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 more, see NY BigLaw Leader Scores $1 Million Fee in Pro Bono Case.

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 Moore vs. Cycon Enterprises.

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

Foreclosure Rescue Operator Ordered To Return Homes To A Dozen Victims

In a 2005 Nebraska Supreme Court decision, two Omaha area foreclosure rescue operators were ordered to restore title to the homes of a dozen homeowners who the operators fraudulently induced into signing over their home titles, or reimburse them for their damages.

In addition, the operators were also ordered to pay approximately $378,000 in attorneys' fees to the lawyers for the victimized homeowners for violations of the state's Consumer Protection Act.

In this case, the homeowners all testified that the operators offered to loan them money to stop foreclosure so that they (the homeowners) could keep their homes, but never disclosed that the operators were actually taking title to the homes. The operators testified to the contrary, asserting that the terms of the transaction were fully explained to each plaintiff and that each plaintiff understood that he or she was conveying title to the home to defendants. In ruling in favor of the homeowners, the court made a specific finding that the homeowners' testimony was credible and that of the operators was not.

One notable point in this case is the illustration of a well-known legal rule regarding the signing of a contract and how it applies in a case like this one. This legal rule, as described by the Nebraska high court, is this:

• “[o]ne who signs an instrument without reading it, when he can read and has the opportunity to do so, cannot avoid the effect of his signature merely because he was not
  informed of the contents of the instrument.”

Having said that, the Nebraska high court went on to state:

• "[t]he general rule that one who fails to read a contract cannot avoid the effect of signing it applies only in the absence of fraud [...] Restated, the rule that one who signs a contract is bound by its terms does not apply where the controversy is between the parties and the execution of the instrument was induced by fraud."

A second point worth noting is that this case illustrates another method of attacking foreclosure rescue transactions. Unlike the equitable mortgage cases reported elsewhere on this blog (in which proof of fraud is not necessary), the homeowners' action in this case were based on allegations of fraud, civil conspiracy, unjust enrichment, rescission, and violations of Nebraska’s Consumer Protection Act and Uniform Deceptive Trade Practices Act (and importantly for private practice attorneys that are considering handling these types of cases, the $378,000 fee award was based on an attorney fee provision contained in the state Consumer Protection Act, and also involved the application of a "contingency fee" or "lodestar" multiplier that increased the "lodestar amount" (the base fee) by 30 percent).

Sources:

Rising foreclosures fuel fraudulent offers of aid (Seizures, byzantine terms spring from promises to help owners keep homes) (MSNBC website)

High Court Slams Foreclosure Scamsters, (WOWT, Channel 6 News - Omaha, NE)

Eicher v. Mid America Financial Investment Corp.. 270 Neb. 370, 702 N.W.2d 792 (2005) (made available online by Findlaw.com)

Counsel For Homeowners:

Mark C. Laughlin, Andrea F. Scioli, and Tamara D. Borer, of Fraser, Stryker, Meusey, Olson, Boyer & Bloch, P.C.,

Catherine Mahern, of Milton R. Abrahams Legal Clinic (Creighton Legal Clinic - Creighton University School of Law)

D. Milo Mumgaard, of Nebraska Appleseed Center for Law in the Public Interest

(revised 4-23-07) equitable mortgage zebra

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Nebraska Supreme Court Ruling A Reminder That Signed Contracts In Sale Leaseback, Foreclosure Rescue Deals May Not Be Binding

A 2005 court ruling by the Nebraska Supreme Court ordered an Omaha-based foreclosure operator to return home titles to a dozen victims who were duped into signing contract documents based upon assertions that the papers were merely refinancing documents, when in fact they constituted title transfers of their homes coupled with contemporaneous leasebacks of the premises in which the victims were granted rights to repurchase.

In issuing its ruling in favor of the homeowners, the court provided the following analysis that serves as a reminder that signed contracts are not always binding(1) [bold text is my emphasis, not in original]:

• Defendants contend that these written contracts were binding, based upon the rule that “[o]ne who signs an instrument without reading it, when he can read and has the opportunity to do so, cannot avoid the effect of his signature merely because he was not informed of the contents of the instrument.” See Bock v. Bank of Bellevue, 230 Neb. 908, 916, 434 N.W.2d 310, 316 (1989). They further contend that because plaintiffs had the contract documents available for review, plaintiffs could not have reasonably relied on any verbal misrepresentation. See Schuelke v. Wilson, 250 Neb. 334, 549 N.W.2d 176 (1996).

