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 firstname.lastname@example.org.