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In re Rivera

June 29, 2007

IN RE JENNY RIVERA, DEBTOR.
RHONDI LYNN SCHWARTZ APPELLANT,
v.
UNITED STATES TRUSTEE'S OFFICE APPELLEE.



The opinion of the court was delivered by: Katharine S. Hayden, U.S.D.J.

OPINION

I. Introduction

On May 25, 2006, the United States Bankruptcy Court for the District of New Jersey issued an order in a bankruptcy proceeding, In re Rivera, Case No. 01-42625 (MS), that assessed penalties against the appellant, Rhondi Lynn Schwartz ("Schwartz"), and permanently enjoined her from engaging in certain practices. Schwartz timely appealed the May 25, 2006 order.

Schwartz is the sole appellant. Two other parties who were subject to the bankruptcy court's May 25th order, EverHome Mortgage Company ("EverHome") and Shapiro and Diaz, LLP ("S&D"), filed appeals. EverHome has since stipulated with the appellee to remand further proceedings to the bankruptcy court, and S&D has withdrawn its appeal.

The Court has jurisdiction pursuant to 28 U.S.C. § 158(a).

II. Background*fn1

Jenny Rivera filed a voluntary petition for Chapter 13 bankruptcy on November 16, 2001, in which she listed an interest in a residence encumbered by a mortgage with Alliance Mortgage. Filing such a petition automatically stays the continuation of foreclosure proceedings against the debtor. 11 U.S.C. § 362(a).

On October 11, 2002, Alliance filed a motion seeking relief from the bankruptcy stay through the law firm of Shapiro and Diaz, LLP ("S&D"), which the bankruptcy court granted by order dated February 11, 2003. Rivera then filed a motion to reimpose the stay. After a lengthy delay the parties reached a settlement and the bankruptcy court granted Rivera's motion on June 1, 2004. The order granting the motion also provided that Alliance would be entitled to file a certification*fn2 if Rivera defaulted on her mortgage payments and stated that if no objections were made to that certification, the bankruptcy court would lift the stay.

On August 16, 2005, Rhondi Lynn Schwartz, an attorney at S&D, electronically filed a document captioned "Certification of Non-Receipt of Monies" (the "Rivera Certification")*fn3 on behalf of EverHome Mortgage Company.*fn4 Her submission sought the entry of an order vacating the stay imposed in the Rivera bankruptcy proceeding. The bankruptcy court noticed certain anomalies in the Rivera Certification:

[T]he signature page has the appearance of having been telefaxed on "12/24/2003," bears "8" as a paragraph number with the next preceding page ending with a paragraph numbered "5," and is otherwise undated, yet relates to defaults in a period ranging from November 1, 2004 to August 15, 2005, and, further, . . . the certification appears to be signed by one "Amirah Shaheid" without reference to that person's position with Everhome Mortgage Company . . . on its face, the purported paragraph 8 including the signature of "Amirah Shaheid" appears to have been simply affixed to the five-paragraph first page of the Certification of No-Receipt of Monies. . . .

In re Rivera, 342 B.R. at 443, n.8.

The bankruptcy court also compared the Rivera Certification with certifications filed by S&D in other proceedings and discovered that an identical signature page had been used in several other cases. On December 12, 2005, the bankruptcy court issued an order to show cause.

Extensive hearings ensued, prior to which S&D admitted in its pre-hearing submissions that it had used presigned client signature pages. In re Rivera, 342 B.R. at 443. In the course of the hearings, background was developed about S&D, to wit that the firm is part of a national network of law firms controlled by two Illinois attorneys, Gerald M. Shapiro and David Kreisman, who also operated a mortgage loan default outsourcing service called LOGS Financial Services, Inc. ("LOGS). LOGS "interfaced with either mortgage holders or other servicers to process real estate foreclosures and related bankruptcy matters." Id. at 439.

In about June of 2004, LOGS sold its business to First American National Default Outsourcing, LLC ("FANDO"). The bankruptcy court found that "in many instances S & D and other network law firms actually received (and continue to receive) data for foreclosure and bankruptcy motions or applications from such post default servicers, rather than from mortgagees or primary loan servicers." Id. In other words, S&D usually got its information about ...


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