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The dangers of the internet

Back in January, I wrote about the NJ Courts looking at making almost all state court filings available via the internet.  On the federal level, the courts use a filing system called PACER.  For a fee, anyone can go and look at almost all the filings made in a federal case.   The Connecticut Law Tribune reports about a confidentiality violation problems in a case where General Electric is being sued by a former employee for discrimination:

Lawyers involved in the class action sex discrimination case against Fairfield, Conn.-based General Electric in 2007 would rather you not read passages from various filings.

After all, the plaintiffs’ firm, Sanford, Wittels & Heisler in Washington, D.C., took the time and effort to black out reams of pages in numerous briefs to make them inaccessible to the public — or so they thought.

But as of late last week, you could download several documents through PACER’s federal court filing system, copy the black bars that cover the text on the screen and paste them into a Word document.

Voilà. Information about the inner-workings of GE’s white, male-dominated management and their alleged discriminatory practices against women, which is supposed to be sealed by court order, appears with little technical savvy required.

“I didn’t know that,” plaintiffs’ lead counsel David W. Sanford said from his office early last week.

Neither did Patrick W. Shea of Paul, Hastings, Janofsky & Walker in New York, which serves as GE’s outside counsel in the case.

Shea said the two sides are in mediation after Judge Peter C. Dorsey in New Haven, Conn., denied GE’s motion to dismiss on May 8.

Now, the game may have changed with revelations that there’s a large leak of information in the case, though Shea never said as much. He referred all questions to GE, whose spokesman, Gary Sheffer, wouldn’t comment on how the course of the case might be altered.

“All parties agreed that the documents would be filed under seal,” Sheffer said. “We acted under belief that they were filed under seal, and we’re concerned.”

When asked what GE’s legal reaction might be, Sheffer said: “We’re considering our options.”

Late last week, Shea contacted Sanford to discuss the matter. Sanford, the plaintiff’s lawyer, then called the Law Tribune to shed more light on the matter.

“I wasn’t aware of the severity of this problem,” he said. “Certain documents have been filed improperly by us. If this redacted material is in the public domain, it becomes a problem for GE and for us.

“We’re going to try to take steps to correct that error. We’re doing everything we can today (last Thursday)” to make emergency, corrected filings with federal court clerks who are aware of the problem, Sanford said.

PACER account representative Shawn Robledo, who works in PACER’s service center in San Antonio, also was unaware of the problem until she was guided through the process of downloading, copying and pasting.

“We need to report this to the court,” she said. “We’ve never had this problem come up. I’ve been here for years and have never seen [a redaction] done like this.”

The PACER service center is operated by the Administrative Office of the U.S. Courts in Washington, D.C.

Spokesman Richard Carelli said PACER employees do not check filings to make certain that redacted information actually is inaccessible. “The total responsibility rests with the lawyers” to redact properly, he said.

Lorene F. Schaefer, a lawyer in the company’s Erie, Pa.-based GE Transportation, accused company officials in her lawsuit of giving unfair preference to men in promotions to top-paying legal jobs.

The class action lawsuit potentially seeks damages of $500 million. It also seeks an injunction to halt GE’s pay and promotion policies and practices, and names Chairman and Chief Executive Officer Jeffrey R. Immelt, General Counsel Brackett B. Denniston III and numerous other executives as defendants.

Schaefer filed the lawsuit last April after learning that she was to be demoted from her job as GE Transportation’s top legal officer. She was placed on paid administrative leave last May after complaining about her demotion.

Schaefer had been an entry-level executive since 1997, and a GE employee since 1994. In 2007, she was paid $380,000, including bonuses.


The security breach in her case underscores a hot issue in the legal profession involving uncovered trails of electronic data, known as metadata. Where once a black marker strike on a piece of paper was sufficient, redaction in the digital world requires special software and the know-how to delete the words behind the shield.

Sloppy information management “has been a huge problem” for lawyers, said Connecticut Chief Disciplinary Counsel Mark Dubois. “Metadata is a fascinating area of developing law. It is much discussed in the fields of risk aversion and risk management.”

Dubois said a lawyer or law firm who has insufficiently redacted information in a case could be in violation of a host of ethical rules and an easy target for a malpractice lawsuit.

