Tuesday, May 29, 2007

NY Lawyers Land Legal Fee Of $1 Million In Pro Bono Case

I stumbled across a recent New York Law Journal article (appearing in New York Lawyer) that reports on a case heard by a New York Federal Court where the lawyers representing a group of waiters, busboys and captains who worked in a restaurant in New York's Chinatown successfully challenged an unfair labor practice engaged in by their employer. While the attorneys (Skadden, Arps, Slate, Meagher & Flom and the Urban Justice Center) reportedly took on the case on behalf of their clients on a pro bono basis (ie. no legal fees charged to the restaurant employees), a federal judge nevertheless awarded the employees' attorneys a legal fee of $957,710; with liability for the payment thereof being imposed on the restaurant who engaged in the unfair labor practice.

For a copy of the Federal Court decision, see Heng Chan v. Sung Yue Tung Corp.

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I make mention of this case because, in the context of foreclosure rescue litigation, I have no doubt that there are some people who wonder how a financially strapped homeowner, someone who can't afford to make his/her mortgage payments, can possibly be able to afford an attorney to sue a foreclosure rescue operator in order to get his/her home back. The reason that there are a growing number of homeowners bringing lawsuits against foreclosure rescue operators is because their attorneys, like the attorneys who represented the waiters, busboys, and captains in the New York labor law case, are suing for violations of statutes that allow a judge to award a successful plaintiff's attorney a legal fee, and impose the obligation for its payment on the party who violated the law.

Examples of such laws are:

1) The Federal Truth In Lending Act (see, for example, Moore vs. Cycon Enterprises, where a Michigan Federal Court ruled that a foreclosure rescue operator violated that law in a purported sale leaseback arrangement with a financially strapped homeowner).

2) State consumer protection and/or unfair and deceptive trade practices statutes (see, for example, Eicher v. Mid America Financial Investment Corp., where the Nebraska Supreme Court affirmed an attorney fee award of $378,000 to the lawyers representing a group of foreclosure rescue victims, and imposed the obligation for its payment on the foreclosure rescue operator, who was found to have violated the Nebraska Consumer Protection Act).

3) In addition, there is at least one state that allows for a similar award of attorney fees by a court for violation of the state usury laws involving consumer loans and credit sales (see, for example, Smith v. Eisen, where an Arkansas appellate court ruled that a homeowner was entitled to an award of her attorney's fees to be paid by a pawn shop owner; in this case, the court found that a sale of a home with a contemporaneously executed buyback arrangement between the homeowner and a local pawn shop owner was nothing more than a usurious loan secured by an equitable mortgage).
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I am also compelled to mention one other case reported on this blog in the past. In this case, the Washington, D.C. law firm Hogan and Hartson LLP obtained a substantial jury verdict, including $3.3 million in punitive damages, against a foreclosure rescue operator in the Washington, D.C. metropolitan area for violating the D.C. Consumer Protection Act (see Hogan & Hartson Wins $3.3 Million Verdict in Pre-Foreclosure Scam Case). While the news release does not discuss attorney fee awards (and presumably the D.C. statutes allows for an attorney fee award on top of the damages award), it is not unreasonable to believe that the law firm will, at a bare minimum, share in a part of the $3.3 million punitive damage award. Assume a cut of between 20% and 40%, and you can do the math yourself.

Whether you are a financially strapped homeowner, an experienced or aspiring foreclosure rescue operator, or an attorney thinking of representing either, I hope the foregoing has given you some insight as to:

1) How foreclosure rescue victims can go about retaining the services of an attorney for the purpose of undoing a foreclosure rescue arrangement and either getting back their homes, or otherwise salvaging the equity in their homes, and

2) who will end up footing the bill for the foreclosure rescue victim's legal fees in a successful litigation.

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Go here for other posts referencing Eicher vs. Mid America Financial Investment Corp.

Go here for other posts referencing Smith vs. Eisen.

Go here for other posts referencing Hogan & Hartson. equitable mortgage yak

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