Connect with us

Bankers

Fl. Lawyer Committed Criminal Mortgage Fraud which was Not Reported by Judge Marra

Mario German is a Florida attorney with a checkered past, based upon review by LIT. We found a clear case of closing attorney mortgage loan fraud and now he’s allegedly finchin’ escrow funds.

Published

on

LIT COMMENTARY

Now He’s Stealin’ Again.

Mario German is a Florida attorney with a checkered past, based upon review by LIT. We found a clear case of closing attorney mortgage loan fraud by Florida attorney Mario D. German which was never reported to the prosecutor or Florida Bar by S.D. Fl.  District United States Judge Kenneth A. Marra.

This type of scheme normally comes with lengthy jail terms, for example, see the case of Phillip Graham Rose, a closing attorney from Raleigh, was sentenced to 42 months and ordered to pay $1.6 million to the victims of the scheme.

A good example and explanation of this type of scheme is detailed by the Eleventh Circuit in US v Hill, a straw buyer mortgage fraud case, which we cite just a small snippet;

“The higher the property value the larger the loan, the larger the loan the higher the sales price, and the higher the sales price the larger the profit. In order to obtain loans for the highest possible property value, and reap the highest possible profit, Hill and his associates made a multitude of misrepresentations to lenders. They lied a lot. They lied about the true buyers, and they lied about the source of the down payments, and they lied about the value of the properties, and they lied about the income and employment of the buyers, and they lied about whether the buyers would occupy the properties, and they lied about whether any other properties owned by the buyers were being leased.”

U.S. v. Hill, 643 F.3d 807, 820 (11th Cir. 2011)

There is no way that Judge Marra was not aware of exactly what Mario German’s role was in this case, as outlined in his detailed order, yet he chose to blank the mortgage fraud.

Fast forward to 2020/21 and there’s two active cases, one now remanded to Florida State Court claiming theft of $202k and the other is in S.D. Fl. Federal Court, wherein German has stolen escrow funds and in the state court case he’s come up with a ‘hacker theory’ as to why those escrow funds vanished. LIT suggests the hacker and fraudster is right in view, namely the thievin’, schemin’ rogue lawyer called Mario German.

The most recent filing is a customer from Texas, who was buying used catalytic converters from suppliers in South America, only to find that his funds which were wired to German’s escrow, the $178k or so would allegedly be finched by German for his own personal use.

These are just the 3 cases we discovered and have reached court. The question remains, are these the only instances of this type of criminal behavior?

Below LIT has provided the most relevant filings for these three Mario German cases in the hopes that the FBI, DOJ, the Florida Bar and the clients attorneys have access to this information and act accordingly.

It’s highly unlikely the federal court in Florida or the judges therein will act appropriately,  as they are known to exclude and hide key evidence from litigants before the court.

The $178k Theft Case

Global Resource, Inc. v. Mario D. German Law Center, P.A. (9:21-cv-80561) District Court, S.D. Florida

ONGOING…

LIF Update: May 15, 2021

When you read Mario German’s pro se reply, it just reminds us of LIT’s article and review of the attorney fraud perpetrated in the case at the First Circuit. You can read it here and make your own assumptions, but we can see that German is being evasive and struggling to answer the complaint with general and unavailing denials.

Michael J. Krantz, Disbarred Lawyer, named Defendant along with his company Nexus.

Krantz answers for company and himself (although that’s not clearly identified on page 1 of his reply, he states as much later on). As we’ve said before, you’re fine pro se in federal court if you are defending yourself, but for NEXUS, as a registered company, you have to hire a lawyer. You cannot represent the firm pro se.

Insofar as his answer, it’s hard to swallow when you read the reason for the actions which led up to this former lawyer being disbarred in 2015 – effectively the same allegations as here, misappropriation of escrow funds in a wire transfer arrangement.

IN RE: MICHAEL J. KRANTZ NO. BD-2015-073

S.J.C. Judgment of Disbarment entered by Justice Spina on August 10, 2015.1 SUMMARY2

This matter came before the Board of Bar Overseers and the Court on the respondent’s affidavit of resignation pursuant to Supreme Judicial Court Rule 4:01, 15. In the affidavit, the respondent acknowledged that the material facts summarized below could be proved by a preponderance of the evidence.

The respondent was admitted to practice in the Commonwealth on October 22, 1986.

In December 2011, in his capacity as an attorney, the respondent agreed to assist in the transfer of 15,500 Euros, with a U.S. dollar value of approximately $19,500, from an account maintained by his client in Lebanon to an account in the United States, and to hold the funds in escrow.

Between December 2011 and about July 2012, the respondent intentionally misappropriated the escrow funds, and did not return the funds to his clients on demand and on the termination of the representation.

This conduct violated the Massachusetts Rules of Professional Conduct, including, among others, Mass. R. Prof. C. 1.15(b) and (c), 1.16(d), and 8.4(c) and (h).

In addition, the respondent engaged in the unauthorized practice of law in Florida,

and operated a law office and used letterhead and other documents falsely identifying himself as practicing in a law firm in Florida, when he was a sole practitioner and was not licensed in Florida.

This conduct violated Mass. R. Prof. C. 5.5(a), 7.1, and 7.5(a).

On October 3, 2014, bar counsel filed a petition for discipline. On July 1, 2015, the respondent filed an affidavit of resignation.

On July 13, 2015, the Board of Bar Overseers voted to recommend that the affidavit of resignation be accepted and the respondent be disbarred forthwith.

On August 10, 2015, the Supreme Judicial Court entered a judgment accepting the affidavit of resignation and disbarring the respondent from the practice of law in the Commonwealth effective immediately upon the entry of the judgment.

1 The complete Order of the Court is available by contacting the Clerk of the Supreme Judicial Court for Suffolk County.

2 Compiled by the Board of Bar Overseers based on the record filed with the Supreme Judicial Court.

COMPLAINT FOR DAMAGES

COMES NOW Plaintiff Global Resource, Inc., who brings this Complaint against Defendants on the following grounds:

JURISDICTION AND VENUE

1. This Court has diversity jurisdiction over this action pursuant to 28 U.S.C. § 1332. The matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, Plaintiff is a Delaware corporation with its principal place of business in Texas, and Defendants are citizens of Florida, as detailed in paragraphs 3 through 9, herein.

2. Venue is proper in this Court pursuant to 28 U.S.C. § 1391 because all or a substantial part of the events or omissions giving rise to Plaintiff’s claims occurred in Palm Beach County, Florida, in the Southern District of Florida.

THE PARTIES

3. Plaintiff Global Resource, Inc. (hereinafter “Global Resource”) is a Delaware corporation formed in 2004 with its principal place of business in the State of Texas. Global Resource’s sole director and owner is Sean Ramey (hereinafter “Ramey”), an individual who resides in Houston, Texas.

 

4. Defendant Mario D. German Law Center, P.A. (hereinafter “German Law Center”) is a Florida for-profit corporation formed in 1999 with its principal address at 55 N.W. Fifth Avenue 400, Boca Raton, FL 33432. On information and belief, German Law Center’s sole officer and director is Mario D. German, an individual who resides in Palm Beach County, Florida.

5. Defendant Nexus Capital Management, LLC (hereinafter “Nexus”) is a Florida limited liability company formed on or about August 1, 2013 with its principal address at 1374 Cypress Way, Boca Raton, FL 33486. Nexus’ sole member and manager is Defendant Michael
J. Krantz, an individual who resides in Palm Beach County, Florida.

6. Defendant Mario D. German (hereinafter “German”) is an individual who resides in Palm Beach County, Florida. German is the Director of Defendant German Law Center.

7. Defendant Michael J. Krantz (hereinafter “Krantz”) is an individual who resides in Palm Beach County, Florida. Krantz is the sole member, with the title of “Manager”, for Defendant Nexus.

FACTUAL ALLEGATIONS APPLICABLE TO ALL CLAIMS

8. Plaintiff Global Resource is a company engaged in the business of, among other things, purchasing automotive and industrial materials and refining them to extract a variety of residual metal compounds.

9. In connection with these activities, in or around May 2020, Global Resource entered into agreements with three suppliers for catalytic converters, evidenced by purchase orders attached as Exhibits 1-3 hereto. Specifically, those agreements provided the following:

a. Pursuant to a purchase order dated June 25, 2020, Global Resource agreed to order 1,500 kilograms of catalytic converters from a Venezuelan supplier for
$75,000 [Exhibit 1];

b. Pursuant to a purchase order dated July 12, 2020, Global Resource agreed to order 1,000 kilograms of catalytic converters from a Bolivian supplier for
$55,000 [Exhibit 2]; and

c. Pursuant to a purchase order dated July 13, 2020, Global Resource agreed to order 2,060 kilograms of catalytic converters from a Brazilian supplier for
$86,520 [Exhibit 3].1

10. Because the Suppliers were located outside the United States and did not have merchant accounts set up to receive funds directly from Plaintiff’s corporate credit account, Plaintiff and the Suppliers set out to find a solution to facilitate payment.

11. In or around May 2020, one of Plaintiff’s Suppliers referred Plaintiff to Angely Quintero, an agent of Defendant Nexus. Quintero introduced Plaintiff to Nexus, which Quintero represented was a legitimate payment service that could facilitate payments from Plaintiff to the Suppliers.

12. Quintero did not disclose to Plaintiff that Quintero had an arrangement with at least one Supplier to receive a 2.5% commission for referring Plaintiff to Nexus.

13. In or around May 2020, Quintero set up an introductory phone call between Ramey, acting for the Plaintiff, Defendant Krantz, and Joseph J. Camargo, acting as the agent for German Law Center.

1      The three suppliers will collectively be referred to herein as the “Suppliers” and the purchase orders will collectively be referred to herein as the “Purchase Orders”.

14. During that phone call, Krantz and Camargo made the following representations about Nexus and German Law Center, respectively, to Ramey:
a. Nexus was frequently engaged in providing payment services to companies and high net worth individuals who needed to transfer money overseas, including to and from Venezuelan citizens, which could be challenging to an inexperienced layperson;

b. Nexus had a large book of clients who could attest to Nexus’ legitimacy and efficacy as a payment servicer;

c. Nexus frequently, if not exclusively, utilized bank accounts belonging to German Law Center as escrow accounts for facilitating payments between its clientele;

d. German Law Center, whose representative Camargo was on the call, recognized, accepted, and actively participated in this business relationship by offering up its bank accounts for use as escrow accounts and directing funds pursuant to Nexus’ and Nexus’ clients’ instructions; and

e. Nexus and German Law Center were capable of and prepared to provide their services to Plaintiff by acting as transfer agent for the payment of funds from Plaintiff to the Suppliers.

15. Shortly thereafter, the Suppliers each signed an agreement with Nexus, titled “ESCROW / TRUST (Fiducia) AGREEMENT”, whereby Nexus represented that it would facilitate the payments from Plaintiff to the Suppliers, acting as “agent” for the transactions in exchange for a commission of 2.5% of the total payment price on each transaction (hereinafter the “Escrow Agreement(s)”). One of those agreements is attached hereto, unsigned by the supplier. [See Exhibit 4]. Discovery should yield the executed copies of these agreements, which are not in Plaintiff’s possession.
16. In July 2020, Nexus sent a letter to Plaintiff confirming Nexus’ arrangement with the Suppliers (hereinafter the “Confirmatory Letter”). Specifically, Nexus stated:
a. Nexus is retained primarily to provide Consulting, Custody, Paymaster, Escrow Services to facilitate the purchase, sale and delivery of assets to the Clients in the most secure and expeditious manner;

b. To provide the fastest most streamlined to facilitate Purchase and Sales of their assets, Nexus has engaged several Professional Associations (PA) and Law Firms to assist in these operations [sic]; and

c. Nexus is utilizing Attorney IOLTA accounts at principal USA banks to receive the funds for these transactions.

17. The Confirmatory Letter also included a list of five bank accounts at Chase, Bank of America, and Wells Fargo with corresponding Swift Codes, routing numbers, and account numbers. Under the list of bank accounts, Defendant Krantz affixed his signature on behalf of Defendant Nexus accompanied by the statement: “I hereby swear, under penalty of perjury, that the information provided herein is true and correct.” [See Exhibit 5].

18. Nexus represented to Plaintiff that it would “utilize” Defendant German Law Center for the transactions at issue. Notably, one of the Bank of America accounts listed in the Confirmatory Letter with the account number ending in “4048” was German Law Center’s IOLTA (Interest on Lawyers Trust Accounts) account. Id.

19. To fulfill Plaintiff’s obligations to the Suppliers pursuant to the Purchase Orders, and based on Defendants’ representations that they would facilitate Plaintiff’s payments, Plaintiff wired funds intended for disbursement to the Suppliers to German Law Center’s IOLTA account. Plaintiff selected the IOLTA account specifically because, among other things, Plaintiff had a general understanding that lawyer trust accounts were subject to stricter regulation.

20. Plaintiff initiated the following wires to German Law Center’s Bank of America account with the account number ending in “4048”:

21. Plaintiff wired a total of $178,400 to German Law Center. As detailed in the preceding table, the “Memo to Payee” in connection with each wire stated that the funds were intended for payment of a particular Supplier.

22. On July 1, 2020, Defendant Krantz sent an e-mail to Plaintiff instructing Plaintiff to fully execute a form titled “Release of Funds in Escrow” (hereinafter “July 1 Release Agreement”). [See Exhibit 6].

23. The July 1 Release Agreement, printed on Nexus letterhead and attached to that email, was formatted as a letter to Defendant German Law Center instructing it to release Plaintiff’s previously deposited funds for the benefit of the Suppliers.

24. Specifically, the Release Agreement instructed German Law Center to undertake the following:

You are hereby authorized to release funds sent in or otherwise deposited by me, Mr. Sean Ramey into your IOLTA account in the amount of SEVENTY TWO THOUSAND FIVE HUNDRED and 0/00 US Dollard ($72,500 USD) as provided by this agreement.

MARIO D. GERMAN LAW CENTER P.A. has received the above transfer and is in receipt of your transfer or wire receipt, and is prepared to distribute funds according to this agreement.

MARIO D. GERMAN LAW CENTER P.A. is hereby directed to disburse said funds held in escrow in the following manner; NINTY [sic] SEVEN AND A HALF Percent (97.5%) of gross transfer is to be released as directed solely by Mr. Sean Ramey (the Remitter) without delay and or limitations after the funds have fully cleared and credited into MARIO D. GERMAN LAW CENTER, P.A. Escrow Account. I, Sean Ramey direct these funds are to be distributed to Nexus Capital Management for the benefit of [one of the Suppliers]. The balance of funds held in Escrow by MARIO D. GERMAN LAW CENTER, P.A. is to be retained by Mario D. German Law Center, P.A. as fee for the Escrow and Paymaster services provided.

(all emphasis in original).

25. Additionally, the final paragraph of the Release Agreement contained the following language, titled “Disclosure”:
Once this document is duly executed it is a binding agreement that carries my full authority without any limitations whatsoever, and furthermore once the funds are transferred and or transmitted to the banking instructions as described herein above all liability and or responsibility on the part of MARIO D. GERMAN LAW CENTER, P.A. and/or Mario D. German, Esq. and or their officers is completely released without limitations and with prejudice.

(all emphasis in original).

26. On July 1, Ramey, acting for Plaintiff, executed and returned the July 1 Release Agreement to Krantz. [See Exhibit 7].

27. On July 11, 2020, Ramey executed an identical “Release of Funds in Escrow” form directing German Law Center to release 97.5% of $52,500 Plaintiff previously deposited for the benefit of the second Supplier. [See Exhibit 8].

28. On July 24, 2020, Plaintiff executed an identical “Release of Funds in Escrow” form directing German Law Center to release 97.5% of $37,900 Plaintiff previously deposited for the benefit of the third Supplier. [See Exhibit 9].

29. Defendants did not release the funds as instructed.

30. In reality, Defendants never intended to complete the transactions at issue, and, instead, transferred the money to themselves and/or for their own benefit.

31. None of the Suppliers ever received the funds deposited in German Law Center’s account for their benefit.

32. On August 14 and August 19, Plaintiff contacted Krantz and Camargo via email to inquire as to the status of the funds. Neither Krantz nor Camargo responded to these emails. See Exhibits 10 and 11.

33. On October 27, 2020, Ramey spoke with Camargo––who was, at all times acting for The German Law Center––over the phone. During this call, Camargo, on behalf of German Law Center, agreed to advance $20,000 to one of the Suppliers to facilitate shipment of the goods (which were never delivered to Plaintiff due to lack of payment). In support of this transparent stalling tactic, Defendants fabricated a wire transfer confirmation. [See Exhibit 12].

34. German Law Center never intended to pay this advance, never paid this advance, and in fact made this representation to convince Plaintiff that Defendants had not stolen Plaintiff’s funds or committed a fraud.

35. On December 14, 2020, Plaintiff emailed Krantz and Camargo once again requesting return of the funds. [See Exhibit 13]. Neither Krantz nor Camargo responded.

36. During this time period of August through December 2020, Plaintiff had several phone calls with Camargo acting for The German Law Center, who provided a variety of excuses as to what happened to Plaintiff’s money, including that (a) the money could not immediately be disbursed to the Suppliers due to anti-money laundering regulations governing large transactions with foreign individuals/entities; (b) that the Suppliers provided the wrong account numbers for disbursement; and (c) that the money had been invested in another venture and earning interest.

37. Defendants have avoided Plaintiff, concealed what happened to Plaintiff’s money, and made representations designed to lull Plaintiff into believing nothing had gone wrong so that Plaintiff would not exercise its legal rights or alert the criminal authorities.

