF No. 29, pp. 8-9]. The reason: because she “was not a participant in the arbitration” and because Midland “prevented her from raising this claim within the three-month period.” [ECF No. 29, p. 9]. Connor then says that she diligently hired counsel after learning of the arbitration award. [ECF No. 29, p. 9].

Lastly, Connor contends that the FAA empowers a district court to vacate an award “`procured by corruption, fraud, or undue means’ or where the arbitrators `exceeded their powers.’ 9 U.S.C. § 10(a)(1).” [ECF No. 29, p. 9].[6]

For its part, Midland argues that MCI and Buczek should be limited to their facts; specifically, those cases involved a party challenging an arbitration award at the confirmation stage. [ECF No. 32, p. 6]. By contrast, the arbitration award here was confirmed in 2007. Moreover, Midland argues that Connor is not deserving of equitable tolling because she waited ten months to file suit even after learning of the arbitration award. [ECF No. 32, p. 7 n. 4].

No party has cited to any controlling authority on the § 12 issue, and the Court could find none. And the answer is not a straightforward one, either. On the one hand, it is true that MCI and Buczek concerned awards being challenged at the confirmation stage, while the lawsuit at bar was filed many years after the award confirmation. On the other hand, the rationale underlying MCI and Buczek — i.e., that absent an arbitration agreement, an arbitration award is a nullity — applies with equal force regardless of whether a challenge is levied at the confirmation stage or in a separate action.

And to further complicate matters, there is the intersection of the Rooker-Feldmandoctrine in all of this, a crossroads highlighted by the procedural posture in this case. It seems that Connor added Count V to hedge against a Rooker-Feldmanproblem. Her first complaint did not contain a count to vacate the arbitration award. [ECF No. 1]. Only after Midland moved to dismiss the complaint based on, among other things, the Rooker-Feldman doctrine [ECF No. 17], did Connor add a count to vacate the arbitration award [ECF No. 22]. As mentioned previously, the involvement of an arbitration award does not, as a general matter, invalidate the Rooker-Feldman doctrine. See generally Laney, 687 F. App’x at 805.

Moreover, it is questionable whether equitable tolling applies generally to FAA actions and specifically to this case. Several courts, including the Eleventh Circuit, have questioned the existence of a “due diligence” exception to § 12. See Cullen v. Paine, Webber, Jackson & Curtis, Inc., 863 F.2d 851, 854 (11th Cir. 1989)(“Although some courts have considered the possibility that a due-diligence exception to section 12 might be granted in some circumstances, appellant cites no case in which such an exception has been granted.”); see also Belz v. Morgan Stanley Smith Barney, LLC, No. 3:13-CV-636-J-34MCR, 2014 WL 897048, at *7 (M.D. Fla. Mar. 6, 2014) (collecting cases) (“[T]he Trustee fails to cite to any authority in support of applying an equitable exception to the FAA’s limitations period, and the Court questions whether any such exception exists.”). And, either way, Connor waited ten months after learning of the arbitration award to file this action, which is not indicative of due diligence in the face of a three-month limitations period.

Still, the Court declines to dismiss Count V at this stage of the proceedings. Notably, Midland did not argue that the Rooker-Feldman doctrine applied to Count V. Moreover, cases like MCI and Buczek raise doubt about whether § 12 even applies where a party is claiming that there was no arbitration agreement in the first place. The FAA is replete with references to a written arbitration agreement, underscoring its importance as a prerequisite to an arbitration award being valid. See generally Czarina, L.L.C. v. W.F. Poe Syndicate, 358 F.3d 1286, 1292 (11th Cir. 2004). It also does not escape the Court that Buczek and this case both involved arbitral forums with questionable practices that were widely condemned.

As such, Midland has not convinced the Court to dismiss Count V solely based on § 12’s limitations period. The Court may revisit this issue later. But, for now, Count V will be allowed to stand.[7]

DONE AND ORDERED.

[1] Midland also adds in a footnote that the litigation privilege would bar an FCCPA claim that is based on the issuance of writs of garnishments. [ECF No. 26, p. 10 n. 5]. But addressing a legal argument only in a footnote is an incorrect place for substantive arguments on the merits. Mazzeo v. Nature’s Bounty, Inc., No. 14-60580, 2014 WL 5846735, at *2 n.1 (S. D. Fla. Nov. 12, 2014) (not considering argument raised in a footnote); see also Mock v. Bell Helicopter Textron, Inc., 373 F. App’x 989, 992 (11th Cir. 2010) (deeming argument waived because it was raised only in a footnote).

[2] To be sure, Connor further alleges under Count II that Midland “used unfair means when it garnished the Plaintiff’s wages based on the void arbitration award and final judgment.” [ECF No. 22, ¶ 86]. It is unclear whether this allegation is duplicative of the allegations under Count I or whether Connor is alleging that the lack of required disclosures is an “unfair means” of garnishing wages. To the extent the allegation is duplicative, then it would also be barred by the Rooker-Feldman doctrine.

[3] In a footnote, Midland says that “[a] one year . . . statute of limitations applies under the FDCPA, see15 U.S.C. § 1692k(d), a two year statute of limitations applies under the FCCPA, see Fla. Stat. § 559.77(5), and a four year statute of limitations applies to Plaintiff’s unjust enrichment claim. See Fla. Stat. § 95.11.” [ECF No. 26, p. 10]. But Midland’s substantive argument concerns only the FDCPA claims. A footnote is an incorrect place for substantive arguments on the merits. E.g., Mazzeo, 2014 WL 5846735, at *2 n.1. And the Court will not do Midland’s counsel’s job and create its own FCCPA and unjust enrichment argument.

If Midland wants to renew these statute-of-limitations arguments in a renewed motion to dismiss (or in any other substantive motion, for that matter), then it will need to provide substantive arguments with citations to authorities within the body of the motion. Otherwise, the Court will deem the argument waived.

[4] See discussion in note 2, supra.

[5] Other courts in this district have held the same. See Ambroise v. Am. Credit Adjusters, LLC, No. 15-22444-CIV, 2016 WL 6080454, at *3 n.1 (S.D. Fla. Mar. 22, 2016) (“district courts have held no private right of action exists under the FCCPA for failing to register”).

[6] Connor also argues, in a footnote, that “Florida law also states that void judgments and arbitration awards can be collaterally attacked at any time.” [ECF No. 29, p. 8]. Again, a footnote is not the correct place for substantive argument. E.g., Mazzeo, 2014 WL 5846735, at *2 n.1. Moreover, this argument actually undermines Connor’s case because it shows that she can attack the void judgment at any time, in Florida state court.

[7] The Court would also note that if an arbitration agreement did exist, then Midland could easily bring it to the Court’s attention by way of, for example, a summary judgment motion and get the issue resolved. Therefore, the factual reality of whether a contract ever existed should weigh heavily on the mind of the party who will ultimately lose on that seemingly simple factual issue.

 

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In re Application of Davis |  HAWAII ICA – We conclude that the Land Court erred in finding and concluding that the Declaration establishes a contractual right for the AOAOnto conduct nonjudicial or power of sale foreclosures and erred in granting summary judgment on that basis

In re Application of Davis | HAWAII ICA – We conclude that the Land Court erred in finding and concluding that the Declaration establishes a contractual right for the AOAOnto conduct nonjudicial or power of sale foreclosures and erred in granting summary judgment on that basis

Congrats to DUBIN LAW OFFICES

7478309530 by DinSFLA on Scribd

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Perez v. DEUTSCHE BANK NATIONAL TRUST COMPANY | FL 2DCA – The trial court erred in denying Perez and Gonzalez’s motion and renewed motion for involuntary dismissal because the mere existence of a default letter in Chase’s business records is legally insufficient to prove compliance with the paragraph 22

Perez v. DEUTSCHE BANK NATIONAL TRUST COMPANY | FL 2DCA – The trial court erred in denying Perez and Gonzalez’s motion and renewed motion for involuntary dismissal because the mere existence of a default letter in Chase’s business records is legally insufficient to prove compliance with the paragraph 22

 

ANGEL L. PEREZ a/k/a ANGEL PEREZ and DORIS GONZALEZ, Appellants,
v.
DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee for JPMorgan Mortgage Acquisition Trust 2007-CH4, Asset Backed, Pass-Through Certificates, Series 2007-CH4; JOSE M. GONZALEZ; POLK COUNTY, FLORIDA; STATE OF FLORIDA DEPARTMENT OF REVENUE; STEPHANIE B. COOPER; STATE OF FLORIDA; and POLK COUNTY CLERK OF THE CIRCUIT COURT, Appellees.

Case No. 2D17-1043.
District Court of Appeal of Florida, Second District.
Opinion filed February 20, 2019.
Appeal from the Circuit Court for Polk County; Steven L. Selph, Judge.

Mark P. Stopa of Stopa Law Firm, LLC, Tampa (withdrew after briefing); and Latasha Scott of Lord Scott, PLLC, Tampa, (withdrew after briefing), for Appellants.

Angel L. Perez a/k/a Angel Perez and Doris Gonzalez, pro se.

Elliot B. Kula, W. Aaron Daniel, and William D. Mueller of Kula & Associates, P.A., Miami, for Appellee Deutsche Bank National Trust Company.

No appearance for remaining Appellees.

JOHN C. LENDERMAN, Associate Senior Judge.

Angel L. Perez a/k/a Angel Perez and Doris Gonzalez appeal a final judgment of foreclosure entered after nonjury trial in favor of Deutsche Bank National Trust Company, as Trustee for JPMorgan Mortgage Acquisition Trust 2007-CH4, Asset Backed, Pass-Through Certificates, Series 2007-CH4 (Deutsche Bank). We agree with Perez and Gonzalez’s argument that the trial court erred in denying their motion for involuntary dismissal. Deutsche Bank failed to introduce sufficient evidence demonstrating satisfaction of the condition precedent of mailing a default letter pursuant to paragraph 22 of the mortgage at issue in the underlying action. Accordingly, we reverse and remand for involuntary dismissal.

Paragraph 22 of the mortgage at issue in this appeal requires the lender to give the borrower notice of default and opportunity to cure prior to acceleration. Paragraph 15 requires that all notices be written and provides that notices to borrowers shall be deemed to have been given when mailed by first class mail or when actually delivered to the borrower’s notice address. At trial, Deutsche Bank called one witness, a mortgage banking research officer with JPMorgan Chase Bank, N.A. (Chase). Through this witness, Deutsche Bank introduced a default letter drafted on Chase letterhead and addressed to Perez at the property address; the default letter had been maintained in Chase’s business records. The witness never testified whether the letter was actually sent, and Deutsche Bank did not introduce any other documents relating to whether the default letter was sent. After Deutsche Bank rested, Perez and Gonzalez moved for involuntary dismissal, in pertinent part, because the bank’s letter by itself could not demonstrate compliance with the required condition precedent. Deutsche Bank asserted that introduction of the letter was sufficient. The trial court agreed with Deutsche Bank and denied the original motion.[1] Perez and Gonzalez called Deutsche Bank’s witness during the defense case to address other matters, following which they renewed their motion for involuntary dismissal for failing to comply with paragraph 22. After Deutsche Bank again asserted that the letter by itself was sufficient, the trial court denied the renewed motion and ultimately entered the final judgment of foreclosure. Perez and Gonzalez timely appeal.

The trial court erred in denying Perez and Gonzalez’s motion and renewed motion for involuntary dismissal because the mere existence of a default letter in Chase’s business records is legally insufficient to prove compliance with the paragraph 22. See Holt v. Calchas, LLC, 155 So. 3d 499, 507 (Fla. 4th DCA 2015). This court has subsequently held similarly. See Edmonds v. U.S. Bank Nat’l Ass’n, 215 So. 3d 628, 630-31 (Fla. 2d DCA 2017)Allen v. Wilmington Tr., N.A., 216 So. 3d 685, 687-88 (Fla. 2d DCA 2017). Accordingly, we reverse the final judgment of foreclosure and remand for involuntary dismissal. See Edmonds, 215 So. 3d at 631Allen, 216 So. 3d at 688.

Reversed and remanded with directions.

LaROSE, C.J., and LUCAS, J., Concur.

NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION AND, IF FILED, DETERMINED.

[1] Deutsche Bank argues on appeal that Perez and Gonzalez somehow invited this error by absenting themselves from the courtroom to prevent Deutsche Bank from calling them to testify whether they received the letter. But Deutsche Bank ignores that after Perez and Gonzalez ultimately entered the courtroom, Deutsche Bank declined the trial court’s invitation to reopen its case.

 

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First Circuit Invalidates Foreclosure for Paragraph 19 Non-Compliance in Pre-Foreclosure Cure Notice Despite Notice’s Factual Accuracy

First Circuit Invalidates Foreclosure for Paragraph 19 Non-Compliance in Pre-Foreclosure Cure Notice Despite Notice’s Factual Accuracy

JD SUPRA-

Overview: The United States Court of Appeals for the First Circuit recently held that a notice of default and right to cure (“Cure Notice”) potentially misled the borrowers regarding the precise amount of time that the borrowers had to reinstate the loan prior to foreclosure as required by paragraph 19 of the mortgage. As a result, the Court held that the subject foreclosure was voidThompson v. JPMorgan Chase Bank, N.A., No. 18-1559, 2019 WL 493164 (1st Cir. Feb. 8, 2019). In sum, the Court held that the potentially deceptive wording regarding time to cure rendered the Cure Notice invalid. The case was remanded to the district court for further proceedings.

Background: The…

[JD SUPRA]

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Kushner Company Reportedly Seeking Federal Loan For $1.15 Billion Real Estate Deal

Kushner Company Reportedly Seeking Federal Loan For $1.15 Billion Real Estate Deal

White House adviser Jared Kushner remains a key stakeholder in the family business.

HUFFPO-

Jared Kushner’s family real estate business is seeking federal financing for a $1.15 billion real estate deal, Bloomberg reports.

Kushner Cos. has been in talks with federal lenders Fannie Mae and Freddie Mac about backing for its purchase of more than 6,000 rental apartments in 16 properties in Maryland and Virginia from private equity firm Lone Star Funds, two sources told Bloomberg. It’s not clear how much money the company is seeking.

It’s the firm’s biggest deal in more than a decade, The Wall Street Journal reported.

[HUFFPO]

Image: Carolyn Kaster/AP

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TFH 2/24/29 | An Analysis of Recent Judicial Decisions That May Affect Your Foreclosure Case

TFH 2/24/29 | An Analysis of Recent Judicial Decisions That May Affect Your Foreclosure Case

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Sunday – February 24, 2019

An Analysis of Recent Judicial Decisions That May Affect Your Foreclosure Case

.

 ———————

 

The foreclosure field in recent years has produced some of the most interesting and challenging legal disputes between and involving borrowers, lenders, loan servicers, insurance companies, securitized trusts, underwriting and rating agencies, loan officers, appraisers, investors, and government agencies.

Most of this often protracted foreclosure litigation has occurred in state and federal courts in Western and Eastern States, particularly in Florida, New Jersey, New York, Massachusetts, California, Washington State, and Hawaii.

And new judicial decisions in those jurisdictions continue to influence the development of American Foreclosure law.

On today’s show, John and I review a few of those potentially more important recent decisions that likely will affect many of our listeners in the future in their individual foreclosure cases no matter where their property is located involving, for instance:

1. the adequacy of default notices,

2. whether Fannie Mae and Freddie Mac are government actors subject to due process requirements in conducting nonjudicial foreclosure sales,

3. how important are breaks in the chain of title of loan ownership in terms of proof of standing,

4. whether borrowers can be awarded attorneys’ fees when lenders voluntarily dismiss foreclosure lawsuits,

5. how long does a borrower have to sue for a TILA rescission following a timely notice of cancellation ignored or rejected by a lender,

6. whether an association can conduct a nonjudicial foreclosure sale if a power of sale is not contained in its governing instruments or created by statute, and

7. whether lenders are entitled to recover in foreclosure more than they loaned by manipulating auction sales so as to produce artificial deficiencies resulting in the forfeiture of a borrower’s equity.

You are invited to join John and me this Sunday to discuss these issues.

