Public or Private? Right To Counsel Of Your Choosing May Depend On Whether You Have Private Counsel Or Appointed Counsel

by: Peter J. Gallagher (@pjsgallagher)

I don't usually post about criminal law cases but the Appellate Division's recent opinion in State v. Martinez hit close enough to home that I thought it was worth a few words. (I apologize for the uncharacteristically long title. Professor Cole, one of my journalism professors from college, would not be proud.)

A few years back I was fortunate enough to be asked to represent the Association of Criminal Defense Lawyers of New Jersey (ACDL-NJ) as amicus curiae in a case before the New Jersey Supreme Court — State v. Miller — that involved a similar issue to the one addressed in Martinez. Miller involved a defendant who was represented by the public defender's office. In the weeks and months leading up to the trial, defendant had been dealing with one public defender, but on the morning of trial a different public defender showed up to represent him. The trial court denied defendant's request for an adjournment, and forced defendant to go to trial with a lawyer he met for the first time on the morning of trial. Defendant was convicted and appealed the trial court's denial of his adjournment request. Both the Appellate Division and the Supreme Court affirmed the trial court's decision. Over an impassioned dissent from Justice Albin, the Supreme Court held that "it would have been preferable for the trial judge to have postponed the commencement of the [trial]," but that the decision to not do so was not an abuse of the trial court's broad discretion to control its own calendar and did not violate the defendant's right to counsel.

In Martinez, the facts were slightly different. Most importantly, as it turns out, unlike Miller, the defendant in Martinez was not represented by a public defender but was instead represented by private counsel. In Martinez, defendant retained a law firm to represent him and expected a specific partner from that firm to represent him at trial. However, the partner was not available on the trial date because of a conflict with another matter. It appears that both the prosecution and defense expected and agreed that the trial date would be adjourned to accomodate the partner's schedule, but the trial court refused to do so. Over defendant's objection, the trial court forced defendant to go to trial, not with the partner that he expected would handle the case, but with an associate from the partner's firm. By all accounts, the associate was capable and experienced, but defendant nonetheless objected to having to go to trial with counsel that was not the counsel he chose.

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Another Reminder That Even When You Win You Still Lose Under The New Jersey Consumer Fraud Act

by: Peter J. Gallagher

The Appellate Division issued an unpublished decision today that again emphasizes the power (some might say, inequity) of the New Jersey Consumer Fraud Act. In Logatto v. Lipsky, plaintiffs hired defendant to build an addition on their home and perform other renovations. Although defendant prepared a written proposal with cost estimates, he never prepared a written contract. After the project was 90% complete, and plaintiffs had paid him $247,500, defendant notified plaintiffs that actual expenses exceeded the proposed costs, and therefore he required an additional $78,469.37 to complete the project. Plaintiffs refused and, when the parties could not come to a resolution on the issue, defendant left the job. Plaintiffs then sued defendant under the Consumer Fraud Act for the costs of completion of the project, and defendant counterclaimed for $50,000 in unpaid costs. Both parties moved for summary judgment, but both motions were denied.

The case was tried to a jury. After plaintiffs put on their evidence, they moved for judgment on liability in connection with their Consumer Fraud Act Claims. The trial court granted the motion, finding that there were technical violations of the Act (failure to have a signed contract and change orders). However, the trial court left the question of whether plaintiffs had suffered an "ascertainable loss," a requirement under the Consumer Fraud Act, to the jury. The jury ultimately returned a verdict in favor of defendant, finding that plaintiffs did not suffer any ascertainable loss. After the verdict, however, plaintiffs moved for, among other things, fees and costs under the Consumer Fraud Act. The trial court denied the motion, but the Appellate Division reversed the trial court and remanded the issue back to the trial court for disposition of the fee motion.

You may be asking yourself – how is this possible? How can a defendant prevail at trial but still be responsible for the plaintiffs' legal fees? What happened to the "American Rule"? The answer to all of these questions is, the New Jersey Consumer Fraud Act. Under the Act, as it has been interpreted by the New Jersey Supreme Court — in cases like Cox v. Sears Roebuck & Co. and Weinberg v. Sprint Corp. — plaintiffs can recover costs and fees if they prove that a defendant committed an unlawful practice, even if the victim cannot show any ascertainable loss. While a plaintiff cannot recover treble damages under the Act without an ascertainable loss, it can still recover its costs and fees. What this means is that if a plaintiff survives summary judgment and presents a prima facie case of ascertainable loss, it will be able to recover its costs and fees even if, as in the Logatto case, it ultimately loses on the merits at trial.