• The general rule that one who fails to read a contract cannot avoid the effect of signing it applies only in the absence of fraud. See, Mayer v. Howard, 220 Neb. 328, 370 N.W.2d 93 (1985); Day v. Kolar, 216 Neb. 47, 341 N.W.2d 598 (1983). Restated, the rule that one who signs a contract is bound by its terms does not apply where the controversy is between the parties and the execution of the instrument was induced by fraud. The doctrine that the carelessness or negligence of a party in signing a writing estops him from afterwards disputing the contents of such writing is not applicable in a suit thereon between the original parties thereto when the defense is that such writing, by reason of fraud, does not embrace the contract actually made. West v. Wegner, 172 Neb. 692, 694, 111 N.W.2d 449, 451 (1961).(2)

• Because the district court specifically found that each of the plaintiffs was fraudulently induced to sign what were misrepresented as loan documents, the general rule binding a party to a signed contract does not apply.(3)

For the court ruling, Eicher v. Mid America Financial Investment Corp., 270 Neb. 370, 702 N.W.2d 792 (2005) (made available online by Findlaw.com).

(1) This case also serves as a reminder that attorneys taking these cases need not accept them on a purely pro bono basis, but rather, a contingecy fee basis. Part of this ruling affirmed an attorney fee awarded to the defrauded homeowners' lawyers (and payable by the foreclosure rescue operator) of over $375,000.

(2) The U.S. Supreme Court, in FTC v. Standard Education Society, 302 U.S. 112, 116 (1937), also provides this admonition:

• There is no duty resting upon a citizen to suspect the honesty of those with whom he transacts business. Laws are made to protect the trusting as well as the suspicious. The best element of business has long since decided that honesty should govern competitive enterprises, and that the rule of caveat emptor should not be relied upon to reward fraud and deception.

(3) Similarly, in Moore v. Cycon Enterprises, Inc., (Case No. 1:04-CV-800), 2006 U.S. Dist. LEXIS 57452 (W.D. Mi. 2006), a Federal judge in Michigan made these observations when a foreclosure rescue operator asserted that the homeowner/couple should be bound by the terms of the contract they signed [bold text is my emphasis, not in original]:

• The heart of this case is the determination of whether the transaction between the Moores and Cycon was a true sale and leaseback or whether it was in reality a loan. Cycon has offered a number of arguments supporting its position that the transaction was clearly an absolute sale and a leaseback, including: (1) the unambiguous terms of the closing documents establish that the Moores intended to sell their property to Cycon and lease it back from Cycon; (2) the Moores failed to read the closing documents and are therefore bound by the terms of those documents; (3) the parol evidence rule precludes the consideration of evidence of prior discussions between the Moores and Peltz as well as evidence of the Moores’ intentions regarding the transaction; and (4) the integration clause in the lease precludes the Moores from introducing evidence of their intentions regarding the lease.

• While Cycon’s arguments would no doubt be fine, and certainly persuasive, grounds for summary judgment in a typical contract case, the Moores have invoked Michigan’s “equitable mortgage” doctrine in this case, as to which such arguments are not necessarily applicable. “The power of a court of equity to decree an equitable mortgage under proper circumstances and to construe an instrument in the form of an absolute conveyance as security for the payment of a debt, or the performance of some other obligation, is well established.” Judd v. Carnegie, 324 Mich. 583, 587, 37 N.W.2d 558, 589 (1949). See also Grant v. Van Reken, 71 Mich. App. 121, 125, 246 N.W.2d 348, 350 (1976) (“It is well settled that a court of equity can declare a deed absolute on its face to be a mortgage.”).

• In Wilcox v. Moore, 354 Mich. 499, 93 N.W.2d 288 (1958), the Michigan Supreme Court, in discussing the doctrine, observed: Suffice to say that its purpose is to protect the necessitous borrower from extortion. In the accomplishment of this purpose a court must look squarely at the real nature of the transaction, thus avoiding, so far as lies within its power, the betrayal of justice by the cloak of words, the contrivances of form, or the paper tigers of the crafty. We are interested not in form or color but in nature and substance. Id. at 504, 93 N.W.2d at 291.

• Because a court is concerned with the true intention of the parties based upon the surrounding circumstances in considering whether a transaction is an equitable mortgage, traditional legal principles, such as the parol evidence rule, do not apply. See Ferd L. Alpert Indus., Inc. v. Oakland Metal Stamping Co., 379 Mich. 272, 276, 150 N.W.2d 765, 767 (1967) (“One of the many exceptions to the parol evidence rule is that parol evidence may be admitted to prove that a written conveyance absolute in its terms was intended by the parties to operate only as a mortgage.”).

