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Van Ness Prevails in Note Certification Appeal

Summary judgments are subject to reversal on appeal more than judgments entered after trial because a summary judgment effectively denies a litigant their day in court. Van Ness procured a summary judgment in favor of its client and it was recently affirmed on appeal. In Capital Markets Group v. LendingHome Funding Corp., Case No. 1D18-2276 (Fla. 1st DCA June 4, 2019), the borrowers argued that the Florida statutes and rules of civil procedure relating to note certification create a condition precedent to filing a foreclosure action and that plaintiff failed to sufficiently authenticate the note in its note certification. Van Ness defended its case on appeal.

Van Ness argued that the grounds for appeal had been waived because the borrowers did not provide a transcript of the proceeding. Whether a transcript is necessary is a fundamental concern of appellate practice in Florida and can be the end of many appellate actions. Van Ness argued that, because the borrowers did not claim that the final judgment in favor of plaintiff was fundamentally and facially erroneous, the appellate court could not reverse the trial court in the absence of a transcript.

Van Ness also argued that neither section 702.015 of the Florida Statutes nor rule 1.115 of the Florida Rules of Civil Procedure establish a condition precedent to filing suit. If a plaintiff fails to meet a condition precedent to filing a lawsuit, the lawsuit is subject to dismissal. Construing a provision as not creating a condition precedent can prevent such a dismissal. This effort requires a technical analysis of the pertinent statutes and rules. The distinction between a statutory or rule requirement and a condition precedent in Florida can save a case.

Appellate actions present two distinct requirements for counsel: detailed knowledge of the appellate system and a robust understanding of the ever-changing landscape of foreclosure law. Counsel must be aware of the requirements for preservation of error, the appropriate standard of review, and how to properly construct an argument on appeal. All this knowledge must be set against the substantive backdrop of foreclosure law in the State of Florida.

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EVOLVING FORECLOSURE LITIGATION STRATEGY

The Florida courts have recently clarified that, where a complaint is dismissed without prejudice and the dismissal does not operate as an adjudication on the merits, plaintiff may not have to send a new breach letter prior to instituting a subsequent action to foreclose the mortgage.

Foreclosure can be a complex legal area because of the nuance involved in the practice. Strategic decisions need to be made to minimize cost and exposure. A great counselor steps in the shoes of the opposing attorney, analyzing the case from both sides and always staying a chess move ahead. Such strategies can be simple as proactively seeking additional relief in orders, how you conduct motion practice, or dropping certain parties that will delay the cases if deficiency is not an option.

The case law surrounding how a plaintiff can limit its exposure to attorney’s fees liability is growing. Decisions about whether to voluntarily dismiss a claim or ask that it be dismissed without prejudice can be important. In HSBC Bank USA v. Leone, 2019 Fla. App. LEXIS 6753, 2019 WL 1967650, No. 2D17-2851 (Fla. 2d DCA May 3, 2019), plaintiff appealed an involuntary dismissal of its foreclosure case. Plaintiff had filed a second foreclosure case after the first was dismissed without prejudice. The trial court dismissed the claim on the basis that no new notice of default was sent. The trial court found that a “new default notice was required to be mailed prior to filing the second foreclosure action.” The court’s order was appealed and the appellate court reversed.

The Second District Court of Appeal provided that the issue was one of contract interpretation, specifically, one must look to the plain meaning of the mortgage. Analyzing paragraph twenty-two (22) of the standard form mortgage, the court looked to the phrase “on or before the date specified in the notice.” The court discounted the position that cases questioning the application of the statute of limitations would require that a second notice be sent.

Where a foreclosure case had been dismissed without prejudice and a subsequent complaint to enforce the note and foreclose the mortgage has been filed, there is no need to send a new breach letter prior to filing if the default was never cured. However, in the event that the dismissal was with prejudice, a new notice may be required.

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GLASS IS SHATTERED (for now)

In the event that the borrower prevails in a foreclosure case, servicers need to minimize their exposure to prevailing party attorney’s fees. One strategy is, if applicable, using the “standing” defense premised on the fact if the plaintiff did not have standing to foreclose, they cannot in turn use the mortgage agreement fee provision(s) against them.

