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Attorneys’ Fees in Foreclosure Cases

In November of 2010, the New York Times did a story about how some Florida foreclosure defense attorneys charge homeowners facing foreclosure.  I was troubled by the fees being charged by some of my colleagues, and it prompted me to write this blog.  After inquiry from a Florida homeowner today, I’m fired up about this issue again, so it’s time to circle back and talk about the fees that defense attorneys charge homeowners.

First off, I realize there are different ways to skin a cat, particularly in the foreclosure defense industry.  It’s not my prerogative to say that I’m right and the fees everyone else charges are wrong or unreasonable.  That said, I have seen instances where the fees being charged by some foreclosure defense attorneys are just patently ridiculous, totally unreasonable, and offensive.

Consider today’s inquiry.  A Florida homeowner contacted me by email, indicating he had retained a well-known Florida defense firm to fight his foreclosure case.  He made it clear he wanted a loan modification, and after years of trying, he was able to obtain a permanent modification.  He obtained the modification all on his own – his lawyers didn’t even realize he was doing so, and the modification was obtained through his own persistence.  To this homeowner’s surprise, however, his lawyers then told him that he owed them a contingent fee equal to 10% of the amount that the bank had sued him for.  In fact, it seems that is this firm standard fee arrangement – to obtain a 10% “contingent fee” whenever a foreclosure case is dismissed (regardless of the reason for the dismissal).

With this homeowner’s consent, I am posting a redacted copy of that firm’s fee agreement.  Do you see the language, entitling the firm to 10% of the amount demanded by the bank in the complaint if the case is dismissed?  Notice that this contingent fee seems to apply regardless of the reason the case was dismissed and even if the bank is able to immediately turn around again and file a new lawsuit.

Suppose the amount being sought in the foreclosure complaint is $500,000.  Do you seriously mean to tell me that a lawyer can charge $50,000 (10% of $500,000 = $50,000) to that homeowner where that case was dismissed even though the bank can turn right around again and re-file a new lawsuit?  That’s insanity, in my eyes.  Equally unreasonable, in my view, is a lawyer telling a client to pony up the 10% contingent fee where the foreclosure case was dismissed because the homeowner was able to procure a modification through his own efforts.

I can already see that attorney’s justifications.  “But the homeowner never would have been able to get the modification if we weren’t defending the foreclosure case and preventing the bank from foreclosing.”  I suppose that argument isn’t totally frivolous.  After all, that’s part of what we do as defense counsel – defend cases long enough that, hopefully, the parties can reach a resolution in lieu of a foreclosure.  However, just because the lawyer defended the foreclosure case, does that really mean he should get a windfall at his own client’s expense, particularly where the net result to the client is in no way commensurate with the contingent fee owed?  Personally, I don’t think so.  The fees lawyers charge should bear a reasonable relationship to the work performed and the result obtained for the client.  Standard fee agreements shouldn’t have catchalls that enable lawyers to recoup windfalls, particularly where the client may face another foreclosure suit on that same property.

In fairness, I can envision circumstances where a contingent fee like this is authorized.  For instance, if the lawyer is able to help his client obtain eliminate a mortgage and keep title to the property free and clear, then that is an extraorindary result that can arguably justify a contingent fee.  That’s not how my firm’s standard fee agreements are set up, but I can at least understand a contingent fee in that scenario.  However, that result is extremely rare, so that type of fee arrangement would be rare to even discuss, much less enter.

If you’re a homeowner facing foreclosure, and you’re deciding which counsel to retain, I urge you to think about these issues.  Ask yourself “is this lawyer trying to charge a fair amount in order to stay in business and keep the office lights on?  Or is this lawyer trying to obtain a windfall even though he really didn’t obtain a result that changed my life?”

As I assess this issue, I can’t help but wonder if this issue has much larger, far-reaching consequences than any of us realize.  As I say this, I acknowledge I’m speculating a bit, but I think it’s fair to wonder …

Many in the foreclosure defense industry have commented, particularly in recent months, that judges in the Tampa/St. Pete area (and, frankly, most of the area that constitutes Florida’s Second District Court of Appeal) tend to rule in favor of homeowners more frequently than the judges in other parts of Florida.  I’ve seen – and experienced – horror stories in other parts of the state.  Rocket dockets.  Judges setting trials en masse and never ruling for homeowners, even where the evidence and the law required such.  As I assess these stories, and think about the fees being charged by some other attorneys, I can’t help but wonder “are those judges turned off by the defense industry because they realize how much some defense lawyers are charging?”