38. Defendants fraudulently induced Plaintiff to transfer funds to German Law Center’s IOLTA account so that they could keep Plaintiff’s money for themselves or use the money for their benefit. Indeed, that is precisely what they did.

39. Apparently, Defendants did not limit their scheme to Plaintiff as they have been sued by other victims for similar fraudulent behavior, including by Recycled Paper International, LLC in the case styled Recycled Paper International, LLC v. Mario D. German Law Center, P.A., et al., Case No. 9:20-cv-81888 (S.D. Fla., Amended Complaint filed Oct. 22, 2020).

40. All conditions precedent to bringing this lawsuit have been satisfied or waived.

CLAIM I

CONVERSION AGAINST ALL DEFENDANTS

41. Plaintiff re-alleges and adopts all of the allegations set forth in paragraphs 1 through 40 above.

42. This is an action for conversion against German Law Center, German, Nexus, and Krantz.

43. German Law Center and Nexus, acting through the individuals discussed above, induced Plaintiff to transfer funds to German Law Center’s IOLTA account in connection with an agreement that Defendants would facilitate payments to Plaintiff’s Suppliers.

44. Plaintiff transferred money to German Law Center’s IOLTA account in connection with an agreement that Defendants would facilitate payments to Plaintiff’s Suppliers.

45. Defendants then converted the money by removing it from German Law Center’s IOLTA account and using it for various improper purposes or otherwise retaining it for themselves.

46. At all material times, Plaintiff was the rightful owner of the monies transferred to German Law Center’s IOLTA account.

47. Plaintiff has demanded the return of his monies, but the money has not been returned.

48. Plaintiff has been deprived of its possession of money in a manner that equates to conversion.

WHEREFORE, Plaintiff demands a judgment against Defendants, jointly and severally, for actual damages in an amount to be determined by the trier of fact, costs of the lawsuit, pre- and post-judgment interest, and such other relief as the trier of fact deems just and appropriate.

CLAIM II

CONSPIRACY TO CONVERT ASSETS AGAINST GERMAN AND KRANTZ

49. Plaintiff re-alleges and adopts all of the allegations set forth in paragraphs 1 through 40 above.

50. In or around May 2020, individual Defendants German and Krantz agreed to a series of unlawful acts that would convert Plaintiff’s money for their own benefit and benefit of others.

51. The underlying tort was conversion of Plaintiff’s money, as alleged in Claim I (which Claim is hereby incorporated, including paragraphs 41 through 48).

52. Each individual defendant had his own role in the conspiracy and performed overt acts in furtherance thereof:

a. Krantz established and managed Nexus to have an entity to enter into “Escrow Agreements” with the Suppliers and to facilitate Plaintiff’s Release Agreements with German Law Center;

b. German established and managed German Law Center and its IOLTA account, in which Plaintiff deposited the converted monies. In addition, German controlled the IOLTA account and unlawfully disbursed Plaintiff’s money from that account for his benefit, and for the benefit of the other Defendants herein.

53. Plaintiff has suffered significant damages in the loss of its money, as set forth herein, through the conversion of its money.

WHEREFORE, Plaintiff demands judgment against German and Krantz, jointly and severally, for actual damages in an amount to be determined by the trier of fact, costs of the lawsuit, pre- and post-judgment interest, and such other relief as the trier of fact deems just and proper.

CLAIM III BREACH OF CONTRACT

54. Plaintiff re-alleges and adopts all of the allegations set forth in paragraphs 1 through 40 above.

55. Plaintiff entered into an oral contract, evidenced by the Releases attached as Exhibits 7-9, for Nexus to process the funds for the benefit of the suppliers. Alternatively, Plaintiff was a third party beneficiary of the Escrow/Trust Agreement entered into between Nexus and the suppliers, an example of which is attached as Exhibit 4.

56. Under the contractual terms, Nexus, through the German Law Center IOLTA account, was required to disburse $70,687.50, $51,187.50, and $36,952.50, which Plaintiff had previously deposited into German Law Center’s IOLTA account, to Plaintiff’s Suppliers.

57. Nexus breached the terms of the agreement to disburse the funds by diverting the funds for its own benefit, and for the benefit of the other Defendants in this lawsuit.

58. Nexus’ conduct constitutes gross negligence or willful misconduct, as set forth herein, because it diverted the funds for the benefit of Defendants rather than disburse Plaintiff’s funds to the respective Suppliers as instructed.

59. Plaintiff has suffered damages as a consequence of Nexus’ material breaches of the contract.

WHEREFORE, Plaintiff prays that this Court enter judgment in its favor and against Nexus for actual damages in an amount to be determined by the trier of fact, costs of the lawsuit, pre- and post- judgment interest, and such other relief as the trier of fact deems just and appropriate.

CLAIM IV

BREACH OF FIDUCIARY DUTY AGAINST GERMAN, GERMAN LAW CENTER, AND NEXUS

60. Plaintiff re-alleges and adopts all of the allegations set forth in paragraphs 1 through 40 above.

61. German Law Center, as account holder for the IOLTA account in which Plaintiff deposited its monies in exchange for payment, was the effective trustee of Plaintiff’s funds and owed a fiduciary duty to Plaintiff.

62. German, as sole member of German Law Center, being a member of the Florida Bar and benefiting from that designation, and otherwise holding himself out as having control over German Law Center’s IOLTA account, was the effective trustee of Plaintiff’s funds and owed a fiduciary duty to Plaintiff.

63. Nexus, as the agent facilitating the transfer through the German Law Center’s IOLTA account to the suppliers of Plaintiff, owed a fiduciary duty to Plaintiff to execute the transfer according to the consent and direction of Plaintiff.

64. Indeed, German, German Law Center, and Nexus, as trustees of the funds transferred by Plaintiff with the obligation to act primarily for the benefit of Plaintiff and the suppliers, were given the trust and special confidence of Plaintiff to execute the funding instructions to the suppliers as agreed.

65. German, German Law Center, and Nexus breached their fiduciary duties by failing to disburse Plaintiff’s money consistent with its instructions and/or failing to return those funds to Plaintiff, resulting in a complete loss of all monies Plaintiff deposited in German’s and German Law Center’s IOLTA account.

66. As a result, Plaintiff has suffered financial damages in the form of the loss of all the funds deposited in German’s and German Law Center’s IOLTA account.

67. German, German Law Center, and Nexus had actual knowledge that failing to disburse Plaintiff’s money in accordance with Plaintiff’s instructions was wrong and that failure to do so would result in Plaintiff losing these funds.

68. Despite that knowledge, German, German Law Center, and Nexus intentionally pursued that course of conduct, which indeed resulted in Plaintiff’s total loss of the funds it deposited in German Law Center’s IOLTA account.

WHEREFORE, Plaintiff prays that this Court enter a judgment in its favor against German, German Law Center and Nexus for actual and punitive damages in an amount to be determined by the trier of fact, costs of the lawsuit, pre- and post-judgment interest, and such other relief as the Court deems just and appropriate.

CLAIM V

FRAUD IN THE INDUCEMENT

69. Plaintiff re-alleges and adopts all of the allegations set forth in paragraphs 1 through 40 above.

70. This action is against all defendants except German.

71. Nexus, directly and through its agent, Krantz, intentionally made false statements or omitted material facts regarding its role as escrow/transfer agent on Plaintiff’s contracts with the Suppliers, as set forth herein.

72. German Law Center, directly and through its agent, Camargo, intentionally made false statements or omitted material facts regarding its intention to hold Plaintiff’s funds in its IOLTA account and disburse Plaintiff’s funds according to Plaintiff’s instructions, as set forth herein.

73. Defendants Nexus and German Law Center, and their representatives, knew that the representations were false and intended for Plaintiff to rely on those false representations in wiring its money to German Law Center’s IOLTA account to enrich themselves.

74. Plaintiff reasonably relied on those false representations to its detriment.

Specifically, the representations and omissions caused Plaintiff to wire $178,400 to German Law Center’s IOLTA account as set forth herein, and to delay seeking enforcement of its rights while it was being led on by the ongoing fraud.

75. As a result of the false statements, material omissions, and fraudulent conduct by Defendants, Plaintiff suffered financial damages in the form of loss of the monies deposited in German Law Center’s IOLTA account.

WHEREFORE, Plaintiff prays that this Court enter judgment in its favor against all Defendants except German, awarding compensatory and punitive damages, costs of the lawsuit, and such other relief as the Court deems just and appropriate.

CLAIM VI

NEGLIGENT MISREPRESENTATION

76. Plaintiff re-alleges and adopts all of the allegations set forth in paragraphs 1 through 40 above.

77. This action is against all defendants except German.

78. Nexus, directly and through its agent, Krantz, intentionally made false statements or omitted material facts regarding its role as escrow/transfer agent on Plaintiff’s contracts with the Suppliers, as set forth herein.

79. German Law Center, directly and through its agent, Camargo, intentionally made false statements or omitted material facts regarding its intention to hold Plaintiff’s funds in its IOLTA account and disburse Plaintiff’s funds according to Plaintiff’s instructions, as set forth herein.

80. Defendants, except German, should have known that the statements made to Plaintiff were false, and would lead to Plaintiff’s reliance thereon.

81. Defendants, except German, intended for Plaintiff to rely on the false representations that, among other things, Plaintiff’s money that it deposited in German Law Center’s IOLTA account would be disbursed to the Suppliers consistent Plaintiff’s instructions.

82. Plaintiff reasonably and justifiably relied on the false statements to Plaintiff’s detriment, including, but not limited to, wiring $178,400 to German Law Center’s IOLTA account and delaying enforcement of its rights based on the false statements.

83. Defendants’ conduct, except German, constituted gross negligence as their conduct was so reckless or wanting in care, as set forth herein, that it constituted a conscious disregard for the rights of Plaintiff. Among other things, Defendants knew they intended to misappropriate Plaintiff’s money once it was deposited into German Law Center’s IOLTA account.

84. As a direct and proximate result of this conduct, Plaintiff suffered financial damages in the form of loss of the funds wired to German Law Center’s IOLTA account.
WHEREFORE, Plaintiff prays that this Court enter judgment in its favor against Defendants except German, awarding compensatory and punitive damages in an amount to be determined at trial, costs of the lawsuit, and such other relief as the Court deems just and appropriate.

CLAIM VII

UNJUST ENRICHMENT AGAINST ALL DEFENDANTS

85. Plaintiff re-alleges and adopts all of the allegations set forth in paragraphs 1 through 40 above.

86. Plaintiff conferred a benefit on all Defendants by transferring Plaintiff’s money to German Law Center’s IOLTA account, which was used to benefit all Defendants by retaining all of the funds for themselves or used for their benefits.

87. Defendants voluntarily accepted and retained the benefits conferred.

88. Defendants’ acceptance and retention of the benefits under these circumstances (of theft and/or conversion, as set forth in Count I, which is incorporated herein) makes it inequitable for Defendants to retain such benefits without returning the amount wired into German Law Center’s IOLTA account to Plaintiff.

89. Defendants have been unjustly enriched by Plaintiff’s transfer of money to German Law Center’s IOLTA account, that was kept by, and used for, Defendants’ benefit.

WHEREFORE, Plaintiff prays that this Court enter judgment in favor against all Defendants for actual damages in an amount to be determined by the trier of fact, costs of the lawsuit, pre-and post-judgment interest, and such other relief as the Court deems just and appropriate.

Respectfully submitted this 16th day of March, 2021.

WEINBERG WHEELER HUDGINS GUNN & DIAL, LLC

/s/Aaron M. Cohn
Aaron M. Cohn, Esq.
Florida Bar No.: 95552
Weinberg Wheeler Hudgins Gunn & Dial, LLC
3350 Virginia Street, Ste. 500
Miami, FL 33133
T: (305) 455-9500
F: (305) 455-9501
E-mail: acohn@wwhgd.com
malvarez@wwhgd.com
dmallqui@wwhgd.com
Counsel for Plaintiff

SILVER LAW GROUP

/s/ Scott L. Silver
Scott L. Silver
Fla. Bar No. 095631 Ryan Schwamm
Fla. Bar No. 1019116
11780 W. Sample Road Coral Springs,
Florida 33065
T: (954) 755-4799
F: (954) 755-4684
E-mail: ssilver@silverlaw.com
rshwamm@silverlaw.com
rfeinberg@silverlaw.com
Counsel for Plaintiff

The $200k Theft Case

Recycled Paper International, LLC v. JPMorgan Chase Bank, N.A. (9:20-cv-81888) District Court, S.D. Florida

REMANDED TO FLORIDA STATE COURT, DEC 2020

ORDER GRANTING MOTION TO REMAND

THIS CAUSE is before the Court on Plaintiff’s Motion to Remand [DE 20] (“Motion”). The Court has considered the Motion, Defendant JP Morgan Chase Bank

N.A.’s (“Chase”) Response [DE 27], Plaintiff’s Reply [DE 35], and the record in this case and is otherwise advised in the premises.

I.            BACKGROUND

The facts of this case are not in dispute. On or about June 12, 2020, Canacha, Inc. (“Canacha”), who is not a party to this action, attempted to transfer $202,221.96 to Plaintiff’s Chase bank account. But a hacker accessed Plaintiff’s email containing the account details and manipulated it to instruct Canacha to transfer the funds to Huatai USA, LLC, at a Chase account number that is not owned by either Plaintiff or Huatai USA, LLC. Canacha followed the instructions in the hacked email, and Chase processed the transaction on June 15, 2020. Plaintiff has yet to recover any of the fraudulently transferred funds.

Plaintiff initiated this action in the Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach County, Florida, on September 4, 2020, naming Chase as the sole defendant and asserting a single claim of a violation of Florida Statute § 670.207.1 Chase timely removed the action to federal court on October 9, 2020, under diversity jurisdiction.

Plaintiff filed its First Amended Complaint on October 22, 2020, this time also asserting claims of civil theft, conversion, and negligence against Mario D. German Law Center, P.A. (“German”), a Florida professional corporation and the alleged recipient of the transferred funds.

On the same day, Plaintiff moved to remand the case to state court, arguing that the joinder of German destroyed diversity.

I.            LEGAL STANDARD

 

Provided the requirements of original jurisdiction are satisfied, a defendant may remove a case from state court to federal court. 28 U.S.C. § 1441(a). The case must be remanded back to state court, however, “[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction.” Id. § 1447(c). Rule

15(a) of the Federal Rules of Civil Procedure allows plaintiffs to amend a complaint once as a matter of right as long as no answer has been filed, and in all other circumstances with leave of court. Fed. R. Civ. Proc. 15(a)(1). The Rule specifies that leave to amend should be freely given “when justice so requires.” Fed. R. Civ. Proc.

15(a)(2). However, “a district court must scrutinize more closely an amended pleading that would name a new nondiverse defendant in a removed case because justice requires that the district court also balance the defendant’s interests in maintaining the federal forum.”  Dever v. Family Dollar Stores of Georgia, LLC, 755 F. App’x 866, 868 (11th Circuit 2018).

1 Florida Statute § 670.207 is a portion of the Uniform Commercial Code governing the description of beneficiaries in funds transfers.

In determining whether to permit a plaintiff to join a nondiverse defendant after removal, a district court should consider the following factors:

(1) the extent to which the purpose of the amendment is to defeat federal jurisdiction,

(2) whether the plaintiff has been dilatory in asking for amendment,

(3) whether the plaintiff will be significantly injured if amendment is not allowed, and

(4) any other factors bearing on the equities. Id.

I.             DISCUSSION

Plaintiff asserts that this balancing of equities weighs in its favor and the action should be remanded to state court.

Chase takes the opposite position, arguing that the Court should deny German’s joinder and retain jurisdiction over this action.

Applying the Dever factors, the Court finds that the joinder should be permitted and the case should be remanded to state court.

First, the Court finds that Plaintiff did not amend the Complaint for the purpose of destroying diversity. The undisputed facts show that Plaintiff was pursuing its civil theft claim against German even before it filed suit against Chase. Any party asserting a civil theft claim under Florida law is required by statute to send a written demand to the opposing party and then wait 30 days before filing suit. Fla Stat. § 772.11. Accordingly, Plaintiff delivered a demand letter to German on September 2, 2020, two days before it initiated this action against Chase. And while it is true that Plaintiff might have either waited for the expiration of the cure period before initiating this action or asserted its other two claims against German in the initial Complaint, the fact that Plaintiff did not do either of those things does not show that the joinder of German now is a mere ploy to destroy diversity. In fact, Plaintiff asserts, and Chase does not refute, that Plaintiff informed Chase of its intention to join German before Chase removed the matter.

The Court therefore concludes that the first factor weighs in favor of remand.

The Court also finds that Plaintiff has not been dilatory in amending the Complaint. Plaintiff sent the demand letter to German on September 2, 2020, and the cure period ended on October 3, 2020. Plaintiff moved to amend the Complaint on October 12, 2020, and filed the First Amended Complaint on October 22, 2020.2 Only one week elapsed after the cure period ended before Plaintiff sought leave to amend the Complaint, and only two additional weeks elapsed before Plaintiff filed the First Amended Complaint. These are not unreasonable delays. The second factor therefore also weighs in favor of remand.

Next, the Court finds that Plaintiff would be prejudiced if the case were not remanded. Plaintiff has already taken steps to recover damages from German, so this is not one of those cases where it seems unlikely that a plaintiff would seriously pursue its claims against a nondiverse defendant.

And given that Plaintiff may potentially recover treble damages against German, but not against Chase, this is also not a case where a plaintiff can be fully satisfied by the diverse defendant alone.

To require Plaintiff to maintain two separate actions in two separate courts would not only put additional strain upon Plaintiff’s resources, but it would undermine the exercise of judicial economy.

