Dismissal With Prejudice Of Foreclosure Suit Does Not Prevent New Complaint Based Upon New Default

In PNC Bank, N.A. v. Neal (1D12-2544), a short opinion from the First District, the court affirmed a dismissal with prejudice entered in a foreclosure action filed by PNC. The court stated that:

We affirm but point out that the dismissal with prejudice of PNC Bank’s foreclosure action against the Neals does not preclude PNC Bank from instituting a new foreclosure action based on a different act or a new date of default not alleged in the dismissed action. See Star Funding Solutions, LLC v. Krondes, 101 So. 3d 403 (Fla. 4th DCA 2012) (citing Singleton v. Greymar Assocs., 882 So. 2d 1004, 1005 (Fla. 2004)).

Arbitration Agreement That Provides For Fees To Prevailing Party, Contrary To The FLSA, Is Unenforceable

In Hernandez v. Colonial Grocers, Inc. (2D11-3415), the Second District determined an arbitration provision was invalid because it conflicted with the relief afforded by the relevant federal statute. The plaintiff filed a lawsuit asserting violations of the "Fair Labor Standards Act [29 U.S.C. § 216(b)] and section 440.205, Florida Statutes (2010), of the Florida Workers' Compensation Act.” The trial court granted the defendant's motion to compel arbitration pursuant to a provision of the employment contract. That arbitration clause included the following language: “...Although the parties shall initially bear the cost of arbitration equally, the prevailing party, if any as determined by the arbitrator at the request of the parties which is hereby deemed made, shall be entitled to reimbursement for its share of costs and reasonable attorneys' fees, as well as interest at the statutory rate.” 

The Second District first rejected the appellant’s argument that Flyer Printing Co. v. Hill, 805 So. 2d 829 (Fla. 2d DCA 2001) provided "a bright-line rule that any fee-splitting provision renders an arbitration clause unenforceable.”

The court stated that "Hernandez also argues on appeal that the instant arbitration agreement is unenforceable because it includes a prevailing party attorney's fee provision that contradicts the attorney's fee provision of the statute under which he brought suit.” As to that second issue, Flyer Printing did require reversal. 

Here, Hernandez brought suit under the federal Fair Labor Standards Act and the Florida Workers' Compensation Law. The federal act states that a prevailing plaintiff is entitled to an award of reasonable attorney's fees, but it does not allow for prevailing party fees for the defendant. 29 U.S.C. § 216(b). The instant arbitration agreement, however, states that whichever party prevails "shall be entitled to reimbursement for its share of costs and reasonable attorneys' fees." Accordingly, should the arbitrator declare Colonial the prevailing party, Hernandez would be obligated under the arbitration agreement to pay Colonial's attorney's fees. This renders the potential cost of arbitration to be far greater to Hernandez than the potential cost of civil litigation, which under no circumstances would include Colonial's attorney’s fees. As such, while the parties' agreement may not contravene any of Hernandez’s rights under the federal act, it does expose him to a potential liability to which he would not be exposed if the litigation occurred in civil court because the federal statute specifically protects him from such liability.

"This is a sufficient enough chilling effect to defeat the remedial purpose of the federal act. The attorney's fees provision of the Fair Labor Standards Act is intended to encourage employees to seek redress when they believe they have been wronged by an employer. The arbitration agreement, however, does just the opposite— it discourages the employee from pursuing a claim. As such, under Flying Printing, it is unenforceable."

Party That Holds Note When Complaint Filed Has Standing To Enforce Its Terms

In American Home Mortgage Servicing, Inc. v. Bednarek (2D12-2099), the Second District reversed the trial court’s order dismissing a complaint for lack of standing. The court described the facts, and chain of ownership of the note and mortgage in question, as follows:

On May 31, 2005, Ms. Bednarek executed a note and mortgage in favor of American Brokers Conduit for the purchase of real property. Thereafter, the loan was sold to Deutsche Bank. On March 30, 2006, American Brokers Conduit assigned the mortgage to the bank's servicing agent, AHMSI-Maryland. In September 2007, AHMSIMaryland filed a complaint for foreclosure alleging it was the owner and holder of the underlying promissory note. With the complaint and the amended complaint, AHMSIMaryland filed copies of the mortgage, the promissory note showing a blank endorsement, and the 2006 assignment of mortgage. In April 2008, AHMSI purchased AHMSI-Maryland, acquiring the company's servicing rights. In 2009, AHMSI filed the original note and mortgage with the trial court.

