May 10 The Florida Supreme Court heard arguments
on Thursday in a landmark lawsuit that could undo hundreds of
thousands of foreclosures and open up banks to severe financial
penalties in the state where they face the bulk of their
Legal experts say the lawsuit is one of the most important
foreclosure fraud cases in the country and could help resolve an
issue that has vexed Florida's foreclosure courts for the past
five years: Can banks that file fraudulent documents in
foreclosure proceedings voluntarily dismiss the cases only to
refile them later with different paperwork?
The decision, which may take up to eight months, could
influence judges in the other 26 states that require judicial
approval for foreclosures.
The case at issue, known as Roman Pino v. Bank of New York
Mellon, stems from the so-called robo-signing scandal that
emerged in 2010 when it was revealed that banks and their law
firms had hired low-wage workers to sign legal documents without
checking their accuracy, as is required by law.
If the state Supreme Court rules against the banks, "a broad
universe of mortgages could be rendered unenforceable," said
former U.S. Attorney Kendall Coffey, author of the book,
"Foreclosures in Florida."
One issue in Pino's case was an allegedly fraudulent
mortgage assignment, the legal document that binds a loan to a
Bank of New York Mellon, as trustee of the mortgage-backed
security that owns Pino's loan, is the named plaintiff in the
lawsuit. But it was Pino's mortgage servicer, Bank of America,
that handled the loan's administration, foreclosure proceedings
and coordination of litigation.
The parties reached a confidential settlement on July 22,
2011. That same day, Bank of New York Mellon and Bank of America
filed a mortgage satisfaction on Pino's home with the Palm Beach
County Recorder's Office.
Even though the two parties settled the lawsuit, the Supreme
Court is still hearing the case. The court said the voluntary
dismissal strategy used by the banks was of great "public
importance" because so many foreclosures in Florida had been
tainted by fraudulent paperwork.
Florida homeowner defense attorney Thomas Ice has
represented Pino, a drywall hanger, since October 2008 when Pino
received a foreclosure notice after falling behind on his
mortgage payments. Pino bought the home in 2006 for $203,000. He
put 20 percent down and took out a loan from Bank of America for
An associate with Ice's firm, Amanda Lundergan, made the
oral arguments on Ice's behalf in Thursday's proceeding.
Lundergan is a recent graduate of the Florida Coastal School of
Bank of New York Mellon was represented by Bruce Rogow, an
attorney who has argued civil rights cases and defended American
Nazi Party members and Ku Klux Klan Grand Wizard David O. Duke.
He has also represented consumers in the class action against
banks for overdraft fees.
During the proceeding, which lasted less than an hour, the
justices asked the lawyers technical questions.
"Voluntary dismissal shouldn't be used as a shield for
fraud," said Lundergan in one response. "It sets up a system
where every litigant is condoned and encouraged to lie, cheat
and steal, knowing that if they are caught, they can simply
voluntarily dismiss and absolve themselves from that fraud."
At one point, Rogow said he believed that doing away with
voluntary dismissal altogether was simply too broad a remedy
because it would affect all cases, not just foreclosures.
"There are sanctions that can be imposed. We are not saying
no sanctions if there are improper submissions," he said.
Voluntary dismissal is the banks' main strategy in judicial
states for dealing with homeowners who challenge foreclosures,
sa id Adam Levitin, Georgetown University consumer and housing
finance professor, who has served as special counsel to the
Con g ressional Oversight Panel following the 2008-2009 financial
"If that fails, strategy No. 2 is to buy them off," says
If the court rules against voluntary dismissal, the banks
face the costly specter of not being able to simply refile cases
using new paperwork and expect homeowners not to challenge the
In Florida, that's a lot of cases. In the year through July
11, 2011, more than 104,000 foreclosure cases were voluntarily
dismissed from Florida's courts, according to the Office of the
State Courts Administrator.
Attorneys who work in the foreclosure field say such
dismissals usually occur because of the banks' legal document
A ruling against the use of voluntary dismissal would mean
that the nearly 400,000 homeowners who are living in Florida's
foreclosure limbo would simply stay there.
But it would not affect Pino's confidential settlement. No
matter what, Pino, now 41, still owns his house.
Palm Beach County says it's now worth $32,915.