Defending A Foreclosure Defense Case Pro Bono? Don't Forget The Contingency Risk Factor When Sticking Losing Lender With Tab

A recent ruling by a Florida appeals court held that a homeowner successfully fending off a foreclosure action is entitled to clip the losing foreclosing entity for a recovery her attorney’s fees as a prevailing party under subsection 57.105(7), Florida Statutes (2009), after the lower court granted a motion to dismiss a mortgage foreclosure action and dismissed the case without prejudice. (Nudel v. Flagstar Bank, FSB, No. 4D10-3001 (Fla. App. 4th DCA, May 18, 2011).(1)

Although the ruling was silent on a sometimes-related point, a court case cited therein briefly addressed the issue regarding the application of a contingency fee multiplier (in those cases where winning counsel took the case on a pro bono or contingency fee basis) when calculating the amount of the homeowner's legal fee tab that the losing lender will ultimately be stuck with. This multiplier reflects "a contingency bonus to the basic fee award in cases that the [client] was unlikely to win, to give lawyers for non-paying clients an incentive to take risky as well as sure cases."(2)

In that case, the court approved the use of a contingency fee multiplier of 2.5 in determining the amount of the homeowner's legal fees that the improperly foreclosing lender was hammered with.
While this point only merited a brief mention in that ruling, I mention it here as a reminder to those private attorneys, non-profit law firms, and others who take, or are considering taking, foreclosure defense cases on a pro bono basis, that a mechanism exists in Florida law (by the way, Florida is not unique in this(3)) allowing winning counsel, not only to collect legal fees from the foreclosing lender in a successful foreclosure defense (generally based on the number of hours spent on the case multiplied by an hourly rate, subject to court approval), but to enhance the earned legal fee by a contingency fee multiplier, thereby potentially making it worth one's while taking on these types of cases, at least occasionally.(4)

While not a guarantee to make the winning attorney rich beyond his/her wildest dreams, I'm sure the extra cash will come in handy.(5)

For the court ruling, see Bank of New York v. Williams, 979 So.2d 347 (Fla. 1st DCA 2008).

Representing the homeowner in this case was James A. Kowalski, Jr., Jacksonville, Florida.

(1) See also, Fla. Appeals Court: Homeowner Entitled To Nail Bank For Prevailing Party Legal Fees After Lender Voluntarily Dismissed F'closure Case w/out Prejudice.

(2) The Yale Law Jounal: The Contingency Factor In Attorney Fee Awards.
(3) See, for example:

• Nebraska: Eicher v. Mid America Financial Investment Corp., 270 Neb. 370, 702 N.W.2d 792 (2005), where the Nebraska Supreme Court, in slamming an equity stripping, sale leaseback peddler with a prevailing party attorneys fee award of $378,000 payable to the lawyers representing a dozen homeowners who had their home titles ripped off in a foreclosure rescue scam, applied a multiplier of 1.3 in calculating the award (the foreclosure rescue operator was found to have violated the Nebraska Consumer Protection Act).


• Illinois: Gambino v. Boulevard Mortg. Corp., 398 Ill. App. 3d 21, 922 NE 2d 380 (Ill. App. 1st Dist., 6th Div. 2009) (Appeal denied by Gambino v. Blvd. Mortg. Corp. (W.W. Funding, L.L.C.), 2010 Ill. LEXIS 909 (Ill., May 26, 2010)), where an Illinois Court of Appeals approved use of a contingency multiplier of 3 to the lodestar attorney fee calculation to arrive at a total fee award of $595,574 in a case where an elderly property owner successfully sued in a quiet title / slander of title action in an effort to undo a real estate equity scam perpetrated by his nephew and a gang of others involving a purported sale leaseback (coupled with a repurchase option) of property and the recording of forged land documents. The appeals court noted that the trial judge found the use of a multiplier of 3 to be "imminently reasonable."


• Washington State: Pelascini v. Pace-Knapp, No. 63758-4-I (Wash. Ct. App. Div. 1, Feb. 14, 2011) (Reported at Pelascini v. Pace-Knapp, 2011 Wash. App. LEXIS 422 (Wash. Ct. App., Feb. 14, 2011)), where a Washington State appeals panel awarded $134,425 in attorney fees including a lodestar multiplier of 15 percent to a homeowner who successfully sued after getting ripped off in a sale leaseback, equity stripping racket. The sale leaseback peddlers were found to have violated the state Consumer Protection Act.


