JPMorgan Chase Bank, N.A. et al v. Ben-Ezra & Katz, P.A.
Filing
34
ORDER Directing Filing of Substitutions of Counsel; ORDER denying 17 Motion for Temporary Restraining Order; denying 17 Motion for Preliminary Injunction; granting 24 Unopposed Motion for Extension of Time to Answer Complaint. Ben-Ezra & Katz, P.A. answer due 5/6/2011. Signed by Judge James I. Cohn on 4/15/2011. (prd)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 11-60655-CIV-COHN/SELTZER
JPMORGAN CHASE BANK, N.A. and
CHASE HOME FINANCE, LLC,
Plaintiffs,
vs.
BEN-EZRA & KATZ, P.A.,
Defendant.
_______________________________/
ORDER DIRECTING FILING OF SUBSTITUTIONS OF COUNSEL
THIS CAUSE is before the Court upon Plaintiffs’ Emergency Motion for a
Temporary Restraining Order and a Mandatory Preliminary Injunction [DE 17],
Defendant’s Response [DE 20], and the parties’ Affidavits and Declarations in support
thereof. The Court has carefully considered all of the filings and exhibits, the
arguments of counsel made at yesterday’s hearing, and is otherwise fully advised in the
premises.
I. BACKGROUND
Plaintiffs are banks engaged in home mortgage finance and Defendant is a law
firm retained by the Plaintiffs to litigate foreclosure actions in state courts. The parties
entered a Master Services Agreement on February 1, 2009 (Exhibit A to Motion and
Complaint (hereinafter “Agreement”)) and an Attorney- Trustee Schedule to the
Agreement (Exhibit B to Motion and Complaint (hereinafter “Schedule”)) that govern
their attorney-client relationship. Plaintiffs terminated Defendant by letter dated March
9, 2011 (Exhibit C to Complaint), without mentioning any reason for the termination.1
Starting in late March 2011, Defendant began to file Motions to Withdraw as
counsel in the thousands of underlying state court foreclosure cases, based upon
Plaintiffs’ termination letter.2 Plaintiffs allege that these withdrawal motions were filed
without notice to Chase [DE 19-1], a fact disputed with affidavits by Defendant [DE 211]. Plaintiffs seek this Court to enjoin Defendant from unilaterally withdrawing as
counsel for Chase in numerous pending foreclosures cases. Plaintiffs allege that
Defendant’s actions are a breach of the parties’ agreement that will cause Plaintiffs
irreparable harm, in that Defendant is supposed to provide Transition Services under
the Agreement. Defendant contends that its motions were filed because Plaintiffs
terminated Defendant on March 9, 2011, meaning Defendant has no authority to act on
Plaintiffs’ behalf and therefore must withdraw under Florida Bar Rules. Defendant also
contends that in the few instances that state courts have already held hearings,
Plaintiffs had alternative counsel present and/or the state court has given Plaintiffs sixty
1
The letter requested Defendant’s cooperation in transferring files from
Defendant to an unidentified “new firm.” Defendant initially refused to transfer the files
until Plaintiffs paid an outstanding balance of $6 million in attorney’s fees and costs.
On March 25, 2011, Plaintiffs filed this action for breach of contract – specific
performance, replevin and conversion against Defendant for its failure to turn over the
files. Plaintiff moved for immediate relief in the form of a temporary restraining order
and preliminary injunction requiring Defendant to turn over the files.
On Friday, April 1, 2011, following a hearing, the Court denied Plaintiffs’ request
for injunctive relief [DE 15]. However, Defendant was ordered to transfer the files upon
Plaintiffs posting security in the amount of $4 million. On April 4, 2011, Plaintiffs posted
a bond [DE 16]. The files were transferred on April 4 and 5.
2
At the Defendant’s request at the end of the April 1 hearing, Plaintiffs were
directed to file substitutions of counsel in the underlying state court foreclosure actions
within 30 days.
