Much Ado Over Nothing? Ober v. Town of Lauderdale-By-The-Sea

Author: Starlett M. Massey, Partner at McCumber Daniels

In a most welcome 180 degree turnabout, the Fourth District Court of Appeal withdrew its earlier opinion in Ober v. Town of Lauderdale-By-The-Sea and issued a new opinion on Wednesday.  Last August, the Court held that a lien that exists or arises after the entry of final judgment of foreclosure attaches to the property and is not discharged upon the foreclosure sale.  The Court determined the Florida lis pendens statute, section 48.23(1)(d), only serves to discharge liens that exist or arise prior to entry of final judgment, unless, of course, appropriate steps are taken to protect those interests.

gavel

This decision sent shock waves through the mortgage and real property cosmos, prompting many attorneys to describe the Court’s interpretation of the lis pendens statute as an “evisceration.”  The decision also prompted Mr. Ober to file a motion for rehearing.  The Court’s opinion on rehearing no longer eviscerates, but instead invigorates, the lis pendens law.  The Court’s recent opinion interprets section 48.23(1)(d) to provide that a foreclosure sale discharges all liens, recorded both before the final judgment and after, unless the lienor intervenes in the foreclosure action within thirty days after the lis pendens is recorded – no matter how long the delay between the final judgment and the foreclosure sale.  The alternate hardline rule established by the Court’s withdrawn opinion could not be in starker contrast.

Also in stark contrast is the manner in which the Court addresses Form 1.996(a) of the Florida Rules of Civil Procedure in its two opinions.  Form 1.996(a) provides a sample foreclosure judgment, with the following provision:

On filing the certificate of sale, defendant(s) and all persons claiming under or against defendant(s) since the filing of the notice of lis pendens shall be foreclosed of all estate or claim in the property . . ., except as to claims or rights under chapter 718 or chapter 720, Florida Statutes, if any.

In its earlier opinion, the Court describes Form 1.996(a) as an apparent “misstatement of the law.”  However, in its opinion granting Ober’s motion for rehearing, the Court states the form, “reflects the common understanding of the operation of the lis pendens statute.”  The Court then cites to Hancock Advert., Inc. v. Dep’t of Transp., 549 So. 2d 1086 (Fla. 3d 1989), which holds, in pertinent part, that a court may consider practical statutory construction that has been adopted by the relevant industry when engaged in matters of statutory interpretation.  The Ober Court then notes that Form 1.996(a) was first adopted in 1971 and has been subject to continuous review and revision by the Florida Supreme Court since that date, most recently in January 2016.  The Florida Supreme Court’s recent decision not to revise this language, particularly given the pending dispute over the issue, was likely a significant factor guiding the Ober Court’s decision to withdraw its earlier opinion and grant the motion for rehearing (though the latest revision does predate the August 2016 opinion).  It also may predict the outcome of any higher appellate review of the Ober opinion.

A statute prone to such disparate interpretations on appeal is likely to be revisited by the Florida Legislature sooner rather than later, and Florida Supreme Court review is still possible.  A challenge to this opinion via a notice invoking Florida Supreme Court jurisdiction must be filed by February 24, 2017. Thus, while we certainly hope the latest outcome sticks, Ober might not be over quite yet.

In re Failla: Let Them Eat Cake

Author: Starlett M. Massey, Partner at McCumber Daniels

For the past several years, it has been common practice for a mortgagor to “surrender” property subject to a mortgage through a bankruptcy case and later defend (or continue to defend) a foreclosure action in state court. In this manner, mortgagors have been able to enjoy significant benefits afforded by the Bankruptcy Code, such as discharge of the debt and cessation of negative reports to credit bureaus, while at the same time enjoying prolonged possession and ownership of collateral.

A recent opinion from the Eleventh Circuit Court of Appeals threatens to end this practice.

