Connect with us

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.



Acceleration

Who is Presiding Judge Andrea Gundersen, Mortgage Foreclosure Division, Seventeenth Judicial Circuit?

Judge Gundersen presides over all foreclosures in Broward County. She has been referred to JQC, asking that she be removed from the bench.

Published

on

FL Honest Lending Report

REPUBLISHED BY LIT: JUL 5, 2021

After orchestrating one of the largest consumer frauds in American history, the banking industry continues the unethical and illegal servicing and foreclosure practices that were uncovered during the “robo-signing” scandal which eventually led to the $25b settlement with 49 State Attorneys General in 2012.

While some of the unethical practices regarding origination were curbed after the settlement, unethical servicing and fraudulent foreclosures continue to plague homeowners.

Floridians for Honest Lending (FHL) reviewed several hundred foreclosure complaints filed in 2019 by Bank of America, the Bank of New York Mellon, and JP Morgan Chase in the Eleventh and Seventeenth Judicial Circuit Courts that comprise Miami-Dade and Broward counties respectively. Upon that review, FHL found 369 foreclosure complaints were filed with rubber-stamped blank endorsements with signatures of David SpectorLaurie MederMichele Sjolander, and Cynthia Riley, whose names became synonymous with the robo-signing scandal. Of those, 325 were loans originated by Countrywide, the disgraced mortgage company that was bought by Bank of America in 2008.

In addition, FHL found that in Miami-Dade alone, 310 homes had been sold at auction since January 2019 that included these same rubber-stamped blank endorsements from these same rubber-stamped blank endorsements, 21 of which were sold during the COVID-19 pandemic.

The fraudulent rubber-stamped blank endorsements are used to establish standing and the banks’ right to foreclose on homeowners, the same homeowners that were sold predatory loans and pushed into foreclosure with unethical servicing practices.

This practice of filing false documents was documented by 60 Minutes in 2011 and was part of the complaint filed by the 49 State Attorneys General.

It was discovered after the $25b National Mortgage Settlement that Bank of America and JP Morgan Chase continued to submit forged documents, now relying on forgery and perjury, in foreclosures across the nation.

Unfortunately, the banks’ reckless greed left millions of properties with mortgages and promissory notes corrupted and the chain of title on those properties broken, putting trial court judges in an uncomfortable position of either taking the banking industry to task for these forged documents or kicking a family out of their home.

Unfortunately, with little scrutiny from the media, legislators, or regulators, our court system has heavily favored the latter.

In fact, FHL’s review found that in Broward county, 217 of the 219 foreclosure complaints filed in 2019 that included fraudulent rubber stamps were assigned to Judge Andrea Gundersen.

Of these cases assigned to Judge Gundersen, 126 of them have been closed, none of which were ruled in favor of the defendant.

Currently, Judge Gundersen presides over all foreclosures in Broward County.

She was reassigned from Family Court and does not have prior experience in foreclosure litigation.

Since her reassignment, defense attorneys have filed motions for judicial disqualification against Judge Gundersen for allowing attorneys for Bank of America to misrepresent the law and argue that “fraud on the court” is allowed in foreclosure because of a “litigation privilege” and ordering the defendant to pay the Bank’s attorney’s fees for challenging the fraud.

In April 2021, Judge Gundersen granted nineteen motions for disqualification in cases she presided over.

The clients have referred Judge Gundersen to the Judicial Qualifications Commission asking that she be removed from the bench.

These fraudulent foreclosures impact real people like Ana Rodriguez, an 82-year-old homeowner who was a former Cuban political prisoner, who now faces eviction because she was sold a predatory loan by Countrywide.

It impacts people like Mrs. Marie Williams-James who never missed a mortgage payment but Bank of America foreclosed on her anyway and Mr. and Mrs. Simpson who were working on a mortgage modification when the Judge refused the bank’s motion for continuance and forced the Simpsons into a fraudulent foreclosure judgment.

There is a new foreclosure crisis looming due to the economic effects of the COVID-19 pandemic. As we get the pandemic under control, the federal government will be under increased pressure from the banking industry to lift the FHFA moratorium for federally-backed mortgages from Fannie Mae and Freddie Mac.

That moratorium only protects borrowers who had strong enough credit scores to qualify for government-backed mortgages. The elderly, communities of color, and first-time homebuyers who took subprime mortgages are not protected by any moratorium and are still being evicted during the pandemic.

The issue of fraudulent foreclosures must be resolved before this new crisis begins. This is an issue that demands action at the local, state, and federal levels from legislators, regulators, and our judicial system.

We cannot continue to allow fraud in our justice system for the convenience of the banking industry and at the expense of homeowners’ American Dream.

Floridian for Honest Lending is a project of Opportunity For All Floridians, a 501c4 non-profit organization. We believe that our system will only work with transparency, honesty, and accountability. Our research can be found here.

Each complaint filed by the banks’ attorneys is linked in the second column. The forged rubber stamps can usually be found on the promissory notes that are included in the exhibits.

Below you can also find a sample of the varied David Spector signatures.

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

The Fl. Bar Complaint by Judge Hanzman Against Attorney Bruce Jacobs is Personal

Judge Michael Hanzman’s name is appearing frequently in sanctions orders and Florida bar complaints of late and LIF investigates.

Published

on

Judge Michael Hanzman’s name is appearing frequently maligning lawyers and judges in orders, sanctions and/or bar complaints of late. Upon review LIF notes a trend; apparent abuse of office and power for personal vendetta’s.

LIF will be highlighting his cases separately and updating this and other articles frequently to expand on this breaking news story.

Update: July 25, 2021

On July 12, 2021, The Florida Bar’s amended request for extension of time is granted and the referee is allowed to and including September 17, 2021, in which to file the required referee’s report. ALL OTHER TIMES ARE EXTENDED ACCORDINGLY.