2
(60) days to have a substitution of counsel filed, effectively eliminating any irreparable
harm.3
II. LEGAL STANDARD
A. Preliminary Injunction Standard
In order to obtain a preliminary injunction or a temporary restraining order,
Plaintiffs must establish the following four elements: (1) a substantial likelihood that it
will prevail on the merits; (2) a substantial threat that it will suffer irreparable injury if the
injunction is not granted; (3) the threatened injury to Plaintiffs outweighs the threatened
harm the injunction may do to the Defendant; and (4) granting the preliminary injunction
will not disserve the public interest. Church v. City of Huntsville, 30 F.3d 1332, 1342
(11th Cir.1994). Because a "preliminary injunction is an extraordinary and drastic
remedy," it is "not to be granted until the movant clearly carries the burden of
persuasion as to the four prerequisites." Id. (quoting Ne. Fl. Chapter of the Ass'n of
Gen. Contractors of Am. v. City of Jacksonville, 896 F.2d 1283, 1285 (11th Cir.1990));
see also McDonald’s Corp. v. Roberts, 147 F.3d 1301, 1306 (11th Cir. 1998).
B. Substantial Likelihood of Success
Plaintiffs rely upon Section 2.6(c) and (d) of the Agreement and Section II.B of
the Schedule to establish its substantial likelihood of success on its breach of contract
3
Defendant stresses that Plaintiffs failed to inform the Court that on Monday
morning, April 11, 2011, Broward County Circuit Judge Joel Lazarus overruled Plaintiffs’
objections to Defendant’s motion to withdraw from a particular foreclosure action.
Affidavit of Maria De Engle, Esq. [DE 22-1]. In a second action in Palm Beach County,
Circuit Judge Jack Cook set an evidentiary hearing on Plaintiffs’ objections for August
of 2011.
3
claim that Defendant breached its obligation to transition pending cases to new counsel
by executing substitution of counsel documents. Plaintiffs contend that the Agreement
and Schedule require Defendant to cooperate with Plaintiffs, and by unilaterally filing
motions to withdraw before arrangements are made for substitution of counsel and
failing to cancel motion hearings regarding withdrawal, Defendant has breached the
parties’ agreements.
The Agreement states that during the Transition Period (which the parties are
now in, more than 30 days having passed since the termination notice), Defendant “will
perform such other services as mutually agreed to by the parties as are necessary to
enable [Plaintiffs] to obtain from another [attorney] . . . services to substitute or replace
[Defendant]. . . .” § 2.6(c) of Agreement. In addition, “[Defendant] will cooperate in
good faith with [Plaintiff] and any new [attorney] in the performance of its obligations
under this Section 2.6 and [Defendant] further agrees to work with [Plaintiffs] and any
new [attorney] in the development and carrying out of a transition plan as part of the
Transition Services.” Id. § 2.6(d). The Schedule states that “Upon termination, you
agree to properly execute substitution of counsel documents on pending matters and to
immediately forward all Bank Documents, as defined below, and the executed
substitutions of counsel documents in accordance with [Plaintiffs’] written instructions.”
§ II.B of Schedule. Defendant argues that Plaintiffs have failed to provide the
necessary “written instructions,” despite Defendant’s proposal to Plaintiffs on how to
best transition the cases.
Plaintiffs also cite to Rule 4-1.16(d) of the Rules Regulating the Florida Bar to
support their arguments that Defendant breached the Agreement and Schedule. This
4
rule states that a withdrawing lawyer shall take steps to the extent reasonably
practicable to protect a client’s interest, such as allowing time for the employment of
other counsel. Defendant, in turn, relies upon the prior section in Rule 4-1.16(a)(3),
which states that a lawyer shall withdraw from the representation of a client if the lawyer
is discharged. The record in this case indicates that Defendant has taken some
measures to protect Plaintiffs’ interest, such as obtaining extensions in state court for
Plaintiff to obtain substitute counsel.