The third factor therefore also weighs in favor of remand.

2 Plaintiff withdrew its Motion for Leave to Amend Complaint, see DE 19, and, since Chase had not yet answered the initial Complaint, subsequently filed the First Amended Complaint pursuant to Rule 15(a)(1).

Finally, the Court finds that other factors bearing on the equities also support granting Plaintiff’s Motion. First, the case is still in the early stages of litigation, so remanding it would cause no unreasonable delay.

And second, Plaintiff stated in its Reply that it intends to assert a civil theft claim against an additional defendant: a Florida resident who is allegedly responsible for the hacked email and whose identity Plaintiff has just learned.3

And although Chase argues that the pendency of its yet-unripe Motion to Dismiss supports denying the Motion, the Court disagrees.

In the first instance, Chase’s argument relies upon accepting that the Motion to Dismiss is likely to succeed, and it would be inappropriate for the Court to prematurely evaluate the merits of the Motion to Dismiss. But also, Plaintiff has stated its intention of asserting an additional negligence claim against Chase based on newly-discovered information. The pendency of the Motion to Dismiss is therefore irrelevant to this proceeding.

The Court concludes that the Dever factors weigh strongly in favor of remanding this case to state court.

I.            CONCLUSION 

It is thereupon ORDERED AND ADJUDGED as follows:

  1. Plaintiff’s Motion to Remand [DE 20] is GRANTED.
  2. The case is hereby REMANDED to the Fifteenth Judicial Circuit in and for Palm Beach County.
  3. The Clerk of Court is hereby directed to forward a certified copy of this Order to the Clerk of the Fifteenth Judicial Circuit in and for Palm Beach County, Florida, re Case 50-2020-CA-009558-AF.
  4. The Clerk of Court is directed to CLOSE the case and DENY all other pending motions as MOOT.

DONE AND ORDERED in Chambers at Fort Lauderdale, Florida, on this 16th day of December, 2020.

James I Cohn
United States District Judge

Copy Provided:

Magistrate Judge William Matthewman
all counsel of record

3 Plaintiff has already presented a written demand to this individual and is waiting for the cure period to expire.

The Mortgage Fraud Case

Federal Deposit Insurance Corporation v. Mario D. German Law Center, P.A. (9:12-cv-81298) District Court, S.D. Florida

SETTLED 2 JUNE 2014 – DESPITE CLEAR MORTGAGE FRAUD BY LAWYER AS PER MARRA’s OWN ORDER

1914 Alamanda Way, Riviera Beach, FL 33404 - Sold for 220k

Sold for $88k (2014)

OPINION AND ORDER

This cause is before the Court upon Defendant Mario D. German Law Center, P.A.’s Motion to Sever Plaintiff’s Claims (DE 28). The Motion is fully briefed and ripe for review. The Court has carefully considered the Motion and is otherwise fully advised in the premises.

I. Background

On December 3, 2012, Plaintiff Federal Deposit Insurance Corporation (“FDIC”) brought this three count complaint against Defendant Mario D. German Law Center, P.A. (“Defendant”) for breach of contract (count one), breach of fiduciary duty (count two) and negligent misrepresentation (count three). The Complaint alleges the following:

AmTrust Bank (“AmTrust”) was a federally chartered savings bank with its principal place of business in Cleveland, Ohio. (Compl. ¶ 1, DE 1.)

On December 4, 2009, AmTrust was closed by the Office of Thrift Supervision and the FDIC was appointed Receiver.

(Compl. ¶ 2.)

LIT: FRAUD 1 – PROPERTY LOAN $220K for PROPERTY SOLD FOR $88K IN 2014

On or about February 10, 2009, AmTrust funded a purchase money loan in the sum of $220,000 to borrower Olivia Rudolfo (“Rudolfo”) for the purchase of property located at 1914 Alamanda Way, Riviera Beach, Florida. (Compl. ¶ 7.) Rudolfo purchased the property from Sonoma Bay, Inc. for $275,000, financed in part by the Rudolfo loan. (Compl. ¶ 8.) AmTrust required Rudolfo to pay no less than $55,928 as a cash-to-close down payment. (Compl. ¶ 9.)

Rudolfo defaulted on the loan without making a single payment.

(Compl. ¶ 10.)

Defendant was the closing agent on this loan and agreed to abide by AmTrust’s closing instructions. (Compl. ¶ 11.) Defendant certified that it closed the loan in compliance with all the conditions in those instructions. (Compl. ¶ 13.) Despite explicit instructions, Defendant closed the Rudolfo loan and disbursed funds in a matter inconsistent with the HUD-1 Settlement Statement. (Compl. ¶ 18.)

Defendant disbursed $115,500 in proceeds obtained from AmTrust loan proceeds to TLC Marketing Directors, Inc.* (“TLC”), even though the purchase contract for the transaction does not list any disbursements to TLC, TLC does not hold any lien against the property, and the disbursement is not standard in mortgage lending transactions. (Compl. ¶ 20.)

*LIT could only locate a 2008 entity named TLC Marketing Directors Incorporated, ownership by Keith Davis and Maria Davis of Jacksonville, Fl.

Defendant did not contact AmTrust to inform it of the disbursement to TLC prior to closing the Transaction, and instead closed the transaction without authorization from AmTrust to make this disbursement. (Compl. ¶ 21.)

Upon information and belief, Defendant did not collect $55,928 from Rudolfo; instead, TLC paid Rudolfo’s required cash-to-close down payment. (Compl. ¶ 22.)

Defendant did not contact AmTrust to inform it that Rudolfo did not pay his down payment. (Compl. ¶ 23.)

Thus, the true purchase price for the Rudolfo property was only $219,072 which caused AmTrust to fund a loan in excess of the true purchase price of the Rudolfo property. (Compl. ¶ 25.)

Had AmTrust known the true facts, AmTrust would not have funded the loan.

(Compl. ¶ 26.)

LIT: FRAUD 2 – PROPERTY LOAN $228,750 for PROPERTY LAST SOLD FOR $52,500 in 2011

On or about April 7, 2009, AmTrust funded a purchase money mortgage loan in the sum of $228,750 to Luis Jimenez for the purchase of property located at 1925 Alamanda Way, West Palm Beach, Florida 33404. (Compl. ¶ 27.)

Jimenez purchased the property from Sonoma for $305,000, financed in part by the Jimenez loan. (Compl. ¶ 28.)

AmTrust required Jimenez to pay no less than $81,436 as a cash-to-close down payment. (Compl. ¶ 29.)

Jimenez defaulted on the loan without making a single payment.

(Compl. ¶ 30.)

1925 Alamanda Way, Riviera Beach, FL 33404 - Last Sold for $52,500, May 2, 2011 (Redfin)

Defendant agreed to serve as closing agent in connection with this loan and agreed to abide by AmTrust’s closing instructions. (Compl. ¶ ¶ 31; 33.) Defendant closed the loan and disbursed funds in a manner inconsistent with the HUD-1 Settlement Statement. (Compl. ¶ 38.)

Defendant disbursed $144,265 in proceeds obtained from AmTrust’s loan proceeds to TLC, despite the fact that, upon information and belief, the purchase contract for the transaction did not list any disbursements to TLC, TLC did not hold any lien against the property and this disbursement was not standard in mortgage lending transactions. (Compl. ¶ 40.)

Defendant did not contact AmTrust to inform it of the disbursement to TLC prior to closing the transaction and instead closed the transaction without authorization from AmTrust to make the disbursement. (Compl. ¶ 41.)

Upon information and belief, Defendant did not collect $81,436 from Jimenez; instead, TLC paid the cash-to-close down payment. (Compl. ¶ 42.)

Defendant did not contact AmTrust to inform it that Jimenez did not pay his down payment. (Compl. ¶ 43.)

After accounting for Jimenez’ failure to pay his down payment, the true purchase price for the property was only $223,564. (Compl. ¶ 44.)

Defendant’s action caused AmTrust to fund a loan in excess of the true purchase price of the property. (Compl. ¶ 45.)

Had AmTrust known the true facts, AmTrust would not have funded the loan.

(Compl. ¶ 46.)

LIT: FRAUD 3 – PROPERTY LOAN $108K for PROPERTY SOLD FOR $82.5K IN 2014

On or about March 2, 2009, AmTrust funded a purchase money mortgage loan in the sum of $108,000 to borrower Jose Silva for the purchase of property located at 1926 Hibiscus Lane, Riviera Beach, Florida, 33404. (Compl. ¶ 47.)

Silva purchased the property from Sonoma for $240,000, financed in part by the loan. (Compl. ¶ 48.)

AmTrust required Silva to pay no less than $66,430 as a cash-to-close down payment. (Compl. ¶ 49.)

Silva defaulted on the loan after making only one payment.

(Compl. ¶ 50.)

Defendant agreed to serve as the closing agent in connection with the closing of the loan and agreed to abide by AmTrust’s closing instructions. (Compl. ¶ 51.) Despite the instructions, Defendant closed the loan and disbursed funds in a manner inconsistent with the HUD-1 Settlement Statement. (Compl. ¶ 58.)

Silva was to contribute $66,430 towards the purchase of the property. (Compl. ¶ 59.)

Defendant distributed $103,200 in proceeds obtained from AmTrust’s loan proceeds to TLC despite the fact that, upon information and belief, the purchase contract for the transaction did not list any disbursements to TLC, TLC did not hold any lien against the property and this disbursement was not standard in mortgage lending agreements. (Compl. ¶ 60.)

Defendant did not contact AmTrust to inform it of the disbursement to TLC prior to closing the transaction and instead closed the transaction without authorization from AmTrust to make the disbursement. (Compl. ¶ 61.)

Upon information and belief, Defendant did not collect $66,430; instead, TLC paid the required cash-to-close down payment. (Compl. ¶ 62.)

After accounting for Silva’s failure to pay his down payment, the true purchase price was only $173,570. (Compl. ¶ 64.)

Defendant’s actions caused AmTrust to fund a loan in excess of the true purchase price of the property and had AmTrust know the true facts, AmTrust would not have funded the loan.

(Compl. ¶ ¶ 65-66.)

1926 Hibiscus Ln, Riviera Beach, FL 33404

Sold for $82,500 (2014)

Defendant moves to sever Plaintiff’s claims, stating that these are three separate and distinct unrelated real estate transactions, with different agreements, documents, prices, transfers of money and damages.

Defendant states that it is not enough that the claims share the same closing agent for mortgage loans issued by the same lender.

In response, Plaintiff notes that the Complaint alleges similar conduct by Defendant, violation of the same contract language and involvement of the same third party, TLC.

II. Discussion

Defendant moves for severance pursuant to Rule 21 of the Federal Rules of Civil Procedure.

The Rule states, in part, “[t]he court may [ ] sever any claim against a party.” Fed. R. Civ. P. 21. “Among the factors to be considered by the court in exercising its discretion under Rule 21 are whether the claims arise from the same transaction or occurrence, whether they present some common question of law or fact, whether severance would facilitate settlement or
judicial economy, and the relative prejudice to each side if the claim is severed.” Hartley v. Clark, No. 3:09cv559/RV/EMT, 2010 WL 1187880, at * 4 (N.D. Fla. Feb. 12, 2010)

(citing Disparte v. Corporate Executive Bd., 223 F.R.D. 7, 12 (D.D.C. 2004) (severance of plaintiffs’ claims turns on considerations of whether claims arise from same transaction or occurrence, whether claims present some common question of law or fact, whether settlement of claims or judicial economy would be facilitated, whether prejudice would be avoided if severance were granted, and whether different witnesses and documentary proof are required for the separate claims);

In re High Fructose Corn Syrup Antitrust Litigation, 293 F. Supp. 2d 854, 862 (C.D.Ill.2003) (same);

Wausau Business Ins. Co. v. Turner Const. Co., 204 F.R.D. 248, 250(S.D.N.Y.2001) (same)).

Rule 42 of the Federal Rule of Civil Procedure provides: “For convenience, to avoid prejudice, or to expedite or economize, the court may order a separate trial of one or more separate issues, claims, crossclaims, counterclaims, or third-party claims. When ordering a separate trial, the court must preserve any federal right to a jury trial.” Fed. R. Civ. P. 42(b).

At this stage in the proceedings, the Court concludes that the motion to sever should be denied. With respect to discovery and mediation, there is no basis to sever the case.

Based on the allegations, the claims substantially involve the same pattern of conduct, the same legal issues and the same witnesses.

Any differences highlighted by Defendant will not impact discovery or mediation enough to require severance.

With respect to Defendant’s concern that it will be limited in the scope and quantity of interrogatories (Mot. at 4), Defendant may move the Court for permission to craft discovery in an appropriate manner for this case.

Equally unpersuasive is Defendant’s contention that “due to the overlapping allegations asserted in the Plaintiff’s three causes of action, [Defendant] is prejudiced from identifying the documents, communications and witnesses specifically attributed to each transaction, and to prepare a proper defense to each claim.” (Mot. at 5.)

To the extent Defendant feels the Complaint did not provide him an adequate basis to respond to it, the proper course of action was
to file a motion for a more definite statement. See Fed. R. Civ. P. 12(e); Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002) (“If a pleading ‘fails to specify the allegations in a manner that provides sufficient notice’ or does not contain enough information to allow a responsive pleading to be framed, the proper motion to be filed is a motion for a more definite statement.”).

Finally, the Court will deny without prejudice the application to sever the trial. Once the case has been better developed, the Court can determine whether convenience, avoidance of prejudice, or judicial economy requires severance of the trial.

IV. Conclusion

Accordingly, it is hereby ORDERED AND ADJUDGED that Defendant Mario D. German Law Center, P.A.’s Motion to Sever Plaintiff’s Claims (DE 28) is DENIED.

DONE AND ORDERED in Chambers at West Palm Beach, Palm Beach County, Florida, this 5th day of September, 2013.

KENNETH A. MARRA
United States District Judge

JOINT STIPULATION OF DISMISSAL WITH PREJUDICE

Plaintiff FEDERAL DEPOSIT INSURANCE CORPORATION AS RECEIVER FOR AMTRUST BANK (“Plaintiff” or the “FDIC-R”), and Defendant, MARIO D. GERMAN LAW CENTER, P.A., (collectively “Parties”), by and through their undersigned counsel, hereby notify the Court that the parties have entered into a settlement agreement and stipulate and agree as follows, in accordance with that agreement:

  1. This action shall be dismissed with prejudice with each party to shall bear its own attorney’s fees and costs in this lawsuit.
  2. The Parties request the Court enter such order(s) as it may be necessary to effectuate the dismissal in accordance with the terms agreed to by the Parties.

WHEREFORE, the Parties respectfully request the Court enter an Order of Dismissal, dismissing this case with prejudice and further relief this Court deems just and proper.

Dated: June 2, 2014

Case No: 12-81298-CIV-MARRA/BRANSON

Respectfully submitted,

 s/ Kenneth Pollock, Esq

Kenneth Pollock, Esq.
Florida Bar. No. 69558

Gary R. Shendell, Esq.
Florida Bar No. 0964440

SHENDELL & POLLOCK, P.L.
Fountain Square
2700 N. Military Trail, Suite 150
Boca Raton, Florida 33487
Phone: (561) 241-2323
Fax: (561) 241-2330

dustin@shendellpollock.com
lisa@shendellpollock.com
grs@shendellpollock.com
Counsel for Defendant, Mario D. German Law

 s/ George Breur

Robert A. Hingston, Esq.
Florida Bar No. 181815

Michael Jay Rune, II, Esq.
Florida Bar No. 0086355

George Breur, Esq.
Florida Bar No. 33283

Welbaum Guernsey
901 Ponce De Leon Blvd., PH Suite Coral Gables, Florida 33134
Telephone: (305) 441-8900
Fax: (305)441-2255

bhingston@welbaum.com
mrune@welbaum.com
hjonczak@welbaum.com

Counsel for Plaintiff FDIC

ORDER GRANTING JOINT STIPULATION OF DISMISSAL WITH PREJUDICE

THIS CAUSE came on before the Court upon the Joint Stipulation of Dismissal With Prejudice, filed by Plaintiff FEDERAL DEPOSIT INSURANCE CORPORATION AS RECEIVER FOR AMTRUST BANK (“Plaintiff” or the “FDIC-R”), and Defendant, MARIO GERMAN LAW CENTER, P.A., (collectively “Parties”). After having reviewed the Stipulation, and being otherwise fully advised in the matter, it is hereby

ORDERED AND ADJUDGED:

  1. This case is hereby dismissed with prejudice.
  2. Each party to bear its own fees and costs.

ENTERED this           day of, June, 2014

UNITED STATES DISTRICT JUDGE

cc:       Counsel of Record

U.S. District Court
Southern District of Florida (West Palm Beach)
CIVIL DOCKET FOR CASE #: 9:12-cv-81298-KAM

