Outreach Housing, LLC v. Office of the Attorney General, Department of Legal Affairs

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT
OUTREACH HOUSING, LLC, and BLAIR L. WRIGHT,
Appellants,
v.
OFFICE OF THE ATTORNEY GENERAL, DEPARTMENT OF LEGAL
AFFAIRS, STATE OF FLORIDA, UNITED HOME FRONT, and BRYAN
BERRY,
Appellees.
No. 4D15-1173
[July 12, 2017]
Appeal from the Circuit Court for the Seventeenth Judicial Circuit,
Broward County; Michael L. Gates, Judge; L.T. Case No. 08-49280 (12).
Claudia T. Pastorius, Tampa, Crane Johnstone and Robyn L. Sztyndor,
Fort Lauderdale, for appellants.
Pamela Jo Bondi, Attorney General, Fulvio Joseph Gentili and Laura J.
Boeckman, Assistant Attorneys General, Tallahassee, for appellee Office of
the Attorney General, Department of Legal Affairs.
ON MOTION FOR REHEARING
WARNER, J.
We grant the motion for rehearing, withdraw our prior opinion, and
issue the following in its place.
Appellants challenge a substantial judgment against them in favor of
the Office of the Attorney General (“OAG”) for unfair and deceptive trade
practices allegedly committed in connection with the provision of services
for delinquent mortgagors. The court determined liability by summary
judgment and damages through an evidentiary hearing. As to the liability
judgment, disputed issues of material fact remain. As to the damage
award, the evidence did not support the amount ordered. We reverse and
remand for further proceedings.
Outreach Housing, LLC, and its principal, Blair Wright (collectively,
“Outreach”), began operating as a service agent for homeowners facing
foreclosure in 2007, and continued operating up until January 2009. After
receiving many complaints against Outreach by its clients, the OAG
launched an investigation. It found that Outreach solicited clients through
TV commercials and online ads by representing that Outreach would
provide assistance to those facing foreclosure. In its marketing, Outreach
urged homeowners: “Don’t loose [sic] your home. Get the assistance you
need. Stop the foreclosure action by calling today.” Outreach represented
to potential clients that it would interact with lenders to obtain mortgage
or foreclosure relief. According to many of the homeowners who
contracted with Outreach, the firm’s representatives falsely told them that
they would obtain mortgage modifications, and that Outreach would
provide attorneys to represent them in foreclosure proceedings.
As part of its solicitation process, Outreach representatives would
conduct interviews of homeowners via telephone and elicit information
about inaccuracies in their original loan. They would tell each homeowner
that their lender had violated the law and solicit the homeowner to
purchase Outreach’s services. Part of their protocol was to tell Outreach
clients not to make mortgage payments to their lenders. Instead of
working to mitigate the loans, Outreach’s strategy was to delay
foreclosures while it collected monies from its clients.
Based upon the complaints and its investigation, the OAG filed a
complaint against Outreach for violations of the Florida Deceptive and
Unfair Trade Practices Act (“FDUTPA”). The second amended complaint
alleged that Outreach had actual knowledge or should have known of the
unfair and deceptive trade practices of the corporation. It alleged that from
2007 until the date of the complaint, Outreach engaged in deceptive trade
practices designed to induce consumers to purchase its services through
a series of false and fraudulent misrepresentations, including that
Outreach would render assistance in mortgage loan mitigation and
foreclosure defense, and that homeowners should pay Outreach two-
thirds of their monthly mortgage payments, in return for which Outreach
would negotiate with the homeowners’ lenders. The OAG’s complaint
quoted from a complaint filed by Outreach against one of its participating
attorneys in which Outreach alleged that it collected monthly payments
from homeowners which were deposited in an account from which the
costs of litigation were paid, and Outreach and the attorneys shared the
remainder based upon a pre-agreed fee structure. In contrast to these
statements by Outreach, the OAG’s complaint alleged that Outreach
represented to homeowners that the homeowner controlled the funds in
the account, the attorney was not paid by Outreach, and there was no
division of fees between Outreach and the attorneys.
2
The OAG’s complaint further charged that Outreach engaged in the
unauthorized practice of law by analyzing homeowners’ mortgage
documents for violations of federal law. It alleged that Outreach engaged
in the unauthorized practice by employing attorneys to provide services for
its clients and controlling the way that the attorneys would be paid. In
addition, the complaint alleged that Outreach violated Chapter 817,
Florida Statutes, regarding credit counselling and debt management
services.