NOV 3, 2020 | REPUBLISHED BY LIT: JUN 20, 2021

COMPLAINT

The Florida Bar, Complainant, files this Complaint against Bruce Jacobs, respondent, pursuant to the Rules Regulating The Florida Bar and alleges the following:

1. Respondent is, and at all times mentioned in the complaint was, a member of The Florida Bar, admitted on September 24, 1997, and is subject to the jurisdiction of the Supreme Court of Florida.

2. Prior to the filing of this Complaint, there has been a finding of probable cause by a grievance committee as required by Rule 3-7.4(l) Rules Regulating The Florida Bar. The presiding member of that committee has approved the instant Complaint.

COUNT I: AS TO THE FLORIDA BAR FILE NO. 2019-70,188(11H)

3. Respondent’s conduct came to the attention of The Florida Bar as a result of a referral by the Third District Court of Appeal for the State of Florida.

4. Respondent represented the defendant in a civil lawsuit in the case styled HSBC Bank et. al, v. Aquasol Condominium Association, Inc., Case No.:13-29724-CA-01.

5. After a final judgment of foreclosure was entered in favor of the bank, respondent filed an appeal to the Third District Court of Appeal.

6. One of the issues raised by respondent on appeal was that the bank lacked standing to foreclose against his client because the bank was not the holder and owner of the note.

Yet, that issue had been addressed and ruled on in the seminal case HSBC Bank, USA, NA v. Buset, 241 So.3d 882 (Fla. 3d DCA 2018), which held that in order to establish standing in a foreclosure action you must prove that you were either the holder or owner of the note.

7. Respondent did not cite to, acknowledge, or address, the controlling adverse decision in Buset in his briefs, even though respondent was counsel of record in both the trial court and on appeal and was, therefore, fully aware of Buset’s holding and its binding nature on the court.

8. Notwithstanding same, the Third District Court of Appeal affirmed the trial court’s decision, finding no merit in the arguments raised by the appellant.

9. Respondent then filed a motion for rehearing and rehearing en banc.

In his motion, respondent made disparaging and reckless comments regarding the judiciary. Excerpts of his comments are highlighted below:

  • “Most disturbing, the opinion sends the wolves after Aquasol’s counsel personally by commending the trial court’s ‘patience’ for not holding him in contempt of court. Truthfully, no court should dare make the front page of the paper for jailing an attorney for asking about a false document in evidence. This Court’s opinion intentionally emboldens judges to abuse their contempt ”

 

  • “This Court’s insistence on ignoring established Florida Supreme Court law to benefit bad corporate citizens is certain to cause ”

 

  • “Fla. Stat. § 673.3011 controls enforcement of negotiable instruments, not mortgages. Ownership controls the right to enforce the mortgage. This Court is acting illegally by instructing the law is ”

 

  • “I refuse to accept the idea that you cannot win when you are right. This is a biblical, spiritual journey for me. I have faith I will be protected because I am acting so clearly within the law and this Honorable Court is ”

 

  • “It’s become clear to me that the ‘powers that be’ support this fraudulent foreclosure system that took so long to put in place. If only the Courts enforced the 2001 amendments to Article 9 and forced Banks to bring their contracts to prove their purchase of the debt to prove standing. This foreclosure crisis was such an interesting phenomenon. Courts kept covering up for Banks that were intentionally doing it wrong.”

 

  • “Banks have all the resources to do it right but made business decisions to do it fraudulently. It’s as if they knew the Courts would always let them get away with it. Some out of fear as elected officials. Some out of indifference. Some out of belief that banks and bad corporate citizens got them to their position and they are on that team. The banks should always win. I call those judges traitors to the constitution.”

 

  • “These banks have so much and keep taking more. They don’t care if you are rich or poor, white or It is easy to win when the game is rigged.”

 

  • “In the decade that I’ve fought on the trenches of foreclosure court, I’ve been blessed to help so many clients save their homes. Yet, I’ve had to warn them this broken system is riddled with fraud and The judges decide the rule of law, and whether any rule of law exists. Maybe the rule of law only applies to the rest of us.”

 

·        “This Court is sworn to protect and defend the constitution of the United States of America, not the foreclosure fraud of Bank of America or HSBC.”

 

  • “Why would anyone sworn to protect and defend the constitution stay silent while domestic enemies destroy our democracy from within? Is this really the world Americans should live in where those in power do not do what is right?”

 

  • “I’m fighting the modern-day monopoly. I am calling all the patriots who swore the oath to protect and defend the Constitution to join me. Any court that protects the monopoly over the rule of law is a traitor to the constitution and should be tried for ”

 

  • “This Court should not ignore Florida Supreme Court precedent and the actual facts of the dispute to reach a pre-determined result of blow the dogwhistle for judges to attack Aquasol’s counsel with contempt and jail for doing his job.

10. Upon review of respondent’s motion, which included a review of his initial and reply briefs, on or about September 26, 2018, the court issued an Order to Show Cause within ten days as to why the court should not impose sanctions against respondent for filing a motion and briefs which violated both the Florida Rules of Appellate Procedure and The Rules Regulating The Florida Bar. (A copy of the Third District Court of Appeal’s order is attached as Exhibit “A”).

11. On or about December 5, 2018, the court entered its order imposing sanctions. (A copy of the Third District Court of Appeal’s order is attached as Exhibit “B”).

Specifically, the court found that respondent impugned the qualifications or integrity of the court without any objectively or reasonable basis for doing so. The court further found that respondent filed a motion that was frivolous or in bad faith and was subject to sanctions pursuant to Florida Rule of Appellate Procedure 9.410(a) which provides:

“After 10 days’ notice, on its own motion, the court may impose sanctions for any violation of these rules, or for the filing of any proceeding, motion, brief, or other document that is frivolous or in bad faith. Such sanctions may include reprimand, contempt, striking of briefs or pleadings, dismissal of proceedings, costs, attorneys’ fees, or other sanctions.”

12. Additionally, the court found that not only did respondent’s conduct violate the Rules Regulating the Florida Bar, but it also violated the elementary norms of civility and professionalism.