Federal Deposit Insurance Corporation v. Mario D. German Law Center, P.A.
Assigned to: Judge Kenneth A. Marra
Referred to: Magistrate Judge William Matthewman
Cause: 12:1819 Default of Promissory Note
Date Filed: 12/03/2012
Date Terminated: 06/04/2014
Jury Demand: Defendant
Nature of Suit: 190 Contract: Other
Jurisdiction: U.S. Government Plaintiff
Plaintiff
Federal Deposit Insurance Corporation
as Receiver for Amtrust Bank
represented by Heather Marie Jonczak
Carlton Fields Jorder Burt
100 SE 2nd Street
Suite 4200
Miami, FL 33131
(305) 530-0050
Fax: (305) 530-0055
Email: hjonczak@cfjblaw.com
LEAD ATTORNEY
ATTORNEY TO BE NOTICEDMelissa Jill Gomberg
Welbaum Guernsey
901 Ponce de Leon Blvd. Penthouse Suite
Coral Gables, FL 33134
(305) 441-8900
Email: mgomberg@welbaum.com
LEAD ATTORNEY
ATTORNEY TO BE NOTICEDRobert Allen Hingston
Welbaum, Guernsey, et. al.
7740 S.W. 104 Street
Suite #204
Pinecrest, FL 33156
305-441-8900
Fax: 305-441-2255
Email: rhingston@welbaum.com
LEAD ATTORNEY
ATTORNEY TO BE NOTICEDLindsey Fallon Thurswell Lehr
Welbaum Guernsey Hingston Et Al
Penthouse Suite
901 Ponce De Leon Blvd., Floor 10
Coral Gables, FL 33134
(305) 441-8900
Fax: (305) 441-8900
Email: Lthurswell@welbaum.com
ATTORNEY TO BE NOTICEDMichael Jay Rune , II.
Carlton Fields PA
4200
100 SE 2nd Street
Miami, FL 33131
305-530-0050
Fax: 305-530-0055
Email: mrune@carltonfields.com
ATTORNEY TO BE NOTICED
V.
Defendant
Mario D. German Law Center, P.A.
a Florida Corporation
represented by Dustin Craig Blumenthal
Goldberg Segalla
222 Lakeview Drive
Suite 800
West Palm Beach, FL 33401
561-618-4450
Fax: 561-618-4485
Email: dblumenthal@goldbergsegalla.com
LEAD ATTORNEY
ATTORNEY TO BE NOTICEDGary Robert Shendell
Shendell & Pollock PL
One Park Place Suite 310
621 NW 53rd Street
Boca Raton, FL 33487
561-241-2323
Fax: 561-241-2330
Email: gary@shendellpollock.com
LEAD ATTORNEY
ATTORNEY TO BE NOTICED

 

Date Filed # Docket Text
09/06/2013 32 OPINION AND ORDER, denying 28 Motion to Sever. Signed by Judge Kenneth A. Marra on 9/5/2013. (cqs) (Entered: 09/06/2013)
09/06/2013 33 Unopposed MOTION for Extension of Time to Disclose Expert Testimony by September 27, 2013 re 31 Defendant’s MOTION for Extension of Time to Disclose Expert Report re 18 Scheduling Order, Order Referring Case to Magistrate Judge, Order Referring Case to Mediation,,,,,, 15 SCHEDULING REPORT – Rule 26(f)/16.1 by Mario D. German Law Center, P.A.. Responses due by 9/23/2013 (Blumenthal, Dustin) (Entered: 09/06/2013)
09/10/2013 34 ENDORSED ORDER granting 33 Motion for Extension of Time to disclose expert testimony. Expert Discovery due by 9/27/2013. Signed by Judge Kenneth A. Marra on 9/10/2013. (ir) (Entered: 09/10/2013)
09/26/2013 35 Second MOTION for Extension of Time to Disclose Expert Testimony by Mario D. German Law Center, P.A.. Responses due by 10/15/2013 (Blumenthal, Dustin) (Entered: 09/26/2013)
10/01/2013 36 AMENDED Unopposed Second MOTION for Extension of Time To Disclose Additional Expert Testimony by Mario D. German Law Center, P.A.. Responses due by 10/18/2013 (Blumenthal, Dustin)Text Modified on 10/1/2013 (cqs). (Entered: 10/01/2013)
10/02/2013 37 ORDER granting 36 Motion for Extension of Time to disclose expert testimony. Signed by Judge Kenneth A. Marra on 10/2/2013. (ir) (Entered: 10/02/2013)
10/27/2013 38 Joint MOTION for Extension of Time Extend Discovery Cut Off and Pretrial Deadlines re 18 Scheduling Order, Order Referring Case to Judge, Order Referring Case to Mediation,,,,,, by Mario D. German Law Center, P.A.. Attorney Gary Robert Shendell added to party Mario D. German Law Center, P.A.(pty:dft). Responses due by 11/15/2013 (Attachments: # 1 Text of Proposed Order)(Shendell, Gary) (Entered: 10/27/2013)
10/30/2013 39 ORDER granting 38 Motion to Extend Discovery. Discovery due by 2/28/2014. Dispositive Motions due by 3/10/2014. Calendar Call set for 8/15/2014 10:00 AM in West Palm Beach Division before Judge Kenneth A. Marra. Jury Trial set for 8/18/2014 09:00 AM in West Palm Beach Division before Judge Kenneth A. Marra. Signed by Judge Kenneth A. Marra on 10/29/2013. (ir) (Entered: 10/30/2013)
06/02/2014 40 STIPULATION of Dismissal by Federal Deposit Insurance Corporation (Attachments: # 1 Text of Proposed Order)(Breur, George) (Entered: 06/02/2014)
06/04/2014 41 ORDER DISMISSING CASE with prejudice. All pending motions are denied as moot. This case is CLOSED. Signed by Judge Kenneth A. Marra on 6/3/2014. (ir) (Entered: 06/04/2014)

YOUR DONATION(S) WILL HELP US:

• Continue to provide this website, content, resources, community and help center for free to the many homeowners, residents, Texans and as we’ve expanded, people nationwide who need access without a paywall or subscription.

• Help us promote our campaign through marketing, pr, advertising and reaching out to government, law firms and anyone that will listen and can assist.

Thank you for your trust, belief and support in our conviction to help Floridian residents and citizens nationwide take back their freedom. Your Donations and your Voice are so important.



Bankers

Florida Attorney Filing Lawsuits Against Deutsche Bank is Facing Sanctions for Telling the Truth, Repeatedly

The Straw Man, Deutsche Bank National Trust Co., the name used to illegally and unlawfully steal homesteads from American homeowners, is seeking sanctions from Lee Segal, a Florida attorney who obtained $30m or so in default judgments against Deutsche Bank. We’re smiling.

Published

on

LIT COMMENTARY

Update: May 6, 2021

Deutsche Bank is seeking $45,000 in attorney fees as well as other “just and proper” financial penalties from Lee Segal of Segal & Schuh Law Group for multiple filings. Segal is fighting the bid, saying it was filed too late as the case has been dismissed.

Depoalo v. Deutsche Bank , Case No: 2:21-cv-38-SPC-NPM (M.D. Fla. Mar. 1, 2021)

MAR 1, 2021 | REPUBLISHED BY LIT: MAY 6, 2021

OPINION AND ORDER1

Before the Court is Defendant Deutsche Bank National Trust Company’s Amended Motion to Quash Service of Process and Vacate Clerk’s Default (Doc. 13), Plaintiff Darleen Depoalo’s Motion for Remand (Doc. 21), and Depoalo’s Motion to Strike Untimely Hearsay Declaration and/or for Leave to Reply (Doc. 26).

For the following reasons, the Court grants the motion to quash, denies the motion to remand, and denies the motion to strike.

1 Disclaimer: Documents hyperlinked to CM/ECF are subject to PACER fees. By using hyperlinks, the Court does not endorse, recommend, approve, or guarantee any third parties or the services or products they provide, nor does it have any agreements with them. The Court is also not responsible for a hyperlink’s availability and functionality, and a failed hyperlink does not affect this Order.

PROCEDURAL BACKGROUND

This is one of over 25 virtually identical complaints filed across Florida against Deutsche Bank National Trust Company (“DBNTC”) by a cadre of attorneys associated with Attorney Lee Segal.2 (Doc. 14).3

In short, the plaintiffs in these lawsuits allege DBNTC’s prosecution of foreclosure actions were “fraudulent, illegal, and perjurious” and rendered the rulings void. (Doc. 3 at 4).

2 Mr. Segal signed his filings in federal court as Lior Segal, but as Lee Segal in state court. Mr. Segal’s Florida Bar registration information lists his name as Lee Segal, as does his admission to the Middle District of Florida.

3 This may be a significant under-estimation, as recent filings reference over 50 virtually identical cases. (See Case No. 2:21-cv-42-SPC-NPM, Doc. 27).

JUDGE CHAPPELL

First, the plaintiffs allege DBNTC never legally owned the mortgages it sought to foreclose. (Id. at 4-5).

LIT COMMENT: ABSOLUTELY CORRECT.

Second, the plaintiffs allege that the beneficiaries of the trust holding the mortgages never authorized the foreclosure suits. (Id. at 5).

LIT COMMENT: ABSOLUTELY CORRECT.

Third, the plaintiffs allege DBNTC’s trust license had been revoked so it was illegal for it to act as a trustee to the pooled mortgages.(Id.)

LIT COMMENT: ABSOLUTELY CORRECT.

Thus, the plaintiffs allege, DBNTC engaged in a series of frauds in attempting to collect an unlawful debt, including recording a lis pendens, in violation of Florida’s Civil Remedies for Criminal Practices Act, Fla. Stat. § 772.101, et seq.

LIT COMMENT: ABSOLUTELY CORRECT, NATIONWIDE, NOT JUST FL.

The complaints in each case are fundamentally identical except for the quintessential variables of the plaintiff and property. But these facts are virtually irrelevant to the legal claims as currently pled.

Indeed, the allegations as to the supposed fraudulent behavior in each of the underlying foreclosure actions is generalized and not case specific.

Tellingly threading these complaints together, all but one of the complaints before the undersigned, including those ostensibly filed by attorneys other than Mr. Segal like this one, have the same transposition typos citing non-existent Fla. Stat.§ 772.013(1)–(4) and § 772.014, instead of correct citations to Fla. Stat. § 772.103(1)–(4) and § 772.104. (See Doc. 3 at 11).4

LIT COMMENT: WHAT? LIKE DEUTSCHE BANK, A STRAW MAN, USED BY ROGUE FORECLOSURE MILL LAWYERS, FILED HUNDREDS OF THOUSANDS OF UNLAWFUL COMPLAINTS WITH ROBO-SIGNED, FAKE DOCS – AND WHEREIN NOTHING HAPPENED…TOO BIG TO FAIL, TOO BIG TO JAIL.

But the complaints themselves are not the only similarity linking these cases. Foreclosure actions necessarily take place in the county where the mortgaged property is located.

Nearly every lawsuit filed by Mr. Segal and his colleagues, however, contain the same procedural oddity: they were filed in a separate county from the underlying foreclosure action.

Here, for example, Depoalo’s property is in Palm Harbor, Pinellas County, Florida. Depoalo brought this fraud action related to the Pinellas County foreclosure not in Pinellas County, however, but half a state away in rural Hendry County, Florida.

4 The undersigned has nine cases involving these claims against either DBNTC or the Bank of New York Mellon: 2:21-cv-9-SPC-NPM, 2:21-cv-37-SPC-NPM, 2:21-cv-38-SPC-NPM, 2:21- cv-39-SPC-NPM, 2:21-cv-40-SPC-NPM, 2:21-cv-42-SPC-NPM, 2:21-cv-47-SPC-NPM, 2:21-cv-66-SPC-NPM, and 2:21-cv-80-SPC-NPM. Seven have transposition errors as to § 772.103. Eight have transposition errors as to § 772.104. The only complaint that contains multiple counts, Case 2:21-cv-47-SPC-NPM, is not internally consistent as to its transposition errors, with Count 1 citing § 772.103 and § 772.104, Count 2 citing § 772.013 and § 772.014, and Count 3 citing § 772.103 and § 772.014. Only one case, 2:21-cv-80-SPC-NPM, appears to correctly cite the statutes invoked.

Another pronounced procedural oddity linking these lawsuits is this matter before the Court: service of process. Depoalo sued in Hendry County 20th Judicial Circuit Court on November 17, 2020. Depoalo served her complaint and summons on “CT CORP” at 28 Liberty Street in New York on November 18, 2020. (Doc. 13-1). The process server, Michael Levey, included on the affidavit of service:

Per Jacquelin Walton at the security desk, the respondent Deutsche Bank of 60 Wall Street NY NY has directions to continue to serve process at CT Corp 28 Liberty Street NY NY 10005 as no one currently is present in the building who is authorized to accept legal papers. As of 11/12/20 she does not know when this method will revert to the original service address.

(Id.) On November 20, 2020, CT Corporation System (“CT”) sent a letter to Depoalo’s counsel, Megan Lazenby, indicating that CT was not the registered agent of DBNTC and would be unable to forward the complaint and summons purportedly served by Levey. (Doc. 13-2 at 3).5

Depoalo sought summary judgment after default. (See Doc 1-2 at 27). DBNTC appeared on or about January 7, 2021, (Doc. 21 at 4; Doc. 1-2 at 4), then removed the matter to federal court based on diversity jurisdiction on January 14, 2021, (Doc. 1).

5 CT had sent Ms. Lazenby at least four other letters in November and December 2020 indicating the same—that CT is not the registered agent for DBNTC and could not accept service on its behalf. (Doc. 13-4).

FL. ATTORNEY LEE SEGAL

MOTION TO REMAND

Multiple motions are before the Court, but Depoalo’s motion to remand must be addressed first given it implicates the Court’s jurisdiction. See Univ. of S. Alabama v. Am. Tobacco Co., 168 F.3d 405, 411 (11th Cir. 1999) (“[A] federal court must remand for lack of subject matter jurisdiction notwithstanding the presence of other motions pending before the court.”).

Depoalo argues that DBNTC’s notice of removal was untimely because her complaint was served on November 18, 2020, but removal was not effected until January 14, 2021, well beyond the 30-day time limit.

DBNTC responds that removal was timely because the complaint has never been properly served and notice of removal was filed shortly after DBNTC first learned of this case.

A notice of removal “shall be filed within 30 days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action or proceeding is based.” 28 U.S.C. § 1446(b)(1).

A “defendant’s time to remove is triggered by simultaneous service of the summons and complaint, or receipt of the complaint, ‘through service or otherwise,’ after and apart from service of the summons, but not by mere receipt of the complaint unattended by any formal service.”

Murphy Bros., Inc. v. Michetti Pipe Stringing, Inc., 526 U.S. 344, 347- 48 (1999).

“Even where a defendant has actual notice of the filing of a suit, service of process is ineffective where it does not comply with the rules of service.”

Hunt v. Nationstar Mortg., LLC, 782 F. App’x 762, 764 (11th Cir. 2019) (per curiam).

“In actions removed from state court, the sufficiency of service of process prior to removal is determined by the law of the state from which the action was removed.”

Rentz v. Swift Transp. Co., Inc., 185 F.R.D. 693, 696 (M.D. Ga. 1998); Usatorres v. Marina Mercante Nicaraguenses, S.A., 768 F.2d 1285, 1286 n.1 (11th Cir. 1985).

Here, the parties cannot reasonably dispute that DBNTC’s notice of removal was untimely if service was proper, and timely if service was improper.

Thus, resolution of the motion to remand turns entirely on resolution of DBNTC’s motion to quash.

MOTION TO QUASH

Florida law sets specific requirements for serving financial institutions. Fla. Stat. § 48.092.

Financial institutions may designate a registered agent for service of process within the state, but it is not required. Fla. Stat. § 655.0201(2).

If the financial institution has no registered agent, “service may be made to any officer, director, or business agent of the financial institution at its principal place of business or at any other branch, office, or place of business in the state.” Fla. Stat. § 655.0201(3)(a).

DBNTC is a national banking organization formed under the laws of the United States and is authorized by the United States Department of Treasury to transact in the business of banking and to act as a fiduciary. (Doc. 13-3).

DBNTC’s main office is in Los Angeles, California and its primary trust operations office is in Santa Ana, California. (Doc. 24-1 at 3; see Doc. 13-3).6 DBNTC does not have a branch, office, or place of business in Florida. (Doc. 24-1 at 3).

Like many Deutsche Bank-affiliated entities (see Doc. 22-1 at 1; Doc. 22-2 at 1), DBNTC maintained an office at 60 Wall Street to accept service at that address but has not done so since March 2020 due to the COVID-19 pandemic. (Doc. 24-1 at 4).

Since DBNTC has no registered agent, branch, office, or place of business in Florida, Depoalo must have served DBNTC in California to comply with Florida’s law of service. Depoalo asserts she first sought to serve Deutsche Bank at 60 Wall Street, New York, NY, but was instructed to serve CT at 28 Liberty Street, New York, NY.

This is where the defect in Depoalo’s service begins.

Depoalo equated DBNTC—Deutsche Bank National Trust Company— with Deutsche Bank.

Regardless of the connection between these two entities (see Doc. 12) (corporate disclosure statement), Depoalo has not proved that service upon some other Deutsche Bank entity effectuates valid service upon DBNTC.

See Amtrust N. Am. v. Sennebogen Maschinenfabrij GmbH, 2020 WL 5441407, at *11 (M.D. Fla. Aug. 25, 2020) (summons for lawsuit against German company Sennebogen GmbH served upon its American affiliate, Sennebogen LLC, was ineffectual), R&R adopted by 2020 WL 5423203, at *1 (M.D. Fla. Sept. 10, 2020).

Nor can Depoalo prove that attempted service upon Deutsche Bank’s purported agent, CT, renders valid service upon the separate and distinct entity of DBNTC.

Depoalo seeks to save her service defect by arguing about the pre- and post-COVID-19 service norms at 60 Wall Street. Levey is familiar with serving “various Deutsche Bank entities” at 60 Wall Street. (Doc. 22-1 at 1).

Before the COVID-19 pandemic, Levey and his agents would approach the security desk for service, then the security personnel would contact the appropriate Deutsche Bank employee who came to the lobby to accept service. (Id. at 2).

