Consumer Financial Protection Bureau found structurally unconstitutional

The U.S. Court of Appeals for the District of Columbia has found unconstitutional the structure of the Consumer Financial Protection Bureau (“CFPB”), the Bureau proposed by Elizabeth Warren to ward against abuses by financial institutions. The ruling challenges the construct that a congressionally-established independent agency may be headed by a single director who may only be removed for cause.

Initially, the court states, the CFPB was to be “another traditional, multi-member independent agency.” However, as the court concludes, the CFPB was ultimately established as “an independent agency headed not by a multi-member commission but rather by a single Director.” It is the latter part of this statement, “… by a single Director,” that the court finds problematic, within the framework of an independent agency. The court holds that the single-director structure, in the context of a congressionally-created independent agency, departs from history and threatens individual liberty, for reasons bound up in agency control and the separation of powers. The court also takes issue with the limitation on the executive’s ability to remove the head of that agency. The court’s remedy is to have the CFPB operate as an executive agency, of which the President “now has the power to supervise and direct the Director of the CFPB.” The court also holds that a three-year statute of limitations was applicable to the enforcement action in dispute.

Judge Henderson, concurring in part and dissenting in part, states that the opinion unnecessarily reaches the question of the constitutionality of the CFPB. Given that there were other reasons to reverse the award in the enforcement action, she opines, the court should have not decided “a constitutional question,” because “there is some other ground upon which to dispose of the case,” citing Nw. Austin Mun. Util. Dist. No. One v. Holder, 557 U.S. 193, 205 (2009); Rostker v. Goldberg, 453 U.S. 57, 64 (1981). This position will likely come up, should this case be subject to further appeal.


Hurricane Matthew and Avulsion

Hurricanes can affect property rights, particularly along the coastline. If property is changed suddenly, Florida law treats rights of coastal, upland land owners differently with regard to the addition or subtraction of property. The difference comes down to timing and terminology.

A “gradual and imperceptible” change may trigger possessory interests. While there is a right to possess lands that may come from gradual change, that right is “a contingent, future interest that only becomes a possessory interest if and when land is added to the upland by accretion or reliction.” Walton County v. Stop the Beach Renourishment, Inc., 998 So. 2d 1102 (Fla. 2008).

“Accretion” and “reliction” are bound up with “erosion.” Erosion is “the gradual and imperceptible wearing away of land from the shore or bank.” Id. Accretion is “the gradual and imperceptible accumulation of land along the shore or bank of a body of water.” Id. Reliction is “an increase of the land by a gradual and imperceptible withdrawal of any body of water.” Id.

In contrast, “avulsion” is “the sudden or perceptible loss of or addition to land by the action of the water or a sudden change in the bed of a lake or the course of a stream.” In other words, the key is whether the loss or gain is “gradual and imperceptible,” versus “sudden or perceptible.”

With regard to either an accretion or an avulsion, the deposit of land that is added to the shore or bank is called an “alluvion.” Id.

Under the doctrines of erosion, reliction, and accretion, “the boundary between public and private land is altered to reflect gradual and imperceptible losses or additions to the shoreline.” Id. However, “under the doctrine of avulsion, the boundary between public and private land remains the” mean high water line “as it existed before the avulsive event led to sudden and perceptible losses or additions to the shoreline.” Id.

Hurricanes are “generally considered avulsive events that cause avulsion.” Id. Therefore, alluvion created by hurricanes would not typically alter the boundary line between public and private lands, for the purpose of access to the water, etc.

First District Clarifies Jurisdictional Limits for Declaratory Relief

In Helfrich v. City of Jacksonville, 1D15-1095 (Fla. 1st DCA Oct. 4, 2016) the court withdrew its initial opinion and substituted an opinion which discusses the types of issues that are ripe for a party to seek declaratory relief. Appellant, a former employee of the City of Jacksonville, sought an interpretation of the term “contributions” in the City of Jacksonville’s General Employees Retirements Plan. Having left the employ of the city, the employee was faced with two choices: (1) elect to vest her for deferred retirement and leave her own contributions in the fund; or (2) elect to rescind her vested rights and received a refund of her accumulated contributions. The employee had yet to make a choice between the two options.