At the close of testimony in the non-jury trial, counsel for Ms. Bednarek moved for an involuntary dismissal and argued that the plaintiff had failed to establish standing. "Relying on McLean [v. JP Morgan Chase Bank National Ass'n, 79 So. 3d 170, 173 (Fla. 4th DCA 2012)], the trial court granted the motion on the ground AHMSI had failed to prove it was the owner and holder of the note and mortgage.”

The court stated that “a party seeking foreclosure must establish that it had standing to foreclose at the time it filed the complaint. A foreclosure plaintiff has standing if it owns and holds the note at the time suit is filed. A plaintiff may also establish standing to foreclose by submitting evidence of a special endorsement on the note in favor of the plaintiff or a blank endorsement, an assignment from the payee to the plaintiff, or an affidavit of ownership.” Citations removed. Based upon that law, the court held:

Here, both the complaint and the amended complaint reflect that AHMSIMaryland, the original plaintiff, was the owner and holder of the note at the time the complaint was filed. An assignment of mortgage was attached to the complaint which provided that the original lender, American Brokers Conduit, assigned the mortgage to AHMSI-Maryland on March 30, 2006, more than one year prior to the filing of the original complaint. Also attached to the complaint and amended complaint was a copy of the note showing a blank endorsement. Because AHMSI possessed the original note, endorsed in blank, it was the lawful holder of the note entitled to enforce its terms.

Are Communications By A Government Employee With A Government AttorneyPrivileged?

In In re Grand Jury Subpoena, the Fourth Circuit reviewed an order from the district court “that: (1) certain emails sent by a government-employed lawyer were not protected by the attorney-client privilege, and (2) the attorney-client privilege does not exist between a government official and a government-employed lawyer in the context of a criminal investigation.”

The Fourth Circuit first held that the unidentified appellants failed to establish the government attorney was actually providing legal advice to the government employee in the emails at issue. Therefore, the emails were not privileged and that portion of the district court’s order was affirmed.

The Fourth Circuit vacated the second portion of the district court’s order as moot (for now). Having already resolved the privilege issue as to the specific emails presented, the court held resolution of the broader second issue did not present a justiciable issue. Therefore, any decision would be an improper advisory opinion.

The court did note that the broader and more interesting issue may be ripe for resolution in the future (“We note, however, that should the record be more fully developed through the course of the grand jury investigation such that a concrete dispute arises as to particular communications, justiciable claims may yet lie.”).

For what it’s worth, as discussed in a story by Politico, the Associated Press has identified the “confidential” government employee as the Governor of Virginia.

Fifth DCA Reverses Dismissal Based Upon ERISA Preemption

In Universal Checks & Forms, Inc., et al. v. Pencor, Inc. (5D12-3593), the Fifth District Court of Appeal reversed the trial court's judgment of dismissal based upon ERISA preemption. The court stated that "Universal filed a complaint for breach of fiduciary duty and negligence in connection with Pencor’s recommendation and sale to Universal of a defined benefit plan. According to the complaint, Pencor failed to disclose a critical feature of the defined benefit plan, namely, the impact of the age of employees on those employees’ share of the plan…It is Universal’s position that Pencor recommended a defined benefit plan that was unsuitable for Universal. The complaint requested compensatory damages of no less than $80,000, disgorgement of commissions, prejudgment interest, costs, and fees." "Pencor moved to dismiss the complaint on the basis that the claims were preempted by ERISA. The motion was granted and the trial court entered a final judgment of dismissal." 

The court noted that "in enacting ERISA, Congress intended to make the regulation of pension plans solely a federal concern. Firestone Tire & Rubber Co. v. Neusser, 810 F.2d 550, 552 (6th Cir. 1987). Consequently, ERISA preempts 'any and all State laws insofar as they may now or hereafter relate to any employee benefit plan . . . .' 29 U.S.C. § 1144(a)."

"Initially, the Supreme Court gave a broad dictionary interpretation to the 'relate to' preemption language, stating that a law 'relates to' an employee benefit plan 'if it has a connection with or reference to such a plan.' Shaw, 463 U.S. at 96-97. However, the Shaw court also recognized that some state actions may affect employee benefit plans 'in too tenuous, remote, or peripheral a manner to warrant a finding that the law ‘relates to’ the plan.' Id. at 100 n.21." 