Gary

———————

GARY VICTOR DUBIN
Dubin Law Offices
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Posted in STOP FORECLOSURE FRAUD0 Comments

Thompson v. JPMorgan Chase Bank | 1st Cir – The bank … had an obligation under paragraph 22 to provide notice and, under Pinti, to make anything it did say accurate and avoid potential deception

Thompson v. JPMorgan Chase Bank | 1st Cir – The bank … had an obligation under paragraph 22 to provide notice and, under Pinti, to make anything it did say accurate and avoid potential deception

H/T DUBIN LAW OFFICES

Case: 18-1559 Document: 00117399340 Page: 1 Date Filed: 02/08/2019 Entry ID: 6231441

United States Court of Appeals For the First Circuit

No. 18-1559

MARK R. THOMPSON; BETH A. THOMPSON,

Plaintiffs, Appellants,

JPMORGAN CHASE BANK, N.A.,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Rya W. Zobel, U.S. District Judge]

Before

Thompson, Boudin, and Kayatta, Circuit Judges.

Todd S. Dion on brief for appellants. Juan S. Lopez, Jeffrey D. Adams, and Parker Ibrahim & Berg LLP on brief for appellee. February 8, 2019

Case: 18-1559 Document: 00117399340 Page: 2 Date Filed: 02/08/2019 Entry ID: 6231441

BOUDIN, Circuit Judge. Mark and Beth Thompson sued

JPMorgan Chase Bank (“Chase”) for breach of contract and violating

the statutory power of sale Massachusetts affords mortgagees.

Mass. Gen. Laws ch. 183, § 21. The Thompsons alleged Chase failed

to comply with the notice requirements in their mortgage before

foreclosing on their property. The district court granted Chase’s

motion to dismiss for failure to state a claim.

On June 13, 2006, the Thompsons granted a mortgage to

Washington Mutual Bank on their house to secure a loan in the

amount of $322,500. The mortgage included two paragraphs, both

standard mortgage provisions in Massachusetts, relevant to this

appeal.

First, paragraph 22 required that prior to accelerating

payment by the Thompsons, Washington Mutual had to provide the

Thompsons notice specifying:

(a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument and sale of the Property.

In addition, paragraph 22 required Washington Mutual to inform the

Thompsons of “the right to reinstate after acceleration and the

right to bring a court action to assert the non-existence of a

default or any other defense of Borrower to acceleration and sale.”

– 2 –

Case: 18-1559 Document: 00117399340 Page: 3 Date Filed: 02/08/2019 Entry ID: 6231441

Second, paragraph 19 described the Thompsons’ right to

reinstate after acceleration, including the conditions and time

limitations related to that right.

If Borrower meets certain conditions, Borrower shall have the right to have enforcement of this Security Instrument discontinued at any time prior to the earliest of: (a) five days before the sale of the Property pursuant to any power of sale contained in this Security Instrument; (b) such other period as Applicable Law might specify for the termination of Borrower’s right to reinstate; or (c) entry of judgment enforcing this Security Instrument. Those conditions are that Borrower: (a) pays Lender all sums which then would be due under this Security Instrument and the Note as if no acceleration had occurred; (b) cures any default of any other covenants or agreements; (c) pays all expenses incurred in enforcing this Security Instrument, including, but not limited to, reasonable attorneys’ fees, property inspection and valuation fees, and other fees incurred for the purpose of protecting Lender’s interest in the Property and rights under this Security Instrument; and (d) takes such action as Lender may reasonably require to assure that Lender’s interest in the Property and rights under this Security Instrument, and Borrower’s obligation to pay the sums secured by this Security Instrument, shall continue unchanged.

In 2008, after the United States Office of Thrift

Supervision seized Washington Mutual Bank and placed it in

receivership with the Federal Deposit Insurance Corporation

(“FDIC”), FDIC sold the banking subsidiaries to Chase, which became

the mortgagee on the Thompsons’ mortgage.

– 3 –

Case: 18-1559 Document: 00117399340 Page: 4 Date Filed: 02/08/2019 Entry ID: 6231441

On August 12, 2016, Chase sent default and acceleration

notices to the Thompsons. The notices informed the Thompsons that

(1) their mortgage loan was in default; (2) tendering the past-

due amount of $200,056.60 would cure the default; (3) the default

must be cured by November 10, 2016; and (4) if the Thompsons failed

“to cure the default on or before 11/10/2016, Chase [could]

accelerate the maturity of the Loan, . . . declare all sums secured

by the Security Instrument immediately due and payable, commence

foreclosure proceedings, and sell the Property.”

The notices explained to the Thompsons that they had

“the right to reinstate after acceleration of the Loan and the

right to bring a court action to assert the nonexistence of a

default, or any other defense to acceleration, foreclosure, and

sale.” The notices also said the Thompsons could “still avoid

foreclosure by paying the total past-due amount before a

foreclosure sale takes place.”

On November 15, 2017, after the Thompsons failed to cure

the default, Chase foreclosed on the property and conducted a

foreclosure sale. On December 15, 2017, the Thompsons filed a

complaint in Plymouth County Superior Court, alleging Chase failed

to comply with the paragraph 22 notice requirements prior to

foreclosing on their property. On January 23, 2018, Chase removed

the suit to the District Court for the District of Massachusetts.

– 4 –

Case: 18-1559 Document: 00117399340 Page: 5 Date Filed: 02/08/2019 Entry ID: 6231441

Chase then filed a motion to dismiss for failure to state

a claim. After opposition and reply, the district court concluded

that Chase’s default and acceleration notice strictly complied

with paragraph 22, including advising the Thompsons of their post-

acceleration reinstatement right, and granted Chase’s motion to

dismiss. The Thompsons now appeal. They argue that the default

letter failed to comply strictly with paragraph 22 because the

letter did not inform the Thompsons of the conditions and time

limitations included in their post-acceleration reinstatement

right as described in paragraph 19. They also claim that the

portion of the notice that specified that the Thompsons could

“still avoid foreclosure by paying the total past-due amount before

a foreclosure sale takes place” was inaccurate and misleading,

though they do not say that their conduct was in any way altered.

A district court’s dismissal for failure to state a claim

is reviewed de novo, Galvin v. U.S. Bank, N.A., 852 F.3d 146, 153

(1st Cir. 2017), taking all factual assertions in a complaint as

true and drawing all reasonable inferences in the plaintiffs’

favor; but this does not include legal conclusions clothed as

factual allegations. Bell Atlantic Corp. v. Twombly, 550 U.S.

544, 555–56 (2007). To survive a motion to dismiss, the claim

must be “plausible.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).

In Massachusetts, upon default in the performance of a

mortgage, a mortgagee may sell the mortgaged property using the

– 5 –

Case: 18-1559 Document: 00117399340 Page: 6 Date Filed: 02/08/2019 Entry ID: 6231441

statutory power of sale, so long as the mortgage itself gives the

mortgagee the statutory power by reference. Mass. Gen. Laws ch.

183, § 21. Section 21 requires that, prior to conducting a

foreclosure sale, a mortgagee must “first comply[] with the terms

of the mortgage and with the statutes relating to the foreclosure

of mortgages by the exercise of a power of sale.” Id.

Because Massachusetts does not require a mortgagee to

obtain a judicial judgment approving foreclosure of a mortgaged

property, see U.S. Bank Nat’l Ass’n v. Ibanez, 941 N.E.2d 40, 49

(Mass. 2011), Massachusetts courts require mortgagees to comply

strictly with two types of mortgage terms: (1) terms “directly

concerned with the foreclosure sale authorized by the power of

sale in the mortgage” and (2) terms “prescribing actions the

mortgagee must take in connection with the foreclosure sale–

whether before or after the sale takes place.” Pinti v. Emigrant

Mortg. Co., 33 N.E.3d 1213, 1220–21 (Mass. 2015).

The mortgage terms for which Massachusetts courts demand

strict compliance include the provisions in paragraph 22 requiring

and prescribing the pre-foreclosure default notice. Pinti, 33

N.E.3d at 1221. At first glance, Chase’s acceleration and default

notice appears to comply strictly with paragraph 22 in the

Thompsons’ mortgage. By its terms, paragraph 22 required Chase to

“inform [the Thompsons] of the right to reinstate after

acceleration.” Mirroring this language, the notice explained to

– 6 –

Case: 18-1559 Document: 00117399340 Page: 7 Date Filed: 02/08/2019 Entry ID: 6231441

the Thompsons that they had “the right to reinstate after

acceleration of the Loan.”

Because paragraph 19, which defines the Thompsons’ post-

acceleration reinstatement right, imposes conditions and time

limitations on that right, the Thompsons argue that Chase failed

to comply strictly with paragraph 22’s notice requirement by

failing to inform the Thompsons of the conditions and limitations

on the reinstatement right. Paragraph 22, however, instructs that

Chase inform the Thompsons of their substantive right to reinstate;

it does not require that Chase describe in detail the procedure

that the Thompsons must follow to exercise the right or the

deadlines associated with the right. And paragraph 19 does not,

on its own, impose any notice requirements on Chase.

However, Massachusetts law requires that the paragraph

22 notice given to the mortgagor be accurate and not deceptive–

note the possible difference between the two concepts–and the

Supreme Judicial Court has made clear that inaccuracy or deceptive

character can be fatal. In Pinti, the mortgagee’s notice said

that the mortgagors “have the right to assert in any lawsuit for

foreclosure and sale the nonexistence of a default.” Pinti, 33

N.E.3d at 1222 (emphasis omitted). This, the Pinti court reasoned,

could mislead mortgagors into thinking that they could await a

lawsuit by the mortgagee before attacking the foreclosure. Id.

– 7 –

Case: 18-1559 Document: 00117399340 Page: 8 Date Filed: 02/08/2019 Entry ID: 6231441

Here, the notice’s additional language–“you can still

avoid foreclosure by paying the total past-due amount before a

foreclosure sale takes place”–could mislead the Thompsons into

thinking that they could wait until a few days before the sale to

tender the required payment. Suppose the Thompsons had showed up

with the payment three days before the sale believing that their

tender was timely since the notice said that the tender may be

made before the sale. The bank would properly have pointed out

that under paragraph 19 a tender must be made at least five days

before the sale.

The Thompsons do not claim to have been prejudicially

misled, and they certainly did not tender the payment at any time

before the sale. The mind of the common-law lawyer is steeped in

the proposition that a mistake must ordinarily have had an adverse

impact on the plaintiff or a court will disregard it: no harm, no

foul. See, e.g., Shaulis v. Nordstrom, Inc., 865 F.3d 1, 15 (1st

Cir. 2017) (concluding that fraudulent-misrepresentation claim

fails because plaintiff did not allege an actionable injury caused

by defendant’s false statement). But Pinti frees the mortgagor of

any need to prove that the inaccuracy or deception caused harm:

“The defendants’ assertion that the plaintiffs in this case were

not prejudiced by any failure to comply with the provisions of

paragraph 22 misses the point. Paragraph 22 demands strict

compliance, regardless of the existence, or not, of prejudice to

– 8 –

Case: 18-1559 Document: 00117399340 Page: 9 Date Filed: 02/08/2019 Entry ID: 6231441

a particular mortgagor.” Pinti, 33 N.E.3d at 1223 n.20 (citing

Foster, Hall & Adams Co. v. Sayles, 100 N.E. 644, 646 (Mass.

1913)).

After all, the bank is the one writing the notice and

has ample opportunity and expertise to make it entirely accurate.

It may take some imagination to consider every possible way it

could be misleading; but the foreclosure procedure allowed to the

bank is itself favorable to the bank. In exchange, both accuracy

and avoidance of potential deception are conditions of the validity

of the foreclosure, lifting from the Thompsons the need to show

prejudice. The state-court reading of Massachusetts law binds a

federal court sitting in diversity. N. Am. Specialty Ins. Co. v.

Lapalme, 258 F.3d 35, 38 (1st Cir. 2001).

In sum, the bank had no obligation under paragraph 19 to

lay out its procedures, but it did have an obligation under

paragraph 22 to provide notice and, under Pinti, to make anything

it did say accurate and avoid potential deception. Words are

usually elastic, but it does not matter that the purist could well

think that the notice in this case was potentially deceptive rather

than literally inaccurate (for the Thompsons could defeat

foreclosure by payment before the foreclosure date). Omitting the

qualification (that the payment must be tendered at least five

days before the foreclosure date) in our view rendered the notice

potentially deceptive.

– 9 –

Case: 18-1559 Document: 00117399340 Page: 10 Date Filed: 02/08/2019 Entry ID: 6231441

The Thompson brief squarely raised the objection; the

bank offered no response to it. Despite the absence of a claim of

actual prejudice, the strict-compliance requirement, supported by

both the Pinti holding and the rationale supplied for the holding,

invalidates the foreclosure. The judgment must be reversed, and

the case remanded for further proceedings consistent with this

opinion.

It is so ordered.

– 10 –

© 2010-19 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.



Posted in STOP FORECLOSURE FRAUD1 Comment

The Bank of New York Mellon v. Horner |  CA 4DCA- Foreclosure Sale Valid Even if Party Purporting to Be Beneficiary Wasn’t

The Bank of New York Mellon v. Horner | CA 4DCA- Foreclosure Sale Valid Even if Party Purporting to Be Beneficiary Wasn’t

h/t metnews

g 055500 by on Scribd

© 2010-19 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.



Posted in STOP FORECLOSURE FRAUD1 Comment

US Bank National Association v. Bank of America, NA, Court of Appeals, 2nd Cir | Plaintiff-Trustee notified Bank of America that it had violated Mortgage Loan Purchase Agreement “MLPA” Representation No. 8 and demanded that Bank of America cure the violation or repurchase the Loan, as provided in the MLPA. Bank of America did not do so.

US Bank National Association v. Bank of America, NA, Court of Appeals, 2nd Cir | Plaintiff-Trustee notified Bank of America that it had violated Mortgage Loan Purchase Agreement “MLPA” Representation No. 8 and demanded that Bank of America cure the violation or repurchase the Loan, as provided in the MLPA. Bank of America did not do so.

 

U.S. BANK NATIONAL ASSOCIATION, AS SUCCESSOR (WELLS FARGO BANK, NA), AS TRUSTEE (REGISTERED HOLDERS OF CITIGROUP COMMERCIAL MORTGAGE TRUST 2007-C6, COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-C6), ACTING BY AND THROUGH SPECIAL SERVICER CWCAPITAL ASSET MANAGEMENT LLC, Plaintiff-Appellant,
v.
BANK OF AMERICA N.A., Defendant-Appellee.

Docket No. 16-3560-cv.
United States Court of Appeals, Second Circuit.
Argued: November 8, 2017.
Decided: February 15, 2019.
On Appeal from the United States District Court for the Southern District of New York.

Appeal by Plaintiff U.S. Bank National Association from orders of the United States District Court for the Southern District of New York (Paul G. Gardephe, J.) denying Plaintiff’s motion to retransfer the suit to the United States District Court for the Southern District of Indiana, where it was instituted, and granting judgment on the pleadings in favor of Defendant Bank of America N.A., by reason of untimeliness under the laws of New York. The district court in Indiana had transferred the case to New York under 28 U.S.C. § 1631 based on its conclusion that the defendant was not subject to personal jurisdiction in Indiana. Although we disagree with that conclusion (and therefore with the propriety of the transfer under § 1631), we affirm the New York district court’s denial of the motion to retransfer to Indiana, treat the original transfer as one made under 28 U.S.C. § 1404(a) (rather than § 1631), and vacate the judgment that the suit was untimely under the laws of New York. The judgment is VACATED and the case is REMANDED for further proceedings.

Judge CHIN concurs in a separate opinion.

COLLEEN M. MALLON (Gregory A. Cross, on the brief), Venable LLP, Baltimore, Maryland, for Plaintiff-Appellant.

ELIZABETH P. PAPEZ (Luke A. Connelly, Stephanie A. Maloney, on the brief),Winston & Strawn LLP, Washington, D.C. and New York, New York, for Defendant-Appellee.

Before: LEVAL, LIVINGSTON, and CHIN, Circuit Judges.

LEVAL, Circuit Judge.

