Consumer Finance Litigation

The Florida Supreme Court's opinion in Pino v. Bank of New York, 38 Fla. L. Weekly S78a (Fla. Feb. 7, 2013) is an important opinion concerning voluntary dismissal of actions where fraud on the Court has been alleged by the Defendant. In Pino, the Florida Supreme Court upheld the Fourth District Court of Appeal, and held that a trial court lacks jurisdiction to reinstate a dismissed action to award sanctions for fraud on the Court, except when the fraud, if proven, resulted in plaintiff securing affirmative relief to the detriment of the defendant, and upon obtaining that relief, the Plaintiff voluntarily dismissed. This holding means that, in the most common circumstance, where disquieting allegations of fraud on the Court are raised in the early stages of the litigation before any affirmative relief is secured against the Defendant, a Plaintiff can voluntarily dismiss the action without fear that the trial court will reopen the case and award sanctions such as dismissal of the action with prejudice. The Court noted the long standing rule in Florida is that a notice of voluntary dismissal is jurisdictional and cuts off the jurisdiction of the trial court to enter further orders. The source of authority for reopening a voluntary dismissed case is found in Rule 1.540(b) which provides in pertinent part that, on motion, "the court may relieve a party . . . from a final judgment, decree, order, or proceeding for the following reasons . . . fraud . . . misrepresentation, or other misconduct of an adverse party. . . ." In its prior jurisprudence, the Florida Supreme Court has construed the term "proceeding" as used in Rule 1.540(b) to encompass voluntary dismissals taken pursuant to Rule 1.540(b). See Miller v. Fortune Insurance Co., 484 So. 2d 1221, 1223 (Fla. 1986). This holding is contained in a line of cases dealing with the lawyer's worst nightmare, a typographical error in a notice of voluntary dismissal providing that it be "with" prejudice as opposed to "without." In such circumstances, the Florida Supreme Court, and lower courts, had long held that a trial court may reopen the case to permit relief from the typographical error and permit filing of a notice of voluntary dismissal without prejudice. However, the Court concluded in Pino that certain circumstances may present difficulties for the application of Rule 1.540(b) when it is utilized by a Defendant, as opposed to the Plaintiff, in the context of a voluntary dismissal. The Court noted that the term "relieve" in Rule 1.540 connotes that the rule is applicable only where the voluntary dismissal had worked some prejudice on the party seeking dismissal. Thus, the Court held that a Defendant, who is normally benefited by voluntary dismissal, could succeed in getting relief from a notice of voluntary dismissal under Rule 1.540 only when the voluntary dismissal had prejudiced by fraudulently securing "affirmative relief" or an "adverse ruling" to the "defendant's detriment." This interpretation prevents a party from fraudulently obtaining relief from the Court, and then preventing the Court from remedying the fraud by dismissing the action, which were the facts of the case on which counsel for Pino had relied upon heavily, Select Builders of Florida v. Wong, 367 So. 2d 1089 (Fla. 3d DCA 1979). However, in the absence of the fraud having worked prejudice on the Defendant through securing affirmative relief or an adverse ruling, the Court held that Rule 1.540 could not be used by the Defendant to reopen a voluntarily dismissed case and seek stiff sanctions such as monetary awards or dismissal with prejudice for alleged instances of fraud on the Court. The Pino opinion puts to rest the worst fears of many mortgage industry members and lawyers that the Florida Supreme Court was set to unleash a flood of motions to reopen, and dismiss with prejudice, voluntarily dismissed foreclosure actions. Such an outcome would surely have compounded the already severe mortgage foreclosure crisis in Florida. In light of the much publicized, albeit relatively rare, instances of fraudulent conduct in mortgage foreclosures, foreclosure defense attorneys had taken to routinely denouncing each and every perceived inconsistency in foreclosure paperwork as evidence of fraudulent conduct. While few, if any of those cases, were the result of fraud, paperwork irregularities are a common source of voluntary dismissal in mortgage foreclosures, and consequently many voluntarily dismissed were also the subject of what had by then become standard-boilerplate allegations of fraud utilized by certain foreclosure defense firms. In Pino, the Court noted that, "Plaintiffs frequently use the right of voluntary dismissal as a tool to cure defects that existed in the dismissed action." The Court further noted that the voluntary dismissal rule "does not take into account a plaintiff's motive in seeking the dismissal, nor does it expressly preclude a plaintiff from taking a dismissal where the objective is tactical." "In fact, the rule presupposes that the plaintiff will have a tactical reason for voluntarily dismissing its lawsuit at a particular point in time." This does not mean that voluntary dismissal is a panacea in all instances of alleged fraud on the Court. The Pino opinion makes clear that a trial court could reopen a voluntarily dismissed action either under Rule 1.540(b) in circumstances where "affirmative relief to the Defendant's detriment" is obtained by fraud. Even where no affirmative relief is obtained, voluntary dismissal will still trigger liability under Fla. R. Civ. P. 1.420(d) for the defendants "costs and possibly attorney's fees" incurred defending the action. The Court "can require payment [of the costs and attorney's fees] as a precondition to the second suit." Additionally, the Court noted that where a motion for sanctions under Fla. Stat. 57.105 has been filed before the action is voluntarily dismissed, the Court would have jurisdiction to award sanctions. This of course assumes all the grounds for sanctions under Fla. Stat. 57.105 are met, including expiration of the twenty one day safe-harbor. The Court in Pino held that, since the action was dismissed during the twenty one day safe harbor period, Fla. Stat. 57.105 did not support an award of sanctions. External to the litigation, the Court observed that a referral of the Plaintiff's attorney to the Bar for a possible violation of the Code of Professional Responsibility was in order. Thus, the decision to voluntarily dismiss an action must still be carefully considered, especially where fraud on the Court has been alleged, but the opinion in Pino certainly preserves the tactical value of a voluntary dismissal in certain contexts. For more information on consumer finance litigation topics, please contact one of the Burr & Forman team members for assistance. We are happy to answer any questions or concerns you may have.