• New Jersey: Rendine v. Pantzer, 661 A.2d 1202 (N.J. 1995), where, in approving a one-third enhancement of the lodestar calculation (ie. a multiplier of 1.333), the New Jersey Supreme Court made this holding on the use of contingency fee enhancements, generally, in state court litigation in New Jersey (bold text is my emphasis):
  
  We hold that the trial court, after having carefully established the amount of the lodestar fee, should consider whether to increase that fee to reflect the risk of nonpayment in all cases in which the attorney's compensation entirely or substantially is contingent on a successful outcome. We understand and carefully have evaluated the various objections advanced to contingency enhancements, including the often-repeated admonition that "[t]hese statues were not designed as a form of economic relief to improve the financial lot of [attorneys]." Dague, supra, 505 U.S. at 563, 112 S.Ct. at 2642, 120 L.Ed.2d at 457 (quoting Delaware Valley I, supra, 478 U.S. at 565, 106 S.Ct. at 3098, 92 L.Ed.2d at 456).
  
  Both as a matter of economic reality and simple fairness, we have concluded that a counsel fee awarded under a fee-shifting statute cannot be "reasonable" unless the lodestar, calculated as if the attorney's compensation were guaranteed irrespective of result, is adjusted to reflect the actual risk that the attorney will not receive payment if the suit does not succeed. The reasoning underlying our holding often has been explained, and most effectively in simple terms. As the late Judge Charles Wyzanski once observed:
  
  No one expects a lawyer to give his services at bargain rates in a civil matter on behalf of a client who is not impecunious. No one expects a lawyer whose compensation is contingent upon his success to charge, when successful, as little as he would charge a client who in advance had agreed to pay for his services, regardless of success.
  
  [Cherner v. Transitron Elec. Corp., 221 F. Supp. 55, 61 (D.Mass. 1963).]
  
  See also Blum, supra, 465 U.S. at 903, 104 S.Ct. at 1551, 79 L.Ed.2d at 905 ("Lawyers operating in the marketplace can be expected to charge a higher hourly rate when their compensation is contingent on success than when they will be promptly paid, irrespective of whether they win or lose.") (Brennan, J., concurring); Berger, supra, 126 U.Pa.L.Rev. at 324-25 ("The experience of the marketplace indicates that lawyers generally will not provide legal representation on a contingent basis unless they receive a premium for taking that risk."); 2 Derfner & Wolf, supra, ¶ 15.01[2][c], at 15-16 ("Most courts realize that where payment of a fee is contingent on success an attorney should receive a larger overall fee than where payment is guaranteed regardless of outcome....") (footnote omitted).


• Texas: Dillard Department Stores, Inc. v. Gonzales, 72 S.W.3d 398 (Tex. App.-El Paso 2002), where, in doubling the attorney's usual rate (ie. a multiplier of 2), a Texas appeals court made the follwing observation on the use of fee enhancement multipliers in Texas litigation (bold text is my emphasis):
  
  Texas courts consistently allow the use of a multiplier based upon the contingent nature of a fee under Texas statutes allowing recovery of attorney's fees. Guity v. C.C.I. Enterprise Co., 54 S.W.3d 526, 529 (Tex.App.-Houston [1st Dist.] 2001, no pet.); Borg-Warner Protective Services v. Flores, 955 S.W.2d 861, 870 (Tex.App.-Corpus Christi 1997, no pet.); Crouch v. Tenneco, 853 S.W.2d 643, 648 (Tex.App.-Waco 1993, writ denied).
  
  Moreover, we note that at least one state court has specifically rejected the U.S. Supreme Court's ban on a contingency multiplier in interpreting its own state anti-discrimination statute. See Rendine v. Pantzer, 276 N.J.Super. 398, 648 A.2d 223, 254 (1994) (holding that trial judge correctly considered contingent nature of fee in doubling the lodestar, rejecting Dague after extensive discussion), aff'd as modified, 141 N.J. 292, 661 A.2d 1202 (1995). Considering this, we cannot find the trial court acted without reference to guiding principles.

(4) The appeals court's brief mention approving the use of the multiplier follows:

• Further, we find no abuse of discretion in the trial court's use of a multiplier of 2.5 in establishing the attorney's fees. In its order setting the attorney's fees, the trial court fully analyzed the factors under rule 4-1.5, Florida Rules of Professional Conduct, Florida Patient's Compensation Fund v. Rowe, 472 So.2d 1145 (Fla.1985), and Standard Guaranty Ins. Co. v. Quanstrom, 555 So.2d 828 (Fla.1990); and made detailed findings of fact which are supported by competent substantial evidence in the unrebutted testimony of both Williams' counsel and her expert witness.