As a result of these deceptive and unfair trade practices, the complaint
alleged that 1) homeowners paid for debt reduction services that they did
not receive and that were not provided by Outreach; 2) Outreach failed to
provide attorneys or to pay for attorneys; and 3) Outreach enriched
themselves at the expense of the homeowners. The complaint sought to
recover actual damages suffered by the consumers, as well as to obtain
injunctive relief against Outreach.
Outreach answered, generally denying the allegations and claiming as
affirmative defenses that all actions Outreach took were done in good faith,
based upon legal advice, and without any willful intent to violate any rules
or regulations.
The OAG moved for summary judgment. It relied on a stipulation
entered into by Outreach in proceedings before the Florida Supreme Court
in which Outreach agreed to a permanent injunction preventing it from
engaging in the unauthorized practice of law as described in the
stipulation. The motion for summary judgment characterized the
stipulation as an admission by Outreach and asserted that Outreach had
engaged in the unauthorized practice of law. The motion also relied on the
statements of various Outreach customers that Outreach represented to
them that it would render assistance in mortgage loan mitigation and
foreclosure defense for homeowners. The customers also stated that
Outreach made various representations to them regarding illegalities in
their mortgage documents. The motion alleged that although Outreach
referred its customers to licensed attorneys, the services provided were
minimal and, in many instances, non-lawyers performed lawyer functions,
such as preparing and filing court documents. In part, the motion relied
on section 501.1377(3)(b), Florida Statutes (2008), which provided that it
is unlawful to charge for mortgage foreclosure related services before they
are completed. However, this statute was not included in the allegations
of the complaint and was not in effect during the time period of activity
covered by the complaint.
In addition to the unauthorized practice of law, the motion for summary
judgment contended that Outreach engaged in an “illicit lawyer referral
3
service,” because Outreach charged a fee to refer its customers to a lawyer.
The Rules Regulating the Florida Bar prohibit a lawyer from taking a
referral from a service unless the service does not charge for a referral.
The motion characterized this practice as a deceptive practice under
FDUTPA because, it alleged, consumers were deceived into thinking
lawyers would take their foreclosure cases when, in actuality, lawyers
would be prohibited from doing so.
Wright filed an affidavit in opposition, together with documents of
support, stating that Outreach never provided credit reduction services. It
did not tell clients not to pay their mortgages, and it attached a client letter
with standard language informing the client to pay the mortgage. Wright’s
affidavit attested that Outreach did not split fees with lawyers but was paid
for non-legal services that it provided, which included use of claims
management software and a database of mortgage foreclosure documents
developed by Outreach. According to Wright, the customers chose their
own attorneys, and Outreach did not direct how the attorneys represented
their clients. Each of the attorneys had a pre-negotiated fee agreement for
a set fee for services to the homeowner. Outreach frequently facilitated
communication between the attorney and client. Wright attested that
Outreach did not draft any legal documents. Wright’s affidavit stated that
all clients were fully informed as to the services Outreach provided, which
included the review of the homeowner’s mortgage documents by an
attorney. Wright also took issue with the specific persons upon whose
testimony and statements the OAG relied in the summary judgment
motion, noting that they were disgruntled employees, one of whom was
sued by Outreach, and one of whom attempted to open a competing
business. As to the specific customers cited by the OAG in its motion,
Wright attested that they had received all of the services for which they
had paid.
After a hearing, the trial court granted summary judgment as to liability
without further elaboration as to the grounds upon which it was granted.
Subsequently, the trial court held a hearing to establish the amount of the
judgment. Although the complaint had requested an award of actual
damages, at the hearing, the OAG requested an award of restitution of all
of the payments made by complaining clients of Outreach. A senior
investigator stated that 252 customers had complained to the OAG
regarding Outreach, although only 108 submitted statements which were
admitted into evidence pursuant to section 501.207(7), Florida Statutes
(2008). Nevertheless, the trial court ultimately granted restitution for all
252 complaining clients and entered judgment for $880,643, after
subtracting reimbursements Outreach had already made to various
clients.
4
The court then considered whether to grant a civil penalty pursuant to
section 501.2075, Florida Statutes (2008), which permits the court to
award a penalty of “not more than $10,000 for each . . . violation” if the
court finds that the person or entity has willfully used a method, act, or
practice found to be a deceptive act under section 501.204, Florida
Statutes (2008). The court heard testimony from one of the lawyers
working with Outreach that he had been referred clients from Outreach,
and Wright himself admitted that clients would appoint him as attorney-
in-fact to control the “escrow account” where the client’s payments to
Outreach were deposited. Out of those accounts, Wright transferred more
than fifty percent of the funds to his wife, who deposited $517,000 into a
CD held in her name. Wright also used client funds to make payments on
cars registered to him and his children as well as on the mortgage on his
home and his American Express bills.