In this suit for breach of contract, Plaintiff U.S. Bank National Association appeals from orders of the United States District Court for the Southern District of New York (Paul G. Gardephe, J.) denying its motion to retransfer the suit to the United States District Court for the Southern District of Indiana, where it was instituted, and granting judgment on the pleadings in favor of Defendant Bank of America N.A., by reason of the untimeliness of the suit under New York’s statute of limitations. The district court in Indiana had transferred the case to New York under 28 U.S.C. § 1631, based on its conclusion that the suit could not be brought in Indiana because the Defendant (a nationally chartered bank and citizen of North Carolina) was not subject to personal jurisdiction in Indiana.

We disagree with the Indiana district court’s conclusion that the Defendant was not subject to the jurisdiction of the Indiana court, and therefore we necessarily conclude that the Indiana court’s transfer to New York was not authorized by § 1631. We nonetheless affirm the New York district court’s denial of Plaintiff’s motion to retransfer to Indiana, treat the original transfer as one made under 28 U.S.C. § 1404(a) (rather than § 1631), and vacate the judgment of dismissal rendered on the ground that the suit was untimely under the laws of New York.

BACKGROUND

I. The Mortgage Loan Purchase Agreement

In 2007, Defendant Bank of America’s predecessor, LaSalle Bank N.A.,[1] entered into a Mortgage Loan Purchase Agreement (the “MLPA”), for the sale of a portfolio (of approximately 100 commercial mortgage loans) to an entity[2] acting for the benefit of an investment trust (the “Trust”), for which Plaintiff U.S. Bank (a nationally chartered bank and citizen of Ohio) serves as Trustee. The MLPA was supplemented by a Pooling and Servicing Agreement (the “PSA”), which provided that the purchaser would deposit the loans into the Trust and assign all of its rights under the MLPA to the Trust.

In the MLPA, the seller made representations and warranties regarding the loans. These included Representation No. 8 (set forth in the margin),[3] which effectively represented the absence of any restrictions that would interfere with the mortgagor’s ability to pay its obligations under the mortgage loan or would materially and adversely affect the value of the mortgaged property.

The MLPA prescribes specific remedies available to the mortgagee in the event of a “Document Defect or a Breach” of a representation. App. 79. Pursuant to Section 3(c), the seller of the loan portfolio (Defendant’s predecessor) undertook a commitment that, upon receipt of notice of a Document Defect or Breach, it would:

cure such Document Defect or Breach . . . in all material respects, or, if such Document Defect or Breach . . . cannot be cured . . ., (i) repurchase the affected Mortgage Loan at the applicable Purchase Price . . ., or (ii) substitute a Qualified Substitute Mortgage Loan for such affected Mortgage Loan. . . .

App. 79.

The PSA, in Section 2.03, similarly provides that, after receiving timely notice of a Document Defect or Breach, the seller shall:

(i) cure such Document Defect or Breach, as the case may be, in accordance with Section 3 of the applicable [MLPA], (ii) repurchase the affected Trust Mortgage Loan in accordance with Section 3 of the related [MLPA], or (iii) within two (2) years of the Closing Date, substitute a Qualified Substitute Mortgage Loan for such affected Trust Mortgage Loan. . . .

App. 247.

II. The Indiana Loan

One of the items in the portfolio sold pursuant to the MLPA, was a $9 million loan (the “Loan”), which is the subject of this litigation, made in 2007 to Women’s Physicians Group, LLC. Repayment of the Loan was secured in part by a mortgage on a two-story commercial building (the “Property”) (then owned by the borrower/mortgagor Women’s Physicians Group), which was located on a hospital campus in Indiana. Women’s Physicians Group had purchased the Property from Galen Hospital Corporation (the “Hospital”) pursuant to a special warranty deed. The deed includes two title exceptions that run with the property: (1) a use restriction, which, absent the consent of the Hospital, prohibits use of the Property otherwise than as an ambulatory surgery center and medical offices, and (2) a right of first refusal in favor of the Hospital for any sale, transfer, or assignment.

In 2012, Women’s Physicians Group lost the major tenant for the Property, was unable to secure a new tenant that would use the Property in a manner that conformed to the use restriction, and consequently defaulted on the Loan. On December 13, 2012, the Trust, which had acquired the Loan pursuant to the MLPA, commenced a foreclosure action in Indiana state court against Women’s Physicians Group. The foreclosure court appointed a receiver, who similarly failed to secure either a tenant or a waiver or modification of the deed restrictions.

On October 18, 2013, Plaintiff-Trustee notified Bank of America that it had violated MLPA Representation No. 8 and demanded that Bank of America cure the violation or repurchase the Loan, as provided in the MLPA. Bank of America did not do so.

III. The Proceedings Below

On September 12, 2014, Plaintiff, as Trustee, brought this action against Bank of America in the Indiana district court, alleging breach of Representation No. 8. Bank of America moved to dismiss the suit, or alternatively to transfer it to the Southern District of New York, asserting that it was not subject to personal jurisdiction in Indiana. The Indiana district court ruled that Bank of America was not subject to personal jurisdiction in Indiana. The Indiana district court transferred the case to the New York district court pursuant to 28 U.S.C. § 1631, which authorizes a federal district court, on the basis of a “want of jurisdiction, . . . if it is in the interest of justice, [to] transfer such action . . . to any other such court . . . in which the action . . . could have been brought.”[4] It is undisputed that venue and jurisdiction are proper in the Southern District of New York.

Following the transfer, Plaintiff moved in the New York district court to retransfer the case to the Indiana district court, arguing that, contrary to the Indiana district court’s ruling, Bank of America was subject to the court’s personal jurisdiction in Indiana on several different bases. The New York district court denied the motion. In the meantime, Bank of America had moved in the New York district court for judgment on the pleadings. The district court granted that motion, concluding that Plaintiff’s claim for breach of contract was time-barred under New York’s six-year statute of limitations. The court entered judgment in favor of Defendant Bank of America on September 22, 2016. This appeal followed.

DISCUSSION

Plaintiff raises a number of arguments on appeal, including that the Indiana district court erred in finding that Bank of America was not subject to its jurisdiction, that the New York district court erred in refusing to retransfer the case to Indiana, and that the New York district court accordingly should not have entered judgment in favor of Defendant. We address these issues in turn.

I. Was Defendant Subject to the Personal Jurisdiction of the Indiana District Court?

Plaintiff contends that, contrary to the Indiana district court’s ruling, Bank of America was subject to personal jurisdiction in Indiana, both on the basis of general jurisdiction (because of either its waiver or its extensive activities in Indiana) and specific jurisdiction (because of the contractual representations it undertook concerning real property in Indiana and the commitments it undertook in the terms of the MLPA to perform acts in Indiana). We are persuaded that Bank of America made itself subject to Indiana personal jurisdiction in this case.Accordingly, we have no need to consider Plaintiff’s less persuasive arguments that Bank of America was also subject to general Indiana jurisdiction.

To determine personal jurisdiction, a federal district court applies the long-arm statute of the state in which it sits. See Chloé v. Queen Bee of Beverly Hills, LLC,616 F.3d 158, 163 (2d Cir. 2010). Indiana’s long-arm statute authorizes courts to exercise jurisdiction on any basis permitted by the U.S. Constitution. Advanced Tactical Ordnance Sys., LLC v. Real Action Paintball, Inc., 751 F.3d 796, 800 (7th Cir. 2014) (“Under Indiana’s long-arm statute, Indiana state courts may exercise personal jurisdiction on a number of prescribed bases, as well as `on any basis not inconsistent with the Constitution of this state or the United States.'”) (quoting Ind. R. Trial P. 4.4(A)). To comport with due process, a forum state may exercise jurisdiction over an out-of-state corporate defendant only if the defendant has “certain minimum contacts with [the State] such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'” Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 923 (2011) (alteration in original) (quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). Specific jurisdiction over an out-of-state defendant “is available when the cause of action sued upon arises out of the defendant’s activities in a state.” Brown v. Lockheed Martin Corp., 814 F.3d 619, 624 (2d Cir. 2016).

When deciding whether personal jurisdiction over a defendant exists in a district court that falls outside this Circuit, we need not predict how our sister circuit would decide the question, “since we are at liberty to decide for ourselves what the Due Process Clause requires to sustain personal jurisdiction.” Chew v. Dietrich, 143 F.3d 24, 30 (2d Cir. 1998)see also SongByrd, Inc. v. Estate of Grossman, 206 F.3d 172, 180-81 (2d Cir. 2000) (applying this circuit’s case law to decide whether Louisiana could exercise personal jurisdiction over a defendant). Although we consider the decisions of our sister circuits, “we are permitted — indeed, required — to reach our own conclusions” on issues of federal law. Desiano v. Warner-Lambert & Co., 467 F.3d 85, 90 (2d Cir. 2006)see also Rates Tech. Inc. v. Speakeasy, Inc., 685 F.3d 163, 173-74 (2d Cir. 2012) (“[O]ur court is not bound by the holdings — much less the dicta — of other federal courts of appeal.”). But we “defer conclusively” to another circuit’s decision when it addresses a question of state law from a state within that circuit. Desiano, 467 F.3d at 90.

1. Applicable Law of Specific Personal Jurisdiction

The Supreme Court has set out three conditions for the exercise of specific jurisdiction over a nonresident defendant. See Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco Cty., 137 S. Ct. 1773, 1785-86 (2017). “First, the defendant must have purposefully availed itself of the privilege of conducting activities within the forum State or have purposefully directed its conduct into the forum State.” Id. at 1785 (quoting J. McIntyre Machinery, Ltd. v. Nicastro, 564 U.S. 873, 877 (2011) (plurality opinion)). “Second, the plaintiff’s claim must arise out of or relate to the defendant’s forum conduct.” Id. at 1786 (quoting Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984)). “Finally, the exercise of jurisdiction must be reasonable under the circumstances.” Id. (citing Asahi Metal Industry Co. v. Superior Court of Cal., Solano Cty., 480 U.S. 102, 113-114 (1987)).

At the first step, the minimum contacts inquiry is “satisfied if the defendant has `purposefully directed’ his activities at residents of the forum.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985) (quoting Keeton v. Hustler Magazine, Inc.,465 U.S. 770, 774 (1984)); see also Charles Schwab Corp. v. Bank of Am. Corp.,883 F.3d 68, 82 (2d Cir. 2018) (“[M]inimum contacts . . . exist where the defendant purposefully availed itself of the privilege of doing business in the forum and could foresee being haled into court there.”).

To meet the minimum contacts requirement, “the defendant’s suit-related conduct must create a substantial connection with the forum State” — that is, the “defendant [it]self” must create those contacts, and those contacts must be with the “forum State itself,” not simply with persons who reside there. Walden v. Fiore,134 S. Ct. 1115, 1121-22 (2014) (citation omitted). Thus, although a defendant’s contacts with the forum state may be “intertwined with [its] transactions or interactions with the plaintiff or other parties . . .[,] a defendant’s relationship with a . . . third party, standing alone, is an insufficient basis for jurisdiction.” Id. at 1123; see also Bristol-Myers Squibb, 137 S. Ct. at 1783 (2017) (same). It is “insufficient to rely on a defendant’s random, fortuitous, or attenuated contacts or on the unilateral activity of a plaintiff with the forum to establish specific jurisdiction.” Waldman v. Palestine Liberation Org., 835 F.3d 317, 337 (2d Cir. 2016) (quoting Walden, 134 S. Ct. at 1123) (internal quotation marks omitted).

Nor is it sufficient for a plaintiff to show simply that a defendant’s actions caused an “effect” in the forum state where the defendant has not “expressly aimed its conduct at the forum.” Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 732 F.3d 161, 173 (2d Cir. 2013). And “mere injury to a forum resident” is insufficient. Walden, 134 S. Ct. at 1125see also SongByrd, 206 F.3d at 181 (rejecting specific personal jurisdiction over a defendant even if defendant’s action could be viewed as a “but for” cause of relevant events in forum state); accord Noboa v. Barceló Corporación Empresarial, SA, 812 F.3d 571, 572 (7th Cir. 2016) (“[T]he pertinent question is whether the defendant has links to the jurisdiction in which the suit was filed, not whether the plaintiff has such links — or whether the loss flowed through a causal chain from the plaintiff’s contacts with the jurisdiction of suit.”). Similarly, “the fact that harm in the forum is foreseeable . . . is insufficient for the purpose of establishing specific personal jurisdiction over a defendant.” In re Terrorist Attacks on Sept. 11, 2001, 714 F.3d 659, 674 (2d Cir. 2013).

Where the underlying dispute involves a contract, we use a “highly realistic” approach and evaluate factors such as “prior negotiations and contemplated future consequences, along with the terms of the contract and the parties’ actual course of dealing.” Burger King, 471 U.S. at 479.

At the second step, we must be satisfied that “the litigation results from alleged injuries that `arise out of or relate to’ those activities.” Id. at 472 (quoting Helicopteros, 466 U.S. at 414). We have found that a claim arises out of forum contacts when defendant’s allegedly culpable conduct involves at least in part financial transactions that touch the forum. Licci, 732 F.3d at 169-70. And finally, for the third step, once it is established that the defendant has minimum contacts with the forum and the cause of action relates to or arises from those contacts, “a court considers those contacts `in light of other factors to determine whether the assertion of personal jurisdiction would comport with fair play and substantial justice.'” Charles Schwab, 883 F.3d at 82 (quoting Licci, 732 F.3d at 170).[5]

2. Application

We conclude that Plaintiff met the requirements summarized above for establishing specific Indiana jurisdiction over Defendant in this case. The central tenets of Plaintiff’s theory of liability are that (i) Defendant breached Representation No. 8 of the MLPA that there were no restrictions on the use of the Indiana Property that would interfere with the mortgagor’s ability to make its payments or adversely affect the value of the Property and (ii) Defendant failed to comply with its contractual commitment to cure the breach. The restrictions imposed by the Hospital included the clause forbidding use of the Property except for in a specified manner (which allegedly prevented the mortgagor from obtaining a new tenant and thus caused it to default on payment of the Loan), as well as the right of first refusal in favor of the Hospital (which allegedly interfered with the mortgagor’s ability to pay the Loan and adversely affected the value of the Property). Plaintiff alleges that Bank of America then breached its commitments under Section 3(c) of the MLPA to either “cure such . . . Breach. . . or, if such . . . Breach . . . cannot be cured, [to] (i) repurchase the affected Mortgage Loan at the applicable Purchase Price . . . or (ii) substitute a Qualified Substitute Mortgage Loan for such affected Mortgage Loan.” App. At 79. Bank of America’s obligation to “cure” the breach, according to Plaintiff’s theory, required it, among other possibilities, to perform some act in Indiana such as obtaining the Indiana Hospital’s consent to relinquish the deed restrictions that prevented the mortgagor from meeting its Loan obligations.

Defendant’s alleged breach of its contractual representations involved the existence of restrictions on the use and value of Indiana Property. In addition, the obligations expressly undertaken by Defendant under the MLPA were purposefully directed toward residents of Indiana, and the suit arose from and related directly to those Indiana contacts. In view of Defendant’s undertaking of those commitments in the terms of the contract here in question, we see no reason why obliging Defendant to litigate this claim in Indiana would offend traditional notions of fair play or substantial justice, or be unreasonable.

II. Was the New York District Court Correct to Deny Plaintiff’s Motion to Retransfer?

Plaintiff contends that if, as we have concluded, Bank of America was subject to personal jurisdiction in the Indiana court, the Indiana court could not lawfully transfer the venue of the action to New York under § 1631, because that statute authorizes transfer only for “want of jurisdiction.” Plaintiff contends accordingly that the New York district court should have granted its motion to send the case back to Indiana and that we should direct that this be done. We disagree.

Such a ruling would fail to heed the Supreme Court’s sagacious warning in Christianson v. Colt Indus. Operating Corp., 486 U.S. 800 (1988). Confronting a similar circumstance, the Court cautioned, “[T]ransferee courts that feel entirely free to revisit transfer decisions of a coordinate court threaten to send litigants into a vicious circle of litigation,” culminating in a “perpetual game of jurisdictional ping-pong.” Id. at 816, 818. Although Christianson differed slightly in that the potentially dueling transfer orders were entered by coordinate courts of appeals, as opposed to a court of appeals reviewing of a transfer order of a district court in another circuit, that distinction does not lessen the pertinence or importance of the Supreme Court’s observation.