13. As such, the court imposed reasonable attorney’s fees against Respondent not to exceed $5,000.00 and referred this matter to The Florida Bar.

14. Based on the foregoing, Respondent is in violation of Rule 4-8.2(a)

Impugning Qualifications and Integrity of Judges or Other Officers.

(A lawyer shall not make a statement that the lawyer knows to be false or with reckless disregard as to its truth or falsity concerning the qualifications or integrity of a judge, mediator, arbitrator, adjudicatory officer, public legal officer, juror or member of the venire, or candidate for election or appointment to judicial or legal office) of the Rules Regulating The Florida Bar.

COUNT II: AS TO THE FLORIDA BAR FILE NO. 2019-70,358(11H)

15. Respondent’s conduct came to the attention of The Florida Bar as a result of a referral by the Third District Court of Appeal for the State of Florida.

16. Respondent represented the defendant in a civil lawsuit in the case styled Bank of America, N.A., v. Ryan Atkin, Case No. 3D18-1840, Lower Tribunal No. 09-87096.

17. The plaintiffs filed a petition for writ of prohibition with regard to a denial of a motion to disqualify the trial judge.

18. On or about September 17, 2018, respondent filed a Response to the Writ and a Motion to Disqualify the Third District Court of Appeal from ruling in the Atkin matter.

19. In his response, respondent made disparaging and reckless comments regarding the judiciary. Excerpts of his comments are highlighted below:

• “In Simpson [sic], this Court violated the standard of review, ignored Florida Supreme Court precedent, and falsified the facts in contradiction to the record.”

• “The impartiality of this Court is objectively questioned and it cannot issue a ruling with integrity in this case.”

• A named circuit court judge acted with “blatant disregard for the rule of law and the client’s constitutional rights” in an unrelated case and was upheld by this Court.

• The same circuit court judge has “recently escalated her illegal conduct.”

• A different, unnamed circuit court judge changed a favorable ruling because opposing counsel “threw a fundraiser for the new judge who rotated into the division.”

20. Similarly, respondent made the following disparaging and reckless comments regarding the judges of the Third District Court of Appeal, as well as the justices of the Florida Supreme Court, in his jurisdictional brief to the United States Supreme Court which he attached as Appendix 1 to his Response to the Writ:

• “The opinion [of this Court] mispresented facts, ignored Florida Supreme Court law, and disregarded evidence showing fraud. The Florida Supreme Court declined jurisdiction to address this factually and intellectually dishonest result.”

• “The Third District Misrepresented the Amended Rule 1.540(b) Motion to reach a pre-determined result – foreclosure.”

• “… the Dishonesty of the Third DCA’s opinion.”

• “The Florida Supreme Court has repeatedly declined to protect the constitutional rights of foreclosure defendants.”

• “[I]n virtually every appeal where the trial judge ruled in favor of undersigned counsel’s client, including Simpson, the Third DCA reversed with intellectually and factually dishonest opinions.”

• This Court “attempt[ed] to cover up, protect, and ignore well- documented fraud on the court in foreclosures. All to ensure a pre- determined result – foreclosure.”

• “The Third DCA’s Opinion is pretextual and arbitrary.”

• “This Court is called on to act because the Florida Supreme Court has taken no action to prevent the Third DCA from improperly ignoring fraudulent conduct in foreclosures.”

• “It is objectively reasonable to fear the Third DCA acted to reach a predetermined outcome that favors banks over homeowners – foreclosure. If the Florida Supreme Court will not act, this Court must.”

• “Democracy will not fail if financial institutions are held to the rule of law. To the contrary, democracy falls if the public is allowed to believe Courts are biased in favor of bad corporate citizens and a fraudulent foreclosure process.”

21. Upon review of respondent’s pleadings, on or about December 14, 2018, the court issued an Order to Show Cause requiring respondent, within ten days, to address why the court should not impose sanctions against him for violations of both the Florida Rules of Appellate Procedure and Rules Regulating The Florida Bar. (A copy of the Third District Court of Appeal’s order is attached as Exhibit “C”).

22. Specifically, the court found a reasonable basis to conclude that respondent violated Rule 4-8.2(a) on September 17, 2018 when he filed his response to the petition for writ of prohibition.

23. The court also concluded that same was violated when respondent filed as Appendix 1 to his Response a copy of a jurisdictional brief that was filed in an unrelated case to the United States Supreme Court.

24. On or about April 10, 2019, the court entered its order of referral to The Florida Bar. (A copy of the Third District Court of Appeal’s order is attached as Exhibit “D”).

25. Based on the foregoing, Respondent is in violation of Rule 4-8.2(a) Impugning Qualifications and Integrity of Judges or Other Officers.

(A lawyer shall not make a statement that the lawyer knows to be false or with reckless disregard as to its truth or falsity concerning the qualifications or integrity of a judge, mediator, arbitrator, adjudicatory officer, public legal officer, juror or member of the venire, or candidate for election or appointment to judicial or legal office) of the Rules Regulating The Florida Bar.

COUNT III: AS TO THE FLORIDA BAR FILE NO. 2020-70,056(11H)

26. Respondent’s conduct came to the attention of The Florida Bar as a result of a referral by the Honorable Michael A. Hanzman of the Eleventh Judicial Circuit Court in Miami-Dade County.

27. Notably, Judge Hanzman’s referral raised similar concerns with regard to respondent’s conduct as those raised and sanctioned by the Third District Court of Appeals of Florida.

28. Here, respondent represented the defendant in a civil lawsuit in the case styled Bank of New York Mellon v. Ryan Atkin, Case No. 2009-87096 CA.

29. On or about July 26, 2019, respondent filed a Verified Motion for Judicial Disqualification. In his motion, respondent continued to make disparaging and reckless comments regarding a member of the judiciary.

(A copy of respondent’s Verified Motion for Judicial Disqualification excluding attachments is attached as Exhibit “E”).

