Law Suits & Courts

Subpoena discrepancy will go to 4th DCA, experts say

Posted on Thursday, November 11, 2010

When the Shapiro & Fishman foreclosure law firm moved to quash a subpoena from the Florida attorney general’s office, Palm Beach Circuit Judge Jack Cox agreed, calling the subpoena overbroad, invasive and beyond its scope of authority.
But when another foreclosure firm, the Law Offices of David J. Stern, made the same motion, Broward Circuit Judge Eileen O’Connor let the subpoena stand without explanation.
How could two judges in neighboring counties come up with diametrically opposed rulings?
Legal experts aren’t sure, but they are certain of one thing — the issue of whether the attorney general’s office has the authority to broadly subpoena foreclosure law firms will ultimately be decided by the 4th District Court of Appeal.
"I think it will end up in the 4th DCA," said Bruce Rogow, a prominent Fort Lauderdale appellate attorney and law professor at Nova Southeastern University in Davie. "Obviously, you have judges from two different circuits coming to different conclusions, so the 4th DCA will have to resolve it. I don’t think it’s the stuff of the Florida Supreme Court."
Florida Attorney General Bill McCollum’s office issued the subpoenas on four foreclosure law firms — Shapiro & Fishman with offices in Boca Raton and West Palm Beach, the Law Offices of David J. Stern in Plantation, the Law Offices of Marshall Watson in Fort Lauderdale and Florida Default Law Group of Tampa — as part of an investigation into potential wrongdoing in the foreclosure crisis. The probe is part of a 50-state inquiry into whether lawyers for lenders and mortgage servicers submitted improper foreclosure documents or engaged in so-called "robo-signing."
All but one of the four firms — the Law Offices of Marshall Watson — tried to quash the subpoenas, according to Ryan Wiggins, a spokesman for the attorney general’s office. A Hillsborough Circuit judge has set a hearing Nov. 23 on the Florida Default Law Group’s motion to quash its subpoena.
"I think everyone is waiting to see what happens with the third one — yea or nay," said an official at the attorney general’s office who did not want to be identified.
Laundry-List Subpoena
The fact that O’Connor, a former longtime federal prosecutor, refused to kill the subpoena was no surprise to legal experts.
But Cox’s ruling sharply chastising McCollum’s office stunned some observers. Cox, who was recently nominated for an opening on the 4th DCA, sided with prominent Palm Beach County litigator and former Florida Bar president Gerald Richman’s client.
Richman strongly denied the notion that Cox may have been swayed in his ruling by the fact that Cox had applied for a seat on the 4th District Court of Appeal and Richman sits on the judicial nominating commission for that court.
"First of all, there are a lot of people on the JNC, not just me; and secondly, he has applied before," Richman said. "We sent up four extremely qualified judges to the governor. Nothing of that nature was ever discussed with him."
"That’s why Judge Cox is so respected — he calls it the way he sees it," Richman added.
In his ruling Cox concluded that McCollum was improperly trying to delve into areas strictly under the regulatory and disciplinary authority of The Florida Bar and called the gambit a "constitutional absurdity." The attorney general’s office is investigating the lawyers and law firms under the Florida Deceptive and Unfair Trade Practices Act.
"I don’t see why the AG can’t investigate lawyers," said Bob Jarvis, a law professor at Nova Southeastern University. "I don’t know why The Florida Bar should be the only agency to investigate attorneys. I don’t see anything in FDUPTA that exempts attorneys. I’m still scratching my head why Judge Cox did what he did."
Jarvis feels "there’s no question" Cox will be reversed on appeal. The attorney general’s office, however, has not yet decided whether to appeal or retool its subpoena, according to Wiggins, and is weighting its options.
On the other side, Stern’s firm plans to appeal O’Connor’s ruling by the Nov. 15 deadline, said the firm’s lawyer, Jeffrey Tew of Tew Cardenas in Miami.
In response to a motion for rehearing, Cox indicated he might let the subpoena survive if the AG’s office tailored it under a different state law.
In the second ruling, Cox took aim at The Florida Bar, among others. The Attorney General’s office, in its motion, included an affidavit from Kenneth Marvin, director of lawyer regulation for The Florida Bar, who stated that The Bar’s authority extends to individual attorneys but not law firms. Cox asserted that The Bar can indeed regulate law firms in the areas of trust accounts and law firm advertising.
"Obviously, The Bar doesn’t know what they’re talking about," Richman said. "That’s nonsensical."
Even if The Bar did not have authority over law firms, the circuit court does, Cox added.
