memorandum of law of the attorney general in...
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STATE OF NEW YORK SUPREME COURT : COUNTY OF ERIE _________________________________________________ BENEFICIAL HOMEOWNER SERVICES CORP., Plaintiff Hon. Timothy J. Walker
Index No. 9436/09 v. SHAUNA M. FOSTER a/k/a SHAUNA FOSTER, CAPITAL ONE BANK (USA) NA, DEPARTMENT OF SOCIAL SERVICES, JAMES FOSTER, MICHAEL BLACKMON,
Defendants. __________________________________________________
MEMORANDUM OF LAW OF THE ATTORNEY GENERAL IN
SUPPORT OF THE CONSTITUTIONALITY OF ADMINISTRATIVE ORDER 433-11 AND RULE 202.12-a(f) OF THE
CHIEF ADMINISTRATIVE JUDGE OF THE STATE OF NEW YORK
ERIC T. SCHNEIDERMAN Attorney General of the
State of New York Attorney for Defendants BARBARA D. UNDERWOOD The Capitol Solicitor General Albany, New York 12224 ANDREW D. BING Telephone: (518) 474-2256 Deputy Solicitor General Fax No: (518) 473-8963 LAURA ETLINGER Assistant Solicitor General MICHAEL RUSSO Assistant Attorney General Dated: October 31, 2011
of Counsel
Reproduced on Recycled Paper
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TABLE OF CONTENTS PAGE
TABLE OF AUTHORITIES ................................................................................ ii PRELIMINARY STATEMENT........................................................................... 1 STATE OF THE CASE........................................................................................ 2
A. Documented Abuses in Mortgage Foreclosure Proceedings Led to State and Federal Investigations .................................................... 2
B. The Legislature Responded to the Mortgage Foreclosure Crisis
with Comprehensive Legislation and a Delegation of Specific Rulemaking Authority to the Chief Administrative Judge................ 6
C. The Chief Administrative Judge Issued an Administrative Order and a Rule to Protect the Integrity of New York Judicial Proceedings .......................................................................................... 8 D. The Pending Motion Challenges the Constitutionality of
Administrative Order 433-11 and Rule 202.12-a(f) ........................ 12
ARGUMENT
THE CHIEF ADMINISTRATIVE JUDGE WAS AUTHORIZED TO ISSUE THE ADMINISTRATIVE ORDER AND THE RULE PURSUANT TO HER PLENARY CONSTITUTIONAL POWER OVER ADMINISTRATIVE MATTERS AND PURSUANT TO A VALID DELEGATION OF AUTHORITY BY THE LEGISLATURE ....................................................................................... 12 A. The Chief Administrative Judge’s Order Requiring
the Attorney Affirmation Was a Valid Exercise of Her Plenary Administrative Powers................................................. 13
B. The Chief Administrative Judge’s Order Was Also a Proper Exercise of Her Legislatively Delegated Authority ......................... 19
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Table Of Contents (cont'd) PAGE
1. The Judiciary Law Authorizes the Order and the Rule ............. 20 2. The 2009 Foreclosure Legislation Authorizes the Order and the Rule ................................................................................... 21 3. The Order and the Rule Are Consistent With Limitations on the Chief Administrative Judge’s Authority ........................... 22
CONCLUSION................................................................................................... 26 ADDENDUM......................................................................................................A1
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TABLE OF AUTHORITIES CASES PAGE A.G. Ship Maintenance Corp., Matter of v. Lezak,
69 N.Y.2d 1 (1986) ................................................................................... 20,22
Bank of New York Mellon, Matter of, Index No. 651786/2011 (Sup. Ct., N.Y. County Aug. 5, 2011)...................... 4
Corkum v. Bartlett, 46 N.Y.2d 424 (1979) .................................................................................... 14
LaSalle Bank, N.A. v. Face, 31 Misc.3d 627 (Sup. Ct. Suffolk Co. 2011) ................................................. 24
Levenson v. Lippman, 4 N.Y.3d 280 (2005) ............................................................................ 14,15,16
Met Council, Inc., Matter of v. Crosson, 84 N.Y.2d 328 (1994) .................................................................................... 15
Scoralick, Matter of v. Milonas, 207 A.D.2d 159, lv. denied, 86 N.Y.2d 707 (1995)....................................... 15
People v. Correa, 15 N.Y.3d 213 (2010) ............................................................................... 14,15
People v. Ramos, 85 N.Y.2d 678 (1995) .......................................................................... 22,23,25
CONSTITUTIONAL PROVISIONS
N.Y. Const. Art. 6, § 28 ..................................................................................................... 13 Art. 6, § 28(a)................................................................................................. 12 Art. 6, § 28(b)......................................................................................... 1,13,15 Art. 6, § 30 ............................................................................................. 1,13,19
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Table Of Authorities (cont'd) STATE STATUTES PAGE C.P.L.R
3401 ............................................................................................................ 8,21 3408(d) ............................................................................................................. 7 3408(e) .......................................................................................................... 7,8
Executive Law
§ 71.............................................................................................................. 1,12
Judiciary Law § 210(2) .......................................................................................................... 12 § 211(1)(b)................................................................................................... 1,20 § 212(2)(d).............................................................................................. 1,13,20 § 212(3)(a)........................................................................................................ 1
Real Property Actions and Proceedings Law § 1305............................................................................................................... 7
STATE REGULATIONS