When the COVID-19 pandemic began, 60 Wall Street became vacant and, at some point, a paper sign was taped up that read:

“Please direct all service to: . . . CT Corporation System Registered Agent, 28 Liberty Street.” (Id. at 2, 6-9).

This paper sign was updated in early December 2020 to read:

“Please direct all Deutsche Bank service EXCEPT for service [on] Deutsche Bank National Trust Company to: . . . CT Corporation.” (Id. at 5, 10).

But this misses the mark.

Florida law requires service upon DBNTC in California.

That DBNTC accepted service at 60 Wall Street before March 2020 as a courtesy does not codify a change to statutes governing service. Moreover, DBNTC had not designated CT as its registered agent (Doc. 24-1 at 5), and, given the many identical lawsuits handled by Depoalo’s attorney and her colleagues, Depoalo had ample notice that CT was not a registered agent of DBNTC and could not accept service on its behalf. Service here was defective and must be quashed.

Florida’s service statutes are strictly enforced.

Shurman v. Atl. Mortg. & Inv. Corp., 795 So. 2d 952, 954 (Fla. 2001).

If a party fails to comply with Florida’s service requirements, subsequent judgments are voidable.

Floyd v. Fed. Nat’l Mortg. Ass’n, 704 So. 2d 1110, 1112 (Fla. Dist. Ct. App. 1998).

DBNTC was never served.

Instead, Depoalo served a purported agent of a non- party. This service is so defective that it amounted to no notice whatsoever to DBNTC of the proceedings.

The improper service necessitates a finding of good cause to void the default judgment.

Id.; Fed. R. Civ. P. 55(c) (permitting court to set aside entry of default for good cause).

The irony here is palpable:

Depoalo failed to appreciate the separate corporate identities of DBNTC and Deutsche Bank where her complaint asserts a blurring of mortgage owners and mortgage servicers caused her damages.

The continued, knowingly invalid service on non-party, non-agent CT of lawsuits against DBNTC followed by default judgments in state court…

…has the same stink of fraud-upon-the-court that the numerous plaintiffs allege was perpetrated upon them.

Depoalo will not be afforded a set of rules apart from DBNTC.

Because the Court finds service was defective here, it follows that DBNTC’s removal to federal court was timely. DBNTC learned of the lawsuit and promptly removed it within the 30-day time limit.

Depoalo’s motion to remand is denied.

MOTION TO STRIKE

Depoalo moves to strike the Declaration of Ronaldo Reyes (Doc. 24-1) as untimely. The declaration was attached to DBNTC’s response to Depoalo’s motion to remand.

Depoalo first argues the declaration should be stricken because it was not filed alongside DBNTC’s motion to quash. Depoalo’s argument lacks merit.

As discussed, the motion to remand and the motion to quash are intertwined and resolution of one requires consideration of the other. The Court will not strike an affidavit because it was filed with DBNTC’s memorandum opposing Depoalo’s motion to remand rather than with DBNTC’s motion to quash.

Depoalo then argues that the declaration contains hearsay because Reyes signed it and it was notarized in California where he works, rather than in New York where the service efforts took place.

Reyes’ declaration is signed in his capacity as Vice President of DBNTC and provides sufficient foundation for his knowledge of DBNTC’s operations.

Depoalo’s argument fails.

Finally, Depoalo asks for leave to respond should the Court deny her motion to strike. This request is denied.

Motion practice is not a barter system.

Depoalo’s strategic choice of responding to DBNTC’s motion to quash with her own motion to strike rather than submitting full substantive briefing is hers to make.

The deadline to respond has now passed.

The motion to strike contains ample argument responding to DBNTC’s motion to quash. The Court will not provide multiple opportunities to brief the same motion.

CONCLUSION

Service here was defective and DBNTC received no notice of the lawsuit.

As soon as DBNTC learned of the state court proceeding, it appeared and removed this matter to federal court.

That removal was timely and appropriate.

Until Depoalo serves DBNTC, the Court lacks jurisdiction over it.

The Court will allow 30 days for Depoalo to properly serve DBNTC.

Given the service irregularities in this lawsuit and the related lawsuits, if Depoalo fails to effectuate service, the Court will dismiss this matter with prejudice.

Accordingly, it is now ORDERED:

Defendant Deutsche Bank National Trust Company’s Motion to Quash Service of Process and Vacate Clerk’s Default (Doc. 13) is GRANTED.

Service is QUASHED and the default entered against Deutsche Bank National Trust Company in state court is VACATED.

Plaintiff Darleen Depoalo’s Motion for Remand (Doc. 21) is DENIED.

Plaintiff Darleen Depoalo’s Motion to Strike Untimely Hearsay Declaration and/or for Leave to Reply (Doc. 26) is DENIED.

LEE SEGAL TAKES ON DEUTSCHE BANK NATIONAL TRUST IN FEDERAL COURT

04/30/2021 2950 Summer Swan Land Trust v. Deutsche Bank National Trust Company
2:21-cv-00042-SPC-NPM
ORDERED: This action is DISMISSED with prejudice for failure to serve, failure to prosecute, and failure to comply with Court Orders. The Clerk is DIRECTED to enter judgment, terminate any pending motions or deadlines, and close the case. Signed
Judge Sheri Polster Chappell
04/30/2021 Quest Systems LLC v. Deutsche Bank National Trust Company
2:21-cv-00040-SPC-NPM
ORDERED: This action is DISMISSED with prejudice for failure to serve, failure to prosecute, and failure to comply with Court Orders. The Clerk is DIRECTED to enter judgment, terminate any pending motions or deadlines, and close the case. Signe
Judge Sheri Polster Chappell
04/30/2021 Weber v. Deutsche Bank National Trust Company
2:21-cv-00039-SPC-NPM
ORDERED: This action is DISMISSED with prejudice for failure to serve, failure to prosecute, and failure to comply with Court Orders. The Clerk is DIRECTED to enter judgment, terminate any pending motions or deadlines, and close the case. Signe
Judge Sheri Polster Chappell
04/30/2021 Market Tampa Investments, LLC v Deutsche Bank National Trust Company
2:21-cv-00037-SPC-NPM
ORDERED: This action is DISMISSED with prejudice for failure to serve, failure to prosecute, and failure to comply with Court Orders. The Clerk is DIRECTED to enter judgment, terminate any pending motions or deadlines, and close the case. Signed
Judge Sheri Polster Chappell
04/30/2021 Kenny v. Deutsche Bank National Trust Company
2:21-cv-00009-SPC-NPM
ORDERED: This action is DISMISSED with prejudice for failure to serve, failure to prosecute, and failure to comply with Court Orders. The Clerk is DIRECTED to enter judgment, terminate any pending motions or deadlines, and close the case. Signed

 

 

 

PLAINTIFF DEFENDANT COUNTY PLAINTIFF

ATTORNEY

AREIAS, EVA Deutsche Bank National Trust Company, As Trustee Alachua

01 2020 CA 002497

Segal, Lee
AREIAS, EVA Deutsche Bank National Trust Company, As Trustee Clay

2020-CA-000955

Lazenby, Megan
ABPAYMAR, LLC, As Trustee For The 30531 Midtown Court Land Trust Deutsche Bank National Trust Company, As Trustee, In Trust Registered Holders Of Long Beach Mortgage Loan Trust 2005-3, Asset- Backed Certificates, Series 2005-3 Baker

2020-CA-000115

Segal, Lee
ABPAYMAR LLC, As Trustee Deutsche Bank National Trust Company Clay

2020-CA-000695

Segal, Lee; Lazenby, Megan
ABPAYMAR LLC, As Trustee Deutsche Bank National Trust Company Pasco

2020-CA-1437ESB

Segal, Lee
DECOURSY, RICHARD Deutsche Bank National Trust Company, As Trustee USDC ND – Panama City Div. 5:21-cv-00014 Segal, Lee
DECOURSY, RICHARD Deutsche Bank National Trust Company, As Trustee For Residential Asset Securitization Trust Series 2003-A10, Mortgage Pass- Through Certificates Series 2003-AJ USDC MD – Ocala Div. 5:21-cv-00040 Segal, Lee
HAULSEE, MICHAEL AND MARCIA Deutsche Bank National Trust Company, As Trustee USDC ND – Pensacola Div. 3:21-cv-00077 Turner-Hahn, Carla; Wolf, Matthew

 

 

PLAINTIFF DEFENDANT COUNTY PLAINTIFF

ATTORNEY

HAULSEE, MICHAEL AND MARCIA Deutsche Bank Trust Company Americas, As Trustee For Residential Accredit Loans, Inc.

Mortgage Asset-Backed Pass-Through Certificates,

Series 2007-QS4

USDC MD – Tampa Div. 8:20-cv-02410

Dismissed

Segal, Lee
LOFGREN, ANNA Deutsche Bank National Trust Company, As Trustee For Wamu Mortgage Pass- Thru Certificates, Series 2006-Ar1 Trust And Deutsche Bank Trust Company Americas, F.K.A Banker Trust Company, As Trustee And Custodian For IXIS 2005-HE4 Bradford

04-2020-CA-000340

Segal, Lee
LOFGREN, ANNA Deutsche Bank National Trust Company, As Trustee Okeechobee 2020-CA-000212 Lazenby, Megan
BCP Management LLC, As Trustee For 11717 81st Place Land Trust Deutsche Bank National Trust Company, As Trustee For The Gsamp Trust 2005- HE3 Mortgage Pass-Through Certificates Series 2005-HE3 Brevard

05-2020-CA-047023

Segal, Lee
BCP Management, LLC, As Trustee For The 10611 Bamboo Road Land Trust Deutsche Bank National Trust Company, As Trustee For Harborview Mortgage Loan Trust 2006-8 USDC MD – Ocala Div. 5:21-CV-00071 Segal, Lee
BCP Management, LLC, As Trustee For 18522 Sunward Lake Land Trust Deutsche Bank National Trust Company, As Trustee For Morgan Stanley Home Equity Loan Trust Series 2006-3 USDC ND – Panama City Div. 5:21-cv-00017 Segal, Lee
JACARANDA, LLC, As Trustee For The Certificateholders Of The Brev 1144 Land Trust Deutsche Bank National Trust Company, As Trustee For Soundview Home Loan Trust 2004-1, Asset-Backed

Certificates Series 2004-1

Brevard

05-2020-CA-035223

Segal, Lee

 

PLAINTIFF DEFENDANT COUNTY PLAINTIFF

ATTORNEY

ZIFERRYN VENTURES LLC, As

Trustee Of The 8172 Via Rosa Land Trust

Deutsche Bank National Trust Company, As Indenture Trustee For Mortgage Trust 2005-2 Charlotte

2020-CA-000747

Dismissed

Lazenby, Megan; Segal, Lee
ZIFERRYN VENTURES LLC, As

Trustee Of The 8172 Via Rosa

Land Trust

Deutsche Bank National Trust Company As Indenture Clay

2020-CA-000929

Lazenby, Megan; Mausser, Gregory K.
YHT And Associates, Inc., As Trustee Under 20438 Homosassa Court I.V. Trust Dated January 17, 2012 Deutsche Bank National Trust Company, As Trustee On Behalf Of The Holders Of The Residential Accredit Loans, Inc., Mortgage-Asset- Backed Pass-Through Certificates, Series 2007-Qs3 USDC MD – Jacksonville Div. 3:21-cv-00050 Segal, Lee
KENNY, TAMMY Deutsche Bank National Trust Company, As Trustee Of Argent Mortgage Securities, Inc., Asset- Backed Pass Through Certificates Series 2004- W11, Under The Pooling And Servicing Agreement Dated As Of October 1, 2004 Without Recourse USDC MD – Ft. Myers Div. 2:21-cv-00009 Segal, Lee
GEORGE WEBER, As Trustee Of The 12321 Adventure Drive Land Trust Dated 12/30/2011 Deutsche Bank National Trust Company, As Trustee For New Century Home Equity Loan Trust Series 2005-B, Asset-Backed Pass- Through Certificates USDC MD – Ft. Myers Div. 2:21-cv-00039 Segal, Lee
GEORGE WEBER, As Trustee Of The 12321 Adventure Drive Land Trust Dated 12/30/2011 Deutsche Bank National Trust Company, As Trustee For New Century Home Equity Loan Trust, Series 2005-B, Asset-Backed Pass- Through Certificates USDC ND – Gainesville Div. 1:21-cv-00015 Segal, Lee

 

 

PLAINTIFF DEFENDANT COUNTY PLAINTIFF

ATTORNEY

GEORGE WEBER, As Co-

Trustee Of The 10703 Beagle Run Place Land Trust, Dated 12/30/11

Deutsche Bank National Trust Company Lee

2020-CA-005336

Segal, Lee
GEORGE WEBER, As Co-

Trustee Of The 10703 Beagle Run Place Land Trust, Dated 12/30/11

Deutsche Bank National Trust Company USDC MD – Jacksonville Div. 3:21-cv-00102 Segal, Lee
INLAND ASSETS, LLC, As

Trustee For The 4417 Rudder Way Land Trust

Deutsche Bank National Trust Company, As Trustee For GSAMP Trust 2006-NC2,

Mortgage Pass-Through Certificates, Series 2006- NC2

USDC MD – Jacksonville Div. 3:21-cv-00040 Segal, Lee
INLAND ASSETS, LLC, As

Trustee For The 4417 Rudder Way

Deutsche Bank National Trust Company Pasco

2020-CA-001794

Segal, Lee
INLAND ASSETS, LLC, As

Trustee For 4462 Rudder Way Trust

Deutsche Bank National Trust Company Walton

2020-CA-000410

Lazenby, Megan; Wolf, Matthew
BLACKROCK ASSET MANAGEMENT, LLC As

Trustee For The 2950 Summer Swan Land Trust

Deutsche Bank National Trust Company, As Trustee For Indymac Indx Mortgage Loan Trust 2007-AR1, Mortgage Pass-Through Certificates Series 2007-AR1 USDC MD – Ft. Myers Div. MD 5:21-cv-00042 Segal, Lee
BLACKROCK ASSET MANAGEMENT, LLC, As

Trustee For RC Certificateholders Land Trust

Deutsche Bank National Trust Company Hillsborough 20-CA-009950 Wolf, Matthew
MARKET TAMPA INVESTMENTS, LLC Deutsche Bank National Trust Company, As Trustee For Novastar Mortgage Funding Trust, Series 2007 Novastar Home Equity Loan Asset-Back Certificates,

Series 2007

USDC MD – Ft. Myers Div. 2:21-cv-00037 Segal, Lee

 

PLAINTIFF DEFENDANT COUNTY PLAINTIFF

ATTORNEY

LP ASSETS, LLC, As Trustee Deutsche Bank National Trust Company Dixie

2020-CA-000035

Segal, Lee
LP ASSETS, LLC, As Trustee DEUTSCHE BANK NATIONAL TRUST COMPANY, As

Trustee For Financial Asset Securities Corp., Soundview Home Loan Trust 2007- WMC1, Asset-Backed Certificates, Series 2007- WMC1

Pinellas

19-008350-CI

Segal, Lee
LP ASSETS, LLC, As Trustee Deutsche Bank National Trust Company, As Trustee For Financial Asset Securities Corp., Soundview Home Loan Trust 2007- WMCI, Asset-Backed Certificates, Series 2007- WMC1 Pinellas

20-003799-CI

Segal, Lee
KEATHEL CHAUNCEY, ESQ. As

Trustee Only For The 1234 Holly Circle Land Trust

Deutsche Bank National Trust Company Escambia

2020-CA-001394

Segal, Lee
GINSBERG-KLEMMT, ERIKA Deutsche Bank National Trust Company, As Trustee For American Home Mortgage Assets Trust 2006- 5, Mortgage-Backed Pass- Through Certificates, Series 2006-5 USDC ND – Tallahassee Div. 4:21-cv-00041 Segal, Lee
GINSBERG-KLEMMT, ERIKA Deutsche Bank National Trust Company, As Trustee For American Home Mortgage Assets Trust 2006- 5, Mortgage-Backed Pass- Through Certificates, Series 2006-5 USDC SD – Key West Div. 4:21-cv-10010 Segal, Lee
COOK, WALLACE Deutsche Bank Trust Company Americas Glades

2020-CA-000084

Segal, Lee

 

PLAINTIFF DEFENDANT COUNTY PLAINTIFF

ATTORNEY

COOK, WALLACE Deutsche Bank National Trust Company, As Trustee Of Argent Securities Inc., Mortgage-Backed Pass- Through Certificates 2004- W1, Under The Pooling And Servicing Agreement Dated February 1, 2004, And Deutsche Bank Trust Company Americas, Formerly Known As Bankers Trust, As Trustee And Custodian Nassau

2020-CA-000270

Segal, Lee
COOK, WALLACE Deutsche Bank Trust Company Americas, As Trustee For Residential Accredit Loans, Inc., Mortgage Asset-Backed Pass-Through Certificates, Series 2004-QS4 Volusia 2020-11139 Segal, Lee
BONAFIDE PROPERTIES, LLC,

As Trustee For The Anderson Family Land Trust

Deutsche Bank National Trust Company Gulf

2020-CA-000131

Segal, Lee
DIGIOVANNI, LEONARDO Deutsche Bank National Trust Company F.K.A. Bankers Trust Company Of California, N.A., As Trustee Of The Vendee Mortgage Trust 1999-3, And Deutsche Bank National Trust Company, F.K.A. Bankers Trust Company Of California, N.A., As Trustee Of The Vendee Mortgage Trust 1999-2 Hardee

2020-CA-000292

Segal, Lee
FUBAR ASSETS, LLC, as Trustee For, 3417 70th Glen East Land Trust Deutsche Bank National Trust Company, As Trustee USDC – MD- Tampa Div. 8:20-cv-03090 Lazenby, Megan

 

 

PLAINTIFF DEFENDANT COUNTY PLAINTIFF

ATTORNEY

SHEN YI, LLC, A New Mexico Limited Liability Company, As Trustee Of The 1970 Hidden Lake Dr I.V. Trust Under Agreement Dated August 25, 2011 Deutsche Bank National Trust Company Hendry

2020-CA-000336

Segal, Lee
DEPOALO, DARLEEN Deutsche Bank National Trust Company, As Trustee Under The Pooling Abd Servicing Agreement Dated As Of April 1, 2006 Morgan Stanley Abs Capital 1 Trust 2006-NC3, Mortgage Pass- Through Certificates Series 2006-NC3 USDC MD – Ft. Myers Div. 2:21-cv-00038 Lazenby, Megan
FLORIDA LIMITED INVESTMENT PROPERTIES, INC. Deutsche Bank Trust Company Americas USDC SD – Ft. Pierce Div. 2:21-cv-014039 Segal, Lee
ABUNDANT LIFE HOMES, LLC Deutsche Bank National Trust Company, As Indenture Trustee For American Home Mortgage Investment Trust 2007-1 USDC ND – Tallahassee Div. 4:21-cv-00053 Lazenby, Megan; Wolf, Matthew
QUEST SYSTEMS, LLC, As

Trustee Of The 16347 Coco Hammock Land Trust Dated November 29, 2012

Deutsche Bank National Trust Company, As Trustee For American Home Mortgage Asset Tryst 2006- 2, Mortgage Pass-Through

Certificates, Series 2006-2

USDC MD – Ft. Myers Div. 2:21-cv-00040 Segal, Lee
QUEST SYSTEMS, LLC, A New

Mexico Limited Liability Company As Successor Trustee Under The 4787 Woodward Land Trust Dated October 22, 2012

Deutsche Bank National Trust Company, As Trustee For Long Beach Mortgage Loan Trust 2006-4 Sarasota

2020-CA-004318

Segal, Lee; Mausser, Gregory K.

