By the Hour or the Job

By the Hour or the Job

While a federal court upholds foreclosure lawyers' fees, the law firms still sought help from the Legislature.

By Francis X. Gilpin

Associate Editor

A half-dozen Florida law firms, including three in Tampa, have turned their foreclosure practices into efficient business enterprises. They have not done so without criticism, particularly from inside the legal profession.

But the firms and their advocates answer the critics by pointing to a Tallahassee court ruling in 2000 that favored the Tampa office of Codilis & Stawiarski PA, another high-volume litigator for lenders.

"A federal judge was looking at this on the part of the debtors, the consumers, and said basically: 'You don't have a complaint,' " says Donald A. Smith Jr., who represents Michael J. Echevarria.

Joseph J. Circelli, Tampa managing partner of Codilis & Stawiarski, says U.S. District Court Judge Robert L. Hinkle's order in favor of his firm speaks for itself. "All I can tell you is I've been doing this for a lot of years and our firm does everything on the up and up," Circelli told GCBR.

Codilis & Stawiarski was accused of violating federal and state debt-collection laws by tacking on allegedly excessive fees that homeowners who had defaulted on their mortgages were forced to pay to get back their dwellings before foreclosure sale.

Each year Codilis & Stawiarski and the other firms, including Echevarria's, file nearly 75% of the 59,000 or so residential foreclosure actions in Florida, the Tallahassee Democrat newspaper reported in a 1999 story about the litigation.

Hinkle saw an economy of scale at work that benefited Codilis & Stawiarski clients.

"The firm has developed an assembly-line operation that allows it to handle foreclosures at rates substantially below what many other attorneys would charge," the judge wrote.

Hinkle noted that lenders desire foreclosure litigation expenses as low as possible. Although some borrowers do repay costs such as postage and title searches with the reinstatement of a mortgage, lenders cannot expect to recoup those expenses from a foreclosure sale.

Lead plaintiff Walter E. Beck got his mortgage reinstated and claimed Codilis & Stawiarski inflated the flat fee he was charged for its services. By statute, the plaintiffs argued, lender attorneys are supposed to bill by the actual hours they worked.

"The law firm responds that it keeps its rates low in part by refusing to waste time keeping time records," Judge Hinkle wrote, siding with Codilis & Stawiarski. "Nothing in Florida law requires attorneys to charge by the hour. To the contrary, flat fees have been around longer than hourly fees and can be every bit as lawful. The amount at issue here - $1,000 per foreclosure - was reasonable, indeed, cheap."

Likewise, Hinkle belittled the plaintiffs' assertion that a $300 title search fee was illegitimate because a title insurance arm of Codilis & Stawiarski didn't bill for that work by the hour. "Nothing in Florida law prohibits holding plaintiffs to their express agreement to pay their lenders' reasonable collection expenses, including the admittedly reasonable combined fee of $1,300 for attorneys' fees and title search fees," the judge wrote.

Hinkle did not completely vindicate Codilis & Stawiarski.

The judge found that the law firm filed false affidavits when it did try to itemize some fees. "The purported hours times the purported rate yielded the exact amount of the claimed fee," Hinkle wrote in a footnote to his opinion.

Codilis & Stawiarski argued that the affidavits shouldn't be taken literally, only as a guide to what would be a reasonable amount of time for each task.

"That explanation, however, is conspicuously absent from the affidavits themselves," Hinkle wrote. "Under any fair reading, the affidavits constituted a false representation of the actual hours worked and actual hourly rate."

But Hinkle ruled that the plaintiffs could recover nothing. The judge cited common law and case law in deciding that witnesses enjoy absolute immunity from civil liability when making sworn statements in legal proceedings, even when testimony is untrue.

"Submission of false affidavits by attorneys is particularly troublesome," wrote Hinkle. "Any appropriate remedy based on the affiants' status as attorneys is a matter for consideration by the Florida Bar."

Following an appeal of Hinkle's December 2000 dismissal of the claims, the plaintiffs accepted Codilis & Stawiarski's offer to settle the dispute.

"Throughout this litigation, C&S has denied and continues to deny any and all allegations made by the plaintiffs in this matter," Paula Wade Greene, a Tampa lawyer for Codilis & Stawiarski, stated in an affidavit of support for the settlement. "It acted in good faith and without knowledge of or participation in any alleged wrongdoing."

Plaintiff lawyers took one-third of the $295,000 settlement as their fee, according to court records.

Similar suits filed mostly in Tallahassee, including one that Plantation attorney David J. Stern's firm settled for $2.1 million in 2000, prompted the foreclosure lawyers to go to the Legislature for relief.

Tampa-based Echevarria & Associates PA formed the Association of Florida Foreclosure Attorneys, and the group employed five lobbyists. In 2001, Gov. Jeb Bush signed a bill, forwarded to him by fellow Republicans, limiting damage awards for class-action plaintiffs under the Florida Consumer Collection Practices Act.

The new law was tinged with irony. A group of lawyers, normally a Democratic constituency, gained a bit of protection from, of all things, big court judgments.