In the case of, In re Failla, 15-15626, 2016 WL 5750666 (11th Cir. Oct. 4, 2016), the Eleventh Circuit held debtors who surrender real property in a chapter 7 bankruptcy case may not oppose a foreclosure action in state court pertaining to that property.  In reaching this conclusion, the Failla court admonished: “In bankruptcy, as in life, a person does not get to have his cake and eat it too.”  Id. at *5.  Moreover, the Failla decision provides that a bankruptcy court has statutory authority to compel mortgagors to withdraw defenses and dismiss counterclaims asserted in state court foreclosure litigation.  Id. at *6.  This memorandum addresses the specifics of the Failla decision and the potential limitations of its reach.

foreclosure-signage

The Failla opinion resolves two important questions: (i) whether a debtor who surrenders real property in a Chapter 7 bankruptcy case may oppose a state court foreclosure action pertaining to that property; and (ii) whether a bankruptcy court has authority to order a mortgagor to cease opposing a foreclosure action.  Based on an analysis of the duties imposed on debtors pursuant to 11 U.S.C. § 521(a)(2) (“section 521(a)(2)”), the Failla court determined a debtor may not oppose a state court foreclosure action pertaining to real property surrendered in a Chapter 7 case.  Relying on the broad enforcement powers bestowed by 11 U.S.C. § 105(a), the Failla court held a bankruptcy court has authority to order a mortgagor who surrendered real property in a Chapter 7 bankruptcy case to cease opposing a foreclosure action pertaining to that property.

  • Mortgagors May Not Oppose State Court Foreclosure Actions After Declaring the Collateral Surrendered Under 11 U.S.C. § 521(a)(2).

In every individual Chapter 7 bankruptcy case, section 521(a)(2) requires that a debtor file a statement of intentions regarding what the debtor intends to do with property serving as collateral for a debt (the “Statement of Intentions”).  Through the Statement of Intentions, a debtor must provide a sworn declaration stating whether the debtor will surrender the collateral, redeem the collateral, or reaffirm the debt.  11 U.S.C. § 521(a)(2); Fed. R. Bankr. P. 1007(b)(2).  Additionally, section 521(a)(2)(B) mandates a debtor must perform the stated intention.  Thus, clearly, a debtor must effect surrender of real property serving as collateral for a mortgage if a debtor indicates on his or her Statement of Intentions that is what the debtor elects to do.  The issue resolved in Failla was to whom a debtor is required to surrender the collateral, as section 521(a)(2) states a debtor must “surrender” collateral but does not specify to whom.  The Faillas argued section 521(a)(2) merely requires a debtor to surrender collateral to the Chapter 7 bankruptcy trustee, not the creditor.  However, the Failla court determined, based upon a thorough analysis of the use of the term “surrender” in section 521(a)(2) and other sections of the Bankruptcy Code, that section 521(a)(2), “requires debtors who file a statement of intent to surrender to surrender the property to both the trustee and to the creditor.”  Id. at *2-3.

Next, the Failla court considered the meaning of the term “surrender,” as it relates to a debtor’s obligation under section 521(a)(2) and ultimately concluded:

Because “surrender” means “giving up of a right or claim,” debtors who surrender their property can no longer contest a foreclosure action. When the debtors act to preserve their rights to the property “by way of adversarial litigation,” they have not “relinquish[ed] … all of their legal rights to the property, including the rights to possess and use it.” Id., at *4 (quoting In re White, 487 F.3d 199, 206 (4th Cir. 2007).

While the holding in Failla is promising news for creditors, bankruptcy courts hesitant to interfere in state court matters may opt to narrowly apply the opinion.  Specifically, section 521(a)(2) only applies to cases filed under Chapter 7 by individuals.  Consequently, the Failla opinion directly applies only to foreclosure actions where collateral was surrendered in an individual Chapter 7 case.  Also, in order for the reasoning of Failla to directly apply, the name of the foreclosing creditor arguably must match the name of the creditor to whom the collateral was surrendered in the bankruptcy case.  Furthermore, a foreclosure action may involve additional defendants who were not party to the bankruptcy case and, thus, did not relinquish their rights to oppose the action.