The court concluded:

In the instant case, we do not believe that permitting Universal to proceed with its action against Pencor would, in any way, interfere with Congress’s intent to ensure that plans and plan sponsors are subject to a uniform body of benefits law. Universal is not asserting wrongdoing in the administration of the employee benefit plan, nor is it challenging the terms and conditions of the plan as created. Rather, Universal is alleging that Pencor engaged in tortious conduct by recommending that Universal create an employee benefit plan as a retirement investment vehicle and tax shelter. The recommendation, and the tortious conduct allegedly associated with it, necessarily occurred before the plan was even formed.

Therefore, the court reversed the dismissal.

Standing To Foreclose Requires That The Plaintiff Own Or Hold The Note-Not Both

In Wells Fargo Bank v. Morcom (5D11-4089), the Fifth District reversed a trial court's judgment in favor of the borrower. In the case:

Appellant filed a complaint on August 6, 2010, seeking to foreclose a mortgage issued by Appellees. Appellant alleged, inter alia, that “Mortgagee shown on the Mortgage attached as an exhibit is the original Mortgagee” and “Plaintiff is now entitled to enforce Mortgage and Mortgage Note pursuant to Florida Statutes § 673.3011.” Appellant attached to the complaint copies of the mortgage and the promissory note.1 The note is endorsed “pay to the order of ________ without recourse,” with the blank space populated with a stamp of Wells Fargo Bank, N.A.

The trial court held that the borrowers were entitled to judgment in their favor because the bank did not prove that it owned and held the note. The Fifth District, however, concluded that you do not need to prove both ownership and that you hold the note. The court stated:

The Florida UCC and recent cases from this court stand for the proposition that a plaintiff has standing to bring a foreclosure action if the plaintiff is the holder of a promissory note, endorsed in blank, secured by a mortgage….We have previously held that “[t]he party that holds the note and mortgage in question has standing to bring and maintain a foreclosure action.” Deutsche Bank Nat’l. Trust Co. v. Lippi, 78 So. 3d 81, 84 (Fla. 5th DCA 2012) ….“[T]he person having standing to foreclose a note secured by a mortgage may be either the holder of the note or a nonholder in possession of the note who has the rights of a holder.”….In Lippi, Deutsche Bank’s second amended complaint contained the language that it “is now the holder of the Mortgage Note and Mortgage and/or is entitled to enforce the Mortgage Note and Mortgage.” Lippi, 78 So. 3d at 84. The facts in Lippi are almost identical to Appellant’s complaint in the present case, which provides that the “Mortgagee shown on the Mortgage attached as an exhibit is the original Mortgagee” and “Plaintiff is now entitled to enforce Mortgage and Mortgage Note pursuant to Florida Statutes § 673.3011.” The Lippi court held, where the note was endorsed in blank, meaning it was “payable to the bearer and could be transferred simply by possession,” Deutsche Bank’s standing was established because it was the note holder, regardless of any recorded assignments.

In the present case, the original note Appellant attached was endorsed in blank with Appellant’s name stamped in the blank endorsement field, which, paired with section 673.3011(1), established that Appellant was the holder entitled to enforce the instrument….

Applying portions of the Florida UCC, other district courts of appeal have determined that a party that holds a note endorsed in blank has standing to foreclose a mortgage.

Based upon the fact that the bank was holding the note, which was endorsed in blank, the bank had standing to foreclosure and was entitled to judgment in its favor.

Second DCA Certifies Question Regarding Standing In Foreclosure Suits to Florida Supreme Court

In Focht v. Wells Fargo Bank, N.A. (2D11-4511 & 2D11-4980), which was released a few weeks ago, the Second District certified the following question to the Florida Supreme Court as one of great public importance:

CAN A PLAINTIFF IN A FORECLOSURE ACTION CURE THE INABILITY TO PROVE STANDING AT THE INCEPTION OF SUIT BY PROOF THAT THE PLAINTIFF HAS SINCE ACQUIRED STANDING?

In the opinion, written by Judge Silberman, the Court "reverse[d] the final judgment of foreclosure because a genuine issue of material fact exists regarding Well's Fagro's standing to enforce the note and mortgage."