22 N.Y.C.R.R. 80.1(a) ............................................................................................................ 14 80.1(b)(6)................................................................................................... 14,15 130-1.1(c)(3)................................................................................................... 24 202.7 .............................................................................................................. 17 202.12-a ........................................................................................................... 8 202.12-a(b)....................................................................................................... 9 202.12-a(f)................................................................................................... 1,10 part 1200 .................................................................................................. 17,24
MISCELLANEOUS AUTHORITIES
2010 Report of the Chief Administrator of the Courts Pursuant to Chapter 507 available at http://www.nycourts.gov/publications/pdfs/foreclosurereportnov2010.pdf........ 2,7
Congressional Oversight Panel, Examining the Consequences of Mortgage Irregularities for Financial Stability and Loss Mitigation (Nov. 16, 2010), available at http://cybercemetery.unt.edu/archive/cop/20110402010313/http://cop.senate.gov/documents/cop-111610-report.pdf ............................................ 2-3
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Table Of Authorities (cont'd) PAGE
MISCELLANEOUS AUTHORITIES (cont'd)
David Streitfeld, Backlog of Cases Gives a Reprieve on Foreclosures, N.Y. Times (June 19, 2011), available at http://www.nytimes.com/2011/06/19/business/19foreclosure.html ............ 10
Federal Reserve System, Office of the Comptroller of the Currency, & Thrift Supervision, Interagency Review of Foreclosure Policies and Practices (April 2011), at 8, available at http://www.occ.gov/news-issuances/news-releases/2011/nr-occ-2011-47a.pdf.6GAO, Mortgage Foreclosures: Docum
Gretchen Morgenson, New York Subpoenas 2 Foreclosure-Related Firms, N.Y. Times (Apr. 8, 2011), available at http://www.nytimes.com/2011/04/09/business/09foreclose.html. ................. 4
Hon. Ann Pfau, Chief Administrative Judge, New York Courts First in Country to Institute Filing Requirement to Preserve Integrity of Foreclosure Process (Oct. 20, 2010) ................................................................ 9
Karen Freifeld & Aruna Viswanatha, MERS Subpoenaed by New York, Sued by Delaware, Reuters (Oct. 27, 2011), available at http://www.reuters.com/article/2011/10/27/us-mers-subpoena-idUSTRE79Q7SD20111027. .......................................................................... 5
NAAG News (Oct. 13, 2010), available at http://www.naag.org/joint-statement-of-the-mortgage-foreclosure-multistate-group.php..................... 5
Robbie Whelan, GMAC Spotlight On 'Robo-Signer', Wall St. J. (Sept. 22, 2010), available at http://online.wsj.com/article/SB10001424052748703399404575506303831235126.html. ........................................................................................... 3
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Table Of Authorities (cont'd) PAGE
MISCELLANEOUS AUTHORITIES (cont'd)
U.S. Department of Justice, Agreement Announced with New York Mortgage Foreclosure Law Firm to Overhaul Its Practices and Pay $2 Million Fine (Oct. 6, 2011), available at http://www.stopfraud.gov/news/news-10062011.html .................................. 4
PRELIMINARY STATEMENT
The Attorney General intervenes in this mortgage foreclosure
proceeding pursuant to Executive Law § 71 and Civil Practice Law and Rules
(“CPLR”) 1012(b)(1) to defend the constitutionality of Administrative Order
433-11 and Rule 202.12-a(f), 22 N.Y.C.R.R. 202.12-a(f), which require
attorney certification of the accuracy of plaintiffs’ filings in mortgage
foreclosure actions. The Chief Administrative Judge of the State of New York
adopted the administrative order and rule to curb documented widespread
abuses in mortgage foreclosure proceedings that threatened the integrity of
the judicial process.
The Chief Administrative Judge was authorized to adopt the order and
rule under (1) her constitutional authority to regulate the administration of
the courts, see N.Y. Const. Art. 6 § 28(b), (2) the Legislature’s valid delegation
to the Chief Administrative Judge of its authority to regulate practice and
procedure in the courts, see N.Y. Const. Art. 6, § 30, see Judiciary Law §§
211(1)(b), 212(2)(d), and (3) a specific legislative delegation of rule-making
authority in 2009 legislation providing for a foreclosure settlement process,
see New York Laws of 2009, ch. 507, §10-a(1). Each of these sources of
authority alone would be sufficient to sustain the validity of the
administrative order and rule. Together they provide overwhelming support
for the conclusion that the Chief Administrative Judge was authorized to
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adopt the administrative order and the rule. This Court should therefore
deny plaintiff’s motion for a declaration that the administrative order and
rule are unconstitutional, and for an order permitting the foreclosure sale in
this case to proceed without plaintiff’s compliance with the administrative
order.
STATEMENT OF THE CASE
A. Documented Abuses in Mortgage Foreclosure Proceedings Led to State and Federal Investigations.
The abuses committed in recent years by mortgage servicers in
mortgage foreclosure proceedings are well documented. Multiple employees
of the major servicers have admitted in sworn testimony that they
perpetrated systematic fraud on the courts in foreclosure proceedings by
"robo-signing" affidavits -- i.e., attesting to personal knowledge about
mortgages and properties despite having no such knowledge. These abuses
occurred in hundreds of thousands of proceedings nationwide. 1
See, e.g., Congressional Oversight Panel, Examining the 1 The dramatic increase in the number of foreclosure proceedings being commenced compounded the problem. In 2005, 22,601 foreclosure actions were filed in New York, and by 2010 the number of annual filings had increased to 42,356. Ann Pfau, 2010 Report of the Chief Administrator of the Courts Pursuant to Chapter 507 of the Laws of 2009, State of New York Unified Court System 2010, at Appendix 3 and 4, available at http://www.nycourts.gov/publications/pdfs/foreclosurereportnov2010.pdf. During 2009, there were approximately 54,500 mortgage foreclosure proceedings pending in New York courts and during 2010, the number of pending actions increased to over 77,800. Id. at 4.
