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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.

 

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.

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.

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:

http://www.4dca.org/opinions/May%202016/05-18-16/4D14-4518.op.pdf