(5) For those attorneys, law students, paralegals and other fans of the law who find something counterintuitive about an attorney for a prevailing party being able to score attorney fees from the losing litigant in pro bono cases (I suppose that refering to these cases as contingency fee, rather than pro bono, would be more apt), there's really nothing new about it, believe me. See, for example:

• New York Law Journal: NY BigLaw Leader Scores $1 Million Fee in Pro Bono Case,
• Another Law Firm Seeks Big Fees From Lawsuit Loser In Pro Bono Case,
• See also this legal fee 'rate sheet', appearing on the website of one prominent northeastern non-profit law firm, which discloses the hourly fees charged in connection with some of their pro bono cases (unadjusted, of course, for any applicable "contingency fee risk multiplier").

South Florida Homeowner Victimized By Foreclosure Rescue Operator

A suburban Miami woman who was victimized by a foreclosure rescue operator is featured today in a story published by Reuters and appearing in the San Diego Union Tribune. Reportedly, she was solicited in June by a "door to door foreclosure rescue operator" who offered her financial help on an $89,000 mortgage on her home. According to the article:

• Nine months later, her $89,000 mortgage has ballooned into a $234,000 loan, her monthly payments have doubled and she faces foreclosure on a house she no longer owns.

For the rest of the story, see U.S. sub-prime crisis exposes mortgage scams.

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Editor's Note:

Hopefully, an experienced, competent South Florida real estate attorney (someone who also knows his/her away around a courtroom and knows how to make legal arguments in front of a judge and jury) will come forward and help the victimized homeowner in this story. Such an attorney will be aware of the fact that just because she signed away her home, it doesn't mean she can't get it back.

Quoting from Guest v. Claycomb, 932 So. 2d 567 (Fla. App. Ct. 5th Dist. 2006), which, in turn, quotes from the Florida Supreme Court decision in Williams v. Grogan, 100 So.2d 407, 410 (Fla. 1958), a Florida appeals court stated:

• "The rule is well established in Florida and elsewhere to the effect that when a person acquires title to property through the influence of a confidential relationship or otherwise obtains an advantage which he should not in good conscience be permitted to retain, a court of equity will prevent the abuse of the confidence and grant relief on the broad principle that one should not be permitted to be unjustly enriched under such circumstances at the expense of another." (quoting from Williams v. Grogan, 100 So.2d 407, 410 (Fla. 1958))

• "The Court proceeded to explain that the court of equity will grant relief in such instances by imposing a constructive trust "which is created by operation of law" and "is not within the statute of frauds and may be proved by parol evidence." Id."

Further, if the financially strapped homeowner who signs away their home never relinquishes possession of the property, Florida law (and the law of many other states as well) is that actual possession of the property serves as notice to subsequent purchasers and encumbrancers of all rights and equities that the person in possession may have, in which case, the woman's ownership rights to her home, as adjudicated by a court, should be superior to the rights of any subsequent purchaser or (foreclosing) mortgagee. Having constructive notice of the woman's occupancy will eliminate any entitlement to claim the status of "bonafide purchaser".

The Florida Supreme Court, in Florida Land Holding Corp. v. McMillen, 135 Fla. 431, 186 So. 188 (Fla. 1938) stated the following:

"This Court had before it a similar set of facts in the case of Marion Mortgage Co. v. Grennan, 106 Fla. 913, 143 So. 761, when this Court said:

• "Actual possession is constructive notice to all the world or anyone having knowledge of said possession, of whatever rights the occupants have in the land. Such possession when open, visible and exclusive, will put upon inquiry those acquiring any title to or a lien upon the land so occupied to ascertain the nature of the rights the occupants really have in the premises. Carolina Portland Cement Company v. Roper, 68 Fla. 299, 67 So. 115; Tate v. Pensacola G.L. & Dev. Company, 37 Fla. 439, 20 So. 543; McAdams v. Wachab, 45, Fla. 482, 33 So. 702. This court also specifically held in the case of Crozier, et al., v. Ange, 85 Fla. 120, 95 So. 426, that 'where at the time property is mortgaged it is actually occupied by others than the mortgagor, the mortgagee is thereby put upon notice to inquire as to the rights of the occupants.' 19 R.C.L. 421, Sections 201 and 202.

One final point on this case. If a Florida attorney takes on a case like this, and would like the possibility of obtaining a court ordered attorney fee award, he/she may have to assert claims of violations of Federal or Florida consumer protection laws (which entitles an attorney representing a prevailing plaintiff to a fee award to be imposed upon the accused fraudster), in addition to asserting claims of fraud, constructive trust, or any other equitable claims that may be applicable. See my prior post, Voiding A Title Transfer In A Foreclosure Rescue Transaction, which discussed a Nebraska case where the attorney for a dozen victims of a foreclosure rescue operator was granted a $378,000 fee award (imposed on the foreclosure rescue operator) for successfully asserting violations of the Nebraska Consumer Protection Act (in addition to fraud and conspiracy), and which involved the application of a contingency fee risk multiplier in calculating the fee award, which is allowed in Florida on state law claims. The case was Eicher v. Mid America Financial Investment Corp., 270 Neb. 370, 702 N.W.2d 792 (2005).