If we were to direct that the case be retransferred to Indiana, eventual review by the Seventh Circuit might well result in a ruling that that circuit, and not ours, is authoritative on the reach of jurisdiction of the Indiana courts, a reaffirmance of the Indiana district court’s original ruling that Bank of America is not subject to personal jurisdiction in Indiana, and a reinstitution of the original transfer to the district court in New York. Whether and where it would end could not be predicted. Such a scenario would be intolerable. Regardless of which court is correct in its appraisal of the jurisdiction question, such a duel between courts of transfers and retransfers would subject the parties to unacceptably mounting expenses and delays. If such occurs, the federal court system abjectly fails to perform its mission of deciding cases with reasonable speed and efficiency at reasonable cost to the parties.

The New York district court was sensitive to the Supreme Court’s warning in rejecting Plaintiff’s motion for retransfer to Indiana. Citing Christianson, it ruled that it would treat the Indiana court’s transfer of venue as the law of the case. It reviewed the Indiana court’s decision with respect to the absence of personal jurisdiction over Defendant in Indiana to the extent of ruling that it found no clearerror in that ruling, and thus denied the motion. While we are not in completeagreement with the New York district court’s ruling (as explained below) we entirely approve of its rejection of the motion to retransfer to Indiana.

Arguably, the standard for this court’s review of a transfer order of a district court in a different circuit differs from the standard to be exercised by the transferee district court. As we noted in SongByrd, 206 F.3d at 178 n.7, it would be rare for the doctrine of the law of the case to commit a higher court to adhere to a ruling of a lower court. Nonetheless, as noted above, for this court to require retransfer to the Indiana district court based on our conclusion that the Indiana court erred would give rise to the same unacceptable use of the parties as a ping-pong ball as if the retransfer order were made by the transferee district court. Plaintiff has not shown that litigating in New York would subject it to any great inconvenience or unfairness. Allowing the case to remain in the Southern District of New York, notwithstanding that the Indiana court’s transfer order was based on a mistake of law, is a far lesser evil than subjecting the parties to the further expense and delay of a retransfer, with the attendant risk of still further rounds of transfers.

Because the transfer of venue was not available under § 1631, which authorizes transfers only for want of jurisdiction, we think it is our best course to treat the erroneous § 1631 transfer as a transfer under 28 U.S.C. § 1404(a) “[f]or the convenience of [the] parties and witnesses, in the interest of justice.”[6] The interest of justice and the convenience of the parties are served by a transfer under § 1404(a) in that it spares the parties from the intolerable expenses, delays, and attendant burdens that would result from having the case batted back and forth from district to district, and that it positions a court to fulfill the mission of the judicial system by deciding the case.

The New York district court denied the Plaintiff’s motion to retransfer on the ground that the Indiana court’s transfer under § 1631 for want of jurisdiction was not clearly erroneous. We see the issue somewhat differently. To say that the Indiana court’s transfer order was not clearly erroneous does not say it was not erroneous. Because Bank of America was subject to personal jurisdiction in the Indiana court, that court’s transfer of venue under § 1631 was not in accordance with law. Nonetheless, transfer of venue to the Southern District of New York would have been appropriate under § 1404(a). Giving regard to Plaintiff’s failure to show that it would suffer great harm in being compelled to litigate its case in New York instead of in the forum it chose, the unjust burdens that the courts would inflict on the parties by shuttling them back and forth between Indiana and New York, and the Supreme Court’s warnings in Christianson, we find it preferable to affirm the New York district court’s denial of retransfer on a different basis than that court relied on. Accordingly, we affirm the New York district court’s denial of Plaintiff’s motion for retransfer to Indiana, treating the Indiana transfer order as if issued under § 1404(a) and finding such a transfer to be lawful.

III. Did the New York District Court Err in Granting Defendant’s Motion for Judgment on the Pleadings under Rule 12(c)?

In denying Plaintiff’s motion to retransfer to Indiana, the New York district court treated the Indiana court’s transfer order as lawful and efficacious not only as a transfer of venue to New York, but also as a determination that Bank of America was not subject to personal jurisdiction in the Indiana court and that the case would accordingly be decided under the laws of New York, the transferee state. The court explained, “If a district court receives a case pursuant to a transfer under . . . 28 U.S.C. § 1631, for want of jurisdiction, it logically applies the law of the state in which it sits, since the original venue, with its governing laws, was never a proper option.” U.S. Bank Nat’l Ass’n v. Bank of America N.A., No. 15 Civ. 8153, 2016 WL 5118298, at *12 (S.D.N.Y. Sept. 20, 2016) (quoting Gerena v. Korb, 617 F.3d 197, 204 (2d Cir. 2010)). While we agree with that proposition, we find it has no application to this case because, in our view, Bank of America was subject to personal jurisdiction in the Indiana district court, and the original venue, with its governing laws, was a proper option. While we affirm the New York district court’s denial of Plaintiff’s motion to retransfer to Indiana, we do not affirm the propriety of the original transfer for want of jurisdiction under § 1631. We instead affirm the transfer as if made under § 1404(a) by a court that had jurisdiction of the case.

A transfer under § 1404(a) by a court that has jurisdiction of the case has different consequences from a transfer under § 1631 by a court that lacks jurisdiction of the case. Transfers under § 1404(a) by a court that has jurisdiction are adjudicated in the transferee state under the law of the transferor state. This is to avoid the unfairness of having a discretionary transfer done for convenience change the law under which the case will be decided. See Van Dusen v. Barrack, 376 U.S. 612, 633-34 (1964); 17 Moore’s Federal Practice § 111.20[b] (3d ed. 2018) (“[W]hen a case is transferred under Section 1404(a), Van Dusen requires the same choice of law analysis that would have been applied in the transferor court to be conducted in the transferee court, which may require the transferee court to apply its own law, the law of the transferor court, or some other state’s law.”).

Under the New York district court’s analysis, Indiana’s 10-year statute of limitations and its choice of law rules had no pertinence because the case was never properly lodged in the Indiana court. The transfer under § 1631 to New York mandated the application of New York’s six-year statute of limitations, under which the suit was untimely. Our disposition requires that the New York district court treat the case as one properly filed in Indiana, applying Indiana’s choice of law rules to determine whether the suit was timely filed. We therefore vacate the New York district court’s grant of Bank of America’s motion for judgment on the pleadings. We express no view on the question whether the suit was timely filed, when that question is judged under Indiana’s choice-of-law rules, as appropriate for a suit properly brought in Indiana and subsequently transferred to New York under § 1404(a).

IV. Response to Judge Chin’s Concurrence

Judge Chin’s concurring opinion expresses doubt whether Bank of America, as the successor entity following its merger with LaSalle, is subject to personal jurisdiction where LaSalle’s activities in relation to the events giving rise to liability would have subjected LaSalle to specific jurisdiction in a suit alleging breach of LaSalle’s contracts. Our first answer is that this issue is not in the case, having been forfeited, and/or waived, by Bank of America. See United States v. Quiroz, 22 F.3d 489, 490-91 (2d Cir. 1994) (argument not raised on appeal is deemed abandoned, unless manifest injustice otherwise would result); see also Fed. R. Civ. P. 12(h)(1) (“A party waives a[] defense [of lack of personal jurisdiction] by . . . failing to either: (i) make it by motion . . . or (ii) include it in a responsive pleading. . . .”). Bank of America has not argued in this appeal that it is not subject to personal jurisdiction in Indiana for that reason. Indeed, so far as we are aware, Bank of America has never raised that argument in this litigation, notwithstanding its persistent objection, based on other grounds, to personal jurisdiction in Indiana. Its argument has been that it is not subject to Indiana jurisdiction because LaSalle, in negotiating and entering the contract in New York, did not subject itself to Indiana jurisdiction. In fact, in framing its arguments against Indiana jurisdiction, Bank of America has repeatedly acknowledged that LaSalle’s actions in negotiating, drafting, and entering into the MLPA are imputed to Bank of America for the purpose of analyzing where Bank of America is subject to personal jurisdiction, effectively conceding that if LaSalle’s actions would make it subject to personal jurisdiction in Indiana, Bank of America is also subject. See, e.g., Br. of Def.-Appellee at 33; Def.’s Memo. Opp. Pl.’s Mot. Retransfer (App. 2772-73); Def.’s Reply Memo. Supp. Mot. Transfer (App. 2191); Def.’s Memo. Supp. Mot. Transfer (App. 46); see also Def.’s Memo. Opp. Pl.’s Mot. Retransfer (App. at 2784) (recognizing that “[t]he Transferor Court correctly focused its analysis on [Bank of America’s] (and LaSalle’s) activities with respect to the MLPA and PSA” in determining whether it had specific jurisdiction over Bank of America) (emphasis added).

Because the issue is forfeited, we do not rule on it. We nonetheless observe that we can see no reason why, in a suit to enforce a merger partner’s contract, the entity that survives the merger should not be subject to personal jurisdiction in whatever court the actions of the merger partner in relation to the contract would have made the merger partner subject. Upon a merger between two (or more) corporations, each of the merger partners is deemed to survive in the merged entity, and the surviving entity is therefore liable for the liabilities of the corporations that joined in the merger. According to James D. Cox & Thomas Lee Hazen, 4 Treatise of the Law of Corporations § 22:8, “A distinguishing feature of a business combination carried out as a merger or consolidation is that by operation of law the surviving corporation is subject to all the liabilities of the acquired companies.” “In contrast,” the treatise explains, “when the combination is structured as an asset or stock purchase-sale, absent special circumstances, the acquiring company is subject only to those liabilities it has agreed to assume.” Id.Because a successor by merger is deemed by operation of law to be both the surviving corporation and the absorbed corporation, subject to all the liabilities of the absorbed corporation, we see no reason to doubt that Bank of America, as the surviving entity, would be subject to jurisdiction in Indiana in a suit based on breach of LaSalle’s contract if LaSalle’s Indiana-directed actions in relation to the contract would have made Lasalle subject to Indiana jurisdiction. (In contrast, the theory of general jurisdiction would allow the suit against the successor by merger only in those jurisdictions where the defendant corporation at the time of filing is “essentially at home,” see Daimler AG v. Bauman, 517 U.S. 117, 122 (2014) and not in places where, prior to the merger, the absorbed merger partner was at home.)

Furthermore, if the rule were as Judge Chin suggests, the rule would be subject to serious abuse: a corporation liable to suit in a state in which it does not wish to be sued could simply arrange a merger with a dummy corporation and thus avoid being subject to an undesired jurisdiction in the state where its actions incurred the liability.

We think Judge Chin has misread the New York precedent he cites. He relies on a short passage from BRG Corp. v. Chevron U.S.A., Inc., 82 N.Y.S.3d 798, 799 (N.Y. App. Div. 2018), which quotes from and adopts the rule stated in Semenetz v. Sherling v. Walden Inc., 801 N.Y.S.2d 78 (N.Y. App. Div. 2005), aff’d on other grounds 851 N.E.2d 1170 (N.Y. 2006). The line of authority Judge Chin cites does not apply to successor liability that results from a merger.

What those New York decisions reveal is that the answer to our question— whether liability as a successor in interest also entails being subject to personal jurisdiction where the actions of the predecessor would have made the predecessor subject—depends on the basis of the successor liability. The fair inference of the precedents is that, while successor liability based on acquisition of a predecessor’s assets does not necessarily make the defendant also amenable to jurisdiction where the predecessor’s actions would have made the predecessor subject to specific jurisdiction, the rule is different where the successor liability of the defendant derives from a merger with the predecessor. So far as appears from the decisions, none of Judge Chin’s cases involves successor liability based on merger; nonetheless, these decisions imply, indeed virtually state, that where the successor status is based on merger, the merged entity is subject to jurisdiction wherever its merger partner’s actions would have made the merger partner subject in a suit based on the merger partner’s liability.

In Semenetz, the plaintiff, who was injured in New York while operating a sawmill brought a New York personal injury action for products liability against an Alabama corporation (identified as “Sawmills”), which had purchased the assets of the company (“Edger”) that had sold the sawmill to plaintiff’s New York employer. The plaintiff sought to impose both New York jurisdiction and liability on Sawmills based on the argument that Sawmills, having purchased the assets of Edger, was subject to “successor liability” under either the so-called “product line” or “continuing enterprise” exceptions to “the general rule [that] a corporation which acquires the assets of another is not liable for the torts of its predecessor.” Semenetz, 801 N.Y.S.2d at 80. The Appellate Division ruled, “[T]he `product line’ and `continuing enterprise’ exceptions [to nonliability of successor entities] deal with the concept of tort liability, not jurisdiction.” Id. at 81. Therefore, even assuming that Sawmills was liable under a products liability claim for the tort of Edger, whose assets it had purchased, its successor liability did not render it subject to New York jurisdiction, as Edger would have been. However, in the very next sentence, the decision explicitly “recognize[d]” that, in contrast, “in certain circumstances the successor corporation `may inherit its predecessor’s jurisdictional status,'” and cited to a number of cases addressing those circumstances. Id. Among the cases cited by Semenetz with approval as discussing circumstances where the successor to the predecessor’s liability also “inherits” the predecessor’s jurisdictional status is Schenin v. Micro Copper Corp., 272 F. Supp. 523, 526 (S.D.N.Y. 1967), which recognized that, had the successor liability been based on merger (as opposed to successor liability based on purchase of assets), the successor would “inherit” the predecessor’s jurisdictional status.

The Schenin suit was brought in New York against an out-of-state corporation, Micro Copper Corporation (“Micro”), as successor to the liability of Vanura Uranium (“Vanura”), on the theory that Micro, having purchased the assets of Vanura, was not only liable for Vanura’s liabilities but also subject to jurisdiction where Vanura would have been subject. The court ruled that where the theory of successor liability is based on the successor’s purchase of the predecessor’s assets, the successor is not rendered subject to jurisdiction where the predecessor would have been subject in such a suit. The court, however, explicitly contrasted successor liability based on purchase of the predecessor’s assets with successor liability based on a merger with the predecessor, stating, “The insurmountable hurdle in plaintiff’s path [in seeking to subject the defendant to New York jurisdiction on the basis of its successor liability] is the sound distinction in law between a statutory merger and an acquisition of assets.” Schenin, 272 F. Supp. at 526. The court observed that the plaintiff “has sought through ambiguous rhetoric and disproven implication” to represent Micro’s acquisition as a merger, but had “failed to adduce a single shred of probative evidence that the transaction . . . was anything but an acquisition of assets. . . .” Id.

In other words, while the holding of Semenetz was that successor liability on the basis of the “product line” or “continuing enterprise” exceptions to successor-nonliability does not confer on the successor the jurisdictional status of the predecessor, the decision explicitly recognizes that the rule is otherwise when the successor status results from merger with the predecessor.

As noted, Judge Chin cites a sentence from BRG, which relies on, and substantially quotes from, the Semenetz precedent. In BRG, the plaintiff brought a New York suit against Valero Energy Corporation (“Valero”), a foreign corporation, asserting liability to recover the costs of remediating environmental contamination that was caused by Valero’s “predecessor[] in interest.” BRG, 82 N.Y.S.3d at 798. The court of first instance had denied Valero’s motion to dismiss for lack of jurisdiction, reasoning that Valero “was the successor in interest to a company that was itself subject to personal jurisdiction in New York.” Id. at 799. The Appellate Division reversed explicitly basing its decision on the Semenetz precedent, ruling that while Valero’s status as a successor might make it liable for its predecessor’s tort, its successor status did not subject it to personal jurisdiction in New York merely because its predecessor was so subject. BRG did not explain the basis for deeming Valero a successor in interest to the tortfeasor. The decision says nothing to suggest that Valero had merged with the predecessor. Because (a) the BRGcourt deemed the Semenetz precedent to be controlling, (b) the Semenetz court had distinguished successorship resulting from merger from the successorship involved in that case, and (c) nothing in the BRG decision indicated that the defendant’s successor status resulted from merger with the obligor, BRG’s ruling expressed in its quotation from Semenetz presumably did not involve successorship through merger. If it had, the BRG ruling would have been contrary to the rule expressed by the Semenetz decision, which BRG purported to follow. Indeed, BRG recognized as per Semenetz that in some circumstances (unlike the facts of BRG) a successor entity does “inherit jurisdictional status.” Id. at 799. BRGtherefore does not support the proposition that a successor by merger is not subject to jurisdiction where its merger partner’s actions would have subjected the merger partner to jurisdiction for breach of its contracts.

