Entrepreneurial Inmate Loses Lawsuit

by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Jail (pd)While pro se lawsuits by prisoners are not unusual, you don't see ones like Tormasi v. Hayman every day.

In Tormasi, plaintiff sued several officials from the prison in which he was serving a life sentence. In the lawsuit, he claimed that they improperly seized his intellectual property assets and corporate records. As the Appellate Division explained: "During his incarceration, plaintiff acquired various intellectual property assets, which he assigned to Advanced Data Solutions Corporation (ADS) in exchange for sole ownership of the corporation." At some point during his incarceration, prison officials seized plaintiff's personal property, including: "1) miscellaneous corporate paperwork related to ADS . . 2) patent-prosecution documents; 3) an unfiled provisional patent application; 4) several floppy diskettes; and 5) various legal correspondence." Plaintiff sued in federal court, asserting a claim under the Takings Clause of the Fifth Amendment to the U.S. Constitution, various federal civil rights claims, and a state law claim for inverse condemnation.

 

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Chickens Continue Coming Home To Roost For Lenders And Mortgage Companies Involved In Foreclosure Crisis

by:  Peter J. Gallagher and Steven P. Gouin

Our regular followers know that many of our pieces focus on the foreclosure industry, and with good reason, as over 2 million American homes are currently in foreclosure.  Add to this troubling statistic the recent allegations of shoddy paperwork at many of the nation's largest mortgage companies and the law firms representing them, and you have the makings of a compelling story of a giant foreclosure-induced catastrophe.  While homeowners have been feeling the pain from this crisis for years now, the catastrophe struck close to home recently for many of the banks and mortgage companies at the heart of the foreclosure crisis. 

In an article entitled “Confidential Federal Audits Accuse Five Biggest Mortgage Firms Of Defrauding Taxpayers,” the Huffington Post is reporting that a recent federal audit conducted by the Department of Housing and Urban Development (HUD) revealed that five of the nation's largest foreclosure firms, including industry giants like CitiBank and Bank of America, are guilty of fraud under the Federal False Claims Act.  Specifically, the audit concluded that the banks “filed for federal reimbursement on foreclosed homes that sold for less than the outstanding loan balance using defective and faulty documents.”  According to the article, federal prosecutors are debating whether to use the audits as the basis for criminal and civil sanctions against the mortgage companies. 

At the same time, the New York Times is reporting that New York Attorney General Eric Schneiderman has requested information and documents from three major banks – Goldman Sachs, Bank of America, and Morgan Stanley – about their mortgage-backed securities operations (“NY State Investigates Banks’ Role In Financial Crisis”).  This suggests that Mr. Schneiderman may be launching an investigation into the banks' practices, which many believe led to billions in mortgage losses.  One of the most interesting aspects of the article is the suggestion that, by requesting this information from the banks, Mr. Schneiderman is “operating independently of peers from other states who are negotiating a broad settlement with large banks over foreclosure practices.”  The article notes that Mr. Schneiderman has been unwilling to join this proposed settlement because the banks are demanding that it include a clause whereby regulators agree not to conduct additional investigations into the banks’ activities during the mortgage crisis.

New Jersey Reaches Settlement With Six Large Residential Lenders Over Foreclosure Proceedings

by:  Michael L. Rich

The State of New Jersey and six of the country’s biggest residential mortgage lenders reached a settlement agreement announced on March 18, 2011 concerning foreclosure practices.  The financial institutions and their home loan servicing divisions are Bank of America, CitiBank, GMAC, JP Morgan Chase, One-West Bank and Wells Fargo Bank.

The settlement comes four months after New Jersey Supreme Court Chief Justice Stuart Rabner issued a three-part Order to address rogue foreclosure filings and procedures, including apparent instances of “robo-signing” of certifications in support of foreclosure filings.  In the December 2010 Order, Justice Rabner cited a staggering increase in residential foreclosure cases and concerns that had been raised that foreclosures were being “rubber stamped” based on inadequate or incorrect paperwork.  The six financial institutions were ordered to show cause why their residential foreclosure filings should not be halted pending further review.  In response, the banks maintained that they had already begun making changes and were being unfairly targeted by the State.

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Real Property Featured On NPR’s Marketplace

by:    Peter J. Gallagher

As readers of this blog will soon learn, I am a fan of the NPR show Marketplace.  On Monday night, the broadcast was heavy on real property stories.

One story, "Foreclosure Focus Of Protest, Talks," dealt with an issue that Michael L. Rich wrote about recently on this blog ("Time To Pay The Piper? Large Banks May Face Big Fines For Mortgage Practices").  State attorneys general are aggressively pursuing some of the nation's biggest banks in connection with alleged improprieties in their mortgage foreclosure paperwork.  The NPR story notes that the attorneys general and other regulators could look for help in this regard to the newly created Consumer Financial Protection Bureau ("CFPB"), but the CFPB currently lacks clear enforcement authority (not to mention a director that has been confirmed by the Senate), so its role in the crisis remains uncertain. 

Another story, "Homeowners Try To Protect Their Property From Oil Boom,"  hits slightly less close to home but was no less interesting.  This one dealt with the concept of "split estates," whereby homeowners own the property where their house sits, but not the rights to the minerals found in the land under their homes.  The problem generally arises in the western United States where the government historically sold ranch land for development, but retained the mineral rights under the land.  It has now become a problem for some homeowners who are concerned about the disruptions that exploration under their homes could cause and the potential environmental and health impacts that mining could have on the area.