Excerpts of his comments are highlighted below:

• Judge Hanzman refused to respect the notice of unavailability and his office advised the hearing was still scheduled to move forward at this juncture.

This is the latest of a series of improper actions by Judge Hanzman that gives rise to Mr. Atkin’s objectively reasonable fears that he will not be given a fair hearing in this court.

• Judge Hanzman Has Repeatedly Ignored Obvious Fraud on the Court by Large Financial Institutions in Foreclosures While Abusing His Power to Chill Defense Counsel’s Zealous Advocacy Against Those Financial Institutions.

• Judge Hanzman has made repeated statements on the record and off the record that reflect his indifference to large financial institutions presenting false evidence to the court to obtain the equitable relief of foreclosure.

His personal finances appear to be heavily invested in the financial services sector which gives Mr. Atkin a reasonable fear Judge Hanzman will not be fair and impartial because it will negatively impact his significant personal financial holdings.

• Here, this Honorable Court has allowed the most rich and powerful segment of our society, the financial sector in which he is personally heavily invested in, to engage in felony misconduct and walk away without any punishment in violation of the Judicial Canons and the rule of law.

The Court was “unimpressed” with these allegations of felony misconduct based on a prior foreclosure trial that involved entirely different misconduct which the Court similarly excused.

30. On July 29, 2019, respondent’s motion for disqualification was denied as untimely and legally insufficient.

31. In addition to the incident described above, on or about May 3, 2019 and July 14, 2019, respectively, respondent filed a Motion for Determination of Entitlement to Prevailing Party Attorneys’ Fees and Re-hearing, and a Motion for an Award of Attorney’s Fees and Costs for Order Determining Entitlement of Multiplier.

32. In denying the motions, the court found that the defendant was not entitled to attorney’s fees and costs because same was neither plead nor requested in his pleadings.

The court further explained that the rule with regard to a claim for attorney’s fees is well established pursuant to controlling authority which respondent did not cite to, acknowledge or address in his motion.

(A copy of Judge Michael A. Hanzman’s order is attached as Exhibit “F”).

33. Judge Hanzman’s July 31, 2020, order further stated:

“Apparently Defendant’s counsel – Bruce Jacobs – has not gotten the message or been deterred by our appellate court’s issuance of an Order to Show Cause based upon its finding of ‘a reasonable basis to conclude Mr. Jacobs violated his duty of candor to the tribunal … by failing to disclose to this court controlling adverse case law, ” Aquasol Condo Ass ‘n, Inc v. HSBC Bank USA, 43 Fla. L. Weekly D2271 (Fla. 3d Sept. 26 2018), or its later Order Imposing Sanctions” and referral to the Florida Bar for appropriate disciplinary proceedings based – in part- on Mr. Jacobs’ ‘extraordinary and corrosive ‘ attacks ‘on the integrity of the trial court and this court.

‘Aquasol Condo Ass ‘n, Inc v. HSBC Bank USA, Nat’/ Ass ‘n, 43 Fla. L. Weekly D2699 (Fla. 3d DCA Dec. 5, 2018). Despite the appellate court’s findings and Bar referral, Mr. Jacobs’ recently filed a scurrilous motion to disqualify this Court and once again violated Rule 4-8.2(a) of the Rules and Regulation of the Florida Bar by impugning the integrity of this Court, and he has once again failed to cite controlling authorities.

In sum, Mr. Jacobs is unrepentant, undeterred, and continues to engage in the exact same behavior he was sanctioned for and which is now presumably being investigated by the Bar. Accordingly, this Order will be sent to the Florida Bar so it may be considered as part of any disciplinary proceeding. ”

34. Based on the foregoing, Respondent is in violation of Rules 4- 3.3(a)(3) False Evidence; Duty to Disclose.

(A lawyer shall not knowingly: fail to disclose to the tribunal legal authority in the controlling jurisdiction known to the lawyer to be directly adverse to the position of the client and not disclosed by opposing counsel) and Rule 4-8.2(a) Impugning Qualifications and Integrity of Judges or Other Officers.

(A lawyer shall not make a statement that the lawyer knows to be false or with reckless disregard as to its truth or falsity concerning the qualifications or integrity of a judge, mediator, arbitrator, adjudicatory officer, public legal officer, juror or member of the venire, or candidate for election or appointment to judicial or legal office) of the Rules Regulating The Florida Bar.

WHEREFORE, The Florida Bar prays respondent will be appropriately disciplined in accordance with the provisions of the Rules Regulating The Florida Bar as amended.

The court further explained that the rule with regard to a claim for attorney’s fees is well established pursuant to controlling authority which respondent did not cite to, acknowledge or address in his motion.

(A copy of Judge Michael A. Hanzman’s order is attached as Exhibit “F”).

Tonya L. Avery,
Bar Counsel
The Florida Bar
Miami Branch Office
444 Brickell Avenue
Rivergate Plaza, Suite M-100
Miami, Florida 33131-2404
(305) 377-4445
Florida Bar No. 190292
tavery@floridabar.org

Patricia Ann Toro Savitz,
Staff Counsel
The Florida Bar
651 E. Jefferson Street
Tallahassee,
Florida 32399-2300
(850) 561-5839
Florida Bar No. 559547
psavitz@floridabar.org

CERTIFICATE OF SERVICE

I certify that this document has been efiled with The Honorable John A. Tomasino, Clerk of the Supreme Court of Florida; with copies provided via email to Benedict P. Kuehne, at ben.kuehne@kuehnelaw.com and Roy D. Wasson, at roy@wassonandassociates.com Attorneys for Respondent, and that copies have been furnished by United States Mail via certified mail No. 7017 3380 0000 1082 7201, return receipt requested to Benedict P. Kuehne100 SE 2nd St. Ste. 3105, Miami, FL 33131-2100 and to Roy D. Wasson via certified mail No. 7017 3380 0000 1082 7218 at 28 W. Flagler St. Ste. 600, Miami, FL 33130-1893 and to Tonya L. Avery, Bar Counsel, The Florida Bar, via email at tavery@floridabar.org, on this 3rd day of November, 2020.