With regard to the application of contingency fee risk multipliers in Florida, see generally, Bell v. U.S.B. Acquisition Company, Inc., 734 So.2d 403 (Fla. 1999), which discusses Florida Patient's Compensation Fund v. Rowe, 472 So.2d 1145 (Fla. 1985), where the Florida Supreme Court discusses what the contingency fee risk multiplier is based on and how it is calculated and applied.

While these cases may be difficult to make (which is why you need a sharp attorney), those having or creating the impression that nothing can be done for the woman featured in the article are simply uninformed. equitable mortgage zebra

Judge Sticks Sale Leaseback Peddler With Tab For Victim's Interim Attorney's Fee Even Though NJ Consumer Fraud Act Lawsuit Is Still In Discovery

In Newark, New Jersey, the New Jersey Law Journal reports:

• In a case of first impression, an Essex County, N.J., judge has awarded counsel fees during a pending Consumer Fraud Act suit, brought by a couple who claim they were scammed by two foreclosure-rescue companies.

• Superior Court Judge Kenneth Levy made the award after granting preliminary injunctive relief for the plaintiffs, saying "the question is ... can the court award counsel fees at this stage in the proceeding, and there is really no case law that's been presented to me that says I cannot do that."

• In his motion for the pre-judgment fee award, plaintiffs lawyer Abraham Borenstein, who heads a firm in Springfield, N.J., said there is precedent for interim awards in other fee-shifting cases though none under the applicable Consumer Fraud Act section, N.J.S.A. 56:8-19. Ruling on April 23 from the bench, Levy found the preliminary injunction -- based on a probability of success on the merits -- was sufficient to trigger that section, which provides for fees and costs to anyone granted equitable relief under the Act.

• "Although I'm not in a position to order a final judgment, I think that the plaintiffs should be awarded counsel fees for at least the work that they had to do through obtaining the preliminary injunction," the judge said in Pena v. Newell Funding, LLC, ESX-C-16-09.

• The case is still in discovery, but Levy cited strong evidence of fraud already uncovered, which probably will result in the court imposing an equitable mortgage: a remedy that returns title to people who have been defrauded out of their property by an illegal mortgage scheme.(1)

• In the suit, plaintiffs Juan Miguel and Iluminada Pena of Newark, N.J., claim that when they sought help from Newell Funding, a New York mortgage company, to forestall foreclosure of their home, Newell devised a scheme that purported to give them a $125,000 mortgage loan but actually had them execute a deed to a newly formed company, 376 Broad Street LLC, for little or no consideration. The suit charges Newell and other defendants -- including another mortgage company, Multi Solutions LLC -- used confusing documents to turn the loan into a sale without the plaintiffs' knowledge.

• In January of this year, Levy entered a temporary restraining order barring the defendants from selling, encumbering or transferring the home, and in March he granted the preliminary injunction.

• Levy awarded fees incurred from the outset of the case, filed in August 2008, to the entry of the injunction in March 2009. The award was made jointly and severally against the two mortgage company defendants and five other defendants. Borenstein calls the fee award "groundbreaking" and says it means that "litigants -- who previously could not afford to initiate a lawsuit -- are now empowered to fight and expose mortgage fraudsters."

• Borenstein is preparing his certification of time spent on the case, saying he will seek his customary hourly rate of $500 and will renew his fee application periodically as the case proceeds. "The right to attorneys' fees, in my estimation, is not dependent on winning the entire case," he says. "It's dependent on winning relief. We have won relief already."

• Newell was represented by Raphael Jacobs, of Jacobs & Bell in Tenafly, N.J., but on April 23, Levy approved a plaintiff's motion to disqualify him and add him as a defendant, says Borenstein's associate, Massimo D'Angelo. Jacobs declines to comment. The attorney for Multi Solutions, Scotch Plains, N.J., solo Richard Friedman, says, "I don't believe there's any support for the award of attorney's fees." He adds that the allegations against his client are "without foundation."

Source: Interim Attorney Fees Awarded in Consumer Fraud Suit Over Mortgage.

(1) In another recent New Jersey case in which, among other things, the attorney for the victim of another sale leaseback, foreclosure rescue equity stripping ripoff reportedly filed a request with the court to order the scammer to pick up the bill for his attorney's fees, see:

• Foreclosure Rescue Operator, Closing Attorney Found Jointly Liable For $690K+ In Bogus Sale Leaseback, Equity Stripping Ripoff,
• Bankruptcy Judge Disregards Terms In Sale Leaseback Docs In Home Sale; Recharacterized Equity Stripping F'closure Rescue Scam As An Equitable Mortgage.