The city had also made payments to the fund during the time of Appellant’s employment. If “contributions” included those contributions made by the City of Jacksonville, then it might have been advantageous for the employee to rescind and receive those contributions. The employee sued for declaratory relief, seeking a declaration that “contributions” included those payments made by the city.

The trial court noted, and the appellate court agreed, that it did not have jurisdiction to issue a ruling, because the employee had yet to elect to vest or rescind. In order for a court to have jurisdiction to issue a declaration, it needs to be dealing with a “present, ascertainable state of facts or present controversy as to a state of facts.” The court held that, prior to the employee’s election of either of her two options, there was no “present” controversy, but instead a hypothetical, potential, future controversy.

Court Clarifies Standards on Testimony

In Ocwen Loan Servicing, LLC v. Gundersen, 2016 Fla. App. LEXIS 14533 (Fla. 4th DCA Sept. 28, 2016), Florida’s Fourth District Court of Appeal clarified the standards by which an employee of a business entity may testify regarding that company’s business records. The law in Florida provides that “hearsay,” which is an out of court statement offered for the truth of the matter asserted, is not admissible at trial, unless it meets the qualifications of a particular exception to the rule against the admission of hearsay. An entity’s “business records” qualify as evidence which is admissible, regardless of whether they are hearsay. However, there is a question as to who may testify about such records, particularly where the records were first created by a different business entity.

Where one business acquires another business’s records and integrates them within its own records, the records are treated as being “made” by the acquiring business. If the acquiring business’s witness can testify that it had procedures in place to check the accuracy of the information received, and if the testifying witness is well enough acquainted with the process, then the records should be admissible.

In Gundersen, the witness demonstrated “sufficient familiarity” with the process. The witness testified that, if the accuracy of the records could not be verified, then the records would not be entered into the acquiring business’s records-keeping system. Although the trial court ruled that the witness was incapable of testifying to the business records, the Fourth District Court of Appeal reversed, claiming that the trial court abused its discretion in excluding the records.

The Gundersen court is not the first appellate court to reach this conclusion. However, the noteworthiness of the presence of the records in a records-keeping system bolsters the ability of a witness to testify as to its company’s records. Additionally, the court seems to indicate that the test of a witness being well enough acquainted with a particular process or category of record should be fairly simple to pass.

Florida Attorney General Going After Alleged Foreclosure Rescue Fraud Companies

The Office of the Attorney General, Department of Legal Affairs, State of Florida, has filed an enforcement action against a number of individuals and entities, alleging that they engaged in a common, deceptive enterprise. The goal of the alleged enterprise was to receive upfront and monthly payments from borrowers, for the representation of such borrowers in foreclosure cases and loss mitigation negotiations. The deception includes, but its not limited to, the unauthorized practice of law by the purportedly offending persons and entities.

Litigation or negotiations with any of the defendants in the enforcement action may be tainted and the defendants may be deemed incapable of binding borrowers. The following is a comprehensive list of the named defendants:

  • Adam Forman
  • Joseph Hilton a/k/a Joseph Starr a/k/a Joseph Yurkin
  • Victor Spagnuolo
  • Wendy Anne Hart a/k/a Wendy Hart Reid
  • Barbara Rudolph
  • Wayne Lucas
  • Asset Protection Law Firm, PA
  • The Asset Protection Law Group, P.A.
  • Consumer Legal Resources of Florida, LLC d/b/a Fresh Start Legal Referral Services, d/b/a/ New Horizons Cust Funding, LLC, d/b/a/ Consumer Legal Advocates Inc., d/b/a Consumer Legal Advocates, d/b/a/ The Asset Protection Law Firm
  • Consumer Legal Advocates II Corp, d/b/a/ The Asset Protection Law Firm, PA
  • Consumer Legal Advocates, Inc.
  • Heritage Law Group PA
  • Heritage Law Processing Inc.
  • Legal Referral Services of Florida II, L.L.C.
  • Liberty Law Group P.A., d/b/a Florida Asset Protection Group
  • Galler Lehman Law, P.A., d/b/a Liberty Law P.A., d/b/a Tanis Galler Law, P.A.
  • Business Administration Growth LLC, d/b/a Lehman Law Group, d/b/a Heritage Title Agency, d/b/a DHS Investments, d/b/a/ Galler Lehman PA, Esq, d/b/a/ Liberty Legal PA, Esq.
  • Selective Housing Solutions
  • Selective Mortgage Corporation

