Illinois Court of Appeals Cracks Code of Silence on Who Pays Foreclosure Mills

Posted on  by Neil Garfield

Illinois Court of Appeals Cracks Code of Silence on Who Pays Foreclosure Mills. The wording of the decision strongly suggests that whether the claimant is US Bank, Deutsch or BONY Mellon et al, the third party who is actually paying the lawyer must be disclosed — at least if the homeowner asks. Given the nature of the role that the alleged Trustee plays — i.e., none except to give the appearance of institutional involvement — this decision opens the door not only to disclosure but to possibly answering the question of who is pretending to be the creditor.

 

We conclude that neither attorney-client privilege nor the Rules of Professional Conduct shield the identity of Steck’s third-party client, so affirm the judgment of the trial court and remand for further proceedings.

Relevant here, the citation requested “[a]ll documents evidencing any payments received by [Steck] or any others employed by [him] with respect to any representation of John Beckstedt [or When 2 Trade Group LLC] or by any other individual or entity acting on [their] behalf.” In addition, the citation requested “[a]ll documents evidencing any retainer received or held by No. 1-19-0012 – 3 – [Steck] or any others employed by or in partnership with [him] with respect to any representation of John Beckstedt [or When 2 Trade Group LLC] whether paid by [them] or by any other individual or entity acting on [their] behalf.” Steck, while noting and reserving some objections, denied having been paid by the debtors or anyone purporting to act on their behalf.

Steck responded that he had “no invoices, evidence of payment or other like records” because he had never billed or issued statements to Beckstedt or When 2 Trade. It was in this series of e-mails that Steck first asserted that “any information [he] ha[d] about [his] clients other than When 2 Trade and Beckstedt is privileged, including their identity.” [e.s.]

Attorney-client privilege “must be strictly confined within its narrowest possible limits.” (Internal quotation marks omitted.) People v. Radojcic, 2013 IL 114197, ¶ 41. Generally, the privilege does not protect a client’s identity. Cesena, 201 Ill. App. 3d at 104-05 (citing People v. Williams, 97 Ill. 2d 252, 295 (1983)). Two exceptions have been recognized: (i) where “the client will be prejudiced in ‘some substantial way’ if his identity were disclosed” (id. at 105 (quoting Williams, 97 Ill. 2d at 295)) and (ii) where protection would be in the public interest (id. (citing Shatkin, 128 Ill. App. 3d at 525); see also People v. Doe, 55 Ill. App. 3d 811, 815 (1977) (collecting cases)). The party asserting the privilege bears the burden of establishing that it applies. Shatkin, 128 Ill. App. 3d at 525.

plaintiffs cannot even attempt to put forward “some evidence” until they know the identity of the third party. Steck’s assertion of privilege as to his client’s identity has cut off the litigation before questions about plaintiffs’ evidentiary basis No. 1-19-0012 – 10 – could even be asked. Steck inserted the issue of attorney-client privilege into this case, and as the proponent of the privilege, he must show its application. [e.s.]

In Shatkin, the court recognized that a client’s identity is not protected by attorney-client privilege because “disclosure of the identity of an attorney’s client provides proof of the existence of the relationship, provides the opposing party with proof that his [or her] opponent is not solely a nominal party, and provides proof to the court that the client whose secret is treasured is actual flesh and blood.” (Internal quotation marks omitted.) Shatkin, 128 Ill. App. 3d at 525; see also Doe, 55 Ill. App. 3d at 814.

It follows then that requests could be made in discovery.

The first is whether the named claimant (e.g. US bank) has any retainer agreement with the foreclosure mill.  This is relevant to the issue of an award of fees in judicial foreclosure proceedings.

The second is “all documents evidencing any payments received by [foreclosure law firm] or any others employed by it with respect to any representation of [e.g. US Bank, BONY Mellon, Deutsch] or [e.g. Ocwen, SPS] or by any other individual or entity acting on [their] behalf.” In addition, the request for production should probably include “all documents evidencing any retainer received or held by [foreclosure law firm] or any others employed by or in partnership with it with respect to any representation of [e.g. US Bank, BONY Mellon Deutsch] whether paid by [them] or by any other individual or entity acting on their behalf.”

The third is possibly a subpoena making the same demand for discovery made to the alleged servicer and its predecessors. This is relevant to the issue of whether the named claimant is in fact the real party in interest or, as set forth in the defense narrative, is acting as a sham conduit or front for third party actors.

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