At a summary judgment hearing, "Wells Fargo asserted that it had standing by virtue of an assignment of the note and mortgage dated September 2008, which was several months after the complaint was filed. Wells Fargo alternatively asserted that it had standing as the holder of the original note endorsed in blank. In opposition to Focht's cross-motion for summary judgment, counsel for Wells Fargo addressed Focht's affirmative defenses and argued that each was either factually or legally insufficient."

The court concluded that "A plaintiff who is not the original lender may establish standing to foreclose a mortgage loan by submitting a note with a blank or special endorsement, an assignment of the note, or an affidavit otherwise proving the plaintiff's status as the holder of the note….But standing must be established as of the time of filing the foreclosure complaint….Thus, Wells Fargo's submission of a postfiling assignment of the note and mortgage does not establish that it had standing when it filed the lawsuit." 

In this case, "Wells Fargo alternatively argues that it established standing by submitting the original note endorsed in blank….As with the assignment, however, Wells Fargo did not submit the original note until several months after it had filed the complaint. To establish standing as the holder of a note endorsed in blank, a party must be in possession of the original note…..Thus, Wells Fargo was required to submit evidence that it was in possession of the original note with the blank endorsement at the time it filed the complaint to establish standing."

In this case, the blank endorsement, which is apparently located on the back of the note, did not get copied for the record….Although Wells Fargo alleged in its unsworn complaint that it was the owner and holder of the note and mortgage, it asserted that the original note had been lost or destroyed and 'is not now in the custody and control of [Wells Fargo].' Notably, the affidavit of indebtedness filed in support of summary judgment relies on the postfiling assignment for standing." Therefore, the judgment was reversed.

The court "also certif[ied] a question based on some of the same concerns articulated by Judge Altenbernd in his concurrence."  The court stated:

For our part, appellate courts have seen a recent influx of appeals in which defendants have successfully argued that the trial court erred in entering a foreclosure judgment in favor of the plaintiff because the plaintiff failed to establish standing at the time of filing. ...In many of these cases, the plaintiff presented unrefuted proof of standing acquired after filing but prior to the final hearing. … The appellate courts are nonetheless compelled to reverse based on the district courts' application of a long line of supreme court cases applying the general principle that "the plaintiff's lack of standing at the inception of the case is not a defect that may be cured by the acquisition of standing after the case is filed."… 

We note that the supreme court has not applied this standing principle inthe exact context presented in this case. And we question whether, in light of the ongoing foreclosure crisis in this State, the supreme court would adhere to this principle in cases in which a plaintiff has acquired standing by the time judgment is entered. Accordingly, we certify the following question as one of great public importance:

CAN A PLAINTIFF IN A FORECLOSURE ACTION CURE THE INABILITY TO PROVE STANDING AT THE INCEPTION OF SUIT BY PROOF THAT THE PLAINTIFF HAS SINCE ACQUIRED STANDING?

Judge Altenbernd wrote a concurring opinion that began:

I concur in this decision because existing precedent requires me to do so. A requirement that the plaintiff prove that it owned or possessed a promissory note at the commencement of a foreclosure action may have made sense during earlier periods of economic downturn,3 but in this era of securitization of mortgage debt and computerized banking, it has proven to be a restriction that often provides a windfall to a borrower who can prove no harm by the fact that the plaintiff obtains possession of the note after the filing of the lawsuit but before the entry of judgment. So long as there is no dispute that the borrower received the money and defaulted on the note, the law should not use "standing" to require the dismissal of a lawsuit. If the defendant raises this issue at the inception of the lawsuit this affirmative defense may warrant a delay in the proceedings while the plaintiff establishes that it can enforce the note. But especially when the original note in default has already been filed in the court record, the law should generally permit a plaintiff to obtain a judgment of foreclosure if the plaintiff establishes that it has a right to enforce the note at the time it seeks to obtain a final judgment…. 

Litigation Client Privilege Applies When Defending Malicious Prosecution & Abuse of Process Claims

In Wolfe v. Foreman, et al (3D10-3055), the Third District addressed the applicability of the litigation client privilege when defending a lawsuit asserting claims for abuse of process and malicious prosecution. The court held:

Because the law is clear that the litigation privilege applies to abuse of process, we affirm the trial court’s order granting judgment on the pleadings in favor of the defendants below as to that cause of action. Although the law is not as clear whether the litigation privilege also applies to a cause of action for malicious prosecution, we: (1) conclude that it does; and (2) affirm the trial court’s order finding that the litigation privilege also applies to a cause of action for malicious prosecution.