  • Bankruptcy Courts Have Statutory Authority to Order Mortgagors to Stop Opposing State Foreclosure Actions After Real Property is Surrendered in a Chapter 7 Case.

 “Bankruptcy courts have broad powers to remedy violations of the mandatory duties section 521(a)(2) imposes on debtors.”  Id. at * 5 (citations omitted).  11 U.S.C. § 105(a) authorizes bankruptcy courts with the power to, “issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of [the Bankruptcy Code].”  The Failla court appropriately noted a bankruptcy court’s powers under § 105(a), “includes section 521(a)(2).”  Id.  Bankruptcy judges regularly enter orders pursuant to 11 U.S.C. § 105(a) which compel action by parties outside of bankruptcy cases in order to redress violations of the Bankruptcy Code and compel compliance with orders of bankruptcy courts.  Id. at *6.  Thus, a bankruptcy court would have authority under section 105(a) to enter an order compelling compliance with a debtor’s Statement of Intention.

Unfortunately, in instances where the Failla opinion does apply, it is not self-effectuating.  Creditors seeking the relief afforded by this opinion must take the additional step of filing a motion to compel in the relevant bankruptcy case.  The necessity of filing a motion to compel may arise after the Chapter 7 case has been closed, thus requiring payment of a reopening fee.  While a bankruptcy court would have authority to order payment by the debtor of the court costs and attorneys’ fees incurred due to filing the motion, the reality of actual payment by the debtor absent other costly legal action is, at best, uncertain.

In conclusion, while the Failla opinion is certainly positive new case law for creditors, the expanse of its practical impact is yet to be seen.

McCumber Daniels Attorney Amy L. Miles Achieves Board Certification Status

Tampa, FL — June, 2, 2014 — McCumber Daniels is pleased to announce that attorney Amy L. Miles has become board certified by The Florida Bar in the area of appellate practice.  Only six percent of lawyers in Florida are board certified and are the only lawyers who receive “legal expert” status by The Florida Bar.

“Amy has been a tremendous asset to the firm.  Her appellate practice allows ourfirm to fully represent all of our clients from pre-suit through trials and appeals,” says Andrew McCumber, McCumber Daniels’ managing partner.  “Amy is always  finding  creative  solutions  and arguments  and I  am proud  that  she  is  being recognized by The Florida Bar and her peers for hFla Bar flame 2er excellent work.”

Board certified lawyers’ experience and competency have been rigorously  evaluated,  and  they  are  the  only  Florida  lawyers  allowed  to  refer  to themselves  as  specialists  or  experts  or  to  use  the  letters  B.C.S.  to  indicate  Board Certified Specialist when referring to their legal credentials. Board certified lawyers have met The Florida Bar’s highest standards for special knowledge, skills and proficiency invarious areas of law and professionalism and ethics in the practice of law.

Tattoos and Piercings in the Workplace

It is becoming more and more common to see a young professional with a “sleeve” tattoo, a small stud nose piercing, or even one of those trendy fingerstache tattoos.  But what happens when this professional is applying for a job, is your employee, or the caregiver for an older family member?

Tattoo man in suit

Customers, clients, co-workers and particularly the older generation, including long-term care patients, have found it hard to accept this new trend.  Some find it offensive.  In fact, in 2012, the Captivate Network polled more than 600 U.S. workers and found that 61% of white-collar staffers over the age of 50 find tattoos distracting.  Employers are left swimming in murky waters as to where they should draw the line on policies and practices to change with societal norms while still respecting the feelings of customers, clients and co-workers.

Self-expression plays an intricate role in making America the country that it is.  However, tattoos and piercings are choices made knowing they won’t be “popular” with every audience.  Limiting an employee’s self-expression in the workplace is necessary to balance competing desires to respect individual preferences.  An inappropriate tattoo such as a rebel flag or swastika is sure to offend a significant portion of an employer’s customers.  An appearance policy which includes not only dress code standards, but tattoos and piercings as well sets boundaries to respect the rights of your employees and the people they serve.