 

PLAINTIFF DEFENDANT COUNTY PLAINTIFF

ATTORNEY

ZIFFERRYN VENTURES, LLC, As

Trustee For The 8172 Via Rosa Land Trust

Deutsche Bank National Trust Company Orange

2020-CA-003153

Segal, Lee
ZIFERRYN VENTURES, LLC, As

Trustee For The 12033 Gandy Blvd Unit 175 Trust

Deutsche Bank National Trust Company, As Trustee For Harborview Mortgage Loan Trust 2005-9 Mortgage Loan Pass-Through Certificates, Series 2005-9 Pinellas

19-000251-CI

Segal, Lee
ZIFERRYN VENTURES, LLC, As

Trustee For The 12033 Gandy Blvd Unit 175 Trust

Deutsche Bank National Trust Company, As Trustee For Harborview Mortgage Loan Trust 2005-9 Mortgage Loan Pass-Through Certificates, Series 2005-9 Pinellas

20-003796-CI

Segal, Lee
JEFFREY M. HAHN and CARLA TURNER HAHN Deutsche Bank National Trust Company, As Trustee For Gsaa Home Equity Trust 2006-10, Asset-Backed

Certificates, Series 2006-10

USDC MD – Tampa Div. 8:21-cv-00039 Segal, Lee; Lazenby, Megan
SHANNON, SEAN Deutsche Bank National Trust Company USDC MD – Orlando Div. 6:21-cv-00198 Segal, Lee
WILSON, ALBERT Deutsche Bank National Trust Company, As Trustee USDC SD – Ft. Pierce Div. 2:21-cv-14036 Segal, Lee

Before the Court is Plaintiff Tammy Kenny’s Amended Motion to consolidate (Doc. 33) and Defendant Deutsche Bank National Trust Company’s response in opposition (Doc. 36).

Kenny asks the Court to consolidate twenty-five similar cases with this one for the purpose of appealing an Order denying remand and quashing service.

Deutsche Bank opposes on many grounds.

To start, Kenny points to nothing suggesting a district court can decide to consolidate cases only for an interlocutory appeal.

Whether to consolidate cases on appeal is a matter handled by the appellate court.

And when cases are consolidated by a district court for all purposes, each case still maintains its separate identity—ending in a separate judgment and notice of appeal. Hall v. Hall, 138 S. Ct. 1118, 1131 (2018). So, the Court denies the request to consolidate.

Even if the Court could consolidate, it cannot do so with all these cases for a separate reason. This Court may consolidate certain cases before it. Fed. R. Civ. P. 42(a); Local Rule 1.07(b).

But Kenny does not seek to only consolidate the cases assigned to the Court.

Kenny wants to consolidate a list of cases assigned to other judges, including many from other Divisions and Districts. Yet the Court does not have the power to simply pluck cases away from other federal judges around Florida.

As Deutsche Bank notes, there is theoretically a process by which Kenny could try consolidating a bunch of cases across the State. But it is much more involved than this empty-handed request to a single judge. So the Motion is denied.

Relatedly, Kenny filed a Notice of Appeal (Doc. 35) yesterday.

There are several issues with this.

Without authorization, Kenny is trying to appeal a nonfinal interlocutory order (i.e., she’s trying to appeal an order that is currently unappealable).

Caterpillar Inc. v. Lewis, 519 U.S. 61, 74 (1996) (“An order denying a motion to remand, standing alone, is obviously not final and immediately appealable as of right.” (cleaned up));

Stelly v. Employers Nat’l Ins., 431 F.2d 1251, 1254 (5th Cir. 1970) (explaining an order quashing service is a nonfinal, interlocutory order if it not effectively dispositive).

What’s more, Kenny misfiled the Notice in CM/ECF as a mere case notice.

Until a notice of appeal is properly filed, the Eleventh Circuit will have no inkling of an attempted appeal and CM/ECF will not trigger its necessary functions to process an appeal.

Finally, Kenny failed to pay the filing fee. Leaving aside the substantive issue—certain dismissal of the appeal—the Court strikes the Notice because it was misfiled.

If Kenny would like to try appealing at this time, she must make any necessary filings.

Accordingly, it is now

ORDERED:

(1) Plaintiff’s Amended Motion to Consolidated [sic] Related Cases for Purpose of Appeal (Doc. 33) is DENIED.

(2) The Court STRIKES Plaintiff’s Notice of Appeal (Doc. 35).

If Plaintiff intends to pursue an appeal, she must make the appropriate filings.

DONE and ORDERED in Fort Myers, Florida on April 2, 2021.

/s/ _________
SHERI POLSTER CHAPPELL
UNITED STATES DISTRICT JUDGE

YOUR DONATION(S) WILL HELP US:

• Continue to provide this website, content, resources, community and help center for free to the many homeowners, residents, Texans and as we’ve expanded, people nationwide who need access without a paywall or subscription.

• Help us promote our campaign through marketing, pr, advertising and reaching out to government, law firms and anyone that will listen and can assist.

Thank you for your trust, belief and support in our conviction to help Floridian residents and citizens nationwide take back their freedom. Your Donations and your Voice are so important.



Continue Reading

Appellate Judges

Jeffrey Epstein’s Little Black Book of Princes’, Law Professors and Now this Prosecutor turned Judge is Just Horrifying

While Bruce E. Reinhart was an assistant U.S. attorney, he learned confidential, non-public information about the Jeffrey Epstein case.

Published

on

Judge in Craig Wright lawsuit once quit as US Attorney to work for Jeffrey Epstein

The controversial case had an equally controversial judge who was on the payroll of the now-dead accused sex trafficker

AUG 28, 2019 | REPUBLISHED BY LIT: MAR 18, 2021

The U.S. magistrate overseeing the legal battle between Craig Wright and the estate of Dave Kleiman over who owns a $10 billion bitcoin fortune and Bitcoin’s underlying IP is not without controversy of his own:

Bruce Reinhart once quit his job as a U.S. Attorney to work for Jeffrey Epstein, the multimillionaire accused sex trafficker who was being targeted in a probe by the U.S. Attorney’s office.

As reported in the Miami Herald on November 28, 2018:

Epstein also hired Bruce Reinhart, then an assistant U.S. attorney in South Florida, now a U.S. magistrate.

He left the U.S. Attorney’s Office on Jan. 1, 2008, and went to work representing Epstein’s employees on Jan. 2, 2008, court records show.

In 2011, Reinhart was named in the Crime Victims’ Rights Act lawsuit, which accused him of violating Justice Department policies by switching sides, implying that he leveraged inside information about Epstein’s investigation to curry favor with Epstein.

Also reported in the Miami Herald, Reinhart made plans that would establish his private practice while still in office:

On Oct 23, 2007, as federal prosecutors in South Florida were in the midst of tense negotiations to finalize a plea deal with accused sex trafficker Jeffrey Epstein, a senior prosecutor in their office was quietly laying out plans to leave the U.S. attorney’s office after 11 years.

“On that date, as emails were flying between Epstein’s lawyers and federal prosecutors, Bruce E. Reinhart, now a federal magistrate, opened a limited liability company in Florida that established what would become his new criminal defense practice.”

In 2011 affidavit, Reinhart swore, under penalty of perjury that

“he was not part of the team involved in Epstein’s investigation and therefore was not privy to any confidential information about the case”

while he was at the U.S. Attorney’s Office.

However, as the Miami Herald points out:

Reinhart’s former supervisors in the U.S. Attorney’s Office filed a court paper contradicting him, saying that

“while Bruce E. Reinhart was an assistant U.S. attorney, he learned confidential, non-public information about the Epstein matter.’’

In one of the 2011 Epstein cases— Jane Does # 1 and #2 v. United States— Reinhart took offense at the idea that he did anything wrong. In that motion, the plaintiffs alleged that Reinhart:

Joined Epstein’s payroll shortly after important decisions were made limiting Epstein’s criminal liability’ and improperly represented Epstein victims in follow-on civil suits. (DE 48 at 22). Plaintiffs contend that such conduct ‘give[s], at least, the improper appearance that Reinhart may have attempted to curry [favor] with Epstein and then reap his reward through favorable employment.’ (DE 48 at 23).

Reinhart takes great offense to these accusation—which he contends are false, irrelevant to the CVRA claims, and gratuitous—and seeks intervention to rebut these allegations and move for sanction.

In 2012, he went to work for the white collar crime division of McDonald Hopkins LLC in Miami. At the time, a public relations firm put out a press release stating, “Since 2008, Reinhart has been in private practice providing white collar and complex civil litigation strategies for a variety of businesses, executives and nonprofit entities around the country.”

As Julie K. Brown of the Miami Herald put it:

Reinhart’s defection was one of many highly unusual turns that the Epstein case took 12 years ago, moves that could merit examination as the multimillionaire’s controversial non-prosecution agreement is dissected in the wake of his arrest last week on sex trafficking charges.

In 2015, Reinhart defended Epstein on TV not as his attorney of seven years but as a legal expert and a “former U.S. prosecutor.”

Reinhart was appointed U.S. magistrate in March 2018, nearly a year after R. Alexander Acosta began his stint as Labor Secretary. Acosta resigned on July 19, 2019 over his handling of the Epstein case. At the time, Reinhart is recorded in the Palm Beach Post as saying, “It’s been a good week in our house.”

That was odd because the next sentence is about a guilty verdict for a client:

“He recently represented former Boynton Beach police officer Michael Brown. The veteran cop last month was sentenced to six months house arrest and three years of probation…”

The Sun Sentinel headline on the story on November 10, 2017 was, “Boynton Beach cop found guilty in beating of unarmed man.”

YOUR DONATION(S) WILL HELP US:

• Continue to provide this website, content, resources, community and help center for free to the many homeowners, residents, Texans and as we’ve expanded, people nationwide who need access without a paywall or subscription.

• Help us promote our campaign through marketing, pr, advertising and reaching out to government, law firms and anyone that will listen and can assist.

Thank you for your trust, belief and support in our conviction to help Floridian residents and citizens nationwide take back their freedom. Your Donations and your Voice are so important.



Continue Reading

Bankers

Owl Creek v Ocwen, S.D. Fl. is a related Lawsuit to Brahman Partners Filed and by Same Law Firms

LIT has focused on the Magistrate Judge’s motion to dismiss findings and order. As with the Brahman Partners case, this law suit would be settled shortly after the motions to dismiss in both actions were released.

Published

on

Owl Creek I, L.P. v. Ocwen Financial Corporation (9:18-cv-80506)

District Court, S.D. Florida

Original Complaint by Owl Creek

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS (DE 43)

Currently before the Court is Defendants’ Motion to Dismiss certain factual allegations from the Complaint based on Rule 12(b)(6) and the heightened pleading standards of Rule 9(b) and the Private Securities Litigation Reform Act of 1995 (PSLRA). DE 43. This motion was referred to the undersigned for final disposition by the presiding District Judge, following the parties’ consent to have the undersigned Magistrate Judge decide the instant motion. DE 61, 64, 65.

The undersigned has reviewed the Complaint (DE 1), the Motion to Dismiss (DE 43), Plaintiffs’ response to the motion (DE 46), and Defendants’ reply. DE 47. The Court heard oral argument of the motion on August 29, 2018 (DE 62), and this matter is now ripe for decision.

For the reasons that follow, Defendants’ Motion to Dismiss certain allegations from the Complaint (DE 43) is GRANTED IN PART AND DENIED IN PART.

ALLEGATIONS IN THE COMPLAINT

The following constitute the material facts alleged in the Complaint.1 All paragraph citations (noted as “¶” or “¶¶”) are references to the numbered paragraphs in the Complaint:

Plaintiffs are investment funds that purchased the common stock of Defendant Ocwen Financial Corporation (Ocwen) beginning in February 2014 and throughout that year. ¶¶1, 3, 188, 190.

Ocwen is a mortgage servicing company founded by Defendant Erbey. ¶2.

He ran the company until he was “forced to resign,” at which time his “right-hand man” and “long time compatriot,” Defendant Faris, took over. Id.2

According to the Complaint, Defendants sought to induce Plaintiffs to invest “tens of millions of dollars” in Ocwen by “making false and materially misleading statements concerning the accuracy of Ocwen’s financial statements, its purported regulatory compliance, and the effectiveness of its internal controls and disclosure procedures.”

¶¶4, 5.

As a mortgage servicer, Ocwen was “required to service mortgage loans in compliance with a number of overlapping servicing standards set forth in a 2011 agreement with the New York State Department of Financial Services (NYDFS 2011 Agreement) and in the National Mortgage Settlement (NMS).” ¶7.3

These servicing standards govern, among other things, the timing of Ocwen’s communications with borrowers. Id. Particularly relevant here is NMS’s

1 For purposes of this Motion, the Court accepts all well-pled factual allegations in the Complaint, and the attached exhibits, as true and evaluates all plausible inferences derived from those facts in favor of the Plaintiffs. See Chaparro v. Carnival Corp., 693 F.3d 1333, 1337 (11th Cir. 20112); AXA Equitable Life Ins. Co. v. Infinity Fin. Grp., LLC, 608 F. Supp. 2d 1349, 1353 (S.D. Fla. 2009) (“On a motion to dismiss, the complaint is construed in the light most favorable to the non-moving party, and all facts alleged by the non-moving party are accepted as true.”).

2 After Faris became CEO, Erbey remained on the executive board, with the title “Former Executive Chairman.” DE 43-4 at 3.

3 NMS was a 2012 global settlement, resulting from federal and state investigations of large mortgage servicers for improper practices. ¶58.

requirement that any denial of a homeowner’s request for an interest rate reduction be accompanied by written notice of the thirty-day appeal period. This notice was significant because failure to timely appeal a denial could result in a foreclosure action. Id. On October 21, 2014, the NYDFS revealed in an open letter that Ocwen had been “backdating . . . potentially hundreds of thousands of letters to borrowers,” thus, belatedly advising its borrowers of deadlines that had already passed. ¶¶9, 127.

Ocwen subsequently acknowledged in a consent order with the NYDFS that it had been backdating letters to borrowers “for years.”

¶¶9, 181.

This backdating issue also revealed a problem in Ocwen’s disclosure controls because an employee had discovered the problem in November 2013 and reported it to Ocwen’s Vice President of Compliance, but Ocwen “failed to investigate or disclose the problem.” ¶¶108, 123, 129. The same employee raised the backdating issue again in April 2014, but it was still not publicly disclosed by the company. Id.

Notwithstanding this history, on October 31, 2013, Defendant Faris, who was then serving as Ocwen’s CEO, President and Director, and also sat on Ocwen’s Compliance Committee, advised investors during a conference call that Ocwen had been “careful to assure . .. strong compliance” while it transferred nearly two million newly-acquired loans from Residential Capital, LLC (ResCap) to Ocwen’s electronic loan servicing platform, REALServicing. ¶¶8, 53, 74, 153, 178; DE 43-4 at 3.

Faris told investors that the transfer of the ResCap loans had been costlier than expected because of the company’s emphasis on compliance. ¶74.4

4 Although Ocwen initially was not a party to the National Mortgage Settlement, when it acquired the ResCap loans, it was required to service those loans in accordance with the NMS standards. ¶61. Thereafter, in December 2013, Ocwen reached a separate agreement with several governmental authorities to comply with the NMS. This agreement required Ocwen to service all of its loans, not just the ResCap loans, in accordance with the NMS.  ¶62.

Plaintiffs considered Ocwen’s compliance with the NYDFS 2011 Agreement and the NMS to be important because Ocwen’s failure to comply with their regulatory requirements could result in the imposition of substantial penalties that would adversely affect Ocwen’s business operations and results. ¶72, 90.   According to the Complaint, “[h]ad Faris acted with the standard of care required of a CEO of a public company . . . he would have been aware that Ocwen was not in compliance with regulatory requirements.” ¶186.