I have no documents to show you and no evidence to which I can point to support my beliefs in this regard.  However, I can’t help but believe that one of the reasons I’ve been able to enjoy the successes that I have defending homeowners is that the judges who know me respect the job that I do.  They know, if I get a case dismissed, that I’m not bilking my client for a 10% contingent fee.  They know I’m not asking the bank to pay a $20-$40K fee, either.  Rather, they know that I ask for two or three grand – sometimes more, sometimes less – and I move on to the next file, trying my darndest to help as many other homeowners as possible.  I’d like to believe that’s what garners respect from the judiciary – when you show up in court, time after time, making legitimate arguments, with case law, taking reasonable positions, and show you’re performing a service for your clients and the community, not just trying to get rich.  I’d like to think, if you do that long enough, that it makes judges realize, no matter the pressures they face to move cases, that they should, where the facts and the law justify it, rule for homeowners.

Think about it from a judge’s perspective.  Florida judges make, what, $125,000 a year?  (I’m guessing, but I suspect that’s not too far off.)  If you were a judge, would you want to see a defense attorney recover a $40,000 fee from a bank on one file merely because the case was dismissed without prejudice?  That’s a third of what the judge makes in an entire year!  Should an attorney really get that on one file where the bank can turn right around and file a new lawsuit?  Even if the law says “yes,” and it sometimes does, if you were the judge, how would you feel about entering that fee award?  Would you, perhaps, be a little more hesitant to dismiss a case the next time that lawyer was in front of you?  Or how about if you knew the lawyer charged his clients a contingent fee?  Would that lawyer garner the same level of respect?  Somehow, I think not.

I realize this blog may irritate some of my colleagues.  That’s regrettable, but I’m confident I’m on the right side of the fence on this one.
Mark Stopa

www.stayinmyhome.com

Posted in Main | 5 Comments »

5 Responses to Attorneys’ Fees in Foreclosure Cases

  1. Rob Harrington says:

    What should an honorable Judge care if they are simply ruling on fact and law (and doing their taxpayer supported job) in regards to what a foreclosure defense attorney makes in a case?

  2. Stopa..

    I enjoyed reading your Blog entry on attorney’s fees which will once again spark a spirited debate among foreclosure defense lawyers and sophisticated consumers shopping for a foreclosure defense attorney. I agree with you that it is unreasonable for the law firm to change 10% of entire loan balance to a consumer who obtained a loan modification primarily as a result of the consumer’s independent communications with the bank.

    If you are asking defense lawyers who win foreclosure cases and thereby become entitled to collect fees from the bank to pull punches, on this issue I cannot agree. Like you, I have had the privilege of defeating a large number of banks in foreclosure cases and have collected fees from banks on many occasions. In almost all of the cases our fees were between $10,000 and $20,000.00 but some cases are fought harder than others. In 2012, I had the largest fee award for a prevailing homeowner in Brevard County. In that case, the bank’s lawyer’s timesheet, filed at the time they moved for summary judgment had approximately 70 hours on it. At such juncture, I had spent slightly fewer hours than the bank’s army of lawyers. After five separate court appearances, I had worked 101 hours against the bank’s counsel who decided to take this one to the mat. The trial judge after hearing testimony of a board certified civil trial lawyer who reviewed my time sheets and the court file, awarded 95 hours ( of the 101 I requested) at $450.00 an hour. The total judgment, once expert witness fees and interest were added, exceeded $46,000.00.

    I am delighted when I recover large fees from banks because I get to take money from such recoveries and use it to reimburse clients for attorney’s fees they previously paid our firm. Every recovery of attorney’s fees I have had resulted in clients getting money back in their pockets.

    There are to many lawyers dabbling in foreclosure defense who have never won a case and who do not understand the difference between foreclosure defense and foreclosure delay. Defeating banks in foreclosure cases is not easy or common and the lawyers who do it should be compensated in fee hearings commiserate with other civil litigators handling matters of similar complexity and consequence.