3
Consequences of Mortgage Irregularities for Financial Stability
and Loss Mitigation (Nov. 16, 2010), at 7, available at
http://cybercemetery.unt.edu/archive/cop/20110402010313/http://cop.senate.g
ov/documents/cop-111610-report.pdf; Robbie Whelan, GMAC Spotlight On
'Robo-Signer', Wall St. J. (Sept. 22, 2010), available at
http://online.wsj.com/article/SB10001424052748703399404575506303831235
126.html.
The wide-spread practice of robo-signing has prompted a number of
investigations by governmental authorities, including several by the New
York Attorney General to determine the scope of the fraud committed against
the courts of this State. In October 2010, the Attorney General sought
documentation from four major servicers and demanded that they suspend
foreclosures actions until they could ensure the legality and integrity
of their procedures. See Attorney General Cuomo Expands Probe of
New York Foreclosure Actions, Office of the
Attorney General Press Release (Oct. 12, 2010), available at
htpp://www.ag.ny.gov/media_center/2010/oct/oct12b_10.html. In April 2011,
Attorney General Schneiderman issued subpoenas to plaintiff’s counsel in
this action, Steven J. Baum, P.C. ("Baum"), 2 and a related firm, Pillar
2 Baum is one of the major mortgage foreclosure legal firms in New York State and handles approximately 40% of all mortgage foreclosure filings in the State.
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Processing, LLC, requesting information about their foreclosure-related
practices, including the documentation that their employees filed with the
courts. 3 See Gretchen Morgenson, New York Subpoenas 2 Foreclosure-
Related Firms, N.Y. Times (Apr. 8, 2011), at B1, available at
http://www.nytimes.com/2011/04/09/business/09foreclose.html. In August,
the Attorney General challenged a settlement between Bank of New York
Mellon and Bank of America based, in part, on the allegation that Bank of
New York Mellon -- the trustee for various pools of residential mortgage-
backed securities -- had failed to respond appropriately to robo-signing and
other foreclosure abuses. See Verified Pleading in Intervention ¶ 27, Doc. #
104, Matter of Bank of New York Mellon, Index No. 651786/2011 (Sup. Ct.,
N.Y. County Aug. 5, 2011). Most recently, the Attorney General initiated an
investigation into Mortgage Electronic Registration Systems ("MERS") -- a
private registry that purports to record information for more than sixty
percent of U.S. mortgages -- because of his concern that MERS had facilitated
See Gretchen Morgenson, New York Subpoenas 2 Foreclosure-Related Firms, New York Times (April 8, 2011), available at http://www.nytimes.com/2011/04/09/business/09foreclose.html. 3 The Baum firm recently entered into a settlement with the United States Attorney for the Southern District of New York in which it admitted making errors in its legal filings. See U.S. Department of Justice, Agreement Announced with New York Mortgage Foreclosure Law Firm to Overhaul Its Practices and Pay $2 Million Fine (Oct. 6, 2011) available at http://www.stopfraud.gov/news/news-10062011.html. Under the settlement, the Baum firm agreed to pay $2 million and extensively change its foreclosure practices to avoid filing misleading pleadings, affidavits and mortgage assignments in New York courts. See id.
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foreclosure abuses. See Karen Freifeld & Aruna Viswanatha, MERS
Subpoenaed by New York, Sued by Delaware, Reuters (Oct. 27, 2011),
available at http://www.reuters.com/article/2011/10/27/us-mers-subpoena-
idUSTRE79Q7SD20111027. Finally, for the past year most of the state
Attorneys General have participated, along with several federal agencies, in
an effort to address robo-signing and related practices. See NAAG News (Oct.
13, 2010), available at http://www.naag.org/joint-statement-of-the-mortgage-
foreclosure-multistate-group.php.
Robo-signing and related abuses also prompted a coordinated review by
federal regulators—including the Office of the Comptroller of the Currency,
the Federal Reserve, the Office of Thrift Supervision and the FDIC—into the
policies, procedures, and internal controls of fourteen major mortgage
servicers. United States Government Accountability Office (GAO), Mortgage
Foreclosures: Documentation Problems Reveal Need for Ongoing Regulatory
Oversight, GAO 11-433 (May 2011), at 30, available at
http://www.gao.gov/new.items/d11433.pdf. This review revealed not only
problems in the preparation of foreclosure documents, but also inadequate
policies, staffing and oversight of internal foreclosure processes. Id. at 31. In
their report, the federal regulators concluded that “most servers had affidavit
signing protocols that expedited the processes for signing foreclosure
affidavits without ensuring that the individuals who signed the affidavits
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personally conducted the review or possessed the level of knowledge of the
information that they attested to in those affidavits. . . . Examiners also
found the majority of servicers had improper notary practices that failed to
conform to state legal requirements.” Federal Reserve System, Office of the
Comptroller of the Currency, & Office of Thrift Supervision, Interagency
Review of Foreclosure Policies and Practices (April 2011), at 8, available at
http://www.occ.gov/news-issuances/news-releases/2011/nr-occ-2011-47a.pdf.
