Specialized Foreclosure Courts Spring-Up in Florida

If you lost your home to foreclosure, would you know who steps into your shoes as the next owner?

Uncertainty answering that question is plaguing an innovative specialized court-system in Florida designed to speed-up the foreclosure process.  The recently tallied second quarter found Florida leading the nation in the proportion of delinquent or foreclosed mortgages: 20.13%.

This high mortgage failure rate is nurtured by the poor economy which has driven home values so far down, nearly half of all Floridian home-owners now owe more on their mortgages than their homes are worth.  To combat this problem, the Florida legislature recently allocated ten million dollars to implement a high-speed "foreclosure only" court system.

Florida's Ninth Judicial Circuit Chief Judge, Belvin Perry, Jr, reported last month in the Florida Bar News that the foreclosure court disposed of 1,319 cases in July alone.  While impressive, this case-completion rate will not make a dent in the nearly half million homes awaiting the requisite repossession adjudication under Florida law.

And speed does not always equate with justice.  Some attorneys that represent borrowers in the Jacksonville area complain that the retired judges enlisted to process the foreclosure "rocket docket" do not spend adequate time reviewing often-complex files, and the homeowners' motions contained therein.  Another common complaint is that as these judges slash through the backlog, they tend to favor lenders over borrowers.

In some cases, judges have awarded foreclosure rights to plaintiffs who have not proved ownership of the subject property; a threshold issue.  In other cases, the retired visiting judge on a particular date is simply not adequately advised in the premises of the multitude of cases on the docket that day.

Another problem facing the court is the large number of cases that feature sketchy documentation presented by a lender to prove ownership.  Added to this are the multiple transfers characterizing many mortgage transactions, each draped with a bewildering assortment of documentation

These problem are so bad, the Florida Attorney General recently announced an investigation of the three largest law firms in the state that represent foreclosing lenders.  Alleging that the firms are acting as foreclosure mills, the Florida AG has accused instances of document fabrication and post-dating.  One of the targeted firms, Law Offices of David J. Stern, filed more than 70,000 foreclosures last year.

Another practice that distorts the identity of home-ownership in foreclosure court is the use of bank affidavits when a particular document can no longer be located or produced for the court.  Borrowers' attorneys assert this common practice is improper when the bank official has a stake in the outcome of the case.

For many of the residents of these homes, foreclosure is just one stop on the way to bankrutpcy.  These folks would probably not see the humor in the name of Attorney Stern's new $20 million dollar yacht: Miss Understood.

Oakland Circuit Judge-Shuffle Shaping Up

Recently, President Obama appointed Oakland Circuit Judge Mark Goldsmith to the federal bench in Detroit. His appointment has been approved by the U.S. Senate and he is expected to assume his place at the United States District Court for the Eastern District of Michigan by year's end.

Goldsmith's appointment creates an opening on the general docket of the Oakland County Circuit Court.  Oakland Family Court Judge James M. Alexander has announced that he will vacate his place in the Family Court to assume Judge Goldsmith's docket.

Judge Alexander will be handling general civil cases, and a criminal docket.  This means that attorneys, and parties that had matters pending with Judge Alexander in the Oakland Family Court will have their matters re-assigned to another judge.

This also means that another judge will be appointed, perhaps by the end of the year, to fill Judge Alexander's spot on the family court in Oakland County.  Rumors are rampant relative to Governor Jennnifer Granholm's appointment for this seat.  Among a few others, we've heard that 51st District Chief Judge Phyllis McMillen is under active consideration.

McMillen would be well-suited for the family court appointment.  A judge's judge, McMillen brings plenty of judicial experience as well as a valuable even-handed judicial demeanor to fill this important vacancy.  Unfortunately, in our system of political judicial appointments, the right person does not always get the job.

Our system of judicial elections for at-large seats, and gubernatorial vacancy appointments makes for an ever-changing bench at the county and municipal levels.  Good judges help to instill in the general public the proper confidence in our judicial system.

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Dividing Retirement Assets: Who's Loss; Who's Gain?