Judge Chin may have been misled by the BRG‘s slight misquotation of the Semenetz precedent. In its critical sentence that was quoted in the BRG opinion, the Semenetz court had made clear that it was “[t]he `product line’ and `continuing enterprise’ exceptions to the [nonliability of a successor that] deal with the concept of tort liability, not jurisdiction.” Semenetz, 801 N.Y.S.2d at 81. In quoting that sentence from Semenetz, however, BRG changed Semenetz‘s sentence to say, “The `successor liability rule[s]’ deal with the concept of tort liability, not jurisdiction.” BRG, 82 N.Y.S.3d at 799 (emphasis added). The alteration of the Semenetz sentence, if considered out of context, could suggest that successor liability never entails successorship to the predecessor’s jurisdictional status. If that had been BRG‘s meaning, its rule would have been contrary to the Semenetzholding. BRG, however, made clear that it was adopting Semenetz‘s rationale. Id.(“Plaintiffs do not challenge Semenetz‘s holding or its rationale, nor do they ask us to chart our own course on this novel and unsettled jurisdictional issue.”).

Nor is Judge Chin’s speculation supported by the Seventh Circuit case he cites. See Purdue Research Found. v. Sanofi-Synthelabo, S.A., 338 F.3d 773 (7th Cir. 2003). In Purdue Research, the plaintiff sued a French corporation in Indiana for breach of contract. The plaintiff’s contract, however, was not originally with the French defendant. The contract had been assigned by the plaintiff’s contractual counterpart to the French defendant in an asset purchase. The plaintiff sought to justify subjecting the French defendant to Indiana jurisdiction on a successor-in-interest theory by reason of its purchase of the contract in question from an entity that was subject to suit in Indiana. The Seventh Circuit upheld the District Court’s dismissal for want of personal jurisdiction in Indiana. The court ruled that the French defendant’s purchase of limited assets including the breached contract from an entity that was subject to suit in Indiana did not render it subject to Indiana jurisdiction as a successor. The court explicitly noted that the defendant “did not merge with [the seller of the assets] nor did it purchase all (or substantially all) of [the seller’s] assets,” implying that the result would be otherwise had either of these been true. Id. at 785.

CONCLUSION

For the reasons set forth above, we hereby (i) REVERSE the Indiana district court’s ruling that it lacked personal jurisdiction over Defendant; (ii) AFFIRM the New York district court’s denial of Plaintiff’s motion for retransfer to Indiana (treating the transfer order as one made under § 1404(a) of Title 28, rather than under § 1631); (iii) VACATE the judgment rendered in favor of Defendant on the basis of the untimeliness of the suit as judged under New York choice of law rules; and (iv) REMAND to the district court to adjudicate under the choice-of-law rules of Indiana.

CHIN, Circuit Judge, concurring:

I concur in the majority’s decision to affirm the denial of the motion to retransfer, and agree that the case should be remanded for further proceedings.

I am not persuaded, on the present record, that Indiana had specific personal jurisdiction over Bank of America. Bank of America’s contacts with respect to the relevant contracts were in New York only. The MLPA and PSA were negotiated, drafted, and executed in New York, and include New York choice-of-law clauses. Bank of America is subject to personal jurisdiction in Indiana, if at all, only because it is a successor-by-merger to LaSalle. While a successor-by-merger is “subject to all the liabilities of the acquired compan[y],” James D. Cox & Thomas Lee Hazen, 4 Treatise of the Law of Corporations § 22:8 (3d ed.), it is not always the case that an acquired company’s jurisdictional contacts can be imputed to the successor-by-merger. Even though Bank of America is liable on the agreements, that does not mean that Bank of America is necessarily subject to suit in Indiana because of LaSalle’s jurisdictional contacts. Compare BRG Corp. v. Chevron U.S.A., Inc., 82 N.Y.S.3d 798, 799 (App. Div. 4th Dep’t 2018) (“The successor liability rule[s] deal with the concept of tort liability, not jurisdiction. When and if [successor liability] is found applicable, the corporate successor would be subject to liability for the torts of its predecessor in any forum having in personam jurisdiction over the successor, but the [successor liability rules] do not and cannot confer such jurisdiction over the successor in the first instance.” (alteration in original) (internal quotation marks omitted)), with Purdue Research Found. v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 783 (7th Cir. 2003) (recognizing a predecessor’s jurisdictional contacts may be imputed to a successor corporation where the successor corporation is a mere continuation of the predecessor or where the forum’s successor liability laws would hold the successor liable for the predecessor’s actions).

I do not believe, on the record before us, that it is clear that Indiana has specific personal jurisdiction over Bank of America. I would, therefore, leave the question of personal jurisdiction to the district court in the first instance to decide after it determines the choice of law question. See 4A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1069.4 (4th ed. April 2018 Update) (“[S]pecial problems are presented when [personal] jurisdiction over a defendant is justified by a related entity’s contacts with the forum. . . . The very nature of these often difficult issues makes their resolution extremely fact dependent.”).

Accordingly, I would remand for the district court to resolve the question of specific personal jurisdiction, in addition to the choice-of-law and statute of limitations issues.

[1] LaSalle Bank later merged with Defendant Bank of America.

[2] Citigroup Commercial Mortgage Securities, Inc. was the purchaser under the MLPA for the benefit of the Trust.

[3] “Each related Mortgage is a valid and enforceable first lien on the related Mortgaged Property subject only to . . . [exceptions not relevant here] and the following title exceptions . . . (b) covenants, conditions and restrictions, rights of way, easements and other matters of public record, none of which,individually or in the aggregate, materially and adversely interferes with the current use of the Mortgaged Property or the security intended to be provided by such Mortgage or with the Mortgagor’s ability to pay its obligations under the Mortgage Loan when they become due or materially and adversely affects the value of the Mortgaged Property. . . .” App. 93. (emphasis added)

[4] 28 U.S.C. § 1631 provides for transfers to cure want of jurisdiction, as follows:

Whenever a civil action is filed in a court . . . and that court finds that there is a want of jurisdiction, the court shall, if it is in the interest of justice, transfer such action or appeal to any other such court . . . in which the action or appeal could have been brought at the time it was filed or noticed, and the action or appeal shall proceed as if it had been filed in or noticed for the court to which it is transferred on the date upon which it was actually filed in or noticed for the court from which it is transferred.

[5] Under the reasonableness inquiry, we evaluate the following factors: (1) the burden on the defendant, (2) the interests of the forum state, (3) the plaintiff’s interest in obtaining relief, (4) the “interstate judicial system’s interest in obtaining the most efficient resolution of controversies,” and (5) “the shared interests of the several States in furthering fundamental substantive social policies.” Asahi,480 U.S. at 113 (citations omitted). Although we consider a variety of factors, “the `primary concern’ is `the burden on the defendant.'” Bristol-Myers Squibb, 137 S. Ct. at 1780 (quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980)).

[6] “For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought or to any district or division to which all parties have consented.” 28 U.S.C. § 1404(a). While the Indiana district court expressly relied on § 1631 as authority for the transfer, see U.S. Bank Nat’l Ass’n v. Bank of America N.A., No. 1:14-cv-01492, 2015 WL 5971126, at *10 (S.D. Ind. Oct. 14, 2015) (“[T]he Court concludes that it does not have personal jurisdiction over Bank of America. As a result, the Court TRANSFERS this case to the Southern District of New York, pursuant to 28 U.S.C. § 1631.”), the court also observed, although making no findings relating to the convenience of the parties and witnesses or the interest of justice, that transfer would also be appropriate under § 1404(a). Id.

 

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Posted in STOP FORECLOSURE FRAUD0 Comments

Former Fannie Mae employee found guilty of making millions on shady foreclosure sales

Former Fannie Mae employee found guilty of making millions on shady foreclosure sales

Ordered to forfeit a property she bought with a duffle bag full of cash

Housing Wire-

A former Fannie Mae employee is now facing 40 years in prison after being found guilty of accepting millions of dollars in bribes and kickbacks in exchange for selling Fannie Mae-owned foreclosures for less than market value.

Back in January 2018, Shirene Hernandez was charged with accepting bribes for steering foreclosures to certain brokers and even allegedly buying some foreclosures herself at below market value.

And this week, Hernandez was found guilty of two wire fraud counts that involved the deprivation of honest services.

[HOUSING WIRE]

© 2010-19 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.



Posted in STOP FORECLOSURE FRAUD0 Comments

TFH 2/17/19 | Special Robo-Signer Exclusive Expose (January 12, 2014 Rebroadcast)

TFH 2/17/19 | Special Robo-Signer Exclusive Expose (January 12, 2014 Rebroadcast)

COMING TO YOU LIVE DIRECTLY FROM THE DUBIN LAW OFFICES AT HARBOR COURT, DOWNTOWN HONOLULU, HAWAII

LISTEN TO KHVH-AM (830 ON THE AM RADIO DIAL)

ALSO AVAILABLE ON KHVH-AM ON THE iHEART APP ON THE INTERNET

.

Sunday – February 17, 2019

Special Robo-Signer Exclusive Expose (January 12, 2014 Rebroadcast)

.

 ———————

 

This Sunday’s live broadcast first aired on The Foreclosure Hour when the nationwide fraudulent signing of mortgage assignments/notarizations and note allonges was first exposed due to the superior lawyering of several Florida attorneys.

Nevertheless, although at first drawing the attention of some astute judges, such as the late Judge Arthur Schack in New York, judicial attention to such outright forgeries and the falsely recorded and the falsely sworn and falsely notarized documents in court rapidly decreased as judges are said to have erroneously concluded that the infamous AG Settlement years ago had somehow compensated borrowers for such false loan documentation, which it obviously however did not.

The major investment banks then assured the AGs that they would correct and remove the fraudulent mortgage assignments and allonges. Of course, they did not, only compounding their fraud, this time also waged against the AGs.

As a follow-up to Professor Campbell’s discussion on our show last week, it seems appropriate to again place focus of all of the false documents still being allowed to be filed in court, lest we forget the incredibly blatant fraud perpetrated through robo-signing not only upon America’s mortgage borrowers, but also upon our courts, which has been instrumental in covering up what we and others have called “The Great Deception”.

And there is no better way of doing so than revisiting the startling video-taped admissions, exclusively broadcast by The Foreclosure Hour in 2014 despite constant threats against me personally of lawsuits, of some of America’s most prolific “robos,” as I like to call them, employed by one of America’s leading past false document manufacturers.

You may also view these exclusive videos on our website at www.foreclosurehour.com.

The next time your foreclosure Judge says he or she does not understand the significance of robo-signing as fraud and as perjury waged against borrowers and courts and recording offices, please ask your foreclosure Judge to view these videos.

Gary

———————

GARY VICTOR DUBIN
Dubin Law Offices
Suite 3100, Harbor Court
55 Merchant Street
Honolulu, Hawaii 96813
Office: (808) 537-2300
Cellular: (808) 392-9191
Facsimile: (808) 523-7733
Email: gdubin@dubinlaw.net.

Host: Gary Dubin Co-Host: John Waihee

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CALL IN AT (808) 521-8383

Have your questions answered on the air.

Submit questions to info@foreclosurehour.com

The Foreclosure Hour is a public service of the Dubin Law Offices

Past Broadcasts

EVERY SUNDAY
3:00 PM HAWAII 
5:00 PM PACIFIC
8:00 PM EASTERN
ON KHVH-AM
(830 ON THE DIAL)
AND ON
iHEART RADIO

The Foreclosure Hour 12

 

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Posted in STOP FORECLOSURE FRAUD0 Comments

Attorney Mark Stopa says he never wants to practice law again but the Florida Bar won’t let him retire

Attorney Mark Stopa says he never wants to practice law again but the Florida Bar won’t let him retire

Embattled foreclosure defense attorney Mark Stopa is seeking “permanent retirement,” in part to head of a hearing on new complaints against him.

Tampabay-

For months, embattled foreclosure defense attorney Mark Stopa fought for the right to keep practicing law.

Stopa now says he never wants to practice again — but can’t retire because the Florida Bar won’t let him.

In an unusual petition filed this month with the Florida Supreme Court, Stopa is seeking “permanent retirement” with no leave to apply for readmission to the Bar. The move is aimed in part at heading off a Jan. 22-24 hearing on several new Bar complaints against him that include allegations of fraud.

[TAMPABAY]

image: Mark-Stopa-DOUGLAS-R.-CLIFFORD-TIMES

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Posted in STOP FORECLOSURE FRAUD4 Comments

McGreevey wins: Veteran who alleged illegal foreclosure gets $125,000 settlement

McGreevey wins: Veteran who alleged illegal foreclosure gets $125,000 settlement

Oregon Live-

When Marine Jacob McGreevey returned home to Vancouver after four years in Afghanistan and Iraq war zones, the fight wasn’t over. No, McGreevey launched into more combat, this time against the company he claimed illegally foreclosed on his house.

This month, the Marine won. But he did so only after a powerful ally — the U.S. Department of Justice — joined the fight on his side.

New Jersey based PHH Mortgage last week agreed to pay $125,000 each to McGreevy and five other servicemembers it foreclosed on. The firm did so after the U.S. Department of Justice sued it for violating federal law when it grabbed the servicemembers’ homes.

[OREGON LIVE]

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Posted in STOP FORECLOSURE FRAUD1 Comment

Venezia v. JP MORGAN MORTGAGE ACQUISITION CORP | FL 4DCA – Because the voluntary dismissal rendered appellants the prevailing party for purposes of attorney’s fees, we reverse.

Venezia v. JP MORGAN MORTGAGE ACQUISITION CORP | FL 4DCA – Because the voluntary dismissal rendered appellants the prevailing party for purposes of attorney’s fees, we reverse.

 

GEORGE P. VENEZIA and VICKY VENEZIA, Appellants,
v.
JP MORGAN MORTGAGE ACQUISITION CORP., Appellee.

No. 4D18-1278.
District Court of Appeal of Florida, Fourth District.
February 6, 2019.
Appeal from the Circuit Court for the Fifteenth Judicial Circuit, Palm Beach County; Cymonie Rowe, Judge; L.T. Case No. 50-2014-CA-009993-XXXX-MB.

W. Trent Steele of Steele Law, Hobe Sound, for appellants.

Joseph B. Towne of Lender Legal Services, LLC, Orlando, for appellee.

PER CURIAM.

Appellants appeal an order denying their motion for attorney’s fees following JP Morgan’s voluntary dismissal of its foreclosure action. Because the voluntary dismissal rendered appellants the prevailing party for purposes of attorney’s fees, we reverse.

JP Morgan filed a foreclosure complaint against appellants. JP Morgan alleged it was entitled to enforce the note as the holder because it had physical possession of the note endorsed in blank. JP Morgan further alleged it was entitled to fees under the note and mortgage. A copy of the note attached to the complaint listed HomeBanc as the original lender and contained an endorsement in blank by HomeBanc.

Appellants filed an answer, raising standing as an affirmative defense. They also asserted entitlement to attorney’s fees.

After JP Morgan voluntarily dismissed its case without prejudice, appellants moved for attorney’s fees pursuant to the mortgage and section 57.105(7), Florida Statutes. JP Morgan opposed the motion, arguing that appellants could not recover fees because they denied JP Morgan was a party to the contract rather than proving JP Morgan was a party to the contract. During a hearing on the motion, appellants argued that “there’s no requirement on us to prove anything against—of the plaintiff’s case.” After the hearing, the trial court denied appellants’ motion for fees.

“[W]e review de novo a trial court’s final judgment determining entitlement to attorney’s fees based on a fee provision in the mortgage and the application of section 57.105(7).” Bank of New York Mellon Tr. Co., N.A. v. Fitzgerald, 215 So. 3d 116, 118 (Fla. 3d DCA 2017). Under section 57.105(7), unilateral attorney’s fees provisions in a contract are deemed reciprocal. See § 57.105(7), Fla. Stat. (2018). The entitlement to fees under section 57.105(7) applies when the party seeking fees prevails and is a party to the contract containing the fee provision. Fla. Cmty. Bank, N.A. v. Red Rd. Residential, LLC, 197 So. 3d 1112, 1115 (Fla. 3d DCA 2016).