The court provided an analysis of the relevant facts, which can be read in the opinion. However, the court also provided the elements of the causes of action, which could be useful to some, and copied below:

The elements of a cause of action for abuse of process under Florida law are: (1) an illegal, improper, or perverted use of process by the defendant; (2) an ulterior motive or purpose in exercising the illegal, improper, or perverted process; and (3) damages to the plaintiff as a result. Valdes v. GAB Robins N. Am. Inc., 924 So. 2d 862 (Fla. 3d DCA 2006).

***

The elements for a malicious prosecution cause of action are that a judicial proceeding: (1) was commenced against the plaintiff; (2) was instigated by the defendant; (3) ended in favor of the plaintiff; (4) was instigated with malice; (5) was commenced without probable cause; and (6) resulted in damage to the plaintiff. Valdes, 924 So. 2d at 866 n.1 (quoting Alamo Rent-A-Car, Inc. v. Mancusi, 632 So. 2d 1352, 1355 (Fla. 1994)).

Judge Rothenberg wrote the court's opinion and was jointed by Chief Judge Shepherd and Judge Cortinas. Chief Judge Shepherd wrote an opinion specially concurring in the majority opinion.

11th Circuit Reduces Requirements For Record Excerpt Program In Most Appeals

Today, the Eleventh Circuit reduced the requirements for its pilot record excerpt program. The program began as a pilot program in February 2006 in the Southern District of Alabama. Since that time, the program had slowly expanded to include other district courts within the jurisdiction of the Eleventh Circuit.

In March of this year, an email was sent to attendees of the Eleventh Circuit Appellate Practice Institute requesting comment on the pilot record program. At that time, the email stated, "it appear[ed] possible that we might be on the precipice of a modification — if not an elimination — of the program." For now, it seems the program has not been eliminated. However, it has certainly been modified. Thanks to Chet Kaufman for emailing news of the change.

Earlier today, the court posted a notice on the top of its website that states:

Reduced Requirements for Record Excerpts Now in Effect for Most Appeals. Please see Electronic Records on Appeal Program for additional information.

The page linked above, the Electronic Records on Appeal Program page, is copied below as it currently looks:

Most of these documents are in .pdf format. If you would like to download the Adobe Acrobat Reader, please visit adobe.com Problems downloading our .PDF files? Help files: .PDF or HTML format

In February 2006, with General Order 32, the Court implemented a pilot program in the Southern District of Alabama to determine whether the Court could conduct its business efficiently and without additional cost, while relieving certain district courts of the burden of providing paper copies of the record on appeal. Since that date, the program has been modified and expanded with General Order 33. At the present time, and upon request by the respective district courts, the Court has approved participation by all district courts in the Court’s Electronic Records on Appeal Program, either as an on-going program or a pilot program: Southern District of Alabama – for appeals filed on or after April 1, 2006 Middle District of Alabama – for appeals filed on or after November 1, 2007 Northern District of Alabama – for appeals filed on or after October 1, 2008 Northern District of Florida – for appeals filed on or after October 1, 2009 Middle District of Georgia – for appeals filed on or after October 1, 2010 Northern District of Georgia – for civil appeals filed on or after January 3, 2012; for criminal appeals, and appeals in cases filed pursuant to 28 U.S.C. § 2255, filed on or after November 1, 2012 Southern District of Georgia – for appeals filed on or after April 1, 2012 Southern District of Florida - for appeals filed on or after February 1, 2013 Middle District of Florida - for appeals filed on or after April 1, 2013 Parties in appeals where the district court is now filing only an electronic record on appeal must file an appendix in conformance with the “Appendix on Appeal” Requirements (June 2013) attached to General Order 39. In addition, parties will find more detailed information, including checklists and samples, in the Instructions for Preparing an Appendix (June 2013).

ELECTRONIC RECORDS ON APPEAL PROGRAM INFORMATION General Order 39 “Appendix on Appeal” Requirements (June 2013) Briefs Checklist - Electronic Records on Appeal Program (Revised June 2013) Instructions for Preparing an Appendix (June 2013) Appendix Checklist – Civil / Summary Judgment Cases (June 2013) Appendix Checklist – Criminal Cases (June 2013)