In mid 2008, many divorce attorneys faced the problem of apportioning sudden significant losses in the stock and real estate markets.  Those cases depended on valuing IRAs and 401(k) plans to neutralize the risk for both parties.

The economy fell too fast and too far, however, for many sagging marriages.  During the first two quarters of 2008, many divorce litigants locked-in on values established over appreciable time.  Unless their divorce attorneys had the qualified domestic relations order (QDRO) ready at the trial date (a rare bit of forethought), significant value was lost each day of the delay.  In some cases, more than six-figures.

One such case decided during that era by Oakland County Family Court Judge Elizabeth Pezzetti, Skinner v Skinner, was upheld last week by the Michigan Court of Appeals.

The MCOA opinion in Skinner is a guide for divorcing partners relative to what constitutes premarital or "separate" retirement property and defines "passsive income" relative to retirement assets.  The case also illustrates the consequences of stipulating to division dates for retirement assets, then suffering a long delay prior to full-resolution of the divorce litigation.

In Skinner, Husband stipulated to a date for purposes of valuation of the couple's retirement assets, including the pre-marital portion of his 401(k).  A two or three day trial and other dispositive court hearings were then spread over the next 3-months, during which time investment portfolios tanked, eroding nearly half the accrued value in retirement assets, across the board.

The issues in the case were: how to classify the significant interest income generated from Husband's pre-marital, and thus separate, retirement asset; and what date to use for division of the parties' IRA.

Coming into the marriage, Husband had invested approximately $15,000 in his Ford Motor Company 401(k) plan.  Over the course of the couple's 23-year marriage, more than $150,000 in marital earning contributions were made to the Ford plan.

As of the (pre-Great Recession) trial date, the value of the parties' other significant retirement asset, an IRA, was nearly $500,000.  By the time the judgment of divorce entered in mid-November, the IRA was only worth $330,000, and the Great Recession was upon us.

At trial, Husband presented a mathematically sound formula to calculate the interest generated from his pre-marital investment; these calculations were uncontested.  In her opinion dividing the marital estate, however, Judge Pezzetti ruled that 100% of the appreciation on the retirement plan was part of the marital estate.

The court of appeals affirmed Pezzetti's decision, including such gains as a component of the marital estate when a spouse, in this case the Wife, assists in the growth of the separate asset.  In the Skinner case, this assistance took the form of Wife's role as homemaker for the parents' four children.

Husband in Skinner took a double hit due to the losses incurred from the stipulated valuation date and the delay in getting the divorce judgment entered.  He cried "unfair" to the appellate court, to no avail.

In many of these cases, investor(s) nearing traditional retirement age were caught napping; some had a significant portion of their life-savings  invested in stock-based retirement assets rather than a more liquid, diversified portfolio.  Once the Great Recession took hold of the economy, divorce attorneys whose clients had already agreed to valuation dates for retirement assets lost significant value each and every day until their final judgment was entered.

Even when (painfully) aware of the issue, attorneys simply could not complete these divorces fast enough.  One of the parties, like in Skinner, usually came up short, suffering a complete loss of retirement value.

Once an agreement is reached, or when a divorce trial begins, it is crucial for the attorneys to work diligently in order to complete the often painful and emotional process of ending a long-term marriage.  Skinner tells us that no good can come from a delay.

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Family Court's Custody Rulings Must Cite Findings

Last Thursday, the Michigan Court of Appeals reversed a custody ruling of the Eaton County Family Court.  The tortured case, Wilbur v Carter, arose from a paternity suit, not a divorce.

The couple in this case conducted a protracted custody battle over their now 11-year old child.  The case features just about every tool available to the family court judge: supervised parenting time; temporary orders; in camera interviews with the child (twice) and evidentiary hearings.

The family court made a series of custody rulings in Father's favor over the years, keeping Mother's custody hopes alive by scheduling review hearings.  Father had been awarded sole legal custody and the stated purpose of the review hearings were to determine whether joint legal custody could be reinstituted.

Although the unpublished decision does not contain the underlying facts, the family court judge apparently did not approve of Mother's life style, removing her as a joint legal custodian of her child, and ordering supervised parenting time with Mother.

