Judge rejects privilege claim in foreclosure case

Consumer advocates who claim a Virginia law firm cut corners and overcharged struggling homeowners on high volume foreclosure work won a discovery victory last month.

A federal judge swept aside privilege claims and ordered production of communications between the law firm and a company that monitored lawyers’ foreclosure work.

The decision follows an August ruling that allowed most claims to go forward against the firm once known as Shapiro Brown & Alt LLP of Virginia Beach.

The consumer lawyers representing foreclosed homeowners claim a separate company known as Lender Processing Service Inc. directed foreclosure attorneys and monitored their performance.

Pressure from LPS led foreclosure lawyers to speed up consumer foreclosures and keep costs as low as possible, the lawsuit alleged.

In June, the consumer lawyers subpoenaed the “entire file” from LPS for each of the plaintiff homeowners, according to their account. Nearly four months later, Black Knight Financial Services Inc., a successor company to LPS, moved to block access to “private correspondence” between non-party loan servicers and their foreclosure counsel.

The plaintiffs said BKFS “simply ignored their obligation to object to the subpoena” and so any objections had been waived. BKFS also failed to provide a privilege log of documents it sought to protect from disclosure, the homeowners’ lawyers argued.

Furthermore, the consumer advocates said, many of the documents at issue should be disclosed under the “tort, fraud or crime exception” to privilege rules.

BKFS claimed the documents were protected by the attorney-client privilege and the work product privilege. BKFS claimed it had been in discussions with the plaintiffs’ lawyers since June and only recently had been told the document request covered privileged documents.

The defendant law firm also contended that BKFS should be regarded as a mere bystander while document production and privilege battles were being fought by the law firm and an affiliated defendant.

U.S. Magistrate Judge David J. Novak denied motions to quash from both BKFS and the defendants and granted the plaintiff’s motion to compel production.

First, the judge ruled, the objections raised were not timely.

“Second, no actual holder of any privilege has asserted the attorney-client privilege,” the judge wrote in an Oct. 29 order.

“Third, Black Knight Financial Services, Inc. and Defendants failed to provide a privilege log or functional equivalent, thereby failing to comply with Rule 45(e)(2)(A) of the Federal Rules of Civil Procedure,” Novak said.

Even if the attorney-client privilege were established, Novak said he believed the privilege was waived through disclosure of the information to the third party LPS.

Accordingly, Novak ordered BKFS to begin to produce the documents sought by Nov. 9, with complete disclosure by Nov. 23.

Novak’s order on the subpoena objections is Moore v. Shapiro & Burson LLP.

In August, Novak ruled that the foreclosed homeowners stated a claim that defendant Professional Foreclosure Corporation was the alter ego of the SBA law firm. Novak allowed the homeowners to sue for breach of a mortgage trustee’s “duty of impartiality” and breach of the Fair Debt Collection Practices Act by charging excessive title examination fees.

Nevertheless, the Richmond judge dismissed the plaintiffs’ fiduciary duty claim based on a failure to hold face-to-face meetings with plaintiffs prior to foreclosure.

Novak’s opinion on the motion to dismiss is Moore v. Law Offices of Shapiro, Brown & Alt LLP (VLW 015-3-413).

Shapiro, Brown & Alt is now known as Shapiro & Brown LLP. Its headquarters are in Manassas, according to the firm’s website.