Lis Pendens Stops at Final Judgment, per Fourth DCA

On August 24, 2016, the Fourth District Court of Appeal announced a troubling decision regarding Florida’s lis pendens statute. The case, Ober v. Town of Lauderdale-By-The-Sea, 4D14-4597 (Fla. 4th DCA Aug. 24, 2016), “involves the application” of the statute “to liens placed on property between a final judgment of foreclosure and the judicial sale.” Remarkably, the court holds that liens placed on real property during that timeframe are not discharged by section 48.23, Florida Statutes.

Final judgment was entered in favor of plaintiff in the foreclosure action in 2008. Between 2009 and 2011, a municipality recorded seven liens on the property, relating to code violations. Each violation occurred subsequent to the entry of final judgment. The property was sold in 2012, with a certificate of title being issued. Subsequently, the municipality imposed an additional liens.

The municipality urged that the lis pendens should be deemed to terminate on the date of final judgment, which would mean that the lis pendens would not affect the 10 relevant liens placed on the property. The court agreed, and holds that “a lis pendens bars liens only through final judgment, and does not affect the validity of liens after that date, even if they are before the actual sale of the property.”

This opinion is concerning. It means that, while borrowers are attempting to delay the sale date, and while plaintiff or any would-be purchaser is not in possession of the property, liens may accrue on the property. These liens will encumber the property upon the eventual purchase by someone other than the party that caused the accrual of the liens.

Florida Court Reaffirms Church Immunity

In Mammon v. SCI Funeral Services of Florida, Inc., 2016 Fla. App. LEXIS 7967 (Fla. 4th DCA May 25, 2016), the court reaffirmed Florida’s interpretation of the ecclesiastical abstention doctrine, a defensive doctrine which has only been an issue in a handful of appellate cases in the entire history of the State of Florida.

Plaintiff, a widow, had had her husband buried at a cemetery which promised to bury him in accordance with “Jewish burial customs and traditions.” Upon discovering that there were non-Jewish persons buried at the cemetery, and believing that other practices were not in keeping with such customs and traditions, the widow filed suit, alleging violations of the Florida Funeral Cemetery, and Consumer Services Act and the Florida Deceptive and Unfair Trade Practices Act.

Defendant responded, arguing that the court was without subject matter jurisdiction, due to application of the ecclesiastical abstention doctrine. The ecclesiastical abstention doctrine is rooted in First Amendment protections for religion. Specifically, it provides that courts will refrain, where possible, from settling intra-faith disputes regarding faith.

Defendant alleged that there was an ongoing dispute regarding “Jewish burial customs and traditions” and whether its practices met the standards for such customs and traditions. The Fourth District Court of Appeal agreed, and stated that, to resolve the widow’s claim, the court would have to “first determine what constituted ‘Jewish burial customs and traditions.'”

Court Upholds Class Action Waivers in Arbitration Clauses

Many contracts contain arbitration clauses. These clauses require the parties to submit to binding arbitration, rather than having their day in court. Typically, larger companies push for arbitration clauses. Part of the reason for a larger company to prefer an agreement to arbitrate is that such a clause may effectively waive an adverse party’s right to form a class and prosecute a class action.

In McKenzie Check Advance of Florida, LLC d/b/a National Cash Advance v. Betts, ____ So. 3d ____; 4D15-1893 (Fla. 4th DCA May 18, 2016) the court issued an opinion upholding such a provision. Reviewing a class action waiver in an arbitration clause, the court held that “the arbitration provision’s class action waiver is enforceable, and, therefore,” plaintiff would only be permitted to pursue an individual claim in arbitration.

The outcome of this case stems from a United States Supreme Court case, AT&T Mobility, LLC v. Concepion, 563 U.S. 333 (2011), in which the Supreme Court reasoned that “Requiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA.”