    Judges should take issue with attorneys in all cases ( foreclosure and otherwise) that submit inflated timesheets or timesheets that lack sufficient detail to tell when work was done and how long it took. When a bank goes to the mat and loses a foreclosure case, a judge should have no aversion to the homeowner fully recovering all of the legal expenses they incurred and the full value of the lawyer’s time and efforts.

  3. I enjoyed reading your Blog entry on attorney’s fees which will once again spark a spirited debate among foreclosure defense lawyers and sophisticated consumers shopping for a foreclosure defense attorney. I agree with you that it is unreasonable for the law firm to change 10% of entire loan balance to a consumer who obtained a loan modification primarily as a result of the consumer’s independent communications with the bank.

    If you are asking defense lawyers who win foreclosure cases and thereby become entitled to collect fees from the bank to pull punches, on this issue I cannot agree. Like you, I have had the privilege of defeating a large number of banks in foreclosure cases and have collected fees from banks on many occasions. In almost all of the cases our fees were between $10,000 and $20,000.00 but some cases are fought harder than others. In 2012, I had the largest fee award for a prevailing homeowner in Brevard County. In that case, the bank’s lawyer’s timesheet, filed at the time they moved for summary judgment had approximately 70 hours on it. At such juncture, I had spent slightly fewer hours than the bank’s army of lawyers. After five separate court appearances, I had worked 101 hours against the bank’s counsel who decided to take this one to the mat. The trial judge after hearing testimony of a board certified trial lawyer who reviewed my timesheets and the court file, awarded 95 hours ( of the 101 I requested) at $450.00 an hour. The total judgment, once expert witness fees and interest were added, exceeded $46,000.00.

    I am delighted when I recover large fees from banks because I get to take money from such recoveries and use it to reimburse clients for attorney’s fees they previously paid our firm. Every recovery of attorney’s fees I have had resulted in clients getting money back in their pockets.

    There are to many lawyers dabbling in foreclosure defense who have never won a case and who do not understand the difference between foreclosure defense and foreclosure delay. Defeating banks in foreclosure cases is not easy or common and the lawyers who do it should be compensated in fee hearings commensurate with other civil litigators handling matters of similar complexity and consequence.

    Judges should take issue with attorneys in all cases ( foreclosure and otherwise) that submit inflated timesheets or timesheets that lack sufficient detail to tell when work was done and how long it took. When a bank goes to the mat and loses a foreclosure case, a judge should have no aversion to the homeowner fully recovering all of the legal expenses they incurred and the full value of the lawyer’s time and efforts.

    • Mark Stopa says:

      Thanks for the comment, Richard.
      You know I respect the good work that you do, and everything I’ve said here is with that in mind.

      I don’t doubt the time that you invested in the Brevard County case to which you refer was reasonable, as the law defines it, particularly where the bank’s lawyers spent similar time on the file. My concern is that the overwhelming majority of homeowners cannot afford anywhere close to $46,000 in attorneys’ fees. If they could afford that, they wouldn’t be facing foreclosure! Hence, I struggle at the thought of a having a business model which charges anywhere close to $46,000 in fees. Also, while I laud your returning all such fees to your clients when you won, I shudder at the thought that a homeowner paid anything close to $46,000 in fees but didn’t win (no matter how good of a job you might have done) … meaning he was foreclosed AND was out that money. That’s the risk they take, I suppose, if they’re willing to go down that road, but man, that’s a steep price to pay.

      I share your concerns about “delaying” versus “defending.” That’s a big problem, and there are far too many inept defense lawyers. That said, in my five years of defending foreclosures, I’ve never felt it was necessary to spend $46,000 on one file – or anywhere close to it. I’ve taken cases through trial and won and never asked for more than $6,500 or so. Suffice it to say that I think foreclosure cases can be defended aggressively and vigorously for much less than $46,000. Plus, by charging less, we can help more homeowners … and, in my view, earn the respect of the judges before whom we appear.

      I know some attorneys have bills that large even though the homeowner isn’t actually paying. That might sound good at first blush – spending that much time helping a homeowner who can’t afford to pay. My problem there, though, is that if an attorney is going to spend a lot of time helping homeowners who can’t afford to pay, why not do it on many files, not just one? In other words, if you’re willing to spend 100 hours unpaid, spread it over 20 files, not just one. That way, we’re helping lots of homeowners who need it, not just one.

      Just my thoughts. Thanks for sharing yours.

      Mark

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