The underlying story in these posts, originally reported in the New Jersey Law Journal (see Real Estate Lawyer Liable for Damages for Role in Client's Mortgage Scam) contained the following excerpt in this regard:

• [Gabriel] Halpern, of PinilisHalpern in Morristown, N.J., has already filed an application for $33,932 in fees and asked U.S. Bankruptcy Judge Raymond Lyons Jr. to multiply the amount by three, for an enhanced fee of $101,797.

(By the way, the appication of a "lodestar multiplier" in calculating the amount of enhanced plaintiff's attorney fees a court will impose on a losing defendant is not unheard of in foreclosure rescue scam cases. For example, in affirming a lower court judgment against a foreclosure rescue operator for violations of the state's Consumer Protection Act in operating a sale leaseback scam, the Nebraska Supreme Court in Eicher v. Mid America Financial Investment Corp., 270 Neb. 370, 702 N.W.2d 792 (2005) ok'd use of a multiplier of 1.3 in calculating the total tab of $375,000+ for plaintiff's attorney's fees that the operator was responsible for paying. Plaintiffs’ lead counsel requested fees based on 2,589 hours of billable time by various persons in his law firm. The lawsuit was brought by approximately a dozen victimized homeowners.)

State Consumer Fraud Act Yields Triple Damages Award For Homeowners In Bogus Sale Leaseback Equity Stripping Racket

A ruling by a Federal bankruptcy court in New Jersey recently awarded at least $690,000 in damages against a foreclosure rescue operator who peddled a sale leaseback arrangement to a financially strapped homeowner/couple purportedly intended to save them from the loss of their home. (The attorney who handled the closing in this ripoff also found himself sucked into the financial quicksand).

Included in the award were the damages attributable to the foreclosure rescue operator's violation of the New Jersey Consumer Fraud Act (the "CFA"), which allows for a tripling of the actual damages suffered by the victim.(1) The court's application of this statute to the equity stripping ripoff, in which the amount of stripped equity was $116,791.49, resulted in a total damage award for violation of this statute of $350,374.47.

The operator attemped to dodge liability under the CFA by claiming that the victims, by reason of their advanced education, business experience, etc. were sophisticated people, knew what they were doing when they did business with him, and were not misled, deceived, or defrauded in any way. The court addressed this point in the following excerpt (bold text is my emphasis, not in original):

• Defendant Cleveland argues that the CFA does not apply in this case because the O'Briens are sophisticated and "were not misled in any capacity." He claims that "no such deception, fraud or falsity occurred." There is no statutory exception for sophisticated consumers. Even the most sophisticated consumers are entitled to the protections of the CFA.

• Additionally, the terms — unconscionable commercial practice, deception, fraud and false promise — are used disjunctively so it is conceivable that a commercial practice might not be fraudulent or deceptive but would, nevertheless, be unconscionable. State v. Hudson Furniture Co., 398 A.2d 900, 902 (N.J. Super. Ct. App. Div. 1979). In fact, the New Jersey legislature amended the CFA in 1971 to add "unconscionable commercial practice" to the prohibited acts evidencing a more expansive reach than fraud alone. 1971 N.J. Laws, ch. 247. "Violation of the act can be shown even though a consumer has not in fact been misled or deceived. It is not necessary to show actual deceit or a fraudulent act; any unconscionable commercial practice is prohibited." Skeer v. EMK Motors, Inc., 455 A.2d 508, 511 (N.J. Super. Ct. App. Div. 1982); Truex v. Ocean Dodge, Inc., 529 A.2d 1017, 1020 (N.J. Super. Ct. App. Div. 1987).

For the ruling, see In re O'Brien (aka O'Brien v. Cleveland), Case No. 03-17448, Adversary Proceeding Case No. 08-1676; (USBC, D. N.J., January 22, 2010).

See also, New Jersey Law Journal: Real Estate Lawyer Liable for Damages for Role in Client's Mortgage Scam.

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(1) Use of a state's consumer fraud / unfair business practices laws is not new when seeking redress against the peddlers of these bogus sale leaseback schemes. See, for example:

• Hogan & Hartson Wins $3.3 Million Verdict in Pre-Foreclosure Scam Case: After a week-long trial in the District of Columbia Superior Court, an eight-person jury found that the defendants defrauded the plaintiff Maria Wilson and wrongfully took her home for a tiny fraction of its value. The jury also found that the defendants' scheme, in which they approach homeowners facing foreclosure and offer to help them "keep" their homes through a fraudulent sale-leaseback transaction, violated the D.C. Consumer Protection Procedures Act. The jury awarded Wilson compensatory damages of $60,000, and assessed punitive damages totaling $3.3 million against the three defendants. For the factual background on this case, see Appellate Brief: Wilson v. Modern Management, et al. (available online courtesy of Legal Aid Society of the District of Columbia).

