Florida has been a hotbed of foreclosure activty, consistently ranking among the top states for numbers of homes taken back on defaulted mortgage loans. As a result, Florida homeowners have fallen victim to a variety of mortgage relief fraud scams, including fraud and abuse by some members of the Florida Bar. According to a recent article in the Orlando Sentinel, the Florida bar has opened 202 foreclosure-fraud grievance investigations since November, with a total of 226 now pending. According to this article, 46 fraud related cases have been investigated and closed, without any findings of attorney misconduct. However, sanctions have been assessed against 53 attorneys involed in 145 foreclousre-related complaints not involving fraud.
While this Orlando Sentinel article is focused on lawyer abuse comitted by attorneys representing mortgage lenders, many home owners and property owners have been victims of legal malpractice from their own attorneys. Many attorneys and law firms have engaged in aggressive marketing campaigns to property owners, taking fees in exchange for empty promises and false hope. Lawyers with little or no experience in foreclosure litigation have represented themselves as having special expertise or inside information to help property owners in foreclosure.
Unfortunately, legal malpractice intakes in my office have increased during the last two years, as vicitms of this kind of legal malpractice are looking for compensation. Most of these property owners will have difficulty demonstrating damages if they were unable to keep their property regardless of how poorly their attoneys represented them. Homeowners will probably have monetary losses that are too small to justify a time consuming and expensive legal malpratice law suit. Their sole remedy may be a complaint with the Florida Bar, or to seek compensation from the Clients' Security Fund. However, legal malpractice in representing clients going through foreclosure may result in demonstrable economic harm. This may be true particularly for commerical property owners. Incompetent representation may deprive the owner of a meaningful settlement opportunity, time to resolve financial disputes with lenders and creditors, or the ability to avoid personal exposure on deficiency judgments. If the property owner can demonstrate economic harm that could have been avoided with competent representation, then a legal malpractice claim may be pursued to compensate the property owner. It is likely that as the foreclosure crisis deepens, and unethical and incompetent lawyers take advantage of distressed property owners, complaints for legal malpratice by mortgage foreclosure clients will continue to increase.
Sunday, May 22, 2011
Tuesday, May 10, 2011
Bankruptcy and Legal Malpractice
With a plummeting economy, bankruptcies are on the rise. This means more individuals interacting with attorneys who undertake to assist them with their legal needs. Fortunately, most lawyers are doing a good job of assisting financially distressed families and individuals with discharging their debts and using the bankruptcy laws to preserve their assets. However, even individuals at the lowest point in their financial life may suffer significant economic losses when the bankruptcy lawyers they seek help from fail to do their job.
In the case of In re: Pullen, 2009 Lexis 2935 (N.D. Ga. 2009) a bankruptcy court awarded damages to a homeowner who was harmed by the bad advice of his bankruptcy lawyers. The homeowner consulted the attorneys for advice on how to prevent his home from being sold in a foreclosure sale. The attorneys erroneously advised the homeowner that he could re-open an old bankruptcy case to stop the foreclosure sale. In fact, the correct procedure would have been to file a new bankruptcy action, which would have immediately halted the foreclosure sale. As a result of the bad advise, the homeowner's home was sold at foreclosure. The homeowner incurred significant legal fees to invalidate the foreclosure sale and regain homeownership. This was accomplished in a second bankruptcy case, by the use of what is known as an adversary proceeding in the bankruptcy court.
In the new bankruptcy case, the court found that the homeowner's attorneys had given bad advice. It held the negligent attorneys responsible for paying their former client the legal fees he had incurred in having to correct the foreclosure sale:
"...Defendants' decision to preoceed with a motion to re-open the 1998 case was based upon a faulty understanding of bankruptcy law and did not accomplish the express purpose sought by Plaintiffs...Because Defendants failed to prevent the Sale, Plaintiffs have incurred substantial legal fees to pursue unwinding the sale in an adversary proceeding in their [second]bankruptcy case..."
This case demonstrates that lawyers in every specialty can cause harm to their clients if they fail to properly advise them. Courts will help these clients if it can be shown that the bad advise resulted in a discernible economic loss directly caused by the bad advise.
In the case of In re: Pullen, 2009 Lexis 2935 (N.D. Ga. 2009) a bankruptcy court awarded damages to a homeowner who was harmed by the bad advice of his bankruptcy lawyers. The homeowner consulted the attorneys for advice on how to prevent his home from being sold in a foreclosure sale. The attorneys erroneously advised the homeowner that he could re-open an old bankruptcy case to stop the foreclosure sale. In fact, the correct procedure would have been to file a new bankruptcy action, which would have immediately halted the foreclosure sale. As a result of the bad advise, the homeowner's home was sold at foreclosure. The homeowner incurred significant legal fees to invalidate the foreclosure sale and regain homeownership. This was accomplished in a second bankruptcy case, by the use of what is known as an adversary proceeding in the bankruptcy court.
In the new bankruptcy case, the court found that the homeowner's attorneys had given bad advice. It held the negligent attorneys responsible for paying their former client the legal fees he had incurred in having to correct the foreclosure sale:
"...Defendants' decision to preoceed with a motion to re-open the 1998 case was based upon a faulty understanding of bankruptcy law and did not accomplish the express purpose sought by Plaintiffs...Because Defendants failed to prevent the Sale, Plaintiffs have incurred substantial legal fees to pursue unwinding the sale in an adversary proceeding in their [second]bankruptcy case..."
This case demonstrates that lawyers in every specialty can cause harm to their clients if they fail to properly advise them. Courts will help these clients if it can be shown that the bad advise resulted in a discernible economic loss directly caused by the bad advise.
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