Insufficient staff and the lack of guidance to staff and external law firms
regarding affidavit requirements contributed to the preparation and filing of
inaccurate affidavits. Id. Regulators also found that the amounts of
indebtedness were often inaccurate, most times adversely to the borrower. Id.
Finally, the federal regulators found inadequacies in the servicers’
management and oversight of outside law firms involved in mortgage
foreclosure document preparation. Id. at 9. The regulators took formal
action against all fourteen major servicers. GAO, Mortgage Foreclosures:
Documentation Problems Reveal Need for Ongoing Regulatory Oversight,
GAO 11-433 (May 2011), at 31.
B. The Legislature Responded to the Mortgage Foreclosure Crisis with Comprehensive Legislation and a Delegation of Specific Rulemaking Authority to the Chief Administrative Judge.
The New York State Legislature also responded to the residential
mortgage crisis with comprehensive legislation. See New York Laws of 2008,
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ch. 472; New York Laws of 2009, ch. 507. This legislation was intended to
address the high number of defaults by unrepresented defendants in
residential foreclosure proceedings. See Ann Pfau, 2010 Report of the Chief
Administrator of the Courts Pursuant to Chapter 507 of the Laws of 2009,
State of New York Unified Court System 2010, at 8, available at
http://nycourts.gov/press/pr2010_12.shtml.
The new legislation provides several layers of protection for
homeowners. At least 90 days before commencing foreclosure proceedings,
mortgage lenders and assignees must notify homeowners about the
availability of housing counseling and foreclosure prevention services. See
Real Property Actions and Proceedings Law § 1305. Within 60 days of the
filing of proof of service, the court must hold a mandatory settlement
conference, to which the plaintiff must bring specified key documents,
including: the mortgage and note, or the name, address, and phone number of
the legal holder of the mortgage if it is not the plaintiff; payment history; and
an itemization of the amounts needed to cure and pay off the loan. See CPLR
3408(e). Finally, when the plaintiff files its request for judicial intervention
(RJI), the court must notify the appropriate local housing counseling agencies
designated by the Division of Housing and Community Renewal so that those
agencies can provide advice and counsel to the defendant homeowner. See
CPLR 3408(d).
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The 2009 legislation authorized the Chief Administrator of the Courts
to adopt “such rules as may be necessary to ensure the just and expeditious
processing of all settlement conferences hereunder.” New York Laws of 2009,
ch. 507, § 10-a(1). As directed by the Legislature, the Chief Administrative
Judge adopted Rule 202.12-a of the Uniform Civil Rules for Supreme Court
and County Court, 22 N.Y.C.R.R. 202.12-a. See also CPLR 3401 (directing
the Chief Administrative Judge to adopt rules “regulating the hearing of
causes”); CPLR 3408(e) (the notice of the settlement conference “shall be in a
form prescribed by the office of court administration”). As described below, in
December 2010, the Chief Administrative Judge amended Rule 202.12-a by
adding new subsection (f), which requires counsel to comply with affirmation
requirements concerning the accuracy of foreclosure filings. That
amendment, and a related administrative order, is the subject of plaintiff’s
motion in this case.
C. The Chief Administrative Judge Issued an Administrative Order and a Rule to Protect the Integrity of New York Judicial Proceedings.
In response to the documented abuses in mortgage foreclosure
proceedings, the Chief Administrative Judge issued an administrative order
on October 20, 2010, to address the effect of these abuses on the courts. See
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Administrative Order 548-10. 4 The order was issued at the direction of the
Chief Judge and in consultation with the Administrative Board of the Courts.
The administrative order directs plaintiff’s counsel in residential
foreclosure actions to affirm that they have communicated with plaintiff’s
employees who have reviewed the accuracy of the relevant records and
confirmed the accuracy of court filings. The order also requires counsel to
affirm that the documents filed with the court contain no false statements.
Consistent with the legislation and court rule governing mandatory
settlement conferences, the affirmation must be filed with the court when the
RJI is filed. 5 See AO 433-11; 22 N.Y.C.R.R.202.12-a(b).
The administrative order was issued “to protect the integrity of the
foreclosure process and prevent wrongful foreclosures” and to help “ensur[e]
that the documents judges rely on will be thoroughly examined, accurate, and
error-free before any judge is asked to take the drastic step of foreclosure.”
Hon. Ann Pfau, Chief Administrative Judge, New York Courts First in
4 The Administrative Order (AO 548-10) was reissued on March 2011, as Administrative Order 433-11. In response to feedback from the plaintiff’s bar, the form affirmation was revised and an alternative form affidavit for use by a representative of the plaintiff was made available. 5 Where the proceeding was commenced prior to the November 18, 2010 effective date of the administrative order, the affirmation is to be filed either with the proposed order of reference or with the proposed judgment of foreclosure (in cases where no judgment of foreclosure had been entered as of the order’s effective date), or before the scheduled auction, with a copy to be served on the referee (in cases where a judgment of foreclosure had been entered but the property had not yet been sold as of the administrative order’s effective date). AO 433-11.