The above standing argument is developing and has been tested in a number of appellate actions, one of which had reached the Florida Supreme Court. At the district court of appeal level in Nationstar v. Glass, 219 So. 3d 896 (Fla. 4th DCA 2019), the court had agreed with the servicer and found that the borrower’s having prevailed on standing meant they was no privity of contract and they were estopped from claiming they were entitled to contractual attorney’s fees.

The case went up to the Florida Supreme Court as Glass v. Nationstar Mortg., LLC, Case No. SC17-1387 (Fla. Jan. 4, 2019). The Court reversed the district court of appeal reasoning that the contract may have been unenforceable as opposed to being nonexistent between the parties. This opinion led to a rush to distinguish the facts at issue in multiple trial and appellate cases throughout the state.

However, the Florida Supreme Court had revisited its opinion. Today, April 18, 2019, the Florida Supreme Court announced that its opinion is withdrawn and a substitute opinion would stand in its place. That substitute opinion expresses the Court “initially accepted review of the decision of the Fourth District Court of Appeal in Nationstar Mortgage LLC v. Glass, 219 So. 3d 896 (Fla. 4th DCA 2017), based on express and direct conflict….” The Court then explains that, “Upon further consideration, we conclude that jurisdiction was improvidently granted.”

Inasmuch as there was no conflict jurisdiction for the review, the Court dismissed the proceeding. Because the original opinion was substituted with a dismissal for lack of jurisdiction, there is no longer a Florida Supreme Court decision of the matter. The original district court opinion in Glass may once again be relied on as authority. Servicers should note that the arguments advanced by the Florida Supreme Court in its January opinion have not been found invalid; instead, the Court has provided that it should not have issued its opinion in this case. In the future, the Court may in fact find that it has jurisdiction to issue a substantially similar opinion, once again causing greater uncertainty with regard to fee liability.

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COURT EASES EVIDENTURY BURDEN FOR PLAINTIFFS

Admissibility is a key question in foreclosure cases. Authenticating documents for admission may complicate a plaintiff’s ability to prevail at trial. The Second District Court of Appeal has explained that loan modification agreements and various other documents are self-authenticating, thus easing the process of admission.

In foreclosure trials, the plaintiff is normally correct about most of the facts: “There is a note.” “The borrower signed a mortgage.” “The borrower breached by failing to make required payments.” “A breach letter was sent.” “The payment history and related documents reflect the amounts due and owing under the terms of the note and mortgage.”

Apart from the muddled issue of standing, the key issue in a case is normally focused on whether the servicer’s documentary evidence is admitted by the court. Admissibility involves two questions: Is the document authentic? Is the document admissible? Each question is equally important.

Authentication or identification requires that a party present sufficient evidence to support a finding that the matter in question is what its proponent claims. However, documents which are self- authenticating are not subject to this rule. While it has been understood that certain documents, including the note, are “self-authenticating” within the meaning of section 90.902, Florida Statutes, the scope of documents subject to the self-authentication rule has been less clear.

In Wells Fargo Bank, N.A. v. Quest Systems, LLC, 2D17-1184 (Fla. 2d DCA Apr. 3, 2019), the court clarified this issue. The court highlighted the fact that the statute provides that all documents “relating to” commercial paper are self-authenticating. Based on this proposition, the court found that a loan modification agreement, being related to the note, was self-authenticating. Other documents that relate to the note may be similarly self-authenticating, removing one of the barriers to admission of the evidence and, thus, judgment in favor of plaintiff.

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Mortgage Reformation Not Tied to Attorney’s Fees

Whether to seek reformation of a mortgage may be a question of strategy. If reformation is not required and may be difficult to prove, servicers may be wary of seeking relief because of the potential for attorney’s fees in the event that the servicer fails to prove the reformation issue. The Fourth District Court of Appeal appears to have made the decision simpler. Servicers may seek reformation without fear that a judgment of foreclosure without reformation will have a negative impact in terms of attorney’s fees.

In Deutsche Bank Nat’l Trust Co. v. Quintela, No. 4D17-873 (Fla. 4th DCA Mar. 27, 2019), the court held that a count to reform a mortgage does not carry the weight of potential attorney’s fees. The court elucidated two primary reasons for this holding.

