Collapse of David J. Stern law firm throws Tampa foreclosure courts into disarray

Collapse of David J. Stern law firm throws foreclosure courts into disarray

By Susan Taylor Martin, Times Senior Correspondent
In Print: Wednesday, March 9, 2011


Attorney David J. Stern, whose law firm was once known as Florida’s top foreclosure “mill,” owns this $16 million Fort Lauderdale home. Now, as Stern himself faces financial difficulties, some of his property and other assets are up for sale.
Attorney David J. Stern, whose law firm was once known as Florida’s top foreclosure “mill,” owns this $16 million Fort Lauderdale home. Now, as Stern himself faces financial difficulties, some of his property and other assets are up for sale.
[Broward County Property Appraiser]
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As many as 20,000 foreclosure cases in the Tampa Bay area have been left in limbo by the virtual collapse of the David J. Stern Law Firm, once Florida’s most prolific foreclosure “mill.”

The firm’s implosion gives many borrowers at least a temporary reprieve from foreclosure and means that thousands of cases could be dismissed unless lenders quickly hire other attorneys.

“It’s a mess,” Pinellas-Pasco Chief Judge Thomas McGrady said Tuesday.

In a letter dated March 4, Stern notified McGrady and other chief judges that as of March 31 the firm will end its involvement in all 100,000 foreclosure cases statewide in which it is still listed as attorney of record. Bank of America and other Stern clients jettisoned the firm last year because of its allegedly sloppy, fraudulent practices, but in many cases have yet to hire anyone to replace him.

“It’s just put the brakes on being able to move forward in these thousands of cases we have, and so they either get counsel or get rid of the case,” McGrady said.

In his letter to the judges, Stern acknowledged that his firm is basically out of business.

“We have been forced to drastically reduce our attorney and paralegal staff to the point where we no longer have the financial or personnel resources to continue to file motions to withdraw in the tens of thousand of cases that we still remain as counsel of record,” he wrote. “Therefore it is with great regret that we will be ceasing the servicing of clients” by month’s end.

Attached to each letter was a list of Stern cases in that particular judicial circuit. In Pinellas-Pasco, the list is 251 pages with a total of about 10,000 cases — a third of all pending foreclosures.

McGrady said his staff is working on orders requiring banks to show cause why their foreclosure suits should not be dismissed if they fail to get timely substitute counsel. In some cases, McGrady said, a new attorney has appeared but without proper legal authority. In other cases, more than one law firm has claimed to represent the same bank.

“Then what do we do?” he asked.

In Hillsborough County, Stern is still attorney of record in just under 10,000 cases, of a total of 25,000 pending foreclosure suits.

Chief Judge Manuel Menendez Jr. said he doubts that Stern’s letter frees him from the responsibility of legally withdrawing from the cases.

“You can’t just walk away,” Menendez said. “I think he’s written the letter in attempt to circumvent the rules of judicial administration.”

For much of his legal career, the 50-year-old Stern has been dogged by allegations of improper and unethical conduct.

In 1999, he agreed to pay $2.1 million to borrowers who said in a federal lawsuit that his firm overcharged them for title searches, postage and other expenses, then submitted “false and fraudulent” invoices to support the charges.

In 2002, the Florida Bar publicly reprimanded Stern over similar allegations involving title insurance.

“Actions such as yours reduce respect for the legal profession and diminish the effectiveness of our system of justice,” the Bar said.

Nonetheless, Stern’s Broward County foreclosure practice grew into the state’s largest, eventually handling one in every five foreclosure suits filed in Florida.

Early last year, Stern netted nearly $60 million when he sold his back-office operations to a new public company, DJSP Enterprises. He lived an extravagant lifestyle, with yachts, high-end cars and luxury properties, including a $16 million waterfront home with tennis court in Fort Lauderdale.

But in August, the Florida Attorney General’s Office announced it was opening criminal investigations of Stern’s firm and two others for filing “improper documentation” designed to speed up the foreclosure process. Defense attorneys said Stern cases were riddled with fraud and errors, and Bill Warner, a Sarasota private investigator, said the firm started foreclosing on him even though it had the wrong Bill Warner.

“They are the sloppiest, most disorganized bunch you’ve ever seen in your life,” said Warner, who is among several homeowners and shareholders suing Stern in various courts.