Redaction problems often arise when people use old versions of Adobe software, which turns paper documents into an easy-to-read electronic Portable Document Format, the format of choice for PACER and many other web sites with multiple documents.

There are ways to hide the text in older versions of Adobe, but the process is “cumbersome” and requires multiple programming steps, said Glastonbury attorney N. Kane Bennett, a member of the Connecticut Bar Association’s Legal Technology Committee.

“With the newest version of Adobe, it is pretty simple to hide the text with a black box and then scrub the hidden text behind it,” said Bennett, who was unfamiliar with problems in the Schaefer case. “This prevents people from copying and pasting into a Word document.”

There’s also a popular software program called Redax, manufactured by Appligent Inc., which is a plug-in application for Adobe Acrobat Standard or Professional 6, 7 and 8, according to its web site. It promises to “permanently” remove sensitive information from PDF documents at a starting price of $249.

In 2005, the Department of Defense suffered through a similar dispersion of classified information. Redacted segments of an investigative report on the shooting death of an Italian journalist by U.S. soldiers in Iraq could be copied and pasted from a PDF into a Word document.

Plaintiff’s attorney Sanford couldn’t say what process or software his law firm used to redact the information in the Schaefer case. “Quite frankly, I’m not involved in the mechanics,” he said.

Paralegals were responsible for redacting the information properly before filing the briefs electronically, but they were out of the office and unavailable for comment last Thursday, Sanford said.

He said the firm is not considering any disciplinary action against them.

“Anything that happened here was an innocent mistake,” he noted. In terms of electronic filing, “people are learning as they go.”

Beware Home Foreclosure Scams

I’ve posted before about the advantages of trying to mediate with your lender if you find yourself in a mortgage foreclosure situation.  Many cases that end up in court could have been resolved before it gets there.  Some people are so embarrassed by being in that situatoin they simply fail to respond until it’s too late.  Other people just don’t know what to do.

Not responding is the second worst thing you can do.  The bank (and court) will assume you’ve abandoned them and the process will run automatically to a sheriff’s sale.  In most cases, the bank does not want your home, especially if the value of the home is less than the outstanding mortgage balance.

The worst thing you can do is try to find a “white knight” to help you.  These are people who prey on the unfortunate situations of others.  You end up in worse shape then before their involvement and they end up richer at your expense.

NPR’s All Things Considered recently featured the latest scams to come forward in this industry:

As homeowners fall behind on their mortgage payments and face the prospect of foreclosure, con artists are also taking advantage of the mortgage crisis. Some of them are finding ways to cheat homeowners out of their deeds.

It was only a matter of time before scam artists would find new ways to swindle these desperate homeowners. The latest scheme is something called a Foreclosure Rescue.

The scheme preys upon people who are about to lose their homes — and will do almost anything to hang onto them.

One homeowner taken in by a con artist, Gloria Johnson, bought her house in the Bushwick section of Brooklyn in 2001. It was her first home, a three-story two-family affair with a nice yard in the back where she has put a swingset and some small plastic tables for the children who attend her daycare center.

Speaking in her backyard, Johnson said she is embarrassed about what happened to her. She doesn’t want to talk about how close she came to losing her house in front of her staff. It started when she feel two months behind in her mortgage payments and started to call around to see if a bank would help her refinance.

“Everyone was telling me no,” Johnson said, “because my credit wasn’t the best. And then this place said they could help me. I was running more on fear.”

The place that seemed to offer rescue was a company called Home Savers Consulting Corporation. Their advertisement in a local newspaper promised to save homeowners from foreclosure, fix their credit in a year, and even give them a little cash in the meantime.

Johnson visited an office to go over how Home Savers could help her, and filled out some paperwork.

“I was under the impression I was doing a loan application,” she said.

But the loan application was complicated. Gloria wondered why there were so many papers to sign. It seemed weird.

As she looked at the papers, Johnson said, the man “just kept saying, ‘Don’t worry, it will work out for you guys, you all are doing the right thing.’ He just kept talking so much, I think that’s why I kept getting a bad feeling.”

But since this was the only lender who seemed willing to help her refinance her home, Johnson didn’t feel she had much choice.