Patricia Ann Toro Savitz Staff Counsel

NOTICE OF TRIAL COUNSEL AND DESIGNATION OF PRIMARY EMAIL ADDRESS

PLEASE TAKE NOTICE that the trial counsel in this matter is Tonya L. Avery, Bar Counsel, whose address, telephone number and primary email address are The Florida Bar, Miami Branch Office, 444 Brickell Avenue Rivergate Plaza, Suite M-100Miami, Florida 33131-2404, (305) 377-4445 and tavery@floridabar.org; and Respondent need not address pleadings, correspondence, etc. in this matter to anyone other than trial counsel and to Staff Counsel, The Florida Bar, 651 E Jefferson Street, Tallahassee, Florida 32399-2300, psavitz@floridabar.org.

MANDATORY ANSWER NOTICE

RULE 3-7.6(h)(2), RULES REGULATING THE FLORIDA BAR, PROVIDES THAT A RESPONDENT SHALL ANSWER A COMPLAINT.

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 Circuit

Judge Charles Wilson and Judge Lisa Branch Like Nothin’ Better than Reviving a Personal Vendetta

Our refrain remains the same. Check the case history to see if you’re about to be “stitched-up” by a panel which is maliciously assembled to execute personal vendettas.

Published

on

In This 2021 Foreclosure Case with Sanctions, two members of the Appellate Panel were on Prior Decisions.

In the case of Judge Wilson, he sat on the Coastal Bank v. Martin case (11th Cir.) and in the case of Judge Branch, she was a Panel member in the $2.7M judgment case referenced herein, the Greenstein v. Bank of Ozarks, while she was a Justice on the Court of Appeals in Georgia State Court. Now, the lawyer who was a named party in that case in relation to CEP–TEN Mile Resorts, is before Branch as a Federal Circuit Judge and both Wilson and Branch are conveniently and non-randomly assigned to the 3-panel in this case.

It’s another example of judicial bias from the Eleventh Circuit. “Our refrain remains the same” and we warn parties to do their homework and look to the lower court and aged history of litigants to see if you’re about to be “stitched-up” by a panel which is maliciously assembled to execute personal vendettas.

MAY 29, 2021

Coastal Bank v. Martin, No. 17-11998 (11th Cir. Nov. 20, 2017)

Greenstein v Bank of the Ozarks,  (GA COA, 2014)

(May 28, 2021)

Before WILSON, MARTIN, and BRANCH, Circuit Judges. PER CURIAM:

More than eight years after Truist Bank foreclosed on Roderick Wright’s and his mother’s homes,1 Wright sued Truist, alleging misconduct related to the underlying loans.

On Truist’s motion, the U.S. District Court for the Northern District of Georgia dismissed Wright’s complaint for failure to state a claim.

Wright argues that the district court erred in dismissing his complaint because:

(1) he pleaded an actionable claim for breach of duty by a notary public,

(2) his Georgia RICO Act claim was not time-barred, and

(3) his substantive claims were adequate to support his claims for punitive damages and attorney’s fees.

Because the district court properly dismissed these claims, we affirm.

Truist requests that we deem Wright’s appeal to be frivolous and award sanctions.

Wright requests that we strike portions of Truist’s motion for sanctions for ad hominem language and for us to award sanctions in his favor.

Because we conclude that Wright’s appeal is frivolous, we grant Truist’s motion for sanctions and remand to the district court for an assessment of attorney’s fees and costs.

As to Wright’s motion to strike and for sanctions, we conclude that the arguments in Truist’s motion for sanctions were not improper and deny Wright’s motion.

1 Truist was then known as the Branch Banking and Trust Company.

I. Background

A. Facts

Wright owned a real estate development business and began banking with Truist around 2000. In March 2010, Truist approached Wright with a restructuring plan for some of his commercial loans.

The plan involved securing and cross- collateralizing the loans with Wright’s and his mother’s homes.

Wright alleges that Truist told him that the restructuring plan would be in his best interests. In reliance on that representation, he subsequently executed the plan.

According to Wright, there were no witnesses or notaries present when he signed the plan documents. Afterwards, he alleges, Truist affixed false notary public attestations and witness signatures to the documents.

Truist then allegedly refused to accept full payoffs of the loans.

In November 2010, several months after the parties executed the restructuring plan, Truist foreclosed on Wright’s and his mother’s homes.

B. Procedural History

On December 16, 2019, Wright filed a complaint against Truist in the Superior Court of Gwinnett County, Georgia. Wright alleged that Truist was liable for breach of duty by a notary public, a violation of the Georgia RICO Act, punitive damages, and attorney’s fees.2

Truist subsequently removed the case to the U.S. District Court for the Northern District of Georgia.

2 Wright also alleged counts of fraud, breach of fiduciary duties, economic duress, and to “set aside improper documents.” Because the district court dismissed these claims and Wright

Truist then moved to dismiss Wright’s complaint for failure to state a claim upon which relief can be granted. In its motion, Truist argued that:

(1) Georgia law does not recognize a private cause of action based on violations of the notary public statutes,

(2) Wright’s Georgia RICO Act claim was barred by the applicable five-year statute of limitations, and

(3) Wright was not entitled to punitive damages or attorney’s fees because he failed to establish his underlying claims.

Wright responded and argued that Truist’s “procurement and participation in the intentional violations of” the notary public statutes was actionable under Georgia law, his Georgia RICO Act claim was timely because it “ar[ose] out of the conduct associated with the execution of [sealed documents]” and was subject to a twenty-year statute of limitations, and his claims for punitive damages and attorney’s fees survived because his underlying claims were adequately pleaded.

The district court granted Truist’s motion to dismiss.