As lenders began removing their files, Stern laid off hundreds of employees, including attorneys. Some of Stern’s property and other assets are up for sale.

The collapse of the firm also means that court-ordered mediations are on hold for more than 100 Pinellas and Pasco homeowners hoping to negotiate with their lenders.

“The problem is that there’s not a new attorney in a lot of the cases so there’s not much we can do but wait on them,” said Dick Rahter, president of Mediation Managers in Clearwater.

“Some program managers around the state are just closing the cases, but we don’t want to do that because that’s taking away the borrower’s right to have mediation,” Rahter said. “It’s not their fault, it’s because of the problem with Stern.”

Susan Taylor Martin can be contacted at susan@sptimes.com.

11 Responses

  1. David J. Stern’s disregard for the rule of law is outrageous. He can’t simply right a letter to each circuit stating that he’s withdrawing. By the time any of these cases receive any attention, the homeowners who were willing and able to make a modified mortgage payment will no longer be able to due to the arrearages. I wonder what Stern’s malpractice policy limits are?????

  2. I don’t understand why we, who are in the know, haven’t organized protests concerning these egregious foreclosure and securitization issues. THERE’S POWER IN NUMBERS & UNITY!!! We can sit around and be mad all day long, but thats almost guaranteed to get us nowhere. Have we not learned anything from the Egyptians?!?! Just sayin

  3. […] this article: Collapse of David J. Stern law firm throws Tampa foreclosure … Tags: break-the-law, court, fraud, law-offices, still-alive, system-were, the-court, […]

  4. gonna need more ammo.
    smells like the gloves are coming off

  5. Nothing will be done to stop this. Last year there were many depositions where the person being deposed admitted to all sorts of things. And nothing done about it, not one damn thing. The law offices proceeded with their fraud as if it meant nothing. So what if we break the law, we can get away with it attitude is still alive and kicking. You would think that if the court and legal system were going to take this seriously, the would have done so by now. There is no justice for the people who were so wrongly thrown out of their homes.
    There are others like Stern who have made millions by destroying peoples lives and they get to walk this earth like they have done everyone a favor. Why is that? Where is the justice?

  6. There’s gonna be some more ‘disarray’, this time in Maryland.
    A former employee of a law firm (Shapiro & Burson) in Virginia allegedly filed an affidavit swearing to forgery as to the signature, and notary fraud on trustee’s foreclosure deeds on up to a thousand deeds. The deeds? Dang.
    Apparently, the deeds were not signed by the person whose name is on the deed:

    http://www.scribd.com/doc/50416131/Maryland-Law-firm-accused-of-Forgery-in-Foreclosure-Trustee-Deeds

  7. I can assure you that if you or I were to walk into any store in America tonight and steal even the most insignificant item and get caught, most likely we would be booked or put in jail for shop lifting, for sure!!! and yet here is one of he biggest thieves and scum bags that stole millions and millions of dollars from the American people and here he is laughing his ass off at his mansion!!! I’m VERY confused at the legal system and the way it works at this point in America. Go figure……I steal a 5 dollar item i go to jail, he steals millions and he is still out!! boy oh boy!!!

  8. @ usedkarguy

    What really confuses me is how the attorney for one of the defendants can represent the Plaintiff in this case. The Voluntary Dismissal was from the Plaintiff and a document was filed with the Clerk canceling the Lis Pendens.

  9. There should be a subsequent order of withdrawal of the action requested by plaintiffs and entered as an order by the judge. Then they have to come back and re-file the action with new attorneys.

  10. In my case, the following was filed in Lee County on 2-1-11

    Notice to Withdraw as Counsel for Plaintiff (Stern’s outfit)

    Notice of Appearance- By the attorney representing the Defendant for the Second Mortgage Bank

    Voluntary Dismissal by Plaintiff without Prejudice- Again signed by the Attorney who is defending the Second Mortgage Bank, not the Plaintiff Bank

    Final Disposition Form- Signed by the Attorney who is defending the Second Mortgage Bank. And this formed is not filled out although the case disposition says “Other, Dismissal after Hearing”

    The Order Granting Withdrawal of Counsel was filed 2-10-11

    Any clues what all this means?

  11. Oh, what a feeling…the utter JOY of schadenfreude at news of this unspeakably vile wretch’s well-deserved downfall. Hahahaha.

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