Over the past seven years, the parents kept filing motions for custody.  The lower court flip-flopped on the issue, alternating between temporary orders of sole legal custody to Father; then switching back to joint custody.  What troubled the Court of Appeals was that none of the requirements contained in the Child Custody Act were followed.

Before a family court judge changes custody, it must first determine whether an "established custodial environment" exists with either, or both, parents.  This term is defined in the custody act to mean:

if over an appreciable time the child naturally looks to the custodian in that environment for guidance, discipline, the necessities of life, and parental comfort. The age of the child, the physical environment, and the inclination of the custodian and the child as to permanency of the relationship shall also be considered.

The Eaton County Family Court neglected to make this determination in the case.  This is important because a court's determination of an established custodial environment determines the burden of proof which the moving parent must satisfy before a change in custody can be made.

In addition, the Court of Appeals was also disturbed because the lower court failed to make any determination that a "change of circumstances" or "just cause" existed to justify the requested custody modification.  Finally, it also reversed the family court because it made no findings of fact based on the 11 statutory custody factors set forth in the custody act.

Often, family courts feel constrained by their crowded dockets and the sometimes "informal" nature of the family court.  Attorneys foster this environment by allowing decisions on custody matters without the requisite findings by the court.

This case stands for the proposition that a family court cannot properly change custody without first: determining whether an established custodial environment exists; then determining whether the requisite "change of circumstances" exists; and finally making a factual determination after an evidentiary hearing as to all 11-factors.

The case calls for good lawyering in each and every custody battle, regardless of the court's resources or the resources of the parties.

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Same-Sex Marriage Cases Go Constitutional

A federal law suit filed last year by two California same-sex couples (one gay; one lesbian) has raised constitutional issues in the gay marriage context and is unfolding in a momentous trial.  In Massachusetts, another federal case tests whether a federal statutory provision that draws a sexual-preference distiniction is constitutional.

The complaint in Perry v Schwarzenneger, filed in the Northern District of California and assigned to Judge Vaughn R. Walker, has high-powered lawyers seeking far-reaching relief for the rights of (gay) individuals.  The case is another chapter in the tumultuous world of 21st Century Californian sex-gender politics.  The "all-in" nature of the Perry case, however, will have effects that touch most families in America.

You may or may not recall that back in 2004, the newly-elected young and dashing San Fransisco mayor Gavin Newsom made an international splash by presiding over same-sex civil marriage ceremonies conducted at City Hall.  The California Supreme Court squashed the practice in about 30-days, voiding all the marriage licenses issued as a result of Gavin's project.

In a May 2008 change of course, the California Supreme Court decided (4-3) the case known as In Re Marriage Cases, holding that any California laws, "that treat persons differently because of their sexual orientation should be subjected to strict scrutiny..."  The California high court decision struck down proposed state legislation seeking to ban same-sex marriage on the grounds the initiative violated the California constitution.

Six months later, in yet another change of course, the California electorate (narrowly) approved Proposition 8, defining marriage as between opposite-sex couples only.  The California Supreme Court swiftly followed suit in Strauss v Horton, upholding the passage of Proposition 8, but applying that referendum prospectively, thereby preserving the approximately 18,000 marriages that had been performed prior to the passage of the referendum; and perhaps unwittingly creating an arbitrary class of persons to which other gays can point in an equal protection analysis.

Enter the lesbian couple Kris Perry and Sandy Stier (Berkeley) and gay couple Paul Katami and Jeff Zarrillo (San Fernando Valley), pictured in the above link emerging from the federal courthouse following the first day of court proceedings.  The couples, very carefully selected by well-funded and well-connected gay rights activists, were apparently up for the arduous task of prosecuting constitutional federal litigation.  Neither couple were among the tens of thousands to take advantage of the narrow 6-month window to obtain a marriage license in mid-2008, making them ideal constitutional-litigants.