10
Country to Institute Filing Requirement to Preserve Integrity of Foreclosure
Process (Oct. 20, 2010), available at http://nycourts.gov/press/pr2010_12.shtml.
The filing of the affirmation furthers the Legislature’s policy objective by
ensuring that the mandatory settlement conference is grounded in accurate
and proper documentation that has been made available to the defendant and
the court.
The new affirmation requirement was subsequently incorporated in the
courts’ rules. In December 2010, the Chief Administrative Judge, with the
advice and consent of the Administrative Board of the Courts, amended Rule
202.12-a of the Uniform Civil Rules for Supreme Court and County Court by
adding new subsection(f). The new rule authorizes the Chief Administrator
of the Courts to “continue to require counsel to file affidavits or affirmations
confirming the scope of inquiry and the accuracy of papers filed in residential
mortgage foreclosure actions.” 22 N.Y.C.R.R. 202.12-a(f).
The administrative order and rule had an immediate and dramatic
effect on residential foreclosure actions when plaintiffs’ counsel discovered
that they could not verify the accuracy of foreclosure information with
plaintiff’s employees, as the administrative order and rule now require. See
David Streitfeld, Backlog of Cases Gives a Reprieve on
Foreclosures, N.Y. Times (June 19, 2011), available at
http://www.nytimes.com/2011/06/19/business/19foreclosure.html. According
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to the Office of Court Administration, an average of over 3,500 RJIs were
filed per month in foreclosure proceedings in 2010, before the administrative
order was issued, while the average number of such filings after the order has
been 773 per month.
New York was not the only state to respond to the residential mortgage
foreclosure crisis with new administrative orders and court rules designed to
protect the integrity of the judicial process and the accuracy of filed
documents. For example, the New Jersey court system has issued an
administrative order that is substantively identical to New York’s.
Administrative Order 01-2010 of the New Jersey Acting Administrative
Director of the Courts (Dec. 10, 2010) (A1-A18).6 Local courts in a number of
states have also issued similar directives, see, e.g., Revised Residential
Mortgage Foreclosure Affidavit Policy of the Cuyahoga County Court of
Common Pleas (Dec. 22, 2010) (A19-A20), and other state judicial systems
approached the same problem from different perspectives, see, e.g., Order
2011-05-02-01 of the Chief Justice of South Carolina (May 2, 2011) (A21-A25)
(requiring notice of loan modification/loss mitigation procedures in residential
foreclosure proceedings); Maryland Court Rule 14-207.1 (2011) (A26-A33)
(authorizing courts in foreclosure proceedings to screen petition and review
6 Copies of the administrative orders and court rules from other jurisdictions are included in an Addendum to the Attorney General’s memorandum of law.
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accuracy of affidavits).
D. The Pending Motion Challenges the Constitutionality of Administrative Order 433-11 and Rule 202.12-a(f). In this mortgage foreclosure action, plaintiff has filed a motion seeking
a declaration that the administrative order and Rule 202.12-a(f) are
unconstitutional. Plaintiff demands an order authorizing it to sell the subject
property without filing the affirmation required by administrative order 433-
11 issued by the Chief Administrative Judge. The Attorney General was
notified of the constitutional challenge and intervenes in this proceeding
pursuant to Executive Law § 71 and CPLR 1012(b)(1) to defend the
constitutionality of the administrative order and rule.
ARGUMENT
THE CHIEF ADMINISTRATIVE JUDGE WAS AUTHORIZED TO ISSUE THE ADMINISTRATIVE ORDER AND THE RULE PURSUANT TO HER PLENARY CONSTITUTIONAL POWER OVER ADMINISTRATIVE MATTERS AND PURSUANT TO A VALID DELEGATION OF AUTHORITY BY THE LEGISLATURE.
The Chief Administrative Judge, who is appointed by the Chief Judge
of the State with the advice and consent of the Administrative Board of the
Courts, 7 has two sources of authority relevant to this proceeding: plenary
7 The Administrative Board of the Courts is comprised of the Chief Judge of the Court of Appeals, who serves as its chair, and the presiding justices of the four appellate divisions. N.Y. Const. Art. 6 § 28(a); Judiciary Law § 210(2). Prior to the
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constitutional authority to “supervise the administration and operation of the
unified court system,” N.Y. Const. Art. 6, § 28(b), and authority delegated by
the Legislature pursuant to its constitutional powers with respect to
regulation of “the jurisdiction and proceedings” of the courts, N.Y. Const. Art.
6, § 30; Judiciary Law §§ 211(1)(b), 212(2)(d); New York Laws of 2009, ch. 507,
§ 10-a(1). Each of these sources of authority independently supports the
Chief Administrative Judge’s power to issue the administrative order and
rule that plaintiff challenges here.
A. The Chief Administrative Judge’s Order Requiring the Attorney Affirmation Was a Valid Exercise of Her Plenary Administrative Powers.
The New York Constitution directly authorizes the Chief
Administrative Judge, on behalf of the Chief Judge, to “supervise the
administration and operation of the unified court system.” N.Y. Const. Art. 6,
§ 28. In exercising her constitutional administrative functions, the Chief
Administrative Judge has the powers and duties delegated to her by the
Chief Judge and any additional powers and duties provided by law. Id. The
Chief Judge has delegated to the Chief Administrative Judge full authority to
supervise the administration and operation of the unified court system,
including authority to adopt administrative rules “for the efficient and
1978 amendment of the New York Constitution, the Administrative Board of the Courts served in the role of chief administrator of the court system.