The employer has the right to create and enforce appearances policies that includes the limitations on tattoos and piercings as long as the policy does not discriminate.  According to The U.S. Equal Employment Opportunity Commission: Title VII of the Civil Rights Act of 1964 prohibits employers with at least 15 employees, as well as employment agencies and unions, from discriminating in employment based on race, color, religion, sex, and national origin. 

No Appeal for Group of Hospitals Inadequately Reimbursed

On January 22, 2013, in a unanimous decision, the US Supreme Court rejected a bid from 18 Hospitals to revisit 25-year old Medicare reimbursement claims.

In the case of Sebelius v. Auburn Regional Medical Center, U.S. Supreme Court, No. 11-123, the providers claimed that from 1987 to 1994 the Centers for Medicare & Medicaid Services undercalculated Medicare payments for care provided to low income patients, based on the Supplemental Security Income (SSI) fraction.   number crunching

The US Supreme Court’s decision reinforces earlier decisions that the appeal was too old, where the imposed law governing these appeals is within 180 days of receiving the Notice of Program Reimbursement (NPR).  By regulation, the Secretary of HHS authorized the PRRB to extend the 180 day limit, for good cause, up to three years. See 42 CFR 405.1841(b) (2007).

The hospitals claimed it was unfair to impose the deadline under the circumstances, alleging the agency knew about and failed to disclose its calculation errors.

Should this same rationale apply to errors citizens make in calculating their tax liability? Do government vendors really need to also incur the expense of auditing payments received within a period as short as180 days, even where the particular agency is aware of an error in their methodology and chooses to not advise all other impacted?

McCumber Daniels’ Tampa Office Relocates to Hoover Boulevard

McCumber Daniels announced today the relocation of its Tampa office to 204 South Hoover Boulevard, Suite 130, Tampa, Florida 33609.

The new office will accommodate the company’s current staff and enable further expansion for the firm’s future growth.

We've movedMcCumber Daniels offers a wide variety of litigation services for insurers, health care facilities, businesses, financial institutions and licensed professionals. The firm regularly handles cases involving Medical Malpractice Defense, Commercial Litigation, Bankruptcy and Creditors’ Rights, Insurance Coverage, General Liability, Professional Liability Defense, Appeals, Long-Term Care Defense, and Health Care Law (including ZPIC Reviews and Audit Appeals.) With years of legal, corporate, medical, commercial, administrative and legislative experience, we are able to provide full-service representation for all of our clients in all types of disputes or litigation.

For more information visit our website at www.mccumberdaniels.com. All email inquiries can be sent to info@mccumberdaniels.com.

And the Survey Says…More Tort Reform Please

Authors: Marc Penchansky and Stephanie Hedrick

The U.S. Chamber Institute for Legal Reform (ILR) polled 1600 voters from last week’s election about their opinions on tort reform.   Nearly 9 out of 10 voters feel that the number of frivolous lawsuits is a “total serious problem.”  These lawsuits are considered to be with “little merit filed by lawyers mostly out to make money.”  The survey also revealed that 83% of the polled number believes that the next Congress should continue to pass legislation to reform the class action lawsuit system.

Prior to the election, The American Tort Reform Association along with Sick of Lawsuits, a campaign headed by Citizens against Lawsuit Abuse, released a report in August 2012, regarding public opinions about tort reform.   Of those polled, 89% felt that lawsuit abuse is a problem and 60% believe that the number of lawsuits have hurt the economy. Similar to the ILR survey, the majority of voters agree, “enacting lawsuit reform is an important part of improving the U.S. business environment and attracting and keeping jobs”

At the State Level

Although tort reform on a national level is important, 2012 was a busy year for medical malpractice tort reform in the states.  As detailed below, these states have enacted approaches, and sometimes made changes to past mandates, to assist in reducing the cost of malpractice claims.