It found that “[i]n Georgia, there is no private cause of action for a claim arising under the notary public statutes,” and that “employers are neither subject directly to nor held vicariously liable for violations of OCGA § 45-17-11 committed by a notary public employed by them.”

It rejected Wright’s argument that a twenty-year statute of limitations applied to his Georgia RICO Act claim because the Georgia RICO Act contains a five-year statute of limitations.

Lastly, it dismissed Wright’s claims for punitive damages and attorney’s fees because it had dismissed all of Wright’s underlying claims.

Wright timely appealed.

2 Wright also alleged counts of fraud, breach of fiduciary duties, economic duress, and to “set aside improper documents.” Because the district court dismissed these claims and Wright does not challenge that decision on appeal, we will limit our discussion to Wright’s remaining claims.

On appeal, Wright argues that the district court improperly dismissed his claim for breach of duty by a notary public because it “misinterpreted case law detailing liability of an employer that procured an employee-notary’s violation of [the notary public statute].”

He also argues that it erred in dismissing his Georgia RICO Act claim because it “failed to recognize that the racketeering activity alleged . . . related to the improper attestations of the notaries subjecting the RICO claim to twenty-year statute of limitations under O.C.G.A. § 9-3-23 because the false swearing and false statements were upon sealed instruments.”

Finally, he argues that because his claim for breach of duty by a notary public and his Georgia RICO Act claim “should be reinstated . . . [his claims] for punitive damages and attorneys’ fees should likewise be reinstated.”

After Wright filed his opening brief, Truist filed a motion for sanctions under Federal Rule of Appellate Procedure 38 and 28 U.S.C. § 1927.3

In its 28 U.S.C. § 1927 states:

“Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.”

Truist argued that Wright’s appeal was frivolous because it was clearly foreclosed by governing law. Truist also made references to the facts that:

(1) Wright’s counsel, Eric J. Nathan, had been sanctioned by this Court in Coastal Bank v. Martin, 717 F. App’x 860, 865–66 (11th Cir. 2017), for failing to disclose controlling authority,

and

(2) Truist had obtained a judgment against Nathan in a separate matter for $2,737,372.61. (LIF Comment: Greenstein v. Bank of the Ozarks, 757 S.E.2d 254 (Ga. Ct. App. 2014).

Based on these facts, Truist suggested that Wright and Nathan were waging a “vendetta” against it.

In response, Wright filed a motion to strike Truist’s motion for containing ad hominem language and requested sanctions.

He argued that Truist “inserted no fewer than eight ad hominem attacks directly, and unnecessarily, attacking the personal credibility and character of Counsel for Wright and Wright himself,” in violation of Eleventh Circuit Rule 25-6.4

According to Wright, it was inappropriate for Truist to mention that Nathan had been sanctioned by this Court or that it had obtained a judgment against Nathan.

He also requested that we impose sanctions against Truist and its counsel under our inherent authority for their purported “continued and pervasive ad hominem attacks.”

3 Rule 38 states: “If a court of appeals determines that an appeal is frivolous, it may, after a separately filed motion or notice from the court and reasonable opportunity to respond, award just damages and single or double costs to the appellee.”

28 U.S.C. § 1927 states: “Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.”

4 Eleventh Circuit Rule 25-6 states: “When any paper filed with the court, including motions and briefs, contains . . . ad hominem or defamatory language . . . the court . . . may without prior notice take appropriate action . . . includ[ing] ordering that: the document be sealed; specified language or information be stricken from the documents; the document be struck from the record; the clerk be directed to remove the document from electronic public access; the party who filed the document either explain why including the specified language or disclosing the specified information in the document is relevant, necessary, and appropriate or file a redacted or replacement document.”

II. Analysis

We review the district court’s grant of Truist’s motion to dismiss de novo, accepting the allegations in Wright’s complaint as true and construing them in the light most favorable to him. McGroarty v. Swearingen, 977 F.3d 1302, 1306 (11th Cir. 2020).

A. Breach of Duty by a Notary Public

Wright argues that the district court erroneously dismissed his claim for breach of duty by a notary public. The district court dismissed the claim because it found that, “[i]n Georgia, there is no private cause of action for a claim arising under the notary public statutes.”
Under O.C.G.A. § 45-17-8(d), “[a] notary public shall not execute a notarial certificate containing a statement known by the notary to be false nor perform any action with an intent to deceive or defraud.” In Anthony v. American General Financial Services Inc., 697 S.E.2d 166, 171–75 (Ga. 2010) (“Anthony I”), the Supreme Court of Georgia held that the notary public statutes do not create a private cause of action. We subsequently adopted that ruling and affirmed a district court’s dismissal of “a private civil claim under the notary fee statute.”5

5 In his complaint, Wright bases his claim for breach of duty by a notary public on O.C.G.A. § 45-17-8(d) in conjunction with O.C.G.A. § 51-1-6. Section 51-1-6 states:

“When the law requires a person to perform an act for the benefit of another or to refrain from doing an act which may injure another, although no cause of action is given in express terms, the injured party  may recover for the breach of such legal duty if he suffers damage thereby.”

Wright does not make any argument related to O.C.G.A. § 51-1-6 on appeal.

Regardless, in Branch Banking & Trust Co. v. Morrisroe, 746 S.E.2d 859, 861 (Ga. Ct. App. 2013), the Court of Appeals of Georgia held that O.C.G.A. § 45-17-8(d) in conjunction with O.C.G.A. § 51-1-6 does not create a viable cause of action because “[a] duty cannot rest solely on OCGA § 51-1-6 . . . because it merely sets forth general principles of tort law.”

Thus, O.C.G.A. § 51-1-6 does not affect our analysis of whether there is a private cause of action for breach of duty by a notary public under O.C.G.A. § 45-17-8(d).

Anthony v. Am. Gen. Fin. Servs., Inc., 626 F.3d 1318, 1321 (11th Cir. 2010) (“Anthony II”).