Exactly six months after Faris’ statement to investors, Erbey announced Ocwen’s operating results for the first quarter of 2014 in a press release dated May 1, 2014. The press release “touted [Ocwen’s] compliance with the [NMS].” ¶75. Specifically, Erbey stated:

Going forward, we believe compliance and counterparty strength will be among the most important factors determining long-term success in the servicing business. We consider our solid balance sheet, National Mortgage Settlement compliance and long history of success in large servicing transfers, where we are able to substantially reduce delinquencies and keep more people in their homes, to be substantial competitive advantages. ¶¶75, 154 (emphasis in Complaint).

Plaintiffs interpreted this as “statement of fact that Ocwen was in compliance with the [NMS]” (¶¶76, 154), and claim that “[h]ad Erbey acted with the standard of care required of a Chairman of a public company . . . he would have been aware that Ocwen was not in compliance with regulatory requirements . . .” ¶185. According to the Complaint, “Defendants Erbey and Faris knew of or recklessly disregarded Ocwen’s letter backdating and the issues with REALServicing throughout 2014.” ¶¶115, 177, 181.5

When several partial corrective disclosures concerning the above-described misrepresentations were released to the market, the price of Ocwen common stock dropped precipitously, and Plaintiffs suffered significant losses on their purchases of Ocwen stock. ¶125.

5 According to the Complaint, Ocwen’s Head of Servicing emailed Faris in 2014 to complain that REALServicing was “an absolute train wreck.”  ¶¶10, 113, 179.

The first disclosure occurred on August 12, 2014, when Ocwen issued a press release stating, among other things, that:

(a) its financial statements for 2013 and the first quarter of 2014 could no longer be relied upon;

(b) it had overstated its pre-tax income for the first quarter of 2014 by almost 20%; and

(c) its internal controls over financial reporting suffered from a material weakness.

On this news, Ocwen stock dropped 4.5%.

¶126.

The second disclosure occurred on October 21, 2014, when the NYDFS issued its open letter to Ocwen recounting the letter-backdating issue. ¶127.

The NYDFS letter stated that Ocwen “did not notify regulators, borrowers, or investigators of this significant issue, nor did Ocwen personnel conduct due diligence to ensure that the issue was firmly resolved . . .” ¶130.

Thus, Ocwen “was not meeting [its] obligations” under various agreements with state and federal authorities, “[a]nd given the issues with Ocwen’s systems, it may be impossible to determine the scope of Ocwen’s non-compliance.” ¶132.6

Ocwen issued a response admitting the backdating of letters “due to software errors in our correspondence systems,” and suggesting that only 283 borrowers in New York received backdated letters. ¶135.

As a result of the information released on October 21, 2014, Ocwen’s stock price fell dramatically by over 18%.

¶136.

After the markets closed on October 21, 2014, Ocwen issued another press release, stating that it wished “to correct its statement in a press release earlier . . . that 283 borrowers in New York received letters with incorrect dates” because it was “aware of additional borrowers in New York who received letters with incorrect dates” but did “not yet know how many such letters there were.” ¶137.

The next day, October 22, 2014, the price of Ocwen common stock dropped more than 11%.

Id..

6 This was a reference to the Consumer Financial Protection Bureau (CFPB) determination that Ocwen’s “REALServicing [electronic platform] suffers from fundamental system architecture and design flaws, including a lack of properly managed data, lack of automation, and lack of capacity.” ¶¶10, 112, 156. As a result of this criticism and the Head of Servicing’s email that REALServicing was “an absolute train wreck,” Ocwen began transitioning from REALServicing in late 2017 to a different electronic servicing platform licensed by an independent third party.  ¶114.

Overall, the price of Ocwen common stock lost almost 30% of its value on October 21-22, 2014, dropping from $26.26 per share to $19.04 per share.

¶138.

Plaintiffs “specifically relied on the representations set forth above prior to purchasing Ocwen stock.” ¶¶82, 187, 189, 190. Plaintiffs also relied on Defendants’ statements “concerning the effectiveness of Ocwen’s disclosure controls and procedures . . . because [they] would ensure that regulatory violations would be publicly disclosed by Ocwen.” ¶91. Plaintiffs did not know that these representations “were either false or omitted truthful information that rendered the representations materially misleading.” ¶93. “Had [Plaintiffs] known the truth . . . [they] would not have purchased Ocwen common stock . . . or, [at least] would not have paid the prices [they] did.” ¶¶92, 192.   The Complaint charges that Defendants Erbey and Faris acted with scienter when making the materially false and misleading statements described above, and that because they were senior executives at the company, their knowledge is imputable to Ocwen. ¶173, 176, 180.

LEGAL CLAIMS

Count One alleges violations of Section 10(b) of the Exchange Act and Rule 10b-5 against all three Defendants, claiming that they intentionally made materially false and misleading statements to artificially inflate Ocwen’s stock price and induce Plaintiffs to buy it.7

7 Section 10(b) states:

 

It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange—(b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, … any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [SEC] may prescribe as necessary or appropriate in the public interest or for the protection of investors.

15 U.S.C. § 78j(b) (2012).

Rule 10b–5 provides:

It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,

To employ any device, scheme, or artifice to defraud,

To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or

To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.

17 C.F.R. § 240.10b–5 (2012).

Count Two alleges violations of Section 18 of the Exchange Act against all three Defendants, claiming that they negligently made misleading statements in their quarterly and annual reports upon which Plaintiffs relied.8

Count Three alleges violations of Section 20(a) of the Exchange Act against Defendants Erbey and Faris by virtue of their “controlling person” status at Ocwen, and claims that they substantially participated in the alleged wrongs.

Count Four alleges common law fraud against all three Defendants in that they knowingly made material misrepresentations and concealed material facts from Plaintiffs, knowing that Plaintiffs would rely on these misrepresentations and be induced to purchase Ocwen’s common stock at inflated prices.

Count Five alleges common law negligent misrepresentation against all three Defendants, claiming that Defendants Erbey and Faris breached their duty to exercise reasonable care and made statements that they knew, or should have known, to be false in order to induce Plaintiffs to purchase Ocwen common stock.

8 Under Section 18, a plaintiff must only plead and prove that the defendant made or caused to be made a material misstatement or omission in a document filed with the Securities Exchange Commission and that the plaintiff relied on the misstatement or omission. Magna Inv. Corp. v. John Does One Through Two Hundred, 931 F.2d 38, 39 (11th Cir. 1991). A Section 18 claim, however, does not require that defendants acted with scienter or any particular state of mind. Id.

Defendants seek to dismiss all five counts to the extent they raise issues concerning Ocwen’s disclosure controls and are predicated on Ocwen’s statements made on October 31, 2013, and May 1, 2014. Defendants contend that these claims do not state a claim for which relief can be granted under Rule 12(b)(6), and that they do not satisfy the heightened pleading requirements of Rule 9(b) or the PSLRA.

Specifically, Defendants argue that Faris’ October 31, 2013 statement constitutes “puffery” in that it was a “generalized and non-verifiable corporate statement[]” that is non- actionable. Defendants also claim that the Complaint fails to adequately allege Faris’ scienter when he made the statement, and that two facts actually negate his scienter, namely that (i) he did not sell any shares of Ocwen stock during the period at issue, and (ii) on the same day Faris made the statement, Ocwen announced a $500 million stock buyback program. DE 43 at 3-4.

With regard to Erbey’s May 1, 2014 statement, Defendants argue that the Complaint fails to allege that Ocwen’s compliance with the NMS was a not competitive advantage, and therefore, Plaintiffs have not demonstrated that the statement is false. Defendants also claim that the Complaint “omits any mention of Mr. Erbey’s state of mind” when he made the statement, and thus, Plaintiffs have not adequately alleged his scienter. As with Faris, Defendants contend that the facts actually negate scienter because Erbey did not sell any shares of Ocwen stock during the period at issue, and “the Ocwen stock buyback program . . . continued well after Mr. Erbey’s May 1, 2014 Statement.” DE 43 at 4.

LEGAL STANDARDS

Motion to Dismiss Standard

Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a motion to dismiss will be granted if the plaintiff fails to state a claim for which relief can be granted. According to the

federal rules, a claimant must only state “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). When considering a Rule 12(b)(6) motion to dismiss, the Court accepts as true all well-pled factual allegations in the complaint, as well as all attachments thereto, and evaluates all plausible inferences derived from those facts in favor of the Plaintiff. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Chaparro v. Carnival Corp., 693 F.3d 1333, 1337 (11th Cir. 2012).

The plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).   Although a plaintiff need not state in detail the facts upon which he bases his claim, Rule 8(a)(2) “still requires a ‘showing,’ rather than a blanket assertion, of entitlement to relief.” Id. at 555 n. 3.

In other words, a plaintiff’s pleading obligation requires “more than labels and conclusions.” Id. at 555; see also Pafumi v. Davidson, No. 05–61679–CIV, 2007 WL 1729969, at *2 (S.D. Fla. June 14, 2007) (J. Cohn).

Heightened Pleading Standard for Fraud under Rule 9(b)

In addition to the usual the notice pleading standard under Rule 8, allegations of fraud require a plaintiff to state “with particularity the circumstances constituting the fraud.” 100079 Canada, Inc. v. Stiefel Labs., Inc., No. 11-22389-CIV, 2011 WL 13116079, at *6 (S.D. Fla. Nov. 30, 2011) (J. Scola) (citing Fed. R. Civ. P. 9(b)).

The Eleventh Circuit has interpreted this to mean that the complaint must set forth (1) precisely what statements or omissions were made in which documents or oral representations; (2) the time and place of each such statement and the person responsible for making (or, in the case of omissions, not making) them; (3) the content of such statements and the manner in which they misled the plaintiff; and (4) what the defendant obtained as a consequence of the fraud. FindWhat Investor Group v. FindWhat.com, 658 F.3d 1282, 1296 (11th Cir. 2011) (noting that while Rule 9(b) requires the circumstances of the fraud to be pled with particularity, “[m]alice, intent, knowledge, and other conditions of a person’s mind may be alleged generally”).

Here, Plaintiffs’ claims in Counts Four and Five for common law fraud and negligent misrepresentation are subject to Rule 9(b)’s heightened pleading requirements. Broadway Gate Master Fund, Ltd. v. Ocwen Fin. Corp., No. 16-80056-CIV-WPD, 2016 WL 9413421, at *3 (S.D. Fla. June 29, 2016) (J. Dimitrouleas).

Specifically, the elements of Florida common law fraud are that:

(1) the defendant made a false statement or omission of material fact;

(2) the defendant knew the statement was false;

(3) the statement was made for the purpose of inducing plaintiff to rely on it;

(4) plaintiff’s reliance was reasonable; and

(5) plaintiff suffered damages. Id.

The elements of Florida common law negligent misrepresentation are:

(1) the defendant made a misrepresentation of material fact;

(2) the defendant either knew of the misrepresentation, made the misrepresentation without knowledge of its truth or falsity, or should have known the representation was false;

(3) the defendant intended to induce another to act on the misrepresentation; and (4) an injury resulted to the plaintiff who acted in justifiable reliance upon the misrepresentation. Id.

Heightened Pleading Standard for PSLRA claims

The PSLRA imposes an even higher pleading requirement on Section 10(b) and Rule 10b-5 claims and requires the plaintiff to set forth with particularity “each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed.” Id. (quoting 15 U.S.C. § 78u–4(b)(1)).

Further, the plaintiff must allege “with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind [i.e., scienter].” 15 U.S.C. § 78u–4(b)(2). “If these PSLRA pleading requirements are not satisfied, the court ‘shall’ dismiss” those counts. FindWhat Investor Group, 658 F.3d at 1296-97 (citing 15 U.S.C. § 78u– 4(b)(3)(A)).

Thus, to survive a motion to dismiss, a claim brought under Section 10(b) or Rule 10b–5 must satisfy (1) the federal notice pleading requirements of Rule 8; (2) the special fraud pleading requirements of 9(b); and (3) the additional pleading requirements imposed by the PSLRA.   In re: Altisource Portfolio Sols., S.A. Sec. Litig., No. 14-81156-CIV-WPD, 2015 WL 11988900, at *2 (S.D. Fla. Dec. 22, 2015) (J. Dimitrouleas).

In order to state a claim under Section 10(b) and Rule 10b–5, a plaintiff must allege the following: “(1) a material misrepresentation or omission by the defendant; (2) scienter; (3) a connection between the misrepresentation or omission and the purchase or sale of a security; (4) reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss causation.” Amgen Inc. v. Connecticut Ret. Plans & Trust Funds, 133 S. Ct. 1184, 1192 (2013).

The element of scienter, which is at issue here, requires a showing of either an “intent to deceive, manipulate, or defraud,” or “severe recklessness.”

“Severe recklessness” is a term reserved for those highly unreasonable omissions or misrepresentations that involve “extreme departure” from the standards of ordinary care and that present a danger of misleading buyers or sellers which is either known to the defendant or is “so obvious” that the defendant must have been aware of it.

In re: Altisource Portfolio Sols., S.A. Sec. Litig., 2015 WL 11988900, at *5 (quoting Mizzaro v. Home Depot, Inc., 544 F.3d 1230, 1238 (11th Cir. 2008).

Judicial Notice

In determining whether to grant a Rule 12(b)(6) motion, the Court primarily considers the allegations in the complaint, however, when a plaintiff refers to documents in the complaint that are “central to the plaintiff’s claims,” the Court “may consider the documents part of the pleadings for purposes of Rule 12(b)(6) dismissal, and the defendant’s attaching such documents to the motion to dismiss will not require the conversion of the motion into a motion for summary judgment.” In re: Altisource Portfolio Sols., S.A. Sec. Litig., 2015 WL 11988900, at *3 (quoting Brooks v. Blue Cross & Blue Shield of Florida, Inc., 116 F.3d 1364, 1369 (11th Cir. 1997)).

Additionally, the Eleventh Circuit has expressly held that a court may judicially notice relevant documents legally required by, and publicly filed with, the Securities and Exchange Commission (“SEC”). See Bryant v. Avado Brands, Inc., 187 F.3d 1271, 1276–81 (11th Cir. 1999).

DISCUSSION

 At the outset, the Court finds that Defendants’ Motion to Dismiss does not implicate Count Two. That Count alleges that Defendants violated of Section 18 of the Exchange Act by filing misleading reports with the SEC upon which Plaintiffs relied. Count Two is not predicated on the allegedly false statements Defendants made on either October 31, 2013 or May 1, 2014.

Accordingly, Defendants’ Motion to Dismiss is denied as moot with regard to Count Two.

The October 31, 2013 Statement

On its face, the Complaint satisfies Rule 9(b)’s heightened pleading requirements as to this first statement because the allegations are made with the requisite specificity.

The Complaint alleges that on October 31, 2013, during an investor phone call, Faris stated that Ocwen had been “careful to assure . . . strong compliance” during its transfer of the ResCap loans. See Complaint at ¶¶8, 74, 153. The Complaint also alleges that Plaintiffs were misled by this statement because they later learned that Defendants had not complied with their regulatory requirements (id. at ¶¶9, 108, 123, 129), that Defendants knew or should have known that Ocwen was not in compliance, and that Defendants benefitted from this misrepresentation because it induced Plaintiffs to invest in Ocwen at inflated prices. Id. at ¶¶72, 90.

Thus, to the extent the October 31, 2013 statement is the predicate for Counts Four and Five (common law fraud and negligent misrepresentation), the Court finds that the allegations in the Complaint are sufficient.

See Hubbard v. BankAtlantic Bancorp, Inc., 625 F. Supp. 2d 1267, 1281–82 (S.D. Fla. 2008) (J. Ungaro) (Rule 9(b)’s heightened pleading requirement satisfied where the complaint pled in detail what statements were materially false (e.g., statements during investor conference calls that defendant was a conservative lender), why defendant knew or should have known that the statements were false (because defendant was making risky loans to borrowers without properly investigating their creditworthiness), and what defendant stood to gain in making the statements (e.g., artificially high stock prices)).

For the October 31, 2013 statement to be used as a predicate for Count One’s claims under Section 10(b) and Rule 10b-5, the Complaint must satisfy the additional criteria of the PSLRA. “Rule 10b–5 prohibits not only literally false statements, but also any omissions of material fact ‘necessary in order to make the statements . . . not misleading.’” In re Ocwen Fin. Corp. Sec. Litig., No. 14-81057-CIV-WPD, 2015 WL 12780961, at *2 (S.D. Fla. Dec. 22, 2015) (J. Dimitrouleas) (quoting 17 C.F.R. § 240.10b–5(b)). “A statement is misleading if in light of the facts existing at the time of the statement a reasonable investor, in the exercise of due care, would have been misled by it.” Id. (quoting FindWhat Investor Group v. FindWhat.com, 658 F.3d 1282, 1305 (11th Cir. 2011)). Under Section 10(b) and Rule 10b–5, “a plaintiff must show that the [defendant’s] statements were misleading as to a material fact.” Id. (quoting Basic Inc. v. Levinson, 485 U.S. 224, 238 (1988)).

Defendants contend that Faris’ October 31, 2013 statement regarding Ocwen’s “strong compliance” cannot support a claim under Section 10(b) or Rule 10b-5 because it is mere puffery, not a statement of fact, and thus, it cannot be shown to be false.