In denying the motion for fees, the trial court relied on Nationstar Mortgage LLC v. Glass, 219 So. 3d 896 (Fla. 4th DCA 2017), quashed, SC17-1387, 2019 WL 98152 (Fla. Jan. 4, 2019). In Glass, after the bank voluntarily dismissed its appeal, this court denied the homeowner’s motion for appellate attorney’s fees because she prevailed on her lack of standing argument in the trial court.

During the pendency of this appeal, the Florida Supreme Court quashed Glassbecause a voluntary dismissal renders the opposing party the prevailing party for purposes of appellate attorney’s fees and because the bank maintained its right to enforce the contract in its appeal until the dismissal. 2019 WL 98152, at *2. The supreme court found that the determinative issue was the bank’s voluntary dismissal of the appeal, not the homeowner’s successful dismissal of the complaint at trial. Id. at *2. The supreme court recognized that while a party cannot recover appellate “attorney’s fees under a contract that has been found to have never existed,” a party can recover attorney’s fees “under a prevailing-party attorney’s fee provision contained therein even though the contract is rescinded or held to be unenforceable.” Id. at *4 (quoting Katz v. Van Der Noord, 546 So. 2d 1047, 1049 (Fla. 1989)). The supreme court concluded that a “contract clearly existed” in that case and that, even if the homeowner prevailed on her standing argument, the contract was merely unenforceable. Id.

In Wells Fargo Bank, N.A. v. Elkind, 254 So. 3d 1153, 1154 (Fla. 4th DCA 2018), this court held that a borrower who had raised lack of standing as an affirmative defense was entitled to prevailing party attorney’s fees following the bank’s voluntary dismissal. This court reasoned that “[s]tanding was never litigated below and the trial court never made a finding that the bank or the borrower were not parties to the contract” and thus, “the borrower did not prevail on his argument that dismissal was required because the bank lacked standing to sue on the contract.” Id. See also Rodriguez v. Wilmington Savings Fund Society, FSB as Trustee for Stanwich Mortgage Loan Trust A, 43 Fla. L. Weekly D2742 (Fla. 4th DCA Dec. 12, 2018) (finding that a borrower who raised lack of standing as an affirmative defense was entitled to prevailing party attorney’s fees following the bank’s voluntary dismissal because “the parties never litigated the merits of [the bank’s] standing below, and the trial court never made a finding that the Borrower was not a party to the note or mortgage”); Harris v. Bank of New York Mellon, 44 Fla. L. Weekly D141 (Fla. 2d DCA Dec. 28, 2018) (stating that “proof of standing is not required to establish a contractual relationship between the parties”).

In the instant case, JP Morgan voluntarily dismissed its case and JP Morgan alleged in its complaint that it was entitled to enforce the note and mortgage. Significantly, there was never a judicial determination by the trial court that JP Morgan or appellants were not a party to the contract. Based on the foregoing authority, appellants were entitled to attorney’s fees. We therefore reverse and remand for the trial court to grant attorney’s fees and determine the reasonableness of the amounts sought.

Reversed and remanded with instructions.

WARNER and LEVINE, JJ., concur.

CIKLIN, J., dissenting with opinion.

CIKLIN, J., dissenting.

I respectfully disagree with the majority and would affirm.

In my opinion, the borrowers not only failed to prove entitlement to fees but went so far as to deny that they were required to offer any and all types of proof whatsoever which I believe § 57.105 requires as a prerequisite to being awarded reciprocal fees.

Not final until disposition of timely filed motion for rehearing.

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Posted in STOP FORECLOSURE FRAUD0 Comments

Roussell v. BANK OF NEW YORK MELLON | FL 4DCA- AFFIDAVIT CHAOS, there is a conflict between the printout and the affidavit regarding the entity from whom Nationstar acquired the loan for servicing. A notation on the printout indicated that Nationstar acquired the loan from Specialized Loan Servicing, while the affidavit stated that Nationstar acquired the loan from Green Tree Servicing.

Roussell v. BANK OF NEW YORK MELLON | FL 4DCA- AFFIDAVIT CHAOS, there is a conflict between the printout and the affidavit regarding the entity from whom Nationstar acquired the loan for servicing. A notation on the printout indicated that Nationstar acquired the loan from Specialized Loan Servicing, while the affidavit stated that Nationstar acquired the loan from Green Tree Servicing.

 

SAMANTHA ROUSSELL, Appellant,
v.
THE BANK OF NEW YORK MELLON, f/k/a THE BANK OF NEW YORK AS SUCCESSOR IN INTEREST TO JP MORGAN CHASE BANK, N.A. AS TRUSTEE FOR STRUCTURED ASSET MORTGAGE INVESTMENTS II TRUST 2006-AR7 MORTGAGE PASS-THROUGH CERTIFICATES SERIES 2006-AR7, Appellee.

No. 4D17-3944.
District Court of Appeal of Florida, Fourth District.
February 6, 2019.
Appeal from the Circuit Court for the Seventeenth Judicial Circuit, Broward County; Joel T. Lazarus, Senior Judge; L.T. Case No. 2017-CA-006417 (11).

Samantha V. Roussell, Doral, pro se.

Nancy M. Wallace of Akerman LLP, Tallahassee, and William P. Heller of Akerman LLP, Fort Lauderdale, for appellee.

PER CURIAM.

A homeowner appeals a final judgment of foreclosure entered in favor of The Bank of New York Mellon based on the bank’s motion for summary judgment. Because material issues of fact remain as to standing and the condition precedent of notice, we reverse and remand for further proceedings.

The bank filed a complaint against the homeowner for mortgage foreclosure and to reestablish a lost note. A copy of the note attached to the complaint listed America’s Wholesale Lender as the lender and did not contain any endorsements. The homeowner filed an answer and affirmative defenses, arguing that the bank lacked standing and failed to comply with the condition precedent of adequate notice concerning the default and acceleration.

The bank filed a lost note affidavit from an employee of the servicer, Nationstar Mortgage, LLC. The affidavit stated that the bank acquired the loan from the original lender, America’s Wholesale. The affidavit listed several transfers of servicing rights, ending with Nationstar. According to the affidavit, “[t]he Note was lost by the prior holder of the note, and prior to the transfer to Nationstar.”

The bank moved for summary judgment. The homeowner opposed the motion, arguing that the bank lacked standing and failed to comply with the condition precedent of notice. After a hearing, the trial court entered a final judgment of foreclosure.

An order granting summary judgment is reviewed de novo. Volusia Cty. v. Aberdeen at Ormond Beach, L.P., 760 So. 2d 126, 130 (Fla. 2000). “Summary judgment cannot be granted unless the pleadings, depositions, answers to interrogatories, and admissions on file together with affidavits, if any, conclusively show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Frost v. Regions Bank, 15 So. 3d 905, 906 (Fla. 4th DCA 2009). “It is the moving party’s burden to show, conclusively, the absence of any genuine issue of material fact.” Patel v. Aurora Loan Servs., LLC, 162 So. 3d 23, 24 (Fla. 4th DCA 2014).

The homeowner raised the issue of standing as an affirmative defense. “Whether a party has standing to bring an action is a question of law to be reviewed de novo.” Joseph v. BAC Home Loans Servicing, LP, 155 So. 3d 444, 446 (Fla. 4th DCA 2015). A party seeking to enforce a lost note must establish, inter alia, that it was “entitled to enforce the instrument when loss of possession occurred, or has directly or indirectly acquired ownership of the instrument from a person who was entitled to enforce the instrument when loss of possession occurred.” § 673.3091(1)(a), Fla. Stat. (2017).

The bank failed to satisfy the requirements of section 673.3091(1)(a). The affidavit from the bank’s servicer stated that “[t]he Note was lost by the prior holder of the note, and prior to the transfer to Nationstar,” the current servicer. Notably, the affidavit is unclear as to who lost the note because the affidavit does not state the identity of the prior noteholder. One could infer the prior noteholder was the servicer immediately prior to Nationstar, Green Tree Servicing LLC. However, it is also possible that the original lender, America’s Wholesale, was the prior holder of the note.

A computer screenshot attached as an exhibit to the affidavit purported to evidence the bank’s receipt of the note from America’s Wholesale. However, the screenshot did not contain any reference to America’s Wholesale. Additionally, the screenshot reflected an assignment by EMC Mortgage Corporation, but there is no indication in the affidavit or elsewhere in the record of this entity’s relation to the note and mortgage. Further, the screenshot listed Countrywide as the prior servicer, but the bank’s affidavit, which allegedly listed all prior servicers, made no mention of Countrywide.

Another exhibit to the affidavit, a computer printout, purported to show that the prior holder of the note was in possession of the note when the loss occurred. However, nothing in the exhibit indicates the identity of the prior holder of the note or when the loss occurred. Further, there is a conflict between the printout and the affidavit regarding the entity from whom Nationstar acquired the loan for servicing. A notation on the printout indicated that Nationstar acquired the loan from Specialized Loan Servicing, while the affidavit stated that Nationstar acquired the loan from Green Tree Servicing. These inconsistencies and conflicts, coupled with the vagueness regarding who lost the note, give rise to material issues of fact as to the bank’s standing.

Material issues of fact also exist as to the bank’s compliance with conditions precedent. “A plaintiff . . . must either factually refute any alleged affirmative defenses or establish that they are legally insufficient to defeat summary judgment before being entitled to a summary judgment of foreclosure.” Patel, 162 So. 3d at 24. The homeowner raised a legally sufficient defense by alleging that the bank failed to comply with the condition precedent of notice. See Fla. R. Civ. P. 1.120(c). The bank did not factually refute this defense. As such, summary judgment must be reversed and the case remanded for further proceedings. See Patel, 162 So. 3d at 25Frost, 15 So. 3d at 906.

Reversed and remanded for further proceedings.

WARNER, CIKLIN and LEVINE, JJ., concur.

Not final until disposition of timely filed motion for rehearing.

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Posted in STOP FORECLOSURE FRAUD0 Comments

Grosso v. HSBC BANK USA, NA | FL 4DCA- We reverse because the voluntary dismissal rendered the homeowner the prevailing party for purposes of attorney’s fees.

Grosso v. HSBC BANK USA, NA | FL 4DCA- We reverse because the voluntary dismissal rendered the homeowner the prevailing party for purposes of attorney’s fees.

DOMENIC GROSSO a/k/a DOMENIC L. GROSSO, Appellant,
v.
HSBC BANK USA, N.A., AS TRUSTEE ON BEHALF OF ACE SECURITIES CORP., Appellee.

No. 4D17-2874.
District Court of Appeal of Florida, Fourth District.

February 6, 2019.
Appeal from the Circuit Court for the Fifteenth Judicial Circuit, Palm Beach County; Susan R. Lubitz, Senior Judge; L.T. Case No. 50-2012-CA-005882-XXXX-MB.

Michael Vater, Kendrick Almaguer, and Peter Ticktin of The Ticktin Law Group, PLLC, Deerfield Beach, for appellant.

Kimberly S. Mello and Joseph H. Picone of Greenberg Traurig, P.A., Tampa, for appellee.

PER CURIAM.

The homeowner appeals an order denying his motion for attorney’s fees following the bank’s voluntary dismissal of its foreclosure action. We reverse because the voluntary dismissal rendered the homeowner the prevailing party for purposes of attorney’s fees.

HSBC Bank filed a foreclosure complaint against the homeowner, alleging it was the owner and holder of the note and mortgage. HSBC further alleged it was entitled to attorney’s fees under the contract. A copy of the note attached to the complaint listed DB Home Lending LLC as the lender and the homeowner as the borrower. The note contained a specific endorsement by DB Home Lending to HSBC.

The homeowner filed an answer and affirmative defenses. In his affirmative defenses, the homeowner stated that the bank lacked standing, the bank did not have legal rights to enforce the note and mortgage, and the endorsement on the note was not valid and authentic. The homeowner also requested attorney’s fees.

A year after filing the complaint, HSBC voluntarily dismissed the case without prejudice. The homeowner moved for prevailing party attorney’s fees under the contract. Specifically, the homeowner alleged in the motion for attorney’s fees that “[t]he Mortgage that was the subject matter of this lawsuit provided for costs and expenses if the Note holder was to enforce the Note” and that section 57.105(7), Florida Statutes, made this provision applicable to the homeowner. HSBC opposed the motion, arguing that the homeowner’s lack of standing defense precluded him from recovering fees. After a hearing, the trial court denied the homeowner’s motion, finding that he failed to prove that he and HSBC were parties to the contract.

A trial court’s determination of whether a party is entitled to attorney’s fees based on a fee provision in the mortgage is reviewed de novo. Bank of N.Y. Mellon Tr. Co., N.A. v. Fitzgerald, 215 So. 3d 116, 118 (Fla. 3d DCA 2017). Section 57.105(7), Florida Statutes, operates to make a unilateral attorney’s fees provision in a mortgage contract reciprocal. In order for a prevailing party to avail itself of section 57.105(7), both the movant and the opponent must be parties to the contract containing the fee provision. Madl v. Wells Fargo Bank, N.A., 244 So. 3d 1134, 1138 (Fla. 5th DCA 2017).

In denying the motion for fees, the trial court relied on Florida Community Bank, N.A. v. Red Road Residential, LLC, 197 So. 3d 1112 (Fla. 3d DCA 2016). In Red Road Residential, the borrower maintained throughout the litigation, including in sworn discovery, that she never signed the mortgage. Id. at 1114. Rather than litigating its claim against the borrower, the bank ultimately dismissed her from the lawsuit with prejudice. Id. Unlike Red Road Residential, the instant case did not involve any sworn discovery and the dismissal was without prejudice.

In Glass v. Nationstar Mortgage, LLC, No. SC17-1387, 2019 WL 98152 (Fla. Jan. 4, 2019), the Florida Supreme Court held that a homeowner was entitled to prevailing party appellate attorney’s fees following the bank’s voluntary dismissal of its appeal, even though the homeowner had prevailed in the trial court. The supreme court found that the voluntary dismissal rendered the homeowner a prevailing party and that the bank had maintained its right to enforce the contract on appeal until the dismissal. Although the trial court’s dismissal was based on four possible grounds, “[e]ven if the trial court’s dismissal was based on lack of standing, it was not based on a finding that [the bank] did not hold the note but on a finding that [the bank’s] complaint was legally insufficient for failure to properly demonstrate the chain of title.” Id. at *4. The supreme court recognized that there is a difference between a non-existent contract, under which a party cannot recover fees, and a contract which is rescinded or unenforceable, under which a party can recover fees. Because a contract “clearly existed” in Glass but was merely unenforceable, the homeowner was entitled to appellate attorney’s fees. Id.

We find instructive Rodriguez v. Wilmington Savings Fund Society, FSB as Trustee for Stanwich Mortgage Loan Trust A, No. 4D18-310, 2018 WL 6528491 (Fla. 4th DCA Dec. 12, 2018). In that case, a borrower was found to be entitled to prevailing party fees after the bank’s voluntary dismissal even though she had challenged the bank’s standing throughout the lawsuit. This court found that “the parties never litigated the merits of [the bank’s] standing below, and the trial court never made a finding that the Borrower was not a party to the note or mortgage.” Id. at *2. Because the bank voluntarily dismissed the action without the trial court resolving the standing issue on the merits, the borrower was entitled to fees. Id. See also Wells Fargo Bank, N.A. v. Elkind, 254 So. 3d 1153, 1154 (Fla. 4th DCA 2018) (finding borrower who raised lack of standing as affirmative defense was entitled to prevailing party attorney’s fees following the bank’s voluntary dismissal because the parties never litigated standing and “the trial court never made a finding that the bank or the borrower were not parties to the contract”); Harris v. Bank of N.Y. Mellon, No. 2D17-2555, 2018 WL 6816177, at *4 (Fla. 2d DCA Dec. 28, 2018) (“[P]roof of standing is not required to establish a contractual relationship between the parties.”).