First, the court held that reformation was outside of the permissible parameters of attorney’s fees under section 57.105(7), Florida Statutes because reformation is not a contractual remedy. The fees’ provision in the mortgage clearly states that plaintiffs are entitled to collect all expenses incurred “in pursuing the remedies provided in this Section 22….” (Emphasis supplied.) Because reformation of the mortgage is not a remedy contemplated within section 22 of the mortgage, defense of reformation is not a ground for recovery of bilateral attorney’s fees.

Secondly, the court determined that reformation of the mortgage is not a significant issue in the litigation. The trial court entered judgment in favor of plaintiff on the foreclosure count despite the fact that the equitable relief of reformation was not provided. Inasmuch as the wont of reformation was not an impediment to foreclosure, it was not a “significant issue” for purposes of determining fees.

The opinion in Quintela may aid servicers in deciding whether to pursue a reformation that may be difficult to prove. Because reformation is not a contemplated remedy in the standard form mortgage and because reformation is not a significant issue in a case in which a foreclosure judgment is ultimately entered, the possibility of an adverse fees award should not deter a servicer from seeking reformation. Also, it is noteworthy that the court examined the scope of section 22 of the mortgage because that may limit other avenues of fees for borrowers and their counsel in the future.

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SAVINGS CLAUSES IN FORECLOSURE

An overlooked topic in foreclosure law is the effect of savings clauses in loan documents. Notes, mortgages, modifications, and just about any other document affecting the validity or viability of a loan may have a savings clause. Review of loan document templates is necessary because savings clauses may be helpful, but also may not completely solve the issues they were meant to address.

Simply stated, a savings clause is a clause in a contract that provides that the contract will remain intact and enforceable to the extent allowable by law, even if certain portions of the contract are deemed invalid or unenforceable. These clauses can both be general and apply to the contract as a whole or specific and apply to key provisions or subject areas of the contract.

A general savings clause is frequently styled as a “severability” clause because the contract explains that the parties intend for the court to sever any portion of the contract that is legally invalid or unenforceable while maintaining the remainder of the agreement. These clauses are helpful to clarify issues that may be severed. See generally Gessa v. Manor Care of Fla., Inc., 86 So. 3d 484, at passim (Fla. 2011). However, courts may find certain portions of the clause ineffective. For instance, a limitations of remedies provision is not severable, regardless of whether the contract contains a severability clause. Id.at 490‐491 & n. 5. Thus, a severability clause may be an attractive addition to a loan document, but it must be understood that there are circumstances under which the provision will, itself, not be enforced.

In the case of mortgage promissory notes, a specific savings clause will usually be focused on interest and the calculation of payments. These clauses may clarify that interest shall not accrue or be charged at any unlawful rate. This type of savings clause can have multiple purposes. First, it can act to attempt to sever any provision that would allow for unlawful interest. Secondly, it can function as evidence of intent.

This second function is helpful in the face of a claim or defense that the loan at issue is usurious. Usury occurs when a loan is intentionally given with an interest rate that exceeds the maximum amount allowable by law. A usurious loan is subject to a setoff against recovery and, in some cases, cancellation of the debt or damages.

Florida law used to provide that a savings clause that expressed a desire for the loan to be nonusurious was sufficient to warrant dismissal of a charge of usury. However, that has changed. InLevine v. United Cos. Life Ins. Co., 638 So. 2d 183, 184 (Fla. 3d DCA 1994), the court examined a mortgage note that “expressly stated that interest was to be charged only at a lawful percentage.” The court held that the “inclusion of this language in loan documents has been held to warrant dismissal of a usury claim.” Id. (citing Forest Creek Dev. Co. v. Liberty Property Sav. & Loan Ass’n, 531 So. 2d 356, 357 (Fla. 5th DCA 1988)). The opinion in Levine, 638 So. 2d at 184 was later disapproved by the Florida Supreme Court to the extent that it explained, “a savings clause is one factor to be considered in the overall determination of whether the lender intended to exact a usurious interest rate.” Levine v. United Cos. Life Ins. Co., 659 So. 2d 265, 267 (Fla. 1995). (Internal quotations omitted.) In other words, the savings clause now presents an issue of fact that is to be weighed in making a determination whether a usurious loan was given.