Puffery

“A statement that is vague, generalized, non-verifiable, or mere corporate puffery is immaterial because a reasonable investor would not make a decision based on such a statement.” Thorpe v. Walter Inv. Mgmt., Corp., No. 14-CV-20880, 2014 WL 11961964, at *11 (S.D. Fla. Dec. 23, 2014) (J. Ungaro). As a result, such statements are inactionable as a matter of law and cannot provide a basis for maintaining a claim under Section 10(b) or Rule 10b–5.  Id.

In Thorpe, the court ruled that the following statements regarding the defendant’s compliance and internal controls constituted inactionable puffery:

Statement touting the Company’s “active portfolio management—to improve servicing, regulatory compliance and credit performance,” “grounded in the long- term value proposition we offer clients for improved credit performance and regulatory compliance;” and

Statement touting the Company’s “culture of compliance: regulatory compliance capabilities remain at the ‘top of list’ in terms of ability to win new ”

By contrast, the following are examples of statements the court in Thorpe deemed to be beyond mere puffery and thus, actionable:

Statement touting the Company’s “culture of compliance—strong independent controls and processes for monitoring and managing compliance;”

Company’s CEO stated “

[w]e have a solid platform with distinct advantages . . . [w]e continue to execute for our clients by delivering strong portfolio performance in a regulatory-compliant matter.”

Company’s CFO stated “[w]e’re very comfortable and confident that our business practices meet all the requirements out there. You can go through the CFPB’s examination manual or any of the other information you might read publicly about what the best practices are in this business and we follow those very, very ”

Company’s COO stated “[w]e put so much emphasis on our day-to-day activities of compliance” and “[s]o where there’s opportunities . . . [but] we don’t see that it’s well-defined within state regulatory requirements, we’re going to pass on ”

Company’s Chief Compliance Officer stated “we review law changes and go through implementation to make sure we remain on Next, we prepare policies and procedures, forms and employee alerts, and all of those are reviewed by the compliance department before they’re implemented.”

Company presentation stating “we aggressively maintain compliance with all federal and state requirements and laws.”

Company’s CEO stated “[w]e have achieved this while maintaining high standards of performance and compliance across the entire ”

Thorpe, 2014 WL 11961964, at *2-4, *12.

As the court in Thorpe noted, “[d]efendants are involved in a heavily regulated industry and their statements relating to compliance with various state and federal laws and the internal controls for ensuring compliance were more than mere puffery.” Id. at *12. See also In re Ocwen Fin. Corp. Sec. Litig., No. 14-81057-CIV-WPD, 2015 WL 12780961, at *3 (comparing aspirational statements of compliance with “affirmative misrepresentation[s] that the corporation is in compliance [which are] actionable”).

Similarly, here, Faris’ October 31, 2013 statement that Ocwen had been “careful to assure. . . strong compliance” during the transfer of the newly-acquired ResCap loans to its REALServicing platform, is a “verifiable and specific factual statement,” particularly when read in context. According to the Complaint, Faris made this statement to explain why the loan transfer was more expensive than expected.

Faris’ explanation that Ocwen’s emphasis on compliance resulted in a costlier loan transfer is the sort of factual averment upon which investors would reasonably rely in their decision-making and is not mere aspirational corporate puffery.

This Court also finds that Plaintiffs have adequately alleged why the October 31st statement was false when made.

In particular, the Complaint alleges that a subsequent investigation by NYDFS which revealed that Ocwen had been “backdating . . . potentially hundreds of thousands of letters to borrowers” (Complaint at ¶9), and that Ocwen ultimately acknowledged in a consent order that it had been backdating letters to borrowers “for years.” Id.

These claims are sufficient to support an allegation at this stage that Ocwen was in violation of the NMS at the time Faris made the October 31st statement.

Additionally, the Complaint alleges that Defendants ignored an employee when he reported the backdating problem in November 2013 and again in April 2014, thus revealing Ocwen’s failure to investigate or disclose the problem once it was on notice. Id. at ¶¶108, 123, 129.

The Complaint also supports the claim that Ocwen was not meeting its regulatory obligations by alleging that an Ocwen executive acknowledged in an email that its electronic loan servicing platform, REALServicing, was “an absolute train wreck.”

Id. at ¶10.

Thus, the Complaint adequately alleges facts to support the claim that Faris’ October 31, 2013 statement, upon which Plaintiffs relied in deciding to invest in Ocwen, was false. See Thorpe, 2014 WL 11961964 at *13 (plaintiffs properly relied on internet postings, consumer complaints, subsequent lawsuits and a government investigation to show that defendants’ statements regarding compliance were false).

Loss Causation

The Court rejects Defendants’ argument that Plaintiffs failed to adequately allege loss causation because the corrective disclosures on October 21, 2014 do not reference the transfer of the ResCap loans. The Court finds that viewed in the light most favorable to Plaintiff, the subsequent corrective disclosures did in fact refute the subject matter of Faris’ October 31st statement, namely, that Ocwen was not in compliance with its regulatory requirements. “To be corrective, [a] disclosure need not precisely mirror the earlier misrepresentation, but it must at least relate back to the misrepresentation . . .” Meyer v. Greene, 710 F.3d 1189, 1197 (11th Cir. 2013) (citation omitted).

Scienter

Defendants argue that the Complaint fails to adequately allege Faris’ scienter when he made the October 31, 2013 statement. This Court agrees. “[I]n order to sufficiently allege scienter, a plaintiff must allege facts from which a reasonable person would infer that it is at least as likely as not that the individual high-ranking defendants either orchestrated the alleged fraud (and thus always knew about it), learned about the alleged fraud, or were otherwise severely reckless in not learning of the alleged fraud when they made the purportedly false or misleading statements.” Thorpe, 2014 WL 11961964, at *15.

First, the allegation that Faris “knew that Ocwen was not in compliance with regulatory standards because he sat on Ocwen’s Compliance Committee” is insufficient.

Plaintiffs essentially allege that Faris “must have” received information about the back-dated letters or Ocwen’s general lack of compliance with regulatory regulations as a result of his position on the Compliance Committee, but the Complaint does not reference any specific report or statement that was produced to the members of that committee. In re Sanofi Sec. Litig., 155 F. Supp. 3d 386, 407 (S.D.N.Y. 2016) (court declined to infer that defendant had knowledge of an illegal marketing scheme by virtue of his membership on the compliance committee) (citing Novak v. Kasaks, 216 F.3d 300, 309 (2d Cir. 2000) (“Where plaintiffs contend defendants had access to contrary facts, they must specifically identify the reports or statements containing this information.”)).

Second, the timing of the Complaint’s allegations fail to establish that Faris operated with the requisite level of scienter on October 31, 2013.   In particular, Plaintiffs rely on the fact that an Ocwen employee discovered and reported the backdating scheme to Ocwen management as evidence of Faris’ scienter, but the Complaint states that this revelation did not occur until November 2013, the month after Faris made his statement regarding strong compliance on the investor conference call.

Thus, this allegation cannot form the basis of Faris’ scienter.

Moreover, the Complaint only makes the general allegation that Defendants knew or recklessly disregarded the fact that Ocwen was not in compliance with its regulatory requirements “throughout 2014.” There are no specific facts alleged in the Complaint to support the conclusory allegation that Faris acted with severe recklessness when he made his statement on October 31, 2013.

Since the Complaint as pled is insufficient to plausibly infer that Faris acted with the requisite intent under the PSLRA, the Court finds that Faris’ October 31st statement cannot be used as a predicate to support Counts One or Three.9

The May 1, 2014 Statement

Similar to Faris’ October 31st statement, this Court finds that the Complaint’s allegations regarding Erbey’s press release dated May 1, 2014 satisfy the heightened pleading standard of Rule 9(b) to provide the factual bases for Counts Four and Five (common law fraud and negligent misrepresentation). Specifically, in his May 1, 2014 press release, Erbey stated that Defendants considered their “National Mortgage Settlement compliance . . . to be [a] substantial competitive advantage[].”

The Complaint provides details regarding the speaker, date, and content of the statement, alleges that Plaintiffs were misled by this statement because they later learned that Defendants had not complied with regulatory requirements, that Defendants knew or should have known that they were not in compliance, and that Defendants benefitted from this misrepresentation because it induced Plaintiffs to invest in Ocwen.

Defendants contend that Plaintiffs failed to “offer allegations that would make the May 2014 statement false,” (i.e., that Ocwen’s compliance was not a competitive advantage), which “defeats the element of falsity.” DE 43 at 14.

This Court declines to adopt this narrow reading of Erbey’s statement.

The corrective disclosure “need not precisely mirror the earlier misrepresentation;” it must only relate back to the misrepresentation. Meyer, 710 F.3d at 1197.

Thus, Plaintiffs are not required to allege that regulatory compliance did not give Ocwen a competitive advantage for the statement to be false.

Rather, it was Erbey’s assertion that Ocwen was in fact complying with the NMS that constitutes the falsity.

The Court finds that these facts are sufficiently pled in the Complaint.

In Broadway Gate Master Fund, Ltd. v. Ocwen Fin. Corp., No. 16-80056-CIV-WPD, 2016 WL 9413421 (S.D. Fla. June 29, 2016), Judge Dimitrouleas was also confronted with Erbey’s May 1, 2014 press release in the context of a motion to dismiss Section 10(b) and Rule 10b-5 claims. Judge Dimitrouleas held that the alleged falsity of this very statement had been adequately pled where the complaint alleged, as it does here, that Ocwen had backdated letters in contravention of NMS standards. Id. at *8.

Moreover, given that the complaint in Broadway Gate alleged that the backdating was discovered by an Ocwen employee in November 2013, as is alleged in this case, Judge Dimitrouleas held that the plaintiffs in Broadway Gate adequately pled that Erbey and Ocwen had the requisite scienter when the May 1, 2014 press release was issued. Id. (finding that “Erbey’s knowledge and the Vice President of Compliance’s knowledge are imputable to Defendant Ocwen”).

Although, as Defendants point out, this Court is not bound by Judge Dimitrouleas’ opinion, the Court considers the reasoning to be persuasive, particularly in light of the additional legal authority regarding scienter cited below, and thus, will adopt it here.

As the United States Supreme Court has held, in determining whether the plaintiff “has alleged facts that give rise to the requisite ‘strong inference’ of scienter, a court must consider plausible, nonculpable explanations for the defendant’s conduct, as well as inferences favoring the plaintiff.” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 323–24 (2007).

Here, the only nonculpable explanation for Erbey’s May 1, 2014 press release is that he did not know Ocwen was in violation of the NMS when he issued it. In light of the totality of the Complaint’s factual allegations, which must be accepted as true at this stage, the Court does not find this alternative explanation to defeat scienter.

It is well settled that in evaluating scienter under the PSLRA, “allegations must be considered collectively . . . the court’s job is not to scrutinize each allegation in isolation but to assess all the allegations holistically.” Id. at 325-26. “[T]he inference of scienter can arise from an aggregation of particularized facts, even if each individual fact standing alone does not create a sufficiently strong inference.” In re Spear & Jackson Sec. Litig., 399 F. Supp. 2d 1350, 1358 (S.D. Fla. 2005) (J. Middlebrooks) (citing Phillips v. Scientific–Atlanta, Inc., 374 F.3d 1015, 1017 (11th Cir. 2004)).

An inference of scienter may also arise where the defendants “knew facts or had access to information suggesting that their public statements were not accurate . . . or. . . failed to check information they had a duty to monitor.” Plumbers & Steamfitters Local 773 Pension Fund v. Canadian Imperial Bank of Commerce, 2010 WL 961596, at *10 (S.D.N.Y. Mar. 17, 2010) (plaintiff must specifically identify the reports or statements and the dates or time frame when defendants were put on notice of contradictory information) (quoting Novak, 216 F.3d at 306).

Here, the allegation that Defendants admitted in a 2014 consent order with the NYDFS that the backdating scheme had been going on “for years” is sufficient to infer that Erbey was aware of the scheme when he made the May 1, 2014 statement.

This inference is bolstered by the Complaint’s factual allegations that an employee reported the backdating problem to Ocwen in November 2013, and again in April 2014, one month before Erbey’s press release.

Although the Complaint does not specifically allege that Ocwen’s Vice President of Compliance conveyed the backdating discovery to Erbey, given Erbrey’s status as a high level executive, there is a plausible inference that he was aware of the backdating scheme.

“Determining whether a complaint states a plausible claim for relief . . . [is] a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679. “[A] plaintiff may, under certain circumstances, successfully plead scienter as to an individual executive defendant without allegations regarding that defendant’s direct knowledge.” Robb v. Fitbit Inc., 2017 WL 219673, at *3 (N.D. Cal. Jan. 19, 2017).

The Ninth Circuit has held that courts may impute scienter to individual defendants in some situations, for example, where we find that a company’s public statements are so important and so dramatically false that they would create a strong inference that at least some corporate officials knew of the falsity upon publication.

Or. Pub. Emps. Ret. Fund v. Apollo Grp. Inc., 774 F.3d 598, 607 (9th Cir. 2014) (quotation and citation omitted) (emphasis in original).

The Ninth Circuit explained that “allegations regarding management’s role in a company may be relevant and help to satisfy the PSLRA scienter requirement” when the allegations, “read together, raise an inference of scienter that is cogent and compelling, thus strong in light of other explanations.” S. Ferry LP, No. 2 v. Killinger, 542 F.3d 776, 785-86 (9th Cir. 2008) (quotation and citation omitted).

In the alternative, allegations against corporate executives “may independently satisfy the PSLRA where they are particular and suggest that [the individual] defendants had actual access to the disputed information.” Id. (emphasis added).

Here, the Court finds that viewed in the light most favorable to Plaintiffs, the particularized allegation about the November 2013 and April 2014 reports regarding the backdating issue, the claim that the discovery was reported to the Vice President of Compliance, and Erbey’s high-ranking position at Ocwen, suggest that at a minimum, Erbey would have had actual access to the reported discovery.

The facts alleged in the Complaint regarding the timing and significance of the backdating discovery, the importance of the May 1, 2014 press release in bolstering investor confidence, and that the statement was “so dramatically false” in claiming that Ocwen had been and continued to be in compliance with the NMS, raises an inference of scienter that is “cogent and compelling” compared to the alternative explanation — that Erbey was simply unaware of Ocwen’s noncompliance when he issued the May 1st press release.

See Or. Pub. Emps. Ret. Fund, 774 F.3d at 607. See also Robb, 2017 WL 219673, at *6 (“[t]hat plaintiffs’ allegations do not directly connect the dots between [the COO’s] knowledge and the individual defendants will not be grounds for dismissing the complaint” where there was “a ‘cogent and compelling’ argument that [the] information . . . would also have been known to the individual defendants”).

For these reasons, the Court finds that the allegations regarding the May 1, 2014 press release and Erbey’s scienter are a sufficient predicate for the PSLRA claims in Count One.

With regard to the Section 20(a) “control person” liability alleged in Count Three, “

[w]hile there is no simple formula for how senior an employee must be in order to serve as a proxy for corporate scienter, courts have readily attributed the scienter of management-level employees to corporate defendants.” In re Sanofi Sec. Litig., 155 F. Supp. 3d 386, 409 (S.D.N.Y. 2016) (quoting In re Marsh & McLennan Companies, Inc. Sec. Litig., 501 F.Supp.2d 452, 481 (S.D.N.Y. 2006).

Here, the Complaint alleges that Defendants Erbey and Faris are liable as “control persons,” and given that the Court has found that the Complaint properly alleges a cause of action under Count One with regard to the May 1, 2014 press release, and that Defendants do not specifically dispute Erbey and Faris’ control over Ocwen at this stage of the proceedings, the Court finds that the May 1, 2014 press release is a proper predicate for establishing control person liability under Count Three. See In re Spear & Jackson Sec. Litig., 399 F. Supp. 2d at 1359 (noting that “[o]ther courts in the 11th Circuit have held that allegations that individuals, because of their management and/or director positions, could control a company’s general affairs, including the content of public statements and financial statements disseminated by the company, are sufficient to state a cause of action for controlling person liability”) (collecting cases).

9 Given that Plaintiffs have failed to plead a primary violation under Section 10(b) or Rule 10b–5 of the Exchange Act with regard to Faris’ October 31st statement, it follows that to the extent the Section 20(a) claim in Count Three is also predicated on this statement, it must fail for the same reason. Marrari v. Med. Staffing Network Holdings, Inc., 395 F. Supp. 2d 1169, 1190 (S.D. Fla. 2005) (J. Dimitrouleas) (“to the extent that the Section 20(a) Count rests upon violations of Section 10(b) or Rule 10b–5 that have been dismissed . . . the Court must also dismiss the Section 20(a) Count”).

CONCLUSION

For the foregoing reasons, Defendants’ Motion to Dismiss (DE 43) is GRANTED IN PART in that Faris’ October 31, 2013 statement, as alleged, is not a proper predicate for Counts One and Three. Defendants’ Motion to Dismiss is DENIED in all other respects.

DONE AND ORDERED in Chambers this 4th day of October, 2018, at West Palm Beach in the Southern District of Florida.

BRUCE REINHART
UNITED STATES MAGISTRATE JUDGE

YOUR DONATION(S) WILL HELP US:

• Continue to provide this website, content, resources, community and help center for free to the many homeowners, residents, Texans and as we’ve expanded, people nationwide who need access without a paywall or subscription.

• Help us promote our campaign through marketing, pr, advertising and reaching out to government, law firms and anyone that will listen and can assist.

Thank you for your trust, belief and support in our conviction to help Floridian residents and citizens nationwide take back their freedom. Your Donations and your Voice are so important.



Continue Reading

Most Read

Copyright © 2021 LawsInFlorida.com is an online brand name which is wholly owned by Blogger Inc., a nonprofit 501(c)(3) registered in Delaware | Caricatures by DonkeyHotey