Some gay rights activists have criticized the suit as premature and ahead of the public opinion curve on the same-sex marriage issue.  While the concept seems to be gaining ground in abstract opinion polls, to date, only 5-states allow same-sex marriages:  Connecticut, Iowa, Massachusetts, New Hampshire, and Vermont.  On the other hand, 29-states (including Michigan) have amended their Constitutions to outright ban gay marriage by defining a marriage as between a man and a woman.

Many in the front-lines of the gay rights movement prefer the slower, state-by-state approach to "resolving" the same-sex marriage issue.  They worry that the Supreme Court could hand their movement a serious setback by issuing a neutral or worse, an anti-gay, decision along the lines of the 1986 Bowers v Hartwick decision (upholding a Georgia sodomy law on the basis there was no constitutional protection for sexual privacy).  It took the high court 17-years to reverse the dubious Bowers decision in the seminal 2003 case of Lawrence v Texas, which expressly overruled their prior decision as defining the liberty and privacy interests of two consenting adults too narrowly to survive a Due Process analysis.

There is also a notion that gay-marriage was removed via the ballot box and that's where the battle should be won.  In our Democracy, however, core individual rights (once defined) are not subject to the ebb and flow of majority rule.

Other gays are tired of waiting, however, genuinely offended by the series of referendums passed which discriminate against their sexual orientation.  For example, California already has a progressive civil union statute to protect property rights and employment benefits.  But the Perry case is about much more than property rights and benefits; it is about individual liberty and the sacred right to chose one's life partner, one's spouse, without interference from the state.  Court watchers equate the Perry case to that of Brown v Board of Education (abolishing the "separate but equal" fallacy in public schools) and Loving v Virginia (holding that a state could not prohibit interracial marriages).

Whatever the outcome of the trial, an intermediate appeal to the Ninth Circuit is guaranteed to send this one to the United States Supreme Court.  Plaintiffs are represented by the unlikely but outstanding duo of Ted Olson and David Boies of Bush v Gore fame.  The former represented Bush as Solicitor General; the latter represented Vice President Al Gore in the famous case settling the 2000 presidential election.

Olson's conservative credentials have led some to wonder whether he is serving as a "double agent" planted to hand the movement a serious setback at the high court.  Olson should be taken at his word, however, when he states that, separate is not equal and that a "civil union" is not the same as a marriage.  With 44-wins already before the high-court, Olson likes his chances at that level and genuinely believes he's on the correct side of this issue.

In the meantime, the Perry case has already been to SCOTUS; Judge Walker's decision to televise the trial on YouTube was appealed from the other end of the state by Senator Dennis Hollingsworth.  The appeal stayed the trial judge's decision to stream the trial to the Internet and subject all of us to reading about the case, or suffering through a painful re-enactment of the trial.  Several key depositions (Paul Nathanson and Katherine Young) taken last fall, however, have been leaked to YouTube, and effectively convey the background surrounding what is shaping-up as our next great civil rights struggle.

5-votes will be required to establish precedent once a writ of certiorari is inevitably issued by the high-court in the case.  Olson and Boies will probably need to persuade Justice Anthony Kennedy, an oft-breaker of ties at the Court.

SCOTUS-watchers figure the so-called liberal bloc of Justices (Ruth Bader Ginnsburg, Sonia Sotomayor, Stephen Breyer, and John Paul Stevens) will vote to condemn Proposition 8 as unconstitutional on Equal Protection grounds.  Since Justice Stevens announced his retirement on Friday, effective at the close of this session of the Court in June, President Obama's second high-court nomination takes on critical importance in the Perry case.  Justice Stevens' replacement will most-likely be a confirmed sitting Justice by the time Perry is on the high-court's docket sometime in 2012; the day-after-tomorrow from the Supreme Court's usual long-range perspective.

Of note:  Perry is not the only "gay-rights" case percolating through the federal courts at the moment.  Also destined for certiorari is Gill v Office of Personnel Management.   That case presents a more narrow constitutional challenge to a specific provision of the Defense Against Marriage Act preventing same-sex couples from receiving benefits that other non-gay federal employees receive for their families.