This case, like seemingly every other decision handed down in connection with the Consumer Fraud Act, should be a cautionary tale for any business or entities that sell products or provide services that are covered by the Act.

You Got A Better Idea?!? Government Opens Suggestion Box For Ideas On How To Rent Out Foreclosed Properties

by: Peter J. Gallagher

The New York Times is reporting that the government is soliciting ideas for turning its glut of vacant, foreclosed houses into rental units that could be managed by private parties or sold in bulk ("U.S. Seeks Ideas On Renting Out Foreclosed Property"). The goal of the program would be to "stabilize neighborhoods where large supplies of empty, foreclosed properties have hurt property values" and "clear the nation’s balance sheet of real estate holdings that, because they have been difficult to sell individually, have hung over the housing market and stunted sales of existing homes and new construction." The request for ideas comes from the Federal Housing Finance Agency, the Department of Housing and Urban Development, and the Treasury Department, and you can click here to submit your ideas.

As the article notes, the percentage of homes owned by the government that are currently in foreclosure is somewhat staggering:

Of the 248,000 homes owned by Fannie Mae, Freddie Mac and the F.H.A. at the end of June, 70,000 were listed for sale, said Corinne Russell, a housing finance agency spokeswoman. The remainder were not yet on the market or the agencies had already received an offer from a prospective buyer.

But it is possible that hundreds of thousands of more homes that are now in the foreclosure process could come into the possession of the federal government in the next few years, housing experts say.

The government is now looking for a few good men ideas for how to deal with this crisis. Among those already proposed are "rent-to-own programs, in which previous homeowners or current renters could lease properties as a path to ownership, and ways in which the properties can be used to support affordable housing."

If you have any thoughts, be sure to let us know when you let the government know.

Surprise! You Don’t Have To Pay As Much As You Thought On That Mortgage

by: Peter J. Gallagher

Last week, Bank of America agreed to a multi-billion dollar settlement with upset investors who had purchased securities comprised of subprime mortgages originated by Countrywide Financial (which Bank of America acquired in 2008) and serviced by Bank of America ("Bank Of America Settles Claims Stemming From Mortgage Crisis"). Among other things, the investors claim that that Countrywide "created securities from mortgages originated with little, if any, proof of assets or income," and that Bank of America then "failed to heed pleas for help from homeowners teetering on the brink of foreclosure." While the settlement still needs to be approved by a judge, and has already run into some opposition ("Investors Challenge Bank Of America Settlement" and "Bank Of America's Proposed Mortgage Debt Settlement Criticized"), it was generally seen as the first major concession by a bank in connection with its role in the mortgage meltdown

On the heels of this settlement comes news that Bank of America (along with JPMorgan and a few other lenders) is also taking a more proactive approach with homeowners who are not even in default. As the New York Times reports in its article, "Big Banks Easing Terms On Loans Deemed As Risks," the banks are "quietly modifying loans for tens of thousands of borrowers who have not asked for help but whom the banks deem to be at special risk." The article tells the story of Rula Diosmas, a Florida (of course) woman who had $150,000 shaved off of the mortgage of her Miami condominium by JPMorgan even though she did not request a modification and was not in default. The bank explained its reasoning as follows:

Banks are proactively overhauling loans for borrowers like Ms. Giosmas who have so-called pay option adjustable rate mortgages, which were popular in the wild late stages of the housing boom but which banks now view as potentially troublesome.

. . .

Option ARM loans like Ms. Giosmas’s gave borrowers the option of skipping the principal payment and some of the interest payment for an introductory period of several years. The unpaid balances would be added to the body of the loan.

. . .

“By proactively contacting pay option ARM customers and discussing other products with better options for long-term, affordable payments, we hope to prevent customers from reaching a point where they struggle to make their payments,” Mr. Frahm [a spokesman for Bank of America] said.

The banks' efforts have not come without some critism, however, including the claim that the banks are behaving in "contradictory and often maddening ways" — showing concern for those who might get in trouble while at the same time being punished by regulators for doing a poor job modifying mortgages that are already in default.