She signed the papers in spite of her misgivings and went home. She called Home Savers the next morning, saying she wanted out. When no one called her back, she opened the phone book and started calling lawyers.

“When I called the lawyer and explained the situation to the lawyer,” Johnson said, “the lawyer said, ‘Miss, I believe they have swindled you out of your house.’ And I was like, what?”

Johnson still gets teary-eyed talking about it. The lawyer was matter-of-fact. From her description of all the papers Johnson signed, it sounded like she hadn’t refinanced her home, but in fact had sold it.

Jessica Attie is one of the co-directors of the Foreclosure Prevention Project, a group based in Brooklyn. She was Gloria Johnson’s lawyer.

“What she had done unknowingly was transfer her home,” Attie said of Johnson, “to what we call a straw buyer. He paid off her mortgage of $240,000 and he got a new mortgage of $425,000.”

The straw buyers are an important part of the foreclosure rescue scam. They lend their identities and good credit to the operation and get a fee in return. The straw buyers never live in the house. Instead, the scammers ask homeowners to sign over the deed of their house for a year, while a “foreclosure consultant” helps them repair their credit.

The schemers promise the homeowners that they can live in their houses mortgage-free, and then buy their houses back after a year. What their victims don’t know is that the scammers work with straw buyers to take out a bigger mortgage that essentially cashes out any equity in the house.

“These cases are very difficult to undo,” Attie said, “because the people who get to take out the cash often disappear. You can’t find them you can’t find the money and the property is left encumbered by a huge mortgage.”

But the surprising part is that it isn’t your stereotypical con artist doing the scheming.

More often than not, it is a real estate professional — an aboveboard mortgage pro who might have been in the business honestly for years — but who saw a chance to make big money and took it.

“We’ve seen alot of them are people who used to work in mortgage companies,” Attie said. “I think it is so profitable because you can make hundreds of thousands of dollars with one deal. I even heard that they were giving seminars, teaching people how to do these scams at one point.”

FBI Assistant Director Mark Mershon, who oversees the New York bureau’s mortgage fraud investigations, agreed.

“It’s a mix,” Mershon said. “You have people who live their entire, so to speak, professional lives as con men or con persons — but we do have others who have crossed over, so to speak, to the dark side.”

Gloria Johnson’s story has one of the rare happy endings in this scenario.

When Attie filed suit against Home Savers they got scared, and sent Johnson back her money and the deed.

Then Attie talked to a legitimate bank and got them to refinance Gloria’s house, cutting her mortgage payments in half. Gloria, for her part, said she has learned her lesson. If you look in her savings account, there is always enough money to cover four months of mortgage payments.

If you find yourself in this situation and want to try mediation, give me a call at 732-963-2299 or contact me through my website. I am on the court roster of mediators for Superior Court in New Jersey.

There must be something in the water…

From the AP News:

SHEBOYGAN, Wis. (AP) – A male who lied to Sheboygan police to hide his unpaid traffic citations almost got himself into far more serious trouble. Police said they stopped a vehicle Saturday for improper registration. One passenger identified himself to police, who ran a check on that name.

It turned out to be the name of someone who has an active felony warrant for vehicular homicide.

When the passenger found out, he quickly gave police his real name. He said he lied earlier because he has outstanding traffic fines in another state and wasn’t sure whether there was a warrant out for him.

The male was arrested on an obstruction charge.

Before he was released, police verified through photos and fingerprints that he wasn’t the vehicular-homicide suspect.

Not to be outdone, also in Sheboygan, WI:

A husband and wife turned each other in to Sheboygan police this week after their car was pulled over for reckless driving, according to a criminal complaint.

The ensuing investigation — which included a bag of stolen steaks — led to a felony, three misdemeanors, an ordinance violation and one pending charge for the couple and a friend, authorities said.

According to the complaint:

Mark and Carol Reindl, of 1313-A Alabama Avenue, were pulled over about 11:45 p.m. Wednesday in the 1300 block of Virginia Ave. A police officer had observed the vehicle squealing its tires, coming to an abrupt stop and operating erratically.

Carol Reindl, 43, who was driving when the car was pulled over, told police she had just gotten behind the wheel, saying the erratic driving was done by her husband. Since she was behind the wheel, however, she was cited for operating with a suspended license.