Turning back to the main claim of breach of contract, Defendant argues in
opposition to Plaintiffs’ arguments that the federal Anti-Injunction Act bars this Court
from entering the requested injunction. The Act states that: “A court of the United
States may not grant an injunction to stay proceedings in a State court, except as
expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or
to protect or effectuate its judgments.” 28 U.S.C. § 2283. This statute is to be narrowly
construed. Delta Air Lines, Inc. v. McCoy Rests., Inc., 708 F.2d 582, 585 (11th Cir.
1983). Defendant contends that by forbidding it to move to withdraw in cases where
Plaintiffs have already terminated counsel, the state court case could not move forward.
Plaintiffs asserted at the hearing that it was only asking the Court to enjoin Defendant
from withdrawing in the next two weeks. However, a party cannot avoid the clear
prohibition in the statute by naming as a defendant a state court party rather than the
state court itself. Int’l Ass’n of Machinists & Aerospace Workers v. Nix, 512 F.2d 125,
129 (5th Cir. 1975).4
4
The decisions of the United States Court of Appeals for the Fifth Circuit, as
that court existed on September 30, 1981, handed down by that court prior to the close
5
The Court concludes that Plaintiffs have failed to meet their burden to show a
substantial likelihood of a breach of contract. In addition, the Anti-Injunction Act
precludes the relief sought by Plaintiffs, as such an injunction would hamstring a state
court that wished to move forward on any of the thousands of pending foreclosure
actions.
C. Irreparable Harm
Plaintiffs argue that § 13.2 of the Agreement states that if Defendant breaches
its obligation to provide Transition Services, then irreparable harm is proven
automatically. Plaintiffs also support their contention of irreparable harm by stating that
under the law, they cannot represent themselves in the state court actions and stand to
have cases dismissed if not represented by counsel. The value of Plaintiffs’ mortgage
assets would therefore be irreparably harmed. Defendant asserts, as noted above, that
there is in fact no irreparable harm to Plaintiffs because in the few instances that state
courts have already held hearings on the motions to withdraw, Plaintiffs had alternative
counsel present and/or the state court has given Plaintiffs sixty (60) days to have a
substitution of counsel filed, effectively eliminating any irreparable harm.
The Court concludes that Plaintiffs have not met their burden to show that
irreparable harm will occur if the requested injunction is not entered.5
of business on that date, shall be binding as precedent in the Eleventh Circuit, for this
court, the district courts, and the bankruptcy courts in the Circuit. Bonner v. Pritchard,
661 F.2d 1206, 1207 (11th Cir. 1981) (en banc).
5
The Court need not address the remaining elements for issuance of a
preliminary injunction.
6
III. CONCLUSION
Although the motion for an injunction is denied, the Court will fashion a remedy
to resolve the crux of the parties’ immediate problem involving foreclosures cases set
for trial in the next two weeks.6 The Court does not find the filing of the motion to rise to
the level of vexatiousness required for an award of fees under 28 U.S.C. § 1927.
Accordingly, it is ORDERED and ADJUDGED as follows:
1.
Plaintiffs’ Emergency Motion for a Temporary Restraining Order and a
Mandatory Preliminary Injunction [DE 17] is DENIED;
2.
For foreclosure cases going to trial during the week of April 18, 2011, Plaintiffs
shall file substitutions of counsel in those cases by close of business on Friday,
April 15, 2011;
3.
For foreclosure cases going to trial during the week of April 25, 2011, Plaintiffs
shall file substitutions of counsel in those cases by close of business on Friday,
April 22, 2011;
4.
The deadline for Plaintiffs to file substitutions of counsel in all other cases
remains close of business on May 2, 2011;
5.
Defendant’s Unopposed Motion for Enlargement of Time to Respond to the
Complaint is hereby GRANTED. The Response is due May 6, 2011.
DONE AND ORDERED in Chambers at Fort Lauderdale, Broward County,
Florida, this 15th day of April, 2011.
copies to:
counsel of record on CM/ECF
6
Plaintiffs are already under an obligation, which they fully intend to meet, to file
substitutions of counsel in all of Defendant’s cases by May 2, 2011.
7
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