Plaintiff's counsel in Gill, Mary Bonauto, prevailed in the Massachusetts case that legalized gay-marriage.  While Bonauto acknowledges that her more-recent federal case is not the left-coast headline-generator that Perry is, she is mindful that both cases seek to expose the federal government's "double standard" when it comes to same-sex marriage; the feds recognize a wide-variety of marriages once they are licensed by a state, except in the case of gay-marriages.  Bonauto and other legal professionals fear that Perry seeks too momentous and far-reaching relief; the decision, after all, could invalidate anti-gay-marriage laws in nearly 40-states.

Michigan Connection:  In addition to those of us who have a family member involved in a same-sex union (my brother) or who are themselves involved in such a union, the left-coast Perry case could invalidate the 2004 Marriage Amendment to Michigan's constitution.

Also, the electronic divorce attorney (yours truly) will be admitted to the bar of the United States Supreme Court on the final day of this session, June 21st; Justice Stevens' final day of his long career on the high-court.

Stay tuned for the outcomes of these cases folks as we strive to keep you informed of significant developments.

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Child Support Still Owed When Parental Rights Involuntarily Terminated

There has been some buzz among family law practitioners this week concerning the Michigan Court of Appeals' decision in the DHS vs Beck case.

The COA held that a father, so neglectful and abusive that his parental rights were terminated, nevertheless remained obligated to pay child support for his two children.  The decision, arising from an Oakland County abuse case, will be published and thus binding on all Michigan family courts.

The father did not appeal the termination of his parental rights; only the family court's ruling that he remained obligated to pay support for his children.  On appeal, the father argued that he was denied due process because he was arbitrarily deprived of his property (i.e. his support payments).  The intermediate appellate court, however, was unimpressed, ruling that the father failed to articulate how, exactly, his due process rights were implicated.

One of the issues to arise in the Beck case was that the parental termination provisions of the Juvenile Code are silent as to the corresponding "parental responsibilities".

The Court went on to analyze the rights and duties implicated by a family court's decision to terminate parental rights while continuing to obligate support payments.  Michigan common law has long established a minor child's right to support from both parents.  The Court also recognized a parent's right to the "companionship, care, custody and management of his or her children."

In upholding the Oakland County Family Court, the COA ruled that a child's right to support cannot be bargained away in a termination proceeding.  The Beck panel decided that if the legislature had intended to terminate a parent's obligations along with his parental rights, it would have said so in the statute.

The Court also relied on it's earlier decisions that held support obligations continued in the wake of a voluntary termination or adoption.

Also of note in the dicta of the Court's decision was an express acknowledgment of the current "times of difficult financial circumstances."  The Beck panel realized that in such difficult economic times, public policy is served by not shifting all support and maintenance obligations onto the custodial parent or, in some cases, the state.

Finally, in deciding the case, the COA was careful to avoid the unintended consequence of encouraging the neglect and abuse of innocent children by seeking a parental termination.  Since an irresponsible parent cannot escape his support obligations by abusing or neglecting his children, the better interests of those children are served.

This is a sound decision by the intermediate appellate court.  Good thing the COA granted father's delayed application for leave to appeal (a discretionary appeal as opposed to an appeal of right).  Making a parent pay for their children despite their neglect is in both the child's and the community's best interest.

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No Joke: What's the Difference Between a Divorce and a Tatoo?

This blog post is from the SBM Blog and is the original content of the State Bar of Michigan.

As Michigan lawyers go about the work of convincing our state legislators that a tax on legal services would be a fundamental and costly mistake (see "Unfair, Unwieldy, Unwise, Unethical, and Unconstitutional"), we face the same response again and again:  "if we exempt one service we have to exempt them all."  In Georgia, policymakers are also gearing up for a tax on services, and a recent white paper from Georgia's venerable Tax Foundation asks: "Can anyone really keep a straight face while justifying a tax exemption for legal services, tattoos, haircuts, car repair,health club memberships and other common services?"  Well, we can.  In fact, we wonder how serious policymakers can keep a straight face equating legal services with personal grooming and adornment services.Bottom line: government shouldn't tax behavior that is good for society. We're all better off when people get the legal advice they need to secure justice or comply with the law.  Tatoos, not so much.