• District Announces Agreement With Title Settlement Company in Mortgage Rescue Scam: Closing agent in the Metropolitan Money Store sale leaseback fiasco that targeted "high-home equity" homeowners facing foreclosure settles for $575,000 with the District of Columbia Attorney General's Office in a lawsuit alleging, among other things, violations of the D.C. Consumer Protection Procedures Act. Go here for the District’s lawsuit.

• D.C. Appeals Case Provides Roadmap For Obtaining Triple Damages Plus Punitives Against Foreclosure Rescue, Equity Stripper: The court found that operator had committed multiple violations of the District of Columbia Consumer Protection Procedures Act, D.C. Code §§ 28-3901 et seq. and awarded treble and punitive damages to the estate of Hattie Smith (who the trial judge described as a "frail, elderly and vulnerable widow") who lost $148,175.41 equity in her home. The treble damage calculation on that amount yielded an actual award of $315,026.23, which represented a multiplier of three minus a credit of $129,500 from other settling defendants.

• Alleged Sale Leaseback, Foreclosure Rescue Scammers To Pay $110K & Restore Title To Property Acquired From Unwitting Homeowners Seeking Help: Howard County, Maryland consumer protection officials use laws prohibiting unfair deceptive trade practices to obtain $110K settlement plus restoration of title to homes in victims' names on behalf of the estate of Betty J. Bullock, who was 63 and legally blind at the time she signed the mortgage papers, and Griselda Mason, then 68. Bullock died in October 2008 of a stroke, before the case settled.

• Foreclosure Rescue Operator To Cough Up $690K+ To Resolve Arizona AG Civil Charges In Alleged Sale Leaseback Equity Stripping Scam: Operator accused of violating, among other laws, the Arizona Consumer Fraud Act, settles with Arizona Attorney General's Office.

• Arizona Foreclosure Rescue Operator Ordered To Pay $1.2M In Home Sale, Leaseback Program: A Phoenix company and its owner were court-ordered to pay $1.2 million in restitution and penalties for violating the Arizona Consumer Fraud Act in a lawsuit brought by the Arizona Attorney General's Office.

• Washington AG Scores Big Win In Bogus Equity Stripping, Land Trust/Sale Leasebacks & Surplus Ripoffs; Foreclosure Rescue Operator Tagged For $4.2M: A Judge ordered a notorious foreclosure rescue scammer to pay more than $3.2 million to victims he wronged plus $179,000 in penalties for violating the State of Washington's Consumer Protection Act.

• Appeals Court Reverses $3M+ Jury Award To Equity Stripping Victims; Homeowners Forced To "Settle" For Triple Damages Under State Consumer Fraud Act: The Colorado Court of Appeals reversed a $3+ million jury verdict (which included $1.5 million in punitive damages) in favor of a Colorado couple who were victimized in a sale leaseback, equity stripping foreclosure rescue scam. In its ruling, the appellate court found that the damages awarded by the jury on six separate claims were duplicative. Accordingly, the court let stand only one of the awards and disallowed the remainder. That award, in the amount of $247,000 representing actual damages against those participating in the foreclosure rescue scam for violation of the Colorado Consumer Protection Act (CCPA), §6-1-101, et seq., was then tripled (for clear and convincing evidence of the existence of bad faith conduct on the part of the scammers) pursuant to §6-1-113 of the CCPA. Consequently, the final award to the aggrieved homeowners was limited to $741,000.

• Foreclosure Rescue Operator Ordered To Return Homes To A Dozen Victims: In a 2005 Nebraska Supreme Court decision, two Omaha area foreclosure rescue operators were ordered to restore title to the homes of a dozen homeowners who the operators fraudulently induced into signing over their home titles, or reimburse them for their damages. In addition, the operators were also ordered to pay approximately $378,000 in attorneys' fees to the lawyers for the victimized homeowners for violations of the Nebraska Consumer Protection Act. For the court ruling, see Eicher v. Mid America Financial Investment Corp., 270 Neb. 370, 702 N.W.2d 792 (2005) (made available online by Findlaw.com - may require free registration ).

For a 50-State Report on Unfair and Deceptive Acts and Practices Statutes: see National Consumer Law Center: CONSUMER PROTECTION IN THE STATES.