In its final judgment, the court found that Outreach engaged in conduct
that constituted deceptive and/or unfair trade practices under section
501.204, Florida Statutes. Wright’s control of Outreach was conclusively
established by a stipulation in which he admitted he solely controlled and
directed the operations of Outreach. The court found that Wright failed to
show a good faith defense to the deceptive practices because of his
payment of his own personal expenses from the escrow account where
homeowners’ funds were deposited. Wright’s transfer of $517,000 from
homeowners’ funds to his then-wife belied Wright’s good faith defense. As
745 consumers engaged Outreach to provide mortgage relief assistance
and paid Outreach for assistance which was not rendered, the court found
745 violations and entered a civil penalty judgment for $7,450,000. From
this judgment, Outreach and Wright appeal.
A trial court’s ruling on a motion for summary judgment finding liability
is reviewed de novo. Cambridge Credit Counseling Corp. v. 7100 Fairway,
LLC, 993 So. 2d 86, 88 (Fla. 4th DCA 2008).
A trial court may enter summary judgment only when there
are no genuine issues of material fact conclusively shown from
the record and the movant is entitled to judgment as a matter
of law. All doubts and inferences must be resolved against the
moving party, and if there is the slightest doubt or conflict in
the evidence, then summary judgment is not available.
Reeves v. N. Broward Hosp. Dist., 821 So. 2d 319, 321 (Fla. 4th DCA 2002)
(citation omitted); accord Shreffler v. Philippon, 873 So. 2d 1280, 1281 (Fla.
4th DCA 2004).
5
It appears from our review of this rather jumbled record that disputed
issues of fact remain as to all issues of liability. Outreach, through
affidavits and documents, contested every alleged deceptive practice,
including whether its representatives had made false promises regarding
loan reductions and whether to pay the underlying mortgage; whether
Outreach, a non-lawyer entity, had given legal advice; and whether client
funds received by Outreach were for the sole purpose of paying the lawyer
or whether Outreach provided non-lawyer services for which it was entitled
to be paid. It also provided evidence that it sought the advice of attorneys
when setting up its business to make sure that it operated legally.
In seeking summary judgment, the OAG relied to a substantial degree
on a stipulation entered into by Outreach and The Florida Bar to terminate
a complaint of unlicensed practice of law by The Bar. However, in the
stipulation, Wright and Outreach specifically did not admit any
wrongdoing. Thus, the stipulation cannot be taken as an admission that
Outreach engaged in the unauthorized practice of law and, further, cannot
conclusively establish liability on the part of Outreach. In addition, the
OAG claims that fee-sharing with lawyers violated rule 4-7.22 of the Rules
Regulating the Florida Bar. 1 Outreach denies that it split fees. Instead, it
contends that it was paid for services which it provided to the clients and
lawyers, including access to its very extensive database of foreclosure
documents.
Moreover, the OAG also relied on evidence of a violation of section
501.1377, Florida Statutes, to support summary judgment. Not only was
a violation of this section not pled in the complaint, but the statute also
was not in effect for the time period of the complaint.
In sum, the summary judgment evidence and the affidavit in opposition
showed that material issues of fact remain. While the OAG’s evidence is
strong, if believed by the trier of fact, Outreach had a different version and
explanation of what occurred. The OAG did not erase the doubt created
by the opposing evidence. We must reverse.
Because this case will be remanded for further proceedings, we briefly
address the damages. Although in the complaint the OAG sought actual
damages suffered by consumers, it requested restitution at the final
hearing. Section 501.207, Florida Statutes, provides:
1 We are unclear as to how fee-splitting could be a deceptive and unfair trade
practice in this case, unless there were a representation to the client that all
monies being collected were to pay for attorney’s fees when they were not.
6
The enforcing authority may bring:
(a) An action to obtain a declaratory judgment that an act or
practice violates this part.
(b) An action to enjoin any person who has violated, is
violating, or is otherwise likely to violate, this part.
(c) An action on behalf of one or more consumers or
governmental entities for the actual damages caused by an act
or practice in violation of this part.
§ 501.207(1), Fla. Stat. Actual damages are an essential element of a
FDUTPA claim. Rollins, Inc. v. Butland, 951 So. 2d 860, 869 (Fla. 2d DCA
2006). The question is whether restitution comes within the remedies
available to the enforcing authority under the statute. Although no Florida
case has directly held that restitution is an available remedy, several cases
have permitted the enforcing authority to proceed on restitution claims.