Patient Safety and Defensive Medicine Workgroup

In February, 2012, Senate Bill 1580 was passed in Oregon establishing a Governor-appointed Patient Safety and Defense Medicine Workgroup (PSDM); a workgroup created to recommend a medical liability legislative proposal for the 2013 Legislative session.  The workgroup met three times in 2012 to discuss the Governor’s proposal for an Early Disclosure and Resolution (EDR) program, while guided by these principles listed in the Bill:

  • Improve the practice environment to allow physicians to learn from medical errors and improve patient safety;
  • More effectively compensate individuals who are injured as a result of medical errors; and,
  • Reduce the collateral costs associated with the medical liability system including costs associated with insurance administration, litigation, and defensive medicine.

The workgroup’s final recommendations and draft legislation, which will be introduced in the 2013 Legislative session, recommend working toward an Early Disclosure and Resolution (EDR) program.  This program is a first step after a serious event occurs to avoid claiming malpractice and avoiding the trial process.  This program will include a notice of a serious event, a 30-day cooling off period and finally a 90-day resolution process in which the parties must discuss and agree upon compensation, and if not, they move into the next phase of the process, mediation.  Finally, if the case is not resolved at mediation, the patient or representative may pursue legal action through the traditional litigation system, where the EDR and Mediation process will not be admissible.

Apology Legislation

This blog has been tracking the trend of state “apology legislation,” which is designed to allow medical professionals to express empathy for and take ownership of an unforeseen outcome without the risk of retaliatory litigation based solely on the statements made at the time of the apology. This year, Massachusetts joined the growing list of states that have enacted the “Apology Approach” to facilitate the early resolution of medical malpractice cases.

On August 6, 2012, Massachusetts Governor Deval Patrick signed the Healthcare Cost Control Bill, known as “Disclosure, Apology and Offer” (“DA&O”), a joint initiative by Massachusetts physicians and lawyers to utilize a more compassionate approach to handling medical errors and malpractice.  “The new model includes provisions for a six-month, pre-litigation resolution period that affords the time to go through a DA&O process with the sharing of all pertinent medical records by the patient, full disclosure by providers, and makes inadmissible all statements of apology during litigation.”[   Finally, the organizations work with their liability insurers to give patients a fair and timely offer of financial compensation.  “By giving patients the opportunity to receive transparent information and prompt financial recourse, the hope is that the court system would be used only as a last resort.

Tort Reform in New Hampshire

In New Hampshire, Governor John Lynch vetoed “early offer” legislation.  SB 406 established a voluntary program to allow medical providers’ insurance companies to make “early offers” to injured patients who may bring a malpractice suit.  If a patient agreed to participate in the program but rejected the early offer, the patient would need to post a bond to cover the defense’s attorneys’ fees and costs.  If the jury awards the injured patient less than 125 percent of the early offer, the patient would have to pay the defense’s attorneys’ fees and costs.  Supporters argued that the bill would streamline the process and allow patients access to quicker settlements.

Medical Malpractice Caps

Tort reform legislation was established to create a sense of balance between the interest of the patients that are affected by medical negligence and the interest of the physicians who are burdened with the rising cost of insurance premiums and possible threat of a lawsuit.   Medical malpractice caps were created to sufficiently compensate patients faced with medical malpractice, without having the physicians become priced out by high insurance premiums (and aim to reduce the amount of frivolous lawsuits brought by personal injury attorneys.)

Overturning States Medical Malpractice Caps

This year, the Missouri Supreme Court, in a 4-3 decision, overturned a $350,000 cap on non-economic medical malpractice damages.  The cap was created by the Missouri General Assembly in 2005.  On July 31, 2012, in Watts v. Lester E. Cox Medical Centers, the Court ruled the cap unconstitutional because it infringed on an individual’s right to trial by jury.