It appears that a class action waiver contained within an arbitration clause may be enforceable, depending upon other issues concerning the particular contract or agreement. Please contact Van Ness Law Firm, PLC, if you would like to discuss such a provision.

Van Ness prevails in due process appeal

On May 18, 2016, the Fourth District Court of Appeal agreed with Van Ness Law Firm, PLC and its client and reversed a final judgment entered in favor of a borrower. In Bank of Am., N.A. v. Fogel, ____ So. 3d ____; 2016 Fla. App. LEXIS 7648 (Fla. 4th DCA May 8, 2016), plaintiff had prevailed, initially, at the trial court level and received a judgment in its favor. Defendant filed a motion for rehearing, raising various issues with the judgment and plaintiff’s case. The trial court entered an order on October 15, setting an evidentiary hearing for October 20 and requiring plaintiff to complete various tasks within five days of the hearing. The order was mailed, not emailed, and was not mailed to an attorney at plaintiff’s law firm.

Van Ness argued that plaintiff had been denied procedural due process, because it was only provided with one business day’s notice of an evidentiary hearing. Van Ness further argued that the additional irregularities, in terms of not mailing the order to an attorney and requiring certain acts to be accomplished in an impossible timeframe, required reversal. The Court agreed, reversed the amended final judgment, and remanded the case to the trial court. A link to the opinion is below:

Florida Court Clarifies the Law Regarding E-Notes

In Rivera v. Wells Fargo Bank, N.A., ____ So. 3d ____ (Fla. 4th DCA Apr. 20, 2016), the court clarified Florida law regarding electronic notes. Plaintiff had sued borrowers who had taken out such a note for foreclosure and was successful at the trial court level. The borrowers appealed, which caused the court to clarify the law with regard to the enforcement and transfer of e-notes, as discussed, herein.


At trial, the borrowers objected to the introduction of a paper copy of the e-note, a certificate of authenticity, and the certificate’s attachments, into evidence. Plaintiff’s witness testified that the certificate of authentication illustrates the recordkeeping of the entity’s e-notes and attests to the e-note in question being in electronic form. The e-note and a document showing electronic possession were attached to the certificate. The borrower’s hearsay objection to this exhibit was overruled and, on cross examination, the witness agreed that there was no hard copy of the original note and there were no endorsements attached to it. On redirect, the witness testified that the payment history contains an acquisition screen which indicates when plaintiff became the servicer of the loan with the right to enforce the note.


The borrowers appealed, alleging, inter alia, that plaintiff failed to establish standing at the inception of the case, because it did not prove the following: (1) that the e-note contained the borrower’s signatures; or (2) that the purported owner of the e-note owned the e-note and authorized plaintiff to pursue the foreclosure. With regard to the borrowers’ first argument, the court reasoned that it was the borrower’s burden to come forward with “some evidence… which would support a finding that the signature is forged or unauthorized,” pursuant to section 673.3081(1), Florida Statutes.


The borrowers’ second argument required further scrutiny. Florida’s Uniform Electronic Transactions Act (hereinafter referred to as the “FUETA”), codified at section 668.50, Florida Statutes, provides in pertinent part that an e-note may be a “transferable record,” because it would be a note under Florida’s adaptation of Article 3 of the Uniform Commercial Code, were it to have been in writing. FUETA also provides that a person has control of such a transferable record if “a system employed for evidencing the transfer of interests in the transferable record reliably establishes that person as the person to which the transferable record was issued or transferred.” Due to the fact that the testimony established that a single authoritative copy of the e-note exists and due to the fact that the subject copy is “unique, identifiable, and unalterable,” the court found that the requirement of reliable establishment relating to the transfer had been met. The court also found the testimony regarding the acquisition screen noteworthy.


FUETA applies to the enforcement and transfer of e-notes, provided that the e-note meets certain, statutorily defined criteria, one of which being that the e-note would be a typical mortgage promissory note, if the e-note were in writing. Transfer of the e-note is governed by a different set of rules than those governing the process of placing endorsements on or attaching allonges to a note. However, that does not mean that FUETA abrogates the State of Florida’s statutory implementation of the Uniform Commercial Code, with respect to e-notes.


Morgan L. Weinstein, Esq.
Van Ness Law Firm, PLC