See, e.g., E-Racer Tech, LLC v. Office of the Attorney Gen. Dep’t of Legal
Affairs, 198 So. 3d 1107, 1110 (Fla. 4th DCA 2016); State v. Beach Blvd
Auto., Inc., 139 So. 3d 380, 394 (Fla. 1st DCA 2014).
One federal case has squarely held that restitution is an available
remedy under FDUTPA. In Federal Trade Commission v. Mylan
Laboratories, Inc., 99 F. Supp. 2d 1 (D.D.C. 1999), the Federal Trade
Commission and thirty-three states, including Florida, sued
manufacturers of generic lorazepam, alleging violation of antitrust laws as
a result of illegal licensing agreements which allowed for excessive pricing
of drugs. Id. at 4-5. The claims in Florida included claims for restitution
under FDUTPA. Id. at 6. The district court first disallowed the restitution
claims by a number of states, including Florida, on grounds that the
statutes didn’t allow those remedies. Id. at 4-5. On rehearing, it
concluded that restitution was available as a remedy. As to Florida, the
court reinstated the restitution claims, specifically explaining that the
broad language in section 501.207, Florida Statutes, indicated that the
Florida Legislature intended to provide a full range of equitable monetary
relief under FDUTPA. Mylan, 99 F. Supp. at 6.
The statute itself has language allowing the enforcing authority to seek
any available remedy. Section 501.207(1), Florida Statutes, is amplified
by section 501.207(3), Florida Statutes, which allows a court to grant
“legal, equitable, or other appropriate relief” in a FDUTPA action brought
by an enforcing authority.
7
Different sections of the act refer to “restitution,” thus supporting the
notion that restitution is a remedy available under FDUTPA. Section
501.2075, Florida Statutes, provides that the department or court may
waive a civil penalty if a defendant “has previously made full restitution or
reimbursement or has paid actual damages to the consumers or
governmental entities” injured by an “unlawful act or practice.” Section
501.2077(3), Florida Statutes (2008), states that an “order of restitution or
reimbursement based on a violation of this part committed against” certain
classes of defendants are to be given “priority over the imposition of civil
penalties[.]” 2
Allowing the enforcing authority to seek the remedy of restitution is
consistent with the policy statements in the statute itself. Section
501.202, Florida Statutes (2008), states that FDUTPA “shall be construed
liberally to promote the following policies”:
(1) To simplify, clarify, and modernize the law governing
consumer protection, unfair methods of competition, and
unconscionable, deceptive, and unfair trade practices.
(2) To protect the consuming public and legitimate business
enterprises from those who engage in unfair methods of
competition, or unconscionable, deceptive, or unfair acts or
practices in the conduct of any trade or commerce.
(3) To make state consumer protection and enforcement
consistent with established policies of federal law relating to
consumer protection.
§ 501.202, Fla. Stat. (2008). As Judge Gross noted in his concurring
opinion in Dorestin v. Hollywood Imports, Inc., 45 So. 3d 819 (Fla. 4th DCA
2010), “[p]art of the ‘liberal’ construction required by the statute is to
construe statutory damage remedies in a way that makes consumers
whole.” Id. at 826 (Gross, J., concurring). Restitution is a remedy that
makes the consumer whole. Thus, we conclude that the enforcing
authority can seek consumer restitution under FDUTPA.
Nevertheless, the trial court’s award must be revisited. The court
awarded restitution for 252 customers who complained to the OAG
regarding Outreach. The trial court admitted evidence of these complaints
pursuant to section 501.207(7), Florida Statutes. While we conclude that
the statements could be admitted pursuant to this section, only 108 such
2 This language was moved to subsection (4) of section 501.2077, Florida
Statutes, in 2013. See § 501.2077(4), Fla. Stat. (2013).
8
statements were admitted. As to the remaining 144 complaining clients,
no statements were offered. Therefore, there was no competent evidence
either of complaints or of the amount of the payments as to those
consumers who did not bother to file a written complaint.
With respect to the civil penalty, we do not address the issue of whether
or not it should apply, or in what amount, as the factual underpinning for
an award will be litigated on remand. 3
For the foregoing reasons, we reverse the final judgment and remand
for further proceedings consistent with this opinion.
GROSS and FORST, JJ., concur.
3 We note that in the second amended complaint, the OAG requested a penalty
based upon the number of complaining clients, not the total number of clients.
We do not decide whether each client represents a separate violation of FDUTPA
for the purposes of extracting the civil penalty.
9