14
orderly transaction of business in the trial courts.” 22 N.Y.C.R.R. 80.1(a) and
(b)(6).
With respect to administrative functions, the Chief Administrator’s
powers are “complete.” Matter of Met Council, Inc. v. Crosson, 84 N.Y.2d 328,
335 (1994); Matter of Scoralick v. Milonas, 207 A.D.2d 159, 160 (3d Dep’t), lv.
denied, 86 N.Y.2d 707 (1995). “When administrative authority is exercised in
conformity with the consultation and approval requirements, [Unified Court
System] administrators possess broad express and implied powers to take
whatever actions are necessary for the proper discharge of their
responsibilities.” People v. Correa, 15 N.Y.3d 213, 223 (2010). “[T]he
Legislature could not by statute divest the Chief Administrator of [her]
[constitutional] authority . . . to supervise the administration and operation
of the Unified Court System on behalf of the Chief Judge.” Levenson v.
Lippman, 4 N.Y.3d 280, 291 (2005); see Matter of Met Council, Inc. v. Crosson,
84 N.Y.2d at 335.
As the Court of Appeals has explained, in this context the term
“administrative” is elastic; whether an act is administrative depends on the
context in which it is exercised. Corkum v. Bartlett, 46 N.Y.2d 424, 429
(1979). Courts have considered the following matters administrative powers
vested by the Constitution in the Chief Judge and Chief Administrative
Judge: the establishment of personnel classification plans for court
15
employees, id., the appointment of judicial and non-judicial court personnel,
Matter of Met Council, Inc. v. Crosson, 84 N.Y.2d at 335; Matter of Scoralick v.
Milonas, 207 A.D.2d at 160; the transfer of cases among courts, People v.
Correa, 15 N.Y.3d at 224, and the establishment of a process for
administrative review of assigned counsel fee awards, Levenson v. Lippman,
4 N.Y.3d 280, 290-91 (2005).
Here, in issuing the administrative order requiring an affirmation from
plaintiff’s attorney establishing that he performed due diligence in
determining that the plaintiff had reviewed the accuracy of the information
in the complaint, accompanying papers, and any affidavits, and in
promulgating a rule authorizing the affirmation requirement, the Chief
Administrative Judge was performing an administrative act. The
administrative order and rule govern “the administration and operation of
the unified court system,” N.Y. Const. Art. 6 § 28(b), and establish a policy
“for the efficient and orderly transaction of business in the trial courts,” 22
N.Y.C.R.R. 80.1(b)(6).
In particular, the administrative order and the rule further the purpose
of the legislatively required settlement conference in residential mortgage
foreclosure actions by establishing an administrative process whereby
plaintiff confirms the accuracy of the foreclosure documents, including the
plaintiff’s chain of title to the mortgage, at an early stage before the
16
settlement conference begins. The Legislature responded to the residential
mortgage foreclosure crisis by creating a new process to govern foreclosure
proceedings, including the right to a prompt settlement conference and notice
of the availability to foreclosure defendants of counseling assistance, see New
York Laws of 2008, ch. 472; New York Laws of 2009, ch. 507. The
administrative order and rule are designed to administer the process that the
Legislature designed. The affirmation requirement helps to ensure that the
courts are overseeing settlement conferences in cases that in fact warrant
judicial intervention, that the documents forming the basis of the settlement
conference are accurate and truthful, and that the settlement conferences
serve the functions that the Legislature intended.
Additionally, requiring plaintiffs to confirm the accuracy of the
underlying foreclosure facts and documents during the initial stages of the
litigation promotes judicial efficiency. Settlement conferences are
commenced in only those cases where plaintiff has confirmed its factual and
legal basis to seek foreclosure. This also conserves judicial time and
resources that might otherwise be expended in reviewing and deciding
motions to dismiss if factual inaccuracies in the foreclosure documents are
later discovered. Thus, the administrative order and rule further the
legislative purpose and promote the efficiency of the courts in addressing the
identified problem. Cf. Levenson v. Lippman, 4 N.Y.3d at 291 (concluding
17
that rule establishing administrative review of assigned counsel fee awards
filled gap left by legislation establishing assigned counsel fees).
Moreover, the affirmation requirement is similar to many other rules
promulgated by the Chief Administrative Judge requiring the filing of an
affirmation and governing administration of proceedings in the trial courts.
See, e.g., 22 N.Y.C.R.R. 202.7 (requiring that an attorney’s affirmation
accompany a motion relating to disclosure or a bill of particular); id. 202.12
(requiring that an affirmation or affidavit accompany the note of issue and
certificate of readiness in certain cases); id. 205.17 (requiring the filing of a
sworn permanency report in family court permanency hearings); id. 205.49
(requiring the filing of an attorney’s affirmation where a proceeding to
terminate parental rights of a foster child is brought before a different judge
than the one who presided over the last related proceeding); id. 205.52 (same,
adoption); see generally id. 130-1.1-a(b) (attorney’s or party’s signature on a
paper certifies that, based on reasonable inquiry, contentions therein are not
frivolous); id. 130-1.1(c)(3) (defining frivolous conduct to include the assertion
of false material facts); 22 N.Y.C.R.R. Part 1200, rule 4.1 (prohibiting
attorneys from “knowingly make a false statement of fact or law to a third
person” in the course of representing a client). The due diligence
requirements in the administrative order and rule at issue here are not
different in kind or extent from similar requirements that have been part of
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the administration of the court system for years.
