DS News

40 VICTORY AND VINDICATION FOR CASTLE LAW GROUP IN LANDMARK DECISION "is is an incredibly important decision on the right of law firms and their clients to determine what level of service they demand," said Larry Pozner, Partner at Reilly Pozner LLP and Lead Defense Attorney in State of Colorado v. e Castle Law Group, LLC, et al., summing up the ruling that came down in early April. e litigation had the state claiming that the defendants, which included not only the foreclosure law firm but also former partners Larry and Caren Castle, padded billings in order to take in millions in illegitimate profits from the banks they represented as well as the affected homeowners and real estate investors who later bought the foreclosed houses at auction. Denver District Judge Morris Hoffman, however, ruled against the state and brought the five-year case to a close. In a 92-page opinion, Hoffman stated that the Castles and the other defendants, including other foreclosure-related companies, did not take advantage of the position banks were in to move foreclosures quickly during the housing crisis; instead, he came to the conclusion that: "ese foreclosure law firms were not Wall Street firms with their own economic power. For the most part, they were small, local firms specializing in foreclosures, whose very existence depended on the willingness of their clients to keep referring foreclosures to them. As a result, the lenders and servicers could, and did, dictate the terms they would accept from their foreclosure law firms, with virtually no negotiation." Expressing his thoughts on the case coming to a close, Larry Castle said, "e result of the case substantiated our position throughout this whole ordeal that we did not do things like the other law firms that settled with the attorney general. I think it vindicated my wife's reputation, who's been in the [foreclosure] industry for over 25 years and is well respected." While the victory is overwhelmingly in the defendants' favor, Hoffman did determine that the Castles failed to notify Fannie Mae and Freddie Mac about their indirect financial interest in the summons company Absolute Posting & Process Services, LLC. For that, the Castles must pay a $119,500 civil penalty. is is a far cry from the $16 million to $26 million originally sought by the state. "e court found that the actions of the Castles were in keeping with their obligations to their clients and were appropriate steps to protect clients," said Pozner. "But deep down, where it begins is this strange anti-American notion that an attorney general can tell a client and its law firm how much they should spend protecting themselves. [Castle Law Firm] aimed to be the best. Its clients were, of course, the most sophisticated financial institutions in America." Larry Castle said he knew the case would prove fruitless from the beginning. "We told the attorney general going in that we do things differently than some of the other law firms, and they ignored us," he said. "I believe the ruling vindicates the reputations of our law firm, my wife, our selected vendors, and the other lawyers, managers, owners, and staff that worked for these law firms and vendors. Unfortunately, these claims and what I believe were less than truthful statements made by other lawyers and certain investigative reporters resulted in the closure of these enterprises and the loss of jobs by hundreds of good people in six states and two countries who did it the right way for years if not decades on behalf of the law firms' clients." One of Pozner's biggest problems was with the state's handling of the case. According to Pozner, the state attempted, vainly, to argue that the banks were "unsophisticated clients," and Pozner argued that this simply wasn't true. e Castles' use of a product called "title commitment" was, according to Pozner, the best way to provide coverage to their clients. "And the state is arguing, 'Why didn't you buy something cheaper?' Well that's not the business of government to tell law firms how best to serve their clients," concluded Pozner. Overall, the state could not find record of wrongdoing on the Castles' part. e failure to report to Fannie Mae and Freddie Mac was the only issue Hoffman found. "Ultimately, the question is whether plaintiffs have proved that defendants, in taking advantage of the extraordinary entrepreneurial opportunity presented by the economic crisis, crossed the line from lawful self-interest into deception or anticompetitive collusion," Hoffman stated in his 92-page opinion. "With one exception, I find and conclude that plaintiffs have failed to prove their case." "In a 92-page opinion, Hoffman stated that the Castles and the other defendants, including other foreclosure-related companies, did not take advantage of the position banks were in to move foreclosures quickly during the housing crisis."

• Cover