Upholding States Medical Malpractice Caps

Conversely, the Kansas Supreme Court recently upheld a 25-year-old law, in the case of Miller v. Johnson.  That case involving a woman who had the wrong ovary removed by a doctor, reaffirmed the medical malpractice cap of $250,000.  The Kansas Medical Society, an association that represents most of the state’s physicians, stated, “The Court properly observed that the intent of the cap was to ensure quality health care availability in Kansas and to promote affordable, available malpractice insurance for health care providers. The court recognized these objectives as legitimate state interests that promote the general welfare.”[

Deciding Fate

This year the Florida Supreme Court heard arguments in the case of Evette McCall v. United States of America SC11-1145 addressing the malpractice law on the noneconomic medical malpractice caps of $500,000 per claimant and practitioner with an aggregate cap of $1,000,000.  These caps were set in 2003. The decision on whether or not the caps are constitutional now rests in the hands of the Florida Supreme Court.

More Tort Reform Please

The proper balance between plaintiff’s rights and an affordable health care system remains difficult to achieve.  It is clear that the populace is skeptical about the validity of many medical malpractice lawsuits brought in this county and see tort reform as a way to achieve everyone’s goal of more affordable health care.  The answers are not easy but it is clear that federal and state legislatures continue to work to find a system that is fair to all.

Improvements to the ZPIC Audit Process for Florida’s Long-Term Care Providers

Authors: Starlett M. Miller and Stephanie F. Hedrick

During these times of thinning margins, where many businesses’ daily operations may be jeopardized by a month’s delay in the receipt of reimbursement, the fierce backlash the Centers for Medicare and Medicaid Services (CMS) received from nursing home owners and operators regarding prepayment policies implemented for the Zone Protection Integrity Contractors’ (ZPIC) audits was no surprise.

CMS established the ZPIC audits program to identify cases of suspected Medicare fraud, investigate suspected fraud in a thorough and timely manner, and take immediate action to ensure that Medicare Trust Fund monies are not inappropriately paid and that any mistaken payments are recovered.  The ZPIC auditors’ focus has been on skilled nursing facilities, physicians, hospices, HME/Rehab facilities, and physical therapy providers located in the five “hot spot” zones for Medicare fraud, which includes the State of Florida.

Unfortunately, the initiation of a ZPIC audit process initially meant that the provider being audited may face significant challenges to their continued financial viability.  While some providers under investigation may experience a six month time frame for the audit, other providers have seen up to 18-24 months of prepayment reviews.  During the prepayment reviews, the providers were placed on very strict Medicare reimbursement limitations, in which a percentage of their claims undergo review before payment is authorized.

Inside Health Policy recently announced that the CMS modified these rules on August 23, 2012, which will be a significant improvement for long-term care providers.  Thanks in large part to the efforts by the American Health Care Association (AHCA) and the Florida Health Care Association (FHCA), nursing homes in Florida will no longer be subjected to prepayment reviews.   “CMS says circumstances surrounding the reviews indicated that there is still a potential problem with some nursing home documentation, but CMS can accomplish the necessary oversight without prepayment reviews.”  Helpfully, providers against whom ZPIC auditors initiated a prepayment review audit prior to August 23, 2012 who have not yet submitted their responsive documents are not required to submit the information to the ZPICs.

Stripping the prepayment component from the ZPIC auditors’ arsenal is a step in the right direction toward fairness and the restoration of due process in CMS’s ZPIC audits.  Nonetheless, ZPIC audits may still become a costly and daunting process for any healthcare provider.  Many providers will still need to utilize CMS’s appeals process to reverse or modify the decision of the ZPIC auditors.  McCumber Daniels attorneys are available to assist throughout the ZPIC audit process and provide guidance from the initial response to a ZPIC audit through the final appeals process.

Barrick and Forth Again

Update by: Marc L. Penchansky

In December 2011, we wrote about the opinion in Barrick v. Holy Spirit Hospital, where the Superior Court of Pennsylvania reversed a decision of its panel and found that communications between an expert and a party’s attorney were not discoverable absent a showing of cause by the requesting party.  At that time, we expected that the Supreme Court of Pennsylvania was likely to take up the issue.  And so they did.  On August 31, 2012, the Supreme Court granted review to consider “whether the Superior Court’s interpretation of Pa.R.C.P. No. 4003.3 improperly provides absolute work product protection to all communications between a party’s counsel and their trial expert.”

We will continue to keep you updated on the status of this all-important issue.

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