Based on her allegation, 47-year-old Mark Reindl was then arrested for operating after revocation, a misdemeanor. Earlier that same day he had been charged for allegedly driving with a revoked license last week.

While being taken into custody, he told the officer a bag of steaks in the back seat had been stolen by his wife and a friend of hers, Lisa J. Ehlert, 40, from the south-side Piggly Wiggly.

Another friend of the couple — who told police the Reindls had been drinking earlier — said Carol Reindl and Ehlert brought the stolen steaks to his house and offered to sell them for $50, claiming they were worth $140.

Thursday, Carol Reindl and Ehlert were charged with misdemeanor retail theft, with additional charges of felony bail jumping for Ehlert and misdemeanor bail jumping for Reindl for allegedly violating their bond in other pending criminal cases.

If convicted of all charges, Carol Reindl faces up to 18 months in jail, and Ehlert, of 2531 N. 13th St., faces up to three years and nine months in prison.

Mark Reindl was referred to prosecutors for a charge of second-offense operating after revocation, though that has not yet been issued by the Sheboygan County District Attorney’s Office, authorities said.

What are the costs of Civil Lawsuits and Litigation in NJ?

As a follow-up to an earlier posting about the overall costs of justice in NJ to the taxpayer, I want to look at the costs of civil lawsuits and litigation to the taxpayers of the state.  Mark Fellows of the National Arbitration Forum published an analysis of the costs of litigation to the taxpayer in several states in the December 2007 issue of The Metropolitan Corporate Counsel.  He is making an argument for the use of arbitration over litigation, which would remove cases from taxpayer funded courts into litigant funded arbitration settings.

New Jersey happens to be one state which publicly breaks out its judicial costs by part.  Fellows analyzed FY2006, where $571,570,000 was appropriated for the judiciary and $130,112,080 was allocated to the civil courts.  100,332 civil cases were resolved in NJ in 2006, leaving an average of a little under $1300.  That number, though, includes cases resulting in default judgments (where the other side doesn’t answer the complaint), dismissals for want of prosecution, settlements without judicial action and settlements through ADR.  When you exclude these cases, the estimated average cost to the taxpayer of a contested civil case is $3,112.36.

Of course, this does not even account for the costs to the litigants themselves in attorneys fees, experts fees, filing fees and more.  In a typical case, these can be in the tens of thousands which does not even guarantee a positive return on the investment (in a favorable judgment).

In a state with among the highest tax burdens in the country and no shortage of underfunded solutions for societal problems, moving cases out of the courts and into far less costly ADR forums such as arbitration and mediation can help far more than just the litigants involved.  It can help every person in the state.

If you would like to learn more about using mediation or arbitration to resolve your dispute, please feel free to contact me.

An Excellent Video Explanation of Divorce Mediation

Southern California attorney Brian Don Levy has an excellent video of himself posted on-line which describes divorce mediation and its benefits. I’ve embedded it below. He is a collaborative attorney and lends the impression that the attorneys are present during the mediation sessions, which is generally not the case in most divorce mediations.

He very nicely sums up the benefits to the family:

Divorce mediation can have a really positive affect on your family, because you’re resolving your dispute privately, fairly, and you’re taking responsibility for the resolution by coming to an agreement. So typically when people walk out of court and they’ve been forced to do something, it can have a devastating affect on the family. It can effect how you look at your whole family: how you look at your children, how you look at the other parent, your emotional makeup; the whole landscape of feelings that you go through. When you walk away from mediation, you’re usually feeling pretty good about your family because you’ve come to an agreement and nobody forced you to do it. So you’re feeling good about that.

The Cost of Justice in NJ

The State of New Jersey is currently going through the budget process for the fiscal year that begins in July 2008.  Like many states, NJ is projecting a large budget deficit due to the downturn in the economy.  As a result, all government agencies are being asked to tighten their belts.  The judicial branch of government (the courts) is being asked to reduce their budget by $27 million (total proposed budget is $636 million and the courts collect roughly $64 million in fees; the total judicial budget runs about $71 per capita).