Savings clauses should be used wisely. They may be helpful in a defensive posture once litigation ensues, both in terms of rescuing the enforceability of an agreement and in expressing the intent of the parties at the time of the agreement. However, it should not be taken as a given that either of these strategies will work in any particular case.

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VAN NESS DEFENDS NO FEES AT 2nd DCA

Van Ness Law Firm regularly prosecutes and defends appellate actions throughout the State of Florida. This portion of our practice includes representation in all five district courts of appeal and the Florida Supreme Court. We routinely appear in front of the courts for oral argument.

Van Ness Law Firm appeared at oral argument in front of the Second District Court of Appeal on March 13, 2019 in Deutsche Bank v. Hopson. The trial court had granted attorney’s fees in favor of the borrower following a judgment in favor of defendant at trial. The trial court found that there were no endorsements on the note and that the assignment of mortgage was not necessarily valid. Plaintiff filed a motion for rehearing on the fees issue due to the fact the trial court had previously found a lack of a relationship between the plaintiff and both the note and mortgage. The trial court agreed that fees should not have been awarded. Hopson appealed.

The borrower argued Madl, a case in which no valid transfer of the note occurred but a valid assignment of mortgage was made. The borrower also filed the Florida Supreme Court opinion inGlass prior to oral argument. Our firm argued that Madl goes against the literal language in the statute governing fees. Our firm also argued that the exception in Madl does not apply because there was no evidence of a valid transfer of the mortgage and such a transfer was required by the court in Madl. Further, our firm argued that Glass only applies in circumstances in which there is no determination on the merits that a party lacks a relationship to the relevant contracts.

The panel questioned the parties regarding matters outside the briefing. Judge Lucas was interested in questioning whether a mortgage is a contract. Judge Silberman wanted to know how a defendant in a case such as this could possibly get fees. And there was inquiry as to the meaning of the wording of the trial court’s order. On this latter inquiry, we made sure to remind the court that the trial court’s order was one that the borrower’s counsel had drafted, themselves.

An opinion will follow when the Court elects to issue one. Van Ness Law Firm will continue to advocate on behalf of its clients at each level of the Florida courts.

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Gov’t, Atty Square Off Over PACER Fees For Court Opinions

By Sam Reisman

Law360 (February 21, 2019, 7:20 PM EST) — A Florida attorney and the federal government on Wednesday clashed over fees for accessing certain documents through PACER, with the attorney arguing they amount to a breach of contract and the government saying while court opinions are usually free, it’s up to the judge to determine what constitutes an opinion.

In dueling briefs, Theodore D’Apuzzo, the Fort Lauderdale litigator who brought the action, and the government clashed over a central question of whether a contract or implied covenant was established between the government and users of the Public Access to Court Electronic Records, and what duties, if any, are owed to users with respect to access to opinions.

“Under the undisputed facts, a contract was formed between the government and plaintiff as to plaintiff’s PACER usage,” according to D’Apuzzo’s brief. “As such, the breach of implied covenant claim is on sound footing, and is in no way duplicative to or contrary to the express terms of the express or implied-in-fact contract.”

The government countered that no such valid contract exists between the government and people accessing court documents through PACER, and any supposed duties owed to PACER users under the alleged contract are without basis.

“While plaintiff alleges that the PACER registration process is an online agreement, it is not a valid contract because it is insufficiently definite,” the government argued.

Furthermore, while the E-Government Act of 2002 mandates that written opinions should be made available for free, the government argued that there is no clear uniform guidance as to what constitutes a written opinion and authoring judges have discretion determining what qualifies as an opinion.

Even if the court finds a valid contract exists between PACER and its users, the government argued, that does not mean the government would be required to undertake new duties, such as standardizing the process by which documents are labeled opinions.

“That opinions are provided without charge does not require the government to take unspecified ‘steps’ to ensure that ‘[Case Management/Electronic Case Files] websites’ use the ‘same methods’ for designating documents as opinions,” the government’s brief said.

D’Apuzzo initially filed his suit in November 2016, arguing individual judges and their staffs are responsible for designating documents as “judicial opinions,” resulting in inconsistencies and PACER users having to improperly pay for access.

