Attorney Suspended for Operating a Foreclosure Mill

In a recent consent agreement reached with the Florida Bar Association, Attorney Marshall C. Watson, was suspended for 91 days and agreed to shut down his legal practice for his role in operating a foreclosure mill.  The issue: may an attorney be held personally responsible for his oversight of a large foreclosure mill?  The lesson: even when an attorney’s work-product is not technically negligent, she may still be in violation of ethical rules and subject to strict discipline. 

The recent foreclosure crisis hit Florida with a more devastating blow than nearly any other state in the Nation in terms of total foreclosures and the foreclosure rate per household.  Many have suffered but a few opportunistic professionals have taken advantage of this market.  Sure, real estate developers may view the foreclosure crisis as an opportunity to buy-low and sell-high.  The professional liability community too has tapped into the foreclosure market, namely some lawyers operating “foreclosure mills.”  The disciplinary action against Watson is a result of Florida’s efforts to crack down on law firms specializing in high volume foreclosures, which infamously cut corners to churn out as many foreclosures as possible.

Watson may be one of the first attorneys in Florida to be held personally responsible for his role in the “mill.”  Watson’s liability stems from his failure to take steps to supervise and train his employees and his failure to develop acceptable policies for his firm to ensure that he was complying with Florida’s ethical rules.  Allegedly, Watson’s caseload and firm size increased exponentially during the peak of the housing crisis with the firm handling over 65,000 cases.  Additionally, the bar accused Watson of “robo-signing” practices.  Attorneys in the firm would sign affidavits in bulk attesting to the reasonableness of fees and attesting to the truth and accuracy of each of the affidavits in its entirety without reviewing the entire document.  Additionally, in an effort to speed up the foreclosure process, Watson would often file unverified foreclosure complaints in which it claimed the mortgage note was lost without confirmation from the client.

Studies suggest that the foreclosure crisis is improving but it is likely that the number of related disciplinary actions and malpractice claims will continue to rise.  According to the ABA, real estate now tops the legal malpractice claims list.  Certainly some of these claims arise from intentional misconduct while others may not have acted with ill intent but still find themselves on the wrong end of a lawsuit.  Make no mistake, the entire professional liability community – real estate professionals, architects and engineers, contractors, inspectors, accountants, attorneys and others – have all been impacted by the recent real estate market.  Only time will tell how many professionals are involved in professional malpractice or disciplinary actions as a result of the housing market.