Wright ignores these holdings and points to language in Anthony I where the Supreme Court of Georgia stated: “[A]lthough a corporation cannot be directly or vicariously liable for a violation of OCGA § 45-17-11, it still may be liable if it procures or otherwise qualifies as a party to or participating in such a violation by a notary.” 697 S.E.2d at 171;

See id. at 170 (“But under well-established principles, the corporation (or other person) may still be liable if it participates in or procures the notary’s violation. In terms of criminal liability, this is simply the concept of being a party to a crime.”).

He argues that this language permits his claim against Truist to go forward.

But Wright misinterprets this language. Although the Supreme Court of Georgia stated that a “corporation . . . may still be liable if it participates in or procures the notary’s violation,” Anthony I, 697 S.E.2d at 170 (emphasis omitted), it was not creating a private cause of action for violations of the notary public statutes.

Instead, it was merely noting that a plaintiff “may be able to pursue civil liability against [a party who violates the statute] under other applicable tort or contract laws of this State.” Id. at 175.

It is for those claims—for violations of “other applicable tort or contract laws”—that a corporation may be held liable as a joint wrongdoer under the notary public statutes.

See id. at 170 (“[I]n all cases, a person who maliciously procures an injury to be done to another, whether an actionable wrong or a breach of contract, is a joint wrongdoer and may be subject to an action either alone or jointly with the person who actually committed the injury.” (quoting O.C.G.A. § 51-12-30)).

Because the Supreme Court of Georgia and this Court have both clearly held that the notary public statutes do not create a private cause of action, the district court properly dismissed Wright’s claim.6

B. Georgia RICO Act

Next, Wright argues that the district court applied the wrong statute of limitations to his Georgia RICO Act claim.

Under the Georgia RICO Act, “[n]otwithstanding any other provision of law, a criminal or civil action or proceeding under this chapter may be commenced up until five years after the conduct in violation of a provision of this chapter terminates or the cause of action
accrues.” O.C.G.A. § 16-14-8 (2011)7;

See Glock, Inc. v. Harper, 796 S.E.2d 304, 306 (Ga. Ct. App. 2017).

The district court applied this five-year statute of limitations and found that Wright’s claim was “over three (3) years late” because “the most recent action taken by [Truist] relevant to this claim was on May 3, 2011, when it foreclosed on the last of the collateral properties.”8

Wright argues that his Georgia RICO Act claim is subject to the twenty-year statute of limitations of O.C.G.A. § 9-3-23 instead, because the claim arises out of conduct related to the execution of sealed instruments.9

This argument fails for two reasons.

First, the Georgia RICO Act states that the five-year statute of limitations applies “[n]otwithstanding any other provision of law.”10 O.C.G.A. § 16-14-8 (2011).

In his reply brief, Wright argues that “[t]he word ‘notwithstanding’ does not mean that no other rule could apply” and that nothing in the statute “prevent[s] a party from availing itself of a more liberal rule of law such as O.C.G.A. § 9-3-23.”11

But “notwithstanding” means: “Despite; in spite of.” Notwithstanding, Black’s Law Dictionary (11th ed. 2019).

Thus, we conclude that O.C.G.A. § 16-14-8 (2011) supplies the exclusive statute of limitations for Wright’s Georgia RICO Act claim. Because Wright did not file his claim within five years of May 3, 2011, the district court properly dismissed it.

Second, Wright’s expansive interpretation of the twenty-year statute of limitations for sealed instruments has been rejected by the Supreme Court of Georgia.

In Harris v. Black, the Supreme Court of Georgia held that “if suit is brought upon an official bond under seal, for a breach thereof,” then the twenty- year statute of limitations applies. 85 S.E. 742, 747 (Ga. 1915).

But “if the action is brought against the officer individually, and not upon his bond, different periods of limitations may apply according to whether the action sounds in tort or in contract; and if the former, the limitation is dependent upon the particular character of the tort.” Id.

Because Wright’s Georgia RICO Act claim is not a claim “upon an official bond,” it is not subject to the twenty-year statute of limitations of O.C.G.A. § 9-3-23 and was properly dismissed.

6 Even if O.C.G.A. § 45-17-8(d) created a private cause of action for breach of duty by a notary public, Wright’s claim would still fail because he did not meet the four-year statutes of limitations for injuries to realty or personalty under O.C.G.A. §§ 9-3-30 and 9-3-31. See, e.g., Godwin v. Mitzpah Farms, LLLP, 766 S.E.2d 497, 507 (Ga. Ct. App. 2014).

7 O.C.G.A. § 16-14-8 was amended in 2015. Because the amendment was not retroactive, see Glock, Inc. v. Harper, 796 S.E.2d 304, 306 (Ga. Ct. App. 2017), we will apply the version of the statute that was in effect at the relevant time.

8 Wright does not dispute that the statute of limitations on his Georgia RICO Act claim began to run on May 3, 2011.

9 See O.C.G.A. § 9-3-23 (“Actions upon bonds or other instruments under seal shall be brought within 20 years after the right of action has accrued.”).

10 Even though the district court dismissed Wright’s Georgia RICO Act claim based on O.C.G.A. § 16-4-8—the applicable statute of limitations—Wright did not discuss the statute at all in his opening brief.

C. Punitive Damages and Attorney’s Fees

Wright acknowledges that his claims for punitive damages and attorney’s fees must fail if his substantive claims are dismissed.

Because we affirm the district court’s dismissal of his substantive claims, we also affirm its dismissal of his claims for punitive damages and attorney’s fees.

See generally Mann v. Taser Int’l, Inc., 588 F.3d 1291, 1304–05 (11th Cir. 2009).

III. Sanctions

A. Wright’s Motion for Sanctions

Wright argues that we should strike certain language in Truist’s motion for sanctions for being ad hominem and requests sanctions for Truist’s decision to include that language in its motion.

In particular, he contends that it was inappropriate for Truist to mention that Nathan had been sanctioned by this Court for a frivolous appeal or that Truist had obtained a multi-million-dollar judgment against Nathan.