In this case, HSBC voluntarily dismissed its complaint, thus rendering the homeowner the prevailing party for purposes of attorney’s fees. Notably, the trial court never made a judicial determination that HSBC or the homeowner was not a party to the contract. Additionally, HSBC maintained in its complaint a right to enforce the contract. Significantly, the copy of the note attached to the complaint contained a specific endorsement by the original lender to HSBC and listed the homeowner as the borrower. This should be sufficient record evidence to demonstrate that HSBC and the homeowner were parties to the underlying contract so as to justify attorney’s fees pursuant to section 57.105(7). See Mihalyi v. LaSalle Bank, N.A., 162 So. 3d 113, 115 (Fla. 4th DCA 2014) (implying that an evidentiary hearing is required for determining the amount of fees, not for determining entitlement to fees); Hensley v. Eckerhart, 461 U.S. 424, 437 (1983)(“A request for attorney’s fees should not result in a second major litigation.”).

The cases the dissent relies on are distinguishable, as none involve a voluntary dismissal without prejudice like the instant case. The dissent attempts to distinguish Rodriguez and Elkind by stating that those cases dealt with judicial estoppel or prevailing parties, and not with the burden for attorney’s fees. But cases with the same facts should get the same result. A voluntary dismissal, without a judicial determination, should allow reliance on the reciprocal attorney’s fees provision of section 57.105(7).

Based on the foregoing authority, the homeowner was entitled to prevailing party attorney’s fees. We reverse and remand for the trial court to grant attorney’s fees and determine the reasonableness of the amount sought.

Reversed and remanded with instructions.

LEVINE and FORST, JJ., concur.

CONNER, J., dissents with opinion.

CONNER, J., dissenting.

I respectfully dissent for two reasons: (1) the trial court properly determined that no evidence was presented by the homeowner establishing the homeowner and HSBC were parties to a contract with a fee provision; and (2) the case law relied upon by the majority is inapplicable to the specific argument made by HSBC in the trial court, which the trial court found to be dispositive.

Regarding the case law relied upon by the majority, I disagree that the recent supreme court opinion in Glass v. Nationstar Mortgage, LLC, No. SC17-1387, 2019 WL 98152 (Fla. Jan. 4, 2019), controls this case for the simple reason that Glass addressed an award of appellate attorney’s fees, whereas, the instant case involves an award of attorney’s fees at the trial level. More importantly, in Glass,the supreme court did not address the specific argument raised by HSBC, which the trial court found to be dispositive. Additionally, our recent opinions in Rodriguez v. Wilmington Savings Fund Society, FSB as Trustee for Stanwich Mortgage Loan Trust A, No. 4D18-310, 2018 WL 6528491 (Fla. 4th DCA Dec. 12, 2018) and Wells Fargo Bank, N.A. v. Elkind, 254 So. 3d 1153 (Fla. 4th DCA 2018), are likewise inapposite because those opinions address issues concerning determination of a prevailing party and judicial estoppel, but they do not address the specific argument raised in the trial court by HSBC as to who has the burden of proof regarding a contractual relationship.

I respectfully submit the case law on the issue of attorney’s fees after a voluntary dismissal is confusing. In part, this is because appellate courts have frequently failed to articulate with precision the distinction in law between who is a “prevailing party” in litigation and who is a “party” to a contract. Moreover, standing, in the context of foreclosures, can be confusing because there are two phases of standing (at the time suit is filed and at the time of trial), which can be pertinent to determining who prevails on a legal issue. Additionally, the case law frequently fails to emphasize that promissory notes are a special specie of contracts, involving a special set of legal principles. For example, a person who does not properly obtain ownership a blank indorsed note can enforce it because he or she is in possession of it. See § 673.3011, Fla. Stat. (2018). Presumably, enforcement of the note with an attorney fee provision allows such possessor to also receive attorney’s fees. At first blush, it seems implausible to say a person who is not in the chain of ownership can be considered in privity with the maker of the note, however, simple possession of contract (the blank indorsed note) provides the privity, even though there is no meeting of the minds. I also submit that much of the confusion stems from a failure to properly analyze and apply legal principles regarding judicial estoppel.

The case law regarding entitlement to attorney’s fees after a voluntary dismissal has properly discerned that in terms of analysis, there is a difference between cases where the trial court has made evidentiary determinations regarding standing and cases where such evidentiary determinations have not been made. See Glass, 2019 WL 98152 at *3 (distinguishing the application of Bank of New York Mellon Trust Co. v. Fitzgerald, 215 So. 3d 116 (Fla. 3d DCA 2017) to the facts in Glass on the basis that there was an evidentiary determination in Fitzgerald that the bank did not prove it was a party to the contract); Rodriguez, 2018 WL 6528491 at *1; Elkind, 254 So. 3d at 1154. However, trial judges are frequently led down the wrong path by attorneys who fail to recognize the difference between who is the prevailing party in litigation and who has the burden of proof for entitlement to fees. More importantly, if a party to a suit seeks attorney’s fees pursuant to a contract clause, but is not in a contractual relationship with the opposing party in the suit from whom fees are sought, it is improper to award attorney’s fees based on the contract provision. Novastar Mortg., Inc. v. Strassburger, 855 So. 2d 130, 131 (Fla. 4th DCA 2003) (“Because the Strassburgers were not parties to the mortgage, they were not entitled to recover attorney’s fees under the mortgage.”); see also Gibson v. Courtois, 539 So. 2d 459, 460 (Fla. 1989) (determining that the fact that no contract was formed was dispositive on the issue of fees based on a contract provision); Fitzgerald, 215 So. 3d at 121 (“Because no contract existed between the parties, the trial court erred in awarding Fitzgerald attorney’s fees pursuant to section 57.105(7)[.]”); HFC Collection Ctr., Inc. v. Alexander, 190 So. 3d 1114, 1117 (Fla. 5th DCA 2016)(holding that a party cannot employ section 57.105(7) as a basis for fees after proving the opposing party never became a party to the contract).

In granting rehearing and denying fees to the homeowner in this case, the trial court relied upon Judge Scales’s insightful opinion in Florida Community Bank, N.A. v. Red Road Residential, LLC, 197 So. 3d 1112 (Fla. 3d DCA 2016). There, the bank filed a voluntary dismissal after one of the defendants, Rios, filed a motion for fees as a sanction under section 57.105(1), Florida Statutes. Id. at 1114. After the voluntary dismissal, Rios moved for fees under both section 57.105(1) and section 57.105(7) (the contract reciprocity fee provision). Id. The trial court denied fees under section 57.105(1), but granted fees under section 57.105(7). Id.Notably, Judge Scales observed that “[a]s section 57.105(7) plainly requires, to gain the benefit of its substantive entitlement to prevailing party fees, the party seeking the benefit of reciprocity must be a party to the contract containing the fee provision.” Id. at 1115 (emphasis added). After making the observation, the opinion goes on to explain:

Ada Rios does not appear to contest this proposition. Rather, in oral argument, she sought to distinguish the reasoning in Novastarv. Strassburger] by arguing that, in Novastar and other similar cases, the trial court actually adjudicated that the party seeking fees was not a party to the contract. Ada Rios points out that, in this case, the Bank voluntarily dismissed its lawsuit before such an adjudication occurred. Ada Rios argues that, as the prevailing party (by virtue of the Bank’s dismissal), she should be the beneficiary of the fact that her status as a mortgagor specifically was not adjudicated.

Not surprisingly, the Bank takes the contrary position in the form of this syllogism: because Ada Rios’s principal defense was that she was not a party to the mortgage, and because Ada prevailed, therefore, for the purposes of section 57.105(7), Ada Rios was not a party to the mortgage.

Regarding whether Ada Rios was a party to the mortgage, we note that both the Bank and Ada Rios take positions opposite to the positions they took before the Bank’s voluntary dismissal of Ada Rios from the lawsuit. While both the Bank and Ada Rios suggest that the other party should be estopped from making its respective argument about whether Ada was a party to the mortgage, we view the case not from the parties’ estoppel perspectives, but from the perspective of burden:

which party had the threshold burden of establishing whether Ada Rios was a party to the mortgage?

In our view, in order to avail herself of section 57.105(7)’s reciprocity, Ada Rios, as the prevailing party and movant seeking fees under the mortgage’s fee provision, had the threshold burden to plead and establish that she was a party to the mortgage containing the fee provision. Ada Rios’s status as the lawsuit’s prevailing party does not equate to Ada Rios being a mortgagor under the mortgage so as to trigger section 57.105(7)’s reciprocity provision.

Id. at 1115-16 (emphases added) (footnote omitted) (citations omitted). The Third District reversed the order awarding fees and remanded the case for further proceedings because “[t]he burden lies with the prevailing party to establish, as a threshold matter, her status as a party to the contract.” Id. at 1116. I agree with the Third District that in litigation seeking to enforce a contract (which includes foreclosure cases), establishing one party as the prevailing party in the suit does not necessarily establish that the prevailing party is also in a contractual relationship with the opposing party. See id.

In the trial court below, HSBC consistently argued in opposition to the homeowner’s motion for fees, as well as in support of its motion for rehearing, that in order to prove entitlement, the homeowner had the evidentiary burden of proving not only that the homeowner was the prevailing party, but also that the homeowner and HSBC were in a contractual relationship while the foreclosure suit was being litigated. The trial court granted fees to the homeowner, after initially determining that Red Road Residential was factually distinguishable from this case. HSBC moved for rehearing contending the trial court erred in its interpretation and application of Red Road Residential. After entertaining argument on the motion for rehearing, the trial court granted rehearing and specifically set a new evidentiary hearing on the fee motion. At the conclusion of the new hearing on the fee motion, the trial court found that

the Defendant [(the homeowner)] failed to prove that the Plaintiff [(HSBC)] and Defendant were parties to the note and mortgage. The Defendant’s Answer denied paragraphs 3, 4, & 5 of Plaintiff’s Complaint and Defendant’s Affirmative Defense asserted the Defendant [sic] did not have standing to file the Complaint. These assertions have not been overcome by evidence to show the Plaintiff and Defendants were parties to the Contract.

My review of the transcript of the hearing confirms that the homeowner presented no evidence that the homeowner was in a contractual relationship with HSBC. Thus, it appears the trial court’s finding was correct that there was no competent substantial evidence to support a determination that the homeowner and HSBC were parties to a contract which contained a provision of a fee award. Therefore, I contend that we have no legal basis to reverse the trial court. I disagree with the majority’s conclusion that the copy of the note attached to the complaint provided “sufficient record evidence to demonstrate HSBC and the homeowner were parties to the underlying contract so as to justify attorney’s fees pursuant to section 57.105(7).” Although on the issue of entitlement, it is not uncommon that stipulations, admissions in pleadings, and affidavits are frequently used, determinations on entitlement are not summary judgment proceedings, when entitlement is contested. In contested proceedings on entitlement, evidentiary hearings require proof by testimony, exhibits, or both.

In addition to arguing the homeowner was not entitled to attorney’s fees for failure to carry its burden and provide evidence of a contractual relationship, HSBC made arguments below and on appeal asserting the homeowner could not make a factual showing of entitlement based on principles of judicial estoppel. Such arguments were incorrect and distracting. Trial advocates are to be reminded:

In judicial proceedings, a party simply is not estopped from asserting a later inconsistent position (if that it can be called), unless the party’s initial position was successfully maintained.

Leitman v. Boone, 439 So. 2d 318, 322 (Fla. 3d DCA 1983).

I emphasize that judicial estoppel arguments in these fee cases are distracting, when the argument is inappropriate, for a reason. I said above that Elkind was inapposite for the disposition of this case. I was one of the panel members deciding Elkind. In going back and reviewing our analysis and the briefs submitted in that case, I now realize that a somewhat similar argument about the burden of proof in fee cases was made in Elkind, but the clarity of the argument was lost by infusing it with arguments about judicial estoppel and not as a stand-alone argument.

For the reasons I have discussed, I would affirm the trial court.

Not final until disposition of timely filed motion for rehearing.

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TFH 2/10 | Featuring Professor John Campbell Revealing the Behind the Scenes Causes of the Mortgage Crisis in America

TFH 2/10 | Featuring Professor John Campbell Revealing the Behind the Scenes Causes of the Mortgage Crisis in America

COMING TO YOU LIVE DIRECTLY FROM THE DUBIN LAW OFFICES AT HARBOR COURT, DOWNTOWN HONOLULU, HAWAII

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Sunday – February 10, 2019

Featuring Professor John Campbell Revealing the Behind the Scenes Causes of the Mortgage Crisis in America

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If there is one central reason why courts have been unable to protect the statutory and constitutional rights of homeowners it is that the inter-workings of the securitized secondary mortgage market have remained largely hidden from judicial view.

Instead, almost all federal and state courts have continued unthinkingly to robotically apply laws and procedures strictly applicable to traditional mortgages, although asked to foreclose on homeowners whose loans have been placed to their detriment and without their knowledge or consent in a little understood non-traditional and unregulated underground banking casino.

Professor John Campbell of the University of Denver Law School is noted for his ability to communicate complex subjects with relative simplicity, and he has done so in an analysis of non-traditional mortgages which The Foreclosure Hour is pleased to play for our listeners this Sunday.

Professor Campbell describes in his helpful overview many of the disturbing features of non-traditional mortgages that John Waihee and I have discussed on past shows.

In addition to all of the sloppy and fraudulent practices that Professor Campbell identifies, John Waihee and I would add, first, that as described on earlier shows, the so-called homeowner “deadbeat’ is actually the only one, not the so-called lenders, with any money and property at risk, and, second, that the law that should be applied to non-traditional mortgages should not be general contract or real estate law, or the UCC, but securities laws.

That being said, it is ironically often that the foreclosing plaintiff, whether pretender lender or, behind the scenes, Fannie Mae or Freddie Mac, is actually the one seeking a free house, and not the homeowner facing foreclosure.

We invite and encourage our listeners and especially judges everywhere to listen to this Sunday’s show.

Professor Campbell’s entire presentation will also be available and in video format immediately after our Sunday show, attached to this Sunday’s recorded show posted in the “Past Broadcasts” section of our Website at www.foreclosurehour.com.

John Waihee and I are dedicated to the belief that the rights of homeowners facing foreclosure will never be adequately protected until everyone and most importantly our judges better understand the realities of non-traditional mortgages and the greed and abuses their hidden banking system inevitably generate.

Gary Dubin
_____________________
Dubin Law Offices
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Honolulu, Hawaii 96813
Office: (808) 537-2300
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Email: gdubin@dubinlaw.net.

Host: Gary Dubin Co-Host: John Waihee

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Submit questions to info@foreclosurehour.com

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The Foreclosure Hour 12

 

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Justice Department Obtains $750,000 From PHH Mortgage Corp. for Unlawfully Foreclosing on Servicemembers’ Homes

Justice Department Obtains $750,000 From PHH Mortgage Corp. for Unlawfully Foreclosing on Servicemembers’ Homes

Department of Justice
Office of Public Affairs
FOR IMMEDIATE RELEASE
Wednesday, February 6, 2019

Justice Department Obtains $750,000 From PHH Mortgage Corp. for Unlawfully Foreclosing on Servicemembers’ Homes

WASHINGTON –The Justice Department today announced that PHH Mortgage Corporation (PHH) has agreed to pay $750,000 to six servicemembers to resolve allegations that it violated the Servicemembers Civil Relief Act (SCRA) by unlawfully foreclosing on their homes without obtaining the required court orders.

“Our men and women in uniform deserve to be able to focus on their job of keeping our country safe without worrying about losing their homes to an unlawful foreclosure,” said Assistant Attorney General Eric Dreiband. “The Civil Rights Division is committed to protecting the rights of our servicemembers from unlawful conduct.”

“The brave men and women who serve in our nation’s armed forces frequently are required to deploy and serve overseas with little notice,” U.S. Attorney Craig Carpenito said. “This Office remains resolute in its commitment to honor their personal sacrifices when they do so by ensuring that servicemembers’ rights will be protected, as the law requires, whenever duty calls. This agreement ensures that servicemembers will be compensated for the damages they suffered when their homes were improperly foreclosed upon while they were serving our country.”

The SCRA prohibits foreclosing on the home of a servicemember during active military service and one year thereafter without a court order if the mortgage originated prior to the servicemember’s period of military service.

PHH is one of the United States’ largest mortgage loan servicers, operating nationwide. The New Jersey-based company also originates, sells and subservices residential mortgage loans.