Further, requiring the attorney’s affirmation in residential foreclosure
proceedings governs the administration of proceedings because it does not
impose any additional procedural or substantive requirements on the parties,
alter the procedural rules governing these proceedings, or change the burden
of proof. The administrative order and rule do not require the plaintiff
mortgage holder to submit additional information to prove its case. Rather,
the attorney must affirm simply that the plaintiff has reviewed the
documents that it relies on to establish its right to foreclosure and confirmed
their accuracy. This does not change the quantum or burden of proof, or
otherwise alter the procedure of a foreclosure action. Clearly, in the absence
of the affirmation requirement, the plaintiff had no right to submit false or
inaccurate information.
Finally, the purpose of the affirmation fits squarely within the Chief
Administrative Judge’s obligation to protect the integrity of the judicial
process and to prevent continuation of the fraud that was being perpetrated
upon the court. The acknowledged wide-spread practice of “robo-signing”
affidavits by mortgage servicers in residential foreclosure proceedings
demonstrated that existing requirements regarding attestations as to truth
and accuracy of information in pleadings and affidavits were insufficient to
protect the integrity of the courts. Plaintiffs in residential mortgage
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foreclosure actions were routinely flouting the requirement that the
individual signing pleadings and affidavits attest to the truth and accuracy of
the information contained therein -- in many cases the signer was unfamiliar
with the underlying facts and documents or had not even reviewed the
affidavit he was signing.
Thus, the attorney affirmation requirement was imposed as an
additional check on existing requirements regarding the accuracy and
truthfulness of documents submitted to the court. The administration of
justice requires maintenance of the reality and appearance of public
perception of the court’s integrity. The administrative order and rule
constitute a minimal precaution intended to guard against the well-
documented proliferation of neglect and fraud. Accordingly, the
administrative order and the rule were authorized by the Chief
Administrative Judge’s plenary constitutional authority to supervise the
administration of the court system.
B. The Chief Administrative Judge’s Order Was Also a Proper Exercise of Her Legislatively Delegated Authority. The Constitution authorizes the Legislature to regulate court practice
and procedure and permits the Legislature to delegate its regulatory
authority to a trial court, the appellate division, or the Chief Administrative
Judge. N.Y. Const. art. 6, § 30. Thus, while the Chief Judge and Chief
20
Administrative Judge exercise plenary, complete authority over the
administration of the courts, see Point A above, the Chief Administrative
Judge may also exercise authority to regulate practice and procedure that the
Legislature has delegated by statute. In this case, the administrative order
and the rule are supported both by the broad delegation of authority
contained in the Judiciary Law and by the specific grant of authority
contained in the 2009 foreclosure legislation.
1. The Judiciary Law Authorizes the Order and the Rule.
In the Judiciary Law, the Legislature delegated broad authority to the
Chief Judge regarding court practice and procedure. Pursuant to Judiciary
Law § 211(1)(b), the Legislature has delegated to the Chief Judge authority to
adopt “rules and orders regulating practice and procedure in the courts,
subject to the reserved power of the [L]egislature provided for in section
thirty of article six of the constitution.” See also Judiciary Law § 212(2)(d)
(authorizing “rules and orders regulating practice in the courts”).
The administrative order and the rule regulate court practice and
procedure within the meaning of sections 211 and 212 of the Judiciary Law.
They require simply that the plaintiff’s counsel affirm the accuracy of the
pleadings and documents, and file the affirmation at the time that the RJI is
filed. The Court of Appeals has recognized similar requirements as
procedural for this purpose. See Matter of A.G. Ship Maintenance Corp. v.
21
Lezak, 69 N.Y.2d 1, 6 (1986) (recognizing that, in the exercise of their
delegated authority to regulate practice and procedure, courts may proscribe
frivolous conduct and impose sanctions).
Thus, the administrative order and the rule are authorized by the
authority lawfully delegated to the Chief Administrative Judge by the
Legislature to regulate the practice and procedure of the courts.
2. The 2009 Foreclosure Legislation Authorizes the Order and the Rule.
In addition to the broad general grant of authority contained in the
Judiciary Law, the Legislature has specifically authorized the Chief
Administrative Judge to adopt rules to implement the mortgage foreclosure
settlement conference process. In establishing the settlement conference
process and then expanding it in 2009, the Legislature provided that the
Chief Administrative Judge may adopt “such rules as may be necessary to
ensure the just and expeditious processing of all settlement conferences
hereunder.” New York Laws of 2009, ch. 507, § 10-a(1). As explained in
Point A above, the administrative order and rule at issue here are designed to
further the legislative goals of the settlement conference process. The
affirmation requirement helps to ensure that the settlement conferences are
meaningful because the plaintiffs are coming to them with documents that
are truthful. See also CPLR 3401 (directing the Chief Administrator of the
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Courts to “adopt rules regarding the hearing of causes, which may include
the filing of notes of issue, the preparation and publication of calendars, and
the calendar practice for the courts”). Thus, the order and the rule are also
authorized by the Legislature’s specific delegation of rule making authority to
the Chief Administrative Judge.
