Should banks be able to avoid judicial fraud inquiries by voluntarily dismissing a case? The Florida Supreme Court heard arguments on that issue yesterday in Pino v. Bank of New York. The issue is pretty straightforward, but it is a very important one.
In Pino, the Bank of New York filed a foreclosure lawsuit against Mr. Pino. Mr. Pino’s lawyers challenged a document created by the bank’s lawyers (Law Offices of David J. Stern) and sought to question employees about the document’s veracity. On the eve of the depositions, the bank voluntarily dismissed the case thereby blocking the court’s ability to address any sanctions. [Under the Florida Rules of Civil Procedure, the court effectively loses jurisdiction over a case once it is voluntarily dismissed by the plaintiff.] Pino’s lawyers sought to block the bank from re-filing the case, which it did several months later. The trial court denied the request and Mr. Pino appealed to the Fourth District Court of Appeal. The Fourth DCA certified the issue to the Florida Supreme Court. In an interesting twist, the parties settled their dispute, but the Supreme Court still wanted to receive briefs and hear argument due to the importance of the issue.
Some of the questioning by the justices focused on the harm to Mr. Pino. For example, Chief Justice Charles Canady posed this question to Amanda Lundergan, Mr. Pino’s lawyer, “What it seems like to me, you’re just looking for a ‘gotcha’ to get out of the mortgage. Am I wrong?”
The bank’s argument was that voluntary dismissals in foreclosure cases should be treated the same as any other civil case and that rule changes aimed at voluntary dismissals in foreclosures could have far-reaching effects.
We have not had problems. This is, because it’s a mortgage foreclosure case, because there are a lot of those cases, it has attracted a lot of attention. But I think we have to look at this in the universe of general civil litigation. And this has not been a problem in general civil litigation. – Bruce Rogow, lawyer for BNY
Mr. Rogow’s point is well taken, but he overlooks the obvious. Fraudulent filings in have not been a widespread problem in “general civil litigation,” but they do remain a very real (and widespread) problem in foreclosure cases. The issues of robo-signing and fraudulent documents in residential mortgage foreclosure cases have been widely reported yet it continues to happen.
The underlying consideration should be preserving the integrity of the judicial system and the lawyers who are officers of the courts. The existing rule structure provides an opportunity for unscrupulous banks or lawyers to submit fraudulent paperwork in the hopes of getting away with it. When it appears the scheme didn’t work, they can simply dismiss the case and get a do-over. Our judicial system should not let that happen. We have a special rule of civil procedure for the verification of complaints which only applies in mortgage foreclosure cases. Why shouldn’t there be a similar special rule for voluntary dismissals in foreclosure cases?
The Supreme Court took the first step towards limiting this fraud by requiring verification of foreclosure complaints. However, much of the robosigning and fraud occurs in affidavits filed much later in the case. The next step should be to allow the trial courts to retain jurisdiction after a voluntary dismissal in a foreclosure case, upon a proper showing, to consider sanctions against lawyers and lenders who submit fraudulent documents to the courts. Thus, it is still too early to determine what the Court will ultimately decide.
Court watchers will tell you not to read too much into the questioning by the justices. The justices’ feelings can’t be assumed simply from their questioning, and the written opinion often reaches a completely different result than one would assume from the questions asked at the hearing.
We will post another blog on this issue once the Supreme Court issues its opinion.