The Department launched an investigation, which was handled jointly by the Department’s Civil Rights Division and the U.S. Attorney’s Office for the District of New Jersey, after it received a complaint in May 2016 through the Department’s Servicemembers and Veterans Initiative. The Department’s investigation revealed that PHH foreclosed on six homes of SCRA-protected servicemembers in violation of the SCRA between 2010 and 2012.

The agreement resolves a suit filed today by the United States in the United States District Court for the District of New Jersey.

The agreement requires PHH to pay $125,000 to each servicemember whose home was unlawfully foreclosed upon. The agreement also requires PHH to provide training to its staff to ensure that servicemembers do not face unlawful foreclosures in the future, and to notify the Department of future complaints regarding servicemembers’ rights.

The Department’s enforcement of the SCRA is conducted by the Civil Rights Division’s Housing and Civil Enforcement Section and U.S. Attorney’s Offices throughout the country. The SCRA provides protections for servicemembers in areas such as evictions, rental agreements, security deposits, pre-paid rent, civil judicial proceedings, installment contracts, credit card interest rates, mortgage interest rates, mortgage foreclosures, automobile leases, life insurance, health insurance and income tax payments. Since 2011, the Department has obtained over $468 million in monetary relief for servicemembers through its enforcement of the SCRA. For more information about the Department’s SCRA enforcement, please visit www.servicemembers.gov.

Servicemembers and their dependents who believe that their rights under the SCRA have been violated should contact the nearest Armed Forces Legal Assistance Program Office. Office locations may be found at http://legalassistance.law.af.mil/content/locator.php.

Individuals who believe their civil rights have been violated in the District of New Jersey may also file a complaint with the U.S. Attorney’s Office for the District of New Jersey at: http://www.justice.gov/usao-nj/civil-rights-enforcement/complaintor may call the U.S. Attorney’s Office’s Civil Rights Complaint Hotline at (855) 281-3339.

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Manhattan U.S. Attorney Announces Settlement Of Civil Fraud Claims Against Law Firm Rosicki, Rosicki & Associates, P.C., And Two Affiliates For Inflating Foreclosure- And Eviction-Related Expenses

Manhattan U.S. Attorney Announces Settlement Of Civil Fraud Claims Against Law Firm Rosicki, Rosicki & Associates, P.C., And Two Affiliates For Inflating Foreclosure- And Eviction-Related Expenses

Manhattan U.S. Attorney Announces Settlement Of Civil Fraud Claims Against Law Firm Rosicki, Rosicki & Associates, P.C., And Two Affiliates For Inflating Foreclosure- And Eviction-Related Expenses

Defendants Admit and Accept Responsibility for Their Conduct and Will Pay More Than $6 Million in Total to Resolve Claims

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Laura Wertheimer, Inspector General for the Federal Housing Finance Agency Office of Inspector General (“FHFA-OIG”), and Michael J. Missal, Inspector General for the U.S. Department of Veterans Affairs (“VA”) Office of Inspector General (“VA-OIG”), announced today the settlement of a civil fraud lawsuit against New York law firm Rosicki, Rosicki & Associates, P.C. (“ROSICKI”) and its wholly owned affiliates, Enterprise Process Service, Inc. (“ENTERPRISE”) and Paramount Land, Inc. (“PARAMOUNT”).  The settlement resolves the United States’ claims, asserted under the False Claims Act, alleging that ROSICKI used its affiliates, ENTERPRISE and PARAMOUNT, to systematically generate false and inflated bills for foreclosure-related and eviction-related expenses, and caused those expenses to be submitted to and paid for by the Federal National Mortgage Association, known colloquially as Fannie Mae.  The settlement also resolves claims arising from identical misconduct in connection with eviction-related expenses that were submitted to and paid for by the VA.  As part of the settlement approved by U.S. District Judge Jed S. Rakoff, ROSICKI, ENTERPRISE, and PARAMOUNT admitted and accepted responsibility for their conduct and must pay $4.6 million to the United States.  The settlement also requires ROSICKI to implement a compliance program with regular reporting over the next five years, and to publicly disclose the nature of its affiliation with ENTERPRISE and PARAMOUNT on its website.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Lawyers are not above the law.  For years, the Rosicki firm submitted bills to Fannie Mae and the VA that contained inflated and unnecessary charges.  This Office will continue to hold accountable those who seek to achieve profits by fraudulent conduct.”

FHFA-OIG Inspector General Wertheimer said:  “FHFA is committed to holding accountable those who waste, steal, or abuse the resources of FHFA or any of the entities it regulates.  We work with U.S. Attorneys’ Offices across the country to protect the interests of the American taxpayers in the housing government-sponsored enterprises and are proud to have partnered with the U.S. Attorney’s Office for the Southern District of New York on this matter.”

VA-OIG Inspector General Michael J. Missal said:  “This civil settlement should send a clear message to individuals and businesses that VA-OIG and its law enforcement partners will vigorously investigate and expose false claims that fraudulently impact programs designed to benefit our veterans and their families.”

ROSICKI is a New York law firm whose main practice area is mortgage foreclosures.  The two founding ROSICKI partners also own a number of affiliated entities, including ENTERPRISE, a service-of-process company, and PARAMOUNT, a title search company.  Fannie Mae approved ROSICKI to perform legal work in connection with foreclosures on residential properties for which Fannie Mae owned the mortgage loans.  Fannie Mae’s Servicing Guide required, among other things, that all foreclosure costs and expenses be “actual, reasonable, and necessary,” and that foreclosure law firms “must make every effort to reduce foreclosure-related costs and expenses in a manner that is consistent with all applicable laws.”  ROSICKI understood those requirements and represented at various times that the firm was complying with them.

In fact, as ROSICKI, ENTERPRISE, and PARAMOUNT have admitted, from 2009 through 2018, on certain invoices for service of process (i.e., delivery or attempted delivery of legal papers) in connection with foreclosures or evictions, ENTERPRISE added additional charges to the costs charged by independent contractors and otherwise took actions that increased costs and expenses.  Similarly, on certain invoices for foreclosure searches and title continuations, PARAMOUNT added additional charges to the costs charged by independent contractors and otherwise took actions that increased costs and expenses.  ROSICKI submitted those costs and expenses for payment, with the understanding that Fannie Mae would reimburse for them.

The settlement also resolves identical conduct by ROSICKI, ENTERPRISE, and PARAMOUNT pertaining to expenses attendant to evictions that ultimately were paid by the VA.

This case arose from a lawsuit filed by a whistleblower under the False Claims Act.  In March of this year, the United States intervened in the case and took over prosecution of some of the claims that the whistleblower asserted.  In a separate settlement agreement, ROSICKI, ENTERPRISE, and PARAMOUNT agreed to pay the United States an additional $1,518,000 to resolve separate False Claims Act claims pursued by the whistleblower, resulting in a total recovery to the United States of $6,118,000.

*                *                *

Mr. Berman thanked the FHFA-OIG and VA-OIG for their efforts and ongoing support and assistance with the case.

The case is being handled by the Office’s Civil Division.  Assistant U.S. Attorneys Cristy Irvin Phillips, Andrew E. Krause, and Joseph N. Cordaro are in charge of the case.

Topic(s):
False Claims Act
Press Release Number:
18-424
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In a Case of First Impression, the Ninth Circuit Begins to Unravel the Mystery of When a Claim to Enforce a Rescission Request under TILA May be Time-Barred

In a Case of First Impression, the Ninth Circuit Begins to Unravel the Mystery of When a Claim to Enforce a Rescission Request under TILA May be Time-Barred

JD SUPRA-

An action by a Washington state borrower to enforce a request for rescission of a loan under the Truth in Lending Act (TILA) is analogous to an action to enforce a contract and must be brought within the Washington state statute of limitations for such a contract claim, given that TILA itself does not provide a limitations period.  Hoang v. Bank of America, N.A., 2018 WL 6367268 (9th Cir. December 6, 2018).

To effect rescission of a loan under TILA, the borrower must notify the lender of her intent to rescind within three days, or if required disclosures are not given, three years of the loan’s consummation date; but the borrower need not bring a lawsuit to enforce its rescission request within that three-year period.  TILA does not specify when the borrower must bring the enforcement lawsuit.

So, to what limitations should a borrower, her lawyer, and the court look when the borrower has not brought the rescission suit within the three years?  “Without a statute of limitations in TILA, courts must first borrow the most analogous state law statute of limitations and apply that limitation period to TILA rescission enforcement claims.”  Id. at *1.  “Only when a state statute of limitations would ‘frustrate or significantly interfere with federal policies’ do we turn instead to federal law to supply the limitations period” to look for an analogous statute of limitations. Id. at *4.

[JDSUPRA]

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Floyd v. Bank of America, NA, | FL 5DCA- she is entitled to attorneys’ fees under section 57.105(7), Florida Statutes (2018), because she prevailed below by proving that while Appellee had standing at the time of trial, it lacked standing at the inception of the foreclosure suit.

Floyd v. Bank of America, NA, | FL 5DCA- she is entitled to attorneys’ fees under section 57.105(7), Florida Statutes (2018), because she prevailed below by proving that while Appellee had standing at the time of trial, it lacked standing at the inception of the foreclosure suit.

 

DANIELA FLOYD, Appellant,
v.
BANK OF AMERICA, N.A., SUCCESSOR BY MERGER TO BAC HOME LOANS SERVICING, LP F/K/A COUNTRYWIDE HOME LOANS SERVICING, LP AND MIDDLEBROOK PINES CONDOMINIUM ASSOCIATION, INC., Appellees.

Case No. 5D17-2712.
District Court of Appeal of Florida, Fifth District.
Opinion filed January 25, 2019.
Appeal from the Circuit Court for Orange County, Julie H. O’Kane, Judge.

REVERSED and REMANDED

Thomas Eross, Jr., and Kendrick Almaguer, of The Ticktin Law Group, PLLC, Deerfield Beach, for Appellant.

Jason D. Silver, of Greenspoon Marder, of Ft. Lauderdale, Roy A. Diaz and Adam A. Diaz, of SHD Legal Group PA, Ft. Lauderdale, for Appellee Bank of America, N.A., Successor By Merger to BAC Home Loans Servicing, LP F/K/A Countrywide Home Loans Servicing, LP.

No Appearance for Appellee, Middlebrook Pines Condominium Association, Inc.

HARRIS, J.

Appellant appeals the trial court’s final order denying her motion for attorneys’ fees following the involuntary dismissal of Appellee’s residential mortgage foreclosure action. Appellant argues that she is entitled to attorneys’ fees under section 57.105(7), Florida Statutes (2018), because she prevailed below by proving that while Appellee had standing at the time of trial, it lacked standing at the inception of the foreclosure suit. We agree. See Madl v. Wells Fargo Bank N.A., 244 So. 3d 1134 (Fla. 5th DCA 2017); see also Glass v. Nationstar Mortg., LLC., 44 Fla. L. Weekly S100a (Fla. Jan. 4, 2019); Harris v. Bank of N.Y. Mellon, 44 Fla. L. Weekly D141a (Fla. 2d DCA Dec. 28, 2018).

Therefore, we reverse and remand for entry of an order granting Appellant’s motion for attorneys’ fees.

ORFINGER and EDWARDS, JJ., concur.

NOT FINAL UNTIL TIME EXPIRES TO FILE MOTION FOR REHEARING AND DISPOSITION THEREOF IF FILED

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TFH 2/3 | 10 Ways Courts Could Easily Reduce Otherwise Increasing Residential Foreclosure Case Backlogs by More Than 95% While Protecting Homeowners at the Same Time — Are Any Judge’s Listening? (Rebroadcast from 7/2/17)

TFH 2/3 | 10 Ways Courts Could Easily Reduce Otherwise Increasing Residential Foreclosure Case Backlogs by More Than 95% While Protecting Homeowners at the Same Time — Are Any Judge’s Listening? (Rebroadcast from 7/2/17)

COMING TO YOU LIVE DIRECTLY FROM THE DUBIN LAW OFFICES AT HARBOR COURT, DOWNTOWN HONOLULU, HAWAII

LISTEN TO KHVH-AM (830 ON THE AM RADIO DIAL)

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Sunday – February 3, 2019

10 Ways Courts Could Easily Reduce Otherwise Increasing Residential Foreclosure Case Backlogs by More Than 95% While Protecting Homeowners at the Same Time — Are Any Judge’s Listening? (Rebroadcast from 7/2/17)

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We have learned that several foreclosure trial and appellate judges nationwide are now listening to The Foreclosure Hour. As a result, we decided to rebroadcast our July 2, 2017 show once again in the hope that the Judiciary could better understand that reforming the foreclosure system would yield incredible benefits for our legal system as well,

Many of our listeners have concluded that foreclosure judges are either politically corrupt protecting their private pensions or just plain stupid.

The Foreclosure Hour believes otherwise, that most foreclosure judges are historically simply misinformed or perceive themselves bound by archaic case precedents, while equally or more so understandably concerned about their enormous foreclosure case backlogs.

For, not only has mortgage and trust deed law become enormously complicated with the advent of securitized trusts, but the size of judicial residential foreclosure case backlogs has sharply gyrated up and down in recent decades in virtually all state and federal courts.

Starting approximately between 1990 and 2000, for instance, and escalating after the 2008 Mortgage Crisis, in many state and federal jurisdictions the number of judicial foreclose filings rapidly increased, annoyingly becoming the majority of all cases in many courts, with dramatically mushrooming case backlogs, which forced many courts irrationally to adopt in arguably wrongly perceived self-defense either openly or in effect the “rocket docket” processing of many residential foreclosure cases.

Federal courts, moreover, adopted in response what they openly called a “triage” approach, instructing U.S. Magistrates frankly to force foreclosure settlements, planned at a meeting of U.S. Magistrates years ago in San Francisco.

Thereafter, U.S. Magistrates frequently threatened homeowners that otherwise their assigned federal district judges would rule against them, which is what usually happened — anything to cut their foreclosure backlogs which in truth were restricting the time available for all other cases, often deemed more important by federal judges.

And when Fannie Mae and Freddie Mac, in order to save money and speed up foreclosures, instructed foreclosure attorneys in many states by 2000 to elect nonjudicial foreclosures instead, many courts expressed a deep sigh of relief as if a tsunami had turned back and away from them, and matter-of-factly closed their collective eyes to abuses in the unsupervised nonjudicial foreclosure process.

Today in many state court jurisdictions there is emerging an increased awareness of the unacceptable abuses in nonjudicial foreclosure sales as well as within securitized trust judicial foreclosure litigation, with increased appellate restrictions being imposed almost daily upon judicial and nonjudicial foreclosing plaintiffs alike, raising the specter once again of increasing foreclosure case backlogs, surely soon to threaten a possibly new self-defensive retreat by state courts away from protecting homeowner rights.

To hopefully counter this reverse trend which we are already increasingly witnessing, with many lower courts outright ignoring homeowner friendly appellate court decisions in their own jurisdictions, The Foreclosure Hour presents again its 10 ways in which courts could easily cut their foreclosure case backlogs by more than 95% while increasing, not decreasing, protections for homeowners.

Yes, it is possible. Listen and learn how. Tune in to this Sunday’s rebroadcast, or those of you watching the Super Bowl can listen in when the Game is over, when the show’s audio is immediately posted on the “Past Broadcasts” section of our Website, www.foreclosurehour.com.

Judges especially listening this Sunday and Legislators also will be pleasantly surprised, for problems are often not our problem, but the real problem is in the way we relate to problems. And the foreclosure system is a classic example of that aspect of what on past shows we have termed the Rule Ritual.

Gary Dubin
_____________________
Dubin Law Offices
Suite 3100, Harbor Court
55 Merchant Street
Honolulu, Hawaii 96813
Office: (808) 537-2300
Cellular: (808) 392-9191
Facsimile: (808) 523-7733
Email: gdubin@dubinlaw.net.

Host: Gary Dubin Co-Host: John Waihee

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CALL IN AT (808) 521-8383

Have your questions answered on the air.

Submit questions to info@foreclosurehour.com

The Foreclosure Hour is a public service of the Dubin Law Offices

Past Broadcasts

EVERY SUNDAY
3:00 PM HAWAII 
5:00 PM PACIFIC
8:00 PM EASTERN
ON KHVH-AM
(830 ON THE DIAL)
AND ON
iHEART RADIO

The Foreclosure Hour 12

 

© 2010-19 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.



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