3. The Order and the Rule Are Consistent With Limitations on the Chief Administrative Judge’s Authority. The Court of Appeals has recognized that the rules and orders of the
Chief Administrative Judge issued pursuant to a delegation of Legislative
authority must be consistent with existing statutes and cannot “‘invade
recognized rights of person or property.’” People v. Ramos, 85 N.Y.2d 678,
687-88 (1995) (quoting McQuigan v. Delaware, Lackawanna & W.R.R. Co.,
129 N.Y. 50, 55 (1891)); see Matter of A.G. Ship Maintenance Corp. v. Lezak,
69 N.Y.2d at 6. Thus, where the Legislature has defined the legal
relationship between the parties by statute or conferred certain rights, an
order or rule of the Chief Administrative Judge may not significantly alter
that legal relationship or abridge those rights. People v Ramos, 85 N.Y.2d at
687-88.
The Chief Administrative Judge did not exceed this limitation in
issuing the order and rule. The limitation bars only additional procedural
hurdles “that impair statutory remedies.” Id. at 688. Thus, in People v.
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Ramos, the Court of Appeals found a rule of the Appellate Division, Second
Department requiring personal service of the People’s appellate brief on
criminal defendants unauthorized both because it was inconsistent with
general rules of practice requiring, inter alia, service of the notice of appeal
on defendant’s counsel and because it allowed the defendant to completely
defeat the People’s statutory right to appeal. Id. at 688-89. Moreover, the
purpose for which the rule in that case was promulgated -- to implement
what the Appellate Division mistakenly believed was a criminal defendant’s
due process right to personal notice -- demonstrated that the rule was
intended to affect substantive rights rather than to control administrative
aspects of the proceeding. Id. at 689.
Here, in contrast, the requirement that the plaintiff’s attorney submit
an affidavit confirming communication with her client as to the factual
accuracy of the papers relied upon does not “invade recognized rights of
person or property.” The plaintiff has no right to submit false or inaccurate
information to the court and must already attest to the truthfulness of
information submitted in verified pleadings and affidavits. Similarly, as
noted in Point A above, the requirement that the attorney affirm to the best
of her knowledge, information and belief that the complaint and other
documents filed with the court contain no false statements is not
substantively different than the attorney’s obligation under existing rules to
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avoid frivolous conduct and false statements of fact. See 22 N.Y.C.R.R. 130-
1.1(c)(3); 22 N.Y.C.R.R. Part 1200, rule 4.1. Thus, to the extent the
affirmation requirement is viewed as regulating the practice and procedure of
the courts, it is a proper exercise of the Chief Administrative Judge’s
delegated powers because it is not inconsistent with statute and does not
impair the existing rights of the parties.
The contrary reasoning of the court in LaSalle Bank, N.A. v. Face, 31
Misc.3d 627 (Sup. Ct. Suffolk Co. 2011), is unpersuasive. In that case, the
court concluded that the administrative order imposed an additional,
substantive requirement on plaintiffs seeking the remedy of foreclosure
concerning the required nature and sufficiency of the plaintiff’s proof.
31 Misc.3d at 635-36. As we have explained, however, the administrative
order and rule do not require additional or different proof to establish
plaintiff’s right to foreclosure, but merely require the plaintiff’s attorney to
confirm that she performed minimal due diligence in ensuring that plaintiff
possesses and has reviewed the proof on which plaintiff relies.
Mistakenly characterizing the order as “affect[ing] the nature of
evidence to be received and considered by the court,” the court in LaSalle
Bank also found that the order diminished the court’s constitutional
jurisdiction to hear and decide foreclosure actions. 31 Misc.3d at 636.
However, the Court of Appeals has explained that procedural rules may
25
properly affect the ability of a party to litigate a proceeding or the ability of a
court to adjudicate a matter. In People v. Ramos, the Court contrasted rules
for processing and perfecting appeals that, if disregarded, may properly
result in a party’s forfeiture of the right to appeal, with the rule at issue in
that case that improperly impaired the People’s statutory right to appeal by
allowing the defendant the ability to defeat the People’s ability to comply
with the rule. 85 N.Y.2d at 688-89. The order and rule at issue here do not
forfeit the plaintiff’s right to foreclosure by enabling another party to defeat
the plaintiff’s claim.
Because the order and rule fall within the Legislature’s broad
delegation to the Chief Judge and Chief Administrative Judge of authority to
regulate practice and procedure of the courts, as well as the Legislature’s
specific delegation in the 2009 legislation, and do not conflict with any
existing legislation nor invade existing rights, they should be upheld as a
proper exercise of delegated legislative authority.
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CONCLUSION
The administrative order and rule constitute a valid exercise of the
Chief Administrative Judge’s constitutional and delegated powers.
Accordingly, they are constitutional. This Court should deny plaintiff’s
motion for a declaration that such order and rule are unconstitutional and an
order allowing plaintiff to proceed to foreclosure sale without the filing of the
affirmation required by the administrative order and rule.
Dated: Albany, New York October 31, 2011
Respectfully submitted,
ERIC T. SCHNEIDERMAN Attorney General of the State of New York Attorney for Defendants
By:____________________________
LAURA ETLINGER Assistant Solicitor General
Office of the Attorney General
BARBARA D. UNDERWOOD The Capitol Solicitor General Albany, New York 12224 ANDREW D. BING (518) 474-2256 Deputy Solicitor General LAURA ETLINGER Assistant Solicitor General MICHAEL RUSSO Assistant Attorney General of Counsel
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