Truist’s motion for sanctions was based, in part, on 28 U.S.C. § 1927.

To prevail on its claim for sanctions under § 1927, Truist was required to “show subjective bad-faith.” Hyde v. Irish, 962 F.3d 1306, 1310 (11th Cir. 2020).

“This standard can be met either (1) with direct evidence of the attorney’s subjective bad faith or (2) with evidence of conduct so egregious that it could only be committed in bad faith.” Id. (quotation omitted);

See Amlong & Amlong, P.A. v. Denny’s, Inc., 500 F.3d 1230, 1242 (11th Cir. 2007) (“A determination of bad faith is warranted where an attorney knowingly or recklessly pursues a frivolous claim or engages in litigation tactics that needlessly obstruct the litigation of non-frivolous claims.” (quotation omitted)).

The facts that Nathan had been sanctioned by this Court for a frivolous appeal and that Truist had obtained a multi-million-dollar judgment against him are clearly relevant to whether Nathan “knowingly or recklessly pursue[d] a frivolous claim.” Amlong, 500 F.3d at 1242.

And because these facts were relevant to Truist’s claims, we decline to strike or seal Truist’s motion or the related filings.

See 11th Cir. R. 25-6 (suggesting that a paper filed with the court may contain arguably ad hominem language where it is “relevant, necessary, and appropriate”).

Because we conclude that it was not inappropriate for Truist to mention these facts, we deny Wright’s request for us to award sanctions.

To award sanctions under our inherent powers, we “must find that the lawyer’s conduct ‘constituted or was tantamount to bad faith.’” Thomas v. Tenneco Packaging Co., Inc., 293 F.3d 1306, 1320 (11th Cir. 2002) (quotation omitted).

In Thomas, we awarded sanctions where the lawyer made:

“(1) insulting remarks about opposing counsel’s physical traits and demeanor,

(2) comments that called into question opposing counsel’s fitness as a member of the bar,

(3) thinly veiled threats aimed at opposing counsel,

(4) a racial slur, and

(5) unsubstantiated claims that opposing counsel was a racist.”

Id. at 1323.

Unlike the lawyer in Thomas, Truist did not engage in conduct “tantamount to bad faith.”

As already discussed, Truist’s mention of the facts that Nathan had been sanctioned by this Court and that Truist had obtained a multi-million-dollar judgment against him was not inappropriate because it was relevant to Truist’s claims under § 1927.

11 Ordinarily, we do not consider an argument raised for the first time on reply.

Mamone V.United States, 559 F.3d 1209, 1210 n.1 (11th Cir. 2009).

But we will address Wright’s argument here to demonstrate that it is frivolous.

B. Truist’s Motion for Sanctions

Truist argues that Wright’s appeal is frivolous and requests that we award attorney’s fees and double costs under Federal Rule of Appellate Procedure 38.

Wright argues that his appeal is not frivolous—specifically, that “[t]he two enumerations of error in this case are essentially issues of first impression in this Court . . . and have not been fully addressed or settled by any Georgia Appellate Court.”

We may impose sanctions under Rule 38 against a party who “raises clearly frivolous claims in the face of established law and clear facts.”

Parker v. Am.Traffic Sols., Inc., 835 F.3d 1363, 1371 (11th Cir. 2016) (quotation omitted);

See Jackson v. Bank of Am., N.A., 898 F.3d 1348, 1359 (11th Cir. 2018).

“[A] claim is clearly frivolous if it is utterly devoid of merit.”

Parker, 835 F.3d at 1371 (quotation omitted).

When determining whether to award sanctions, we may review the “continuous series of events . . . which gave rise to this appeal.”

Bonfiglio v. Nugent, 986 F.2d 1391, 1393 (11th Cir. 1993).

Wright filed a complaint containing at least four counts that were barred by the applicable statutes of limitations, a conclusion that he does not challenge on appeal.

Then, on appeal, he raised two arguments that were directly foreclosed by precedent from the Eleventh Circuit and the Supreme Court of Georgia, and by the plain language of O.C.G.A. § 16-14-8 (2011).

See Bonfiglio, 986 F.2d at 1394 (awarding sanctions where the appellant “stubbornly filed [an] appeal in which he repeate[d] to this Court the utterly frivolous contentions he made in the district court”).

Finally, when Truist filed a motion for sanctions based on this conduct, Wright filed a meritless motion to strike and for sanctions.

Wright’s arguments on appeal were devoid of merit because Anthony I and Anthony II clearly establish that the notary public statutes do not create a private cause of action and because O.C.G.A. § 16-14-8 (2011) clearly establishes a five- year statute of limitations for Georgia RICO Act claims.

More egregiously, Wright did not even mention O.C.G.A. § 16-14-8 (2011)—the applicable statute of limitations, which the district court relied on to dismiss his Georgia RICO Act claim—in his opening brief.

Instead, he waited until his reply brief to argue that O.C.G.A. § 16-14-8 (2011) does not apply here because “[t]he word ‘notwithstanding’ does not mean that no other rule could apply.”

This argument is utterly devoid of merit and Wright has provided no non-frivolous argument why the Georgia RICO Act’s five-year statute of limitations does not bar his Georgia RICO Act claim.

Thus, as a sanction, we order Wright and his counsel to pay double the costs of this appeal, as well as reasonable attorney’s fees to Truist.

See Bonfiglio, 986 F.2d at 1394;

See Taiyo Corp. v. Sheraton Savannah Corp., 49 F.3d 1514, 1515 (11th Cir. 1995) (imposing joint and several liability for Rule 38 sanctions).

“We remand this case to the district court with instructions for it to calculate and assess the attorneys’ fees and costs that [Wright and his counsel are] to pay in connection with this appeal and to order that amount paid.” Bonfiglio, 986 F.2d at 1395.

IV. Conclusion

For these reasons, we affirm the district court’s decision and remand the case to the district court to assess attorney’s fees and costs.

AFFIRMED and REMANDED.

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