Judge Phillip Carchman, acting Administrative Director of the Courts testified before the Senate Budget committee this week.  In his remarks, he addressed the difficulties of reducing costs in the Judiciary:

The proposed significant budget cuts present unique challenges for the judiciary. In tough fiscal times, when government necessarily looks to reduce spending, people need the courts more than ever. Court business grows rather than shrinks. The judiciary is a people-driven branch, created and functioning to resolve disputes. We cannot eliminate court sessions, particularly in difficult economic times, to absorb the substantial cuts allocated to us. To the contrary, we see record-setting increases ahead in court filings and workload.

He gave some specific numbers in regards to foreclosure actions:

Economic indicators tell us that by the end of this court year, case filings will reach historic highs. For example, foreclosure filings in New Jersey for the first quarter of 2008 exceeded 4,000 per month, a staggering 44 percent increase over the same period last year. This year we are on track to receive an anticipated 49,000 foreclosure filings. This is double the number we received in 2006, just two years ago. And our best estimate is that we may double this number yet again next year.

In the Special Civil Part (claims for under $15,000 which have expedited and relaxed rules), credit card defaults are driving the case loads to record heights, some 621,000 cases projected for this year which is 100,000 more than last year.

He goes on to say how tough economic times tear families apart, increasing demands on the family part (for divorces).  It also increases demands on the criminal courts.

The courts in NJ manage their cases to ensure timely hearings.  Each case is set against a standard.  Cases that are backlogged (behind that standard) account for 12% of all cases.  This is roughly the same number as it was last year despite the caseload increasing by 8%.

Removing the backlog, increasing the speed (and lowering the cost) of “justice” is a primary motivator as to why the courts have a CDR (complementary dispute resolution) program.  Court-mandated mediation resolves roughly 1/3rd of all civil division cases directly and yet only 1.8% of all cases filed make it to trial.  This means that mediation helps set the framework for a later settlement.  Without mediation as a core part of the NJ court process, the courts would be so backlogged as to be unable to operate efficiently.

The Future of Law Practice

New Jersey Lawyer recently took a look at where the future of the practice of law was heading.  They surveyed several prominent NJ lawyers to do so.  Among the areas of change noted was the lessening of trials to resolve disputes (currently, only 1.8% of all cases filed in state court in NJ go to trial).  From the article (my emphasis added):

Another common theme predicted by lawyers in various practice areas is the continuing move away from trials as mechanisms for settling disputes.

Blank Rome’s Orlofsky said “more and more cases will be resolved in some form of ADR.

That push will continue, not only due to mandatory ADR programs instituted by various courts, but also by corporations’ desire to settle commercial disputes quickly.

Corporations will continue to prefer alternative options to trial, because they are “willing to pay for a quick decision, which is sometimes better than the right decision,” Orlofsky noted.

He said more medium-sized companies are entering into highly elaborate ADR clauses in their disputes that call for confidentiality agreements and time frames for reaching resolutions.

Companies also prefer arbitration, he said, because they can choose who resolves the dispute.

The article also addressed the future of family law:

Ceconi, the family law attorney, said courts increasingly rely on hearing officers to handle a range of issues.

“In family court, the calendar has become so congested that you will have to bring in people other than judges,” she added.

Vuotto also sees increasing use of ADR mechanisms such as mediation, arbitration and collaborative law in settling divorces and custody battles.

Peter Verniero, the former Supreme Court justice and attorney general who now practices white-collar criminal law at Newark’s Sills Cummis Epstein & Gross, also foresees an increasing reliance on non-judges to relieve the court’s burdens.

The article then went to touch on the “graying” of America:

Regina M. Spielberg, a trust and estate lawyer with Morristown’s Schenck, Price, Smith & King, said the aging population will require more services in both estate planning and elder law.

“There’s awareness among baby boomers about the need for estate planning,” she said. “And an increasing number of families are recognizing disabilities and making plans to accommodate them.”

Vuotto, the Woodbridge attorney, said that as a result of longer life spans, many aspects of elder law will begin intersecting with family law.

“People are having children when they are older,” he noted, forecasting courts will be dealing with issues such as alimony and child support payments from retired parents, and the need to plan for medical expenses in divorce settlements.

You can read the full article here.