He pointed to several documents that he said had wrongly racked up PACER charges, including a 29- page opinion granting a motion to dismiss from the bankruptcy court in the Eastern District of Michigan, a memorandum opinion and order from the District of Columbia, and opinions from the Southern District of Ohio and the Middle District of Florida. Each of the documents was referred to specifically as an “opinion” but was not made available for free, D’Apuzzo claims.
The parties filed cross-motions for summary judgment in December.

“We as the plaintiff feel good about our position and we can only hope the court will agree, as we believe the public does have a right to free access to federal court opinions and that this is an important right worthy [of] fighting for,” Douglas J. Giuliano, counsel for D’Apuzzo, wrote in an email on Thursday.

Counsel for the government did not immediately respond to a request for comment.

A separate class action lawsuit that could have profound implications for PACER fees in general is now before the United States Court of Appeals for the Federal Circuit.

In that action, originally filed in 2016, three nonprofit groups alleged that the judiciary overcharged PACER users and unlawfully used fees collected through the system for expenses other than maintaining the online documents portal.

A federal district judge partially agreed in March and found that some $198 million in PACER fees were misapplied to projects that did not enhance public access to court documents, in violation of the E-Government Act.

The nonprofit organizations have received the support of former U.S. Sen. Joseph Lieberman, who sponsored the E-Government Act, as well as seven retired federal judges and a host of media advocacy and legal organizations. In a Feb. 7 editorial titled “Public Records Belong to the Public,” The New York Times also championed their cause.

“The government’s practice of charging fees to access court documents that are greater than the costs of making those documents accessible is at odds with the text, history and purpose of the E-Government Act,” Lieberman wrote in an amicus brief.

D’Apuzzo is represented by Nicole W. Giuliano and Douglas J. Giuliano of Giuliano Law PA and John Anthony Van Ness and Morgan L. Weinstein of Van Ness Law Firm PLC.

The government is represented by Alicia H. Welch of the U.S. Department of Justice’s Civil Division. The case is Theodore D’Apuzzo PA et al. v. U.S., case number 0:16-cv-62769, in the U.S. District

Court for the Southern District of Florida.

–Additional reporting by Carolina Bolado, Dave Simpson, RJ Vogt and Emma Cueto. Editing by Michael Watanabe.

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GROSSO DEFINES GLASS FURTHER

It is becoming increasingly clear that the voluntary dismissal of a case in which a foreclosure plaintiff lacks standing does more harm than good. A defendant in such a case may claim an entitlement to prevailing party attorney’s fees. Though it may sound illogical, under such circumstances it may make more sense for a plaintiff to take the case to trial and force the borrower to prevail on their argument regarding standing, as a means to prevent the borrower from accessing attorney’s fees.

In Florida, the ability of a borrower to recover attorney’s fees following the dismissal of a foreclosure case is an evolving concept. Florida law permits a borrower to take advantage of attorney’s fees provisions in notes and mortgages: section 57.105(7), Florida Statutes. Section 57.105(7) provides the following:

If a contract contains a provision allowing attorney’s fees to a party when he or she is required to take any action to enforce the contract, the court may also allow reasonable attorney’s fees to the other party when that party prevails in any action, whether as plaintiff or defendant, with respect to the contract. This subsection applies to any contract entered into on or after October 1, 1988. 

Plaintiffs had argued that borrowers who claimed a foreclosure plaintiff lacked standing were incapable of access to this statute, because a plaintiff who lacks standing with respect to a note and mortgage is not a party to the note or mortgage. This argument gained traction, and courts began to explain that where there is no standing for a foreclosure plaintiff, there is no access to reciprocal fees for a borrower. 