Additionally, Cox stated, the attorney general’s office inaccurately cited criminal cases in its motions while bringing the case under a civil remedy.
"The state does not even allege that a crime was committed and the State has not sought to use criminal investigation tools," Cox stated.
Lastly, Cox noted that banks and savings and loans are exempt from FDUPTA claims and regulated by the Office of Financial Regulation and the Financial Services Commission.
Legal experts believe Cox was most concerned about the breadth of the subpoena. It requested the names of all firm lawyers for the past five years, all lenders it had represented, all notaries it had used, any companies the law firm had an interest in and documents showing pay scales and bonuses for all employees, among other things.
Stern’s firm produced 26,000 pages of documents, according to Tew.
There’s no question lawyers can be prosecuted for crimes. The most prominent South Florida targets of late are Ponzi schemer Scott Rothstein and Miami accountant and attorney Lewis Freeman. But the attorney general’s focus is strictly civil in the foreclosure probes.
And the attorney general’s office has used its civil powers to go after attorneys and law firms before. McCollum shut down the Coral Springs law firm Hess Kennedy and placed it in receivership in 2008 for allegedly pocketing fees from distressed credit card customers seeking debt relief without pursuing promised workouts. Illustrating the split between civil enforcement and discipline, firm leader Laura Hess accepted disbarment.
The attorney general’s office brought that case under the same statute under which it is bringing the foreclosure cases, Florida’s Unfair and Deceptive Trade Practices Act.
When asked why the attorney general was successful in bringing FDUPTA claims against the Hess Kennedy firm and whether that set a precedent, Richman speculated that defense lawyers in that case may not have made the right defenses.
"We don’t know what defenses were brought in that case," he said. "That’s what you have to look at."
Miami appellate lawyer Andrew Berman, who is not involved in the case, said that while Cox was clearly bothered by the breadth of the subpoena, he had other valid reasons for rejecting it. It’s not that McCollum’s office shouldn’t investigate foreclosure firms, it’s that they should have done so under other grounds, he said.
"You have to look at what’s being investigated," Berman said. "The AG has a basis to investigate lawyers if they’re accused of committing a crime. A whole host of other regulations and statutes are available to the AG as a springboard to an investigation. They just picked the wrong one."
Fishing Expedition
The Florida Bar is also concerned about irregularities and possible fraud related to foreclosure documents. Bar president Mayanne Downs has written to every chief circuit judge in the state to ask their judges to refer any suspicious cases to The Bar for investigation. So far, The Bar is investigating 40 lawyers for potential foreclosure law violations, said Bar spokeswoman Francine Walker.
But any Bar investigation would be geared to discipline, not civil or criminal penalties.
"All The Bar would look at is are you fit to keep your license," Jarvis noted. "That’s a very different investigation from the AG saying should you go to jail, pay fines, pay civil restitution. I think the judge got confused."
Downs said she also was surprised by Cox’s ruling, although she had not read it fully.
"I would be surprised that a judge ruled precisely and firmly that no other governmental agency could investigate behaviors or actions by lawyers," she said. "But I suspect what really ticked off the judge was how overbroad the subpoena was. I think that was the real issue."
Downs noted investigators often embark on a fishing expedition because they are not sure exactly what they are looking for and don’t want to be limited.
But that can be dangerous, Rogow said, noting, "narrowly tailored is a mantra for a good subpoena. It may have been the broadness of the subpoena that created a very negative impression."
Attorney General-elect and former Tampa prosecutor Pam Bondi, said before the election that she supported McCollum’s investigation.
"The court’s ruling did not speak to the issue of whether the firms under investigation had committed any wrongdoing," Bondi said in a statement. "We must use whatever means are available to ensure that homeowners are not being subjected to illegal practices. No Floridian should have to fear losing their home as a result of a flawed foreclosure process."
Dan Gelber, a former federal prosecutor who Bondi defeated in the general election, urged McCollum’s office to redraw the subpoena "as narrowly as possible."
Still, "whether they are overbroad doesn’t change that it’s a valid investigation," he said. "Being a lawyer doesn’t give you immunity from violating Florida’s statutes."
Julie Kay
Daily Business Review

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