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Wednesday, February 12, 2014

Ind. Decisions - Gary L. Dilk, Indianapolis, suspended for 6 months, without automatic reinstatement, for misconduct in many foreclosure cases

In In the Matter of Gary L. Dilk, a 4-page, singe-spaced, 5-0 just-posted order, filed Feb. 10th, the Court issues a 6-month suspension, without automatic reinstatement. The details are complex, here are some quotes:

Between 2005 and 2008, Respondent accepted approximately 2,675 referrals from Foreclosure Solutions, a for-profit Ohio LLC, at a standard rate of compensation of $125 to $150 per case, receiving approximately $380,100 during those years. In these actions, pursuant to instructions from Foreclosure Solutions, Respondent would typically enter an appearance, request an extension of time, file a general answer, provide updates and forward documents to Foreclosure Solutions or the clients by use of form letters, and refer any inquiries from the clients back to Foreclosure Solutions. His typical practice was to allow judgment to be entered without opposition or hearing. He would often advise the courts that he would not be attending the hearing and did not object to entry of judgment.

Respondent had no direct contact with many of his clients. If contacted by a client, he would advise them that his role was limited to monitoring and delaying the legal proceedings and keeping the parties and Foreclosure Solutions advised about what was occurring in the case. If not contacted by a client, he would not advise the client about his limited role. If a client contacted him about potential defenses, he would not accept the case or would take steps to withdraw his appearance. He followed the course of action decided upon by Foreclosure Solutions and rejected any clients who wished to divert from that course.

In one case that differed from the typical, the clients told Foreclosure Solutions that they were not behind in their mortgage payments and believed that their payments had been misapplied to another account, providing a detailed list of the payments. Foreclosure Solutions provided this information to Respondent, who requested documentation from the clients. After the clients provided partial documentation, Respondent made no attempt to conduct formal discovery to obtain further documentation. In response to the mortgage holder's summary judgment motion, he did not attempt to present the clients' testimony regarding their payments via affidavit. He testified that he did not believe his clients' statements and thought it would be improper to file an "unsubstantiated statement" in response to the summary judgment motion. On May 1, 2006, he sent a form letter to the clients informing them that summary judgment had been entered and that a sheriff's sale would be scheduled. His file contained bank statements and Western Union receipts substantiating the clients' list of payments, which he received and faxed to Foreclosure Solutions on May 17, 2006.

In representing clients referred to him by other Foreclosure Assistance Entities and in serving as "of counsel" in foreclosure actions for the Ohio law firm, Respondent essentially followed the same pattern as he did in representing clients referred by Foreclosure Solutions.

Without the involvement of Respondent, the Foreclosure Assistance Entities could not have provided the services they offered to homeowners. Selling the assistance of an attorney to defend a foreclosure action was a necessary part of their business model.

The decision as to whether to attempt to negotiate with a mortgage lender, to file bankruptcy as early as possible, or to pursue another course of action is a complex matter. A debtor benefits from early advice from counsel in making this decision. The homeowners represented by Respondent did not receive early advice regarding available options but instead purchased the course of action offered for sale by the Foreclosure Assistance Entities. Through the use of form letters, Respondent raised the possibility of bankruptcy after a foreclosure judgment had been entered. * * *

Respondent's misconduct was not an isolated, inconsequential lapse. By the end of 2008, foreclosure defense referrals constituted about half of his practice. According to the evidence, Respondent's misconduct affected close to 4,000 clients from 2005 through 2009. With a typical fee of $150 per case, it appears he received close to $600,000 from these clients over this five-year period. It appears that in many, if not most, of the cases, the Foreclosure Assistance Entity simply needed someone with a law license willing to enter an appearance and stall the foreclosure for a while. It is unclear how many clients might have been able to save their homes if they had engaged an attorney to give them individualized legal advice (e.g., whether the home could be retained under a Chapter 13 bankruptcy plan). The parties cite to no evidence regarding whether Respondent has made any restitution of the fees he received for his extensive involvement in the practices he now does not dispute were prejudicial to the administration of justice.

ILB Comment: "Without automatic reinstatement" - one wonders over a period of time, such as the past 10 or 20 years, how many attorneys have received such a discipline, how many of them (or how few) have been reinstated, and how long it has taken.

Posted by Marcia Oddi on February 12, 2014 01:57 PM
Posted to Ind. Sup.Ct. Decisions