However, in Glass v. Nationstar Mortg., LLC, 2019 Fla. App. LEXIS 30; 2019 WL 98152; Case No. SC17-1387 (Fla. 2019), the Florida Supreme Court concluded that a voluntary dismissal renders the borrower a prevailing party and, in the absence of a defined ruling stating that the plaintiff lacks standing, there has been no demonstration that the plaintiff is not a party to the note or mortgage. The Fourth District Court of Appeal has carried this logic into Grosso v. HSBC Bank USA, N.A., No. 4D17-2874 (Fla. 4th DCA Feb. 6, 2019). In Grosso, the court distinguishes between voluntary dismissals without prejudice and involuntary dismissals:

In this case, HSBC voluntarily dismissed its complaint, thus rendering the homeowner the prevailing party for purposes of attorney’s fees. Notably, the trial court never made a judicial determination that HSBC or the homeowner was not a party to the contract. Additionally, HSBC maintained in its complaint a right to enforce the contract.

If it had been demonstrated that plaintiff lacked standing, there would have been room to argue that the borrower was not entitled to the reciprocal fees provision contained in section 57.105. In other words, forcing the borrower to have their day in court and prove their defense could have resulted in a better outcome for the plaintiff.

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NEW TREND EMERGING IN FL FORECLOSURES

View this article on DS NEWS

 A new matter has come to our firm which is strikingly similar to another recent case we had. The borrowers are alleging fraud based on “new evidence” discovered after an expert reviewed the loan documents. In this case, an eight year old assignment from MERS was the allegedly fraudulent conveyance despite the fact judgment was entered three years earlier. They are attempting to vacate judgment and sanction all parties supported by an attorney expert affidavit(s). In the other case, a separate suit was filed by the borrowers for fraud based on allegedly forged loan documents (note, mortgage, etc.) after an expert review. This review was performed about four years after entry of judgment and they had lost their appeal. One would think the borrowers would have used that defense the first time around if they did not sign the loan documents. Our firm was successful in procuring dismissal of the latter claim, as well as sanctions against the borrowers by virtue of a 57.105 motion pursuant to the Florida Statutes. Both of these cases seem to be part of an emerging trend as the cases and attorneys are unrelated but the logic is unique. We have learned that other law firms have seen the same types of tactics recently with the use of post judgment expert review on cases already adjudicated.  

Any legal practice area with sufficient volume goes through litigation trends. In foreclosure, there have been trends with regard to standing and conditions precedent, amongst other pleading rules and requirements. As the defense bar attempts to take various, new positions in foreclosure cases, precedent gets developed once trial court cases move through the appellate process.  

This new trend is the attempted use of experts to overcome the doctrines of res judicata and estoppel by judgment. The process appears to be as follows: (1) the plaintiff files a complaint to enforce a note and foreclose a mortgage; (2) the borrower either does or does not defend the claim, but in any event does not endeavor to use expert testimony to claim that the note is inadmissible due to fraud; (3) the plaintiff proceeds to judgment in its favor; and (4) the borrower either moves to vacate the judgment or files an independent action for damages, premised on expert testimony that the note is in some way fraudulent. These actions by borrowers may be barred by either res judicata or estoppel by judgment. An action is barred by the doctrine of res judicata where there exists: (1) identity in the thing sued for; (2) identity of the cause of action; (3) identity of persons and parties to the action; and (4) identity of the quality or capacity for or against whom claim is made. Rhyne v. Miami-Dade Water & Sewer Auth., 402 So. 2d 54, 5 (Fla. 3d DCA 1981). An action is barred by estoppel by judgment under the following circumstances: 

Where the causes of action are different, the doctrine of estoppel by judgment comes into play, in which case the parties are precluded from relitigating matters actually litigated and determined, but only those matters, and not matters which were in fact not litigated in the former action, even though such matters might properly have been determined therein. Thus, before a litigant is barred under the doctrine of estoppel by judgment, it must appear that the points or questions involved in the subsequent action were determined in the prior action. 

Green v. State, 412 So. 2d 413, 414 (Fla. 3d DCA 1982). Courts enforce these bars to litigation because there is an interest to there being an end to litigation and an ultimate point of determination. In other words, it is a disservice to the law to allow the finality of judgments to be diminished. 

Borrowers attempting to use expert testimony to revive cases that have reached their final conclusion may be blocked by the doctrines of res judicata or estoppel by judgment. What’s more, the conduct of this attempted expert testimony may be sanctionable, pursuant to section 57.105, Florida Statutes. An aggressive approach to terminating this litigation may ebb the trend of borrowers’ counsel employing these particular experts in cases that have been concluded.