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Federal judge tosses class action suit against Butler & Hosch

Rules that suit’s linchpin doesn’t apply to individual employees

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U.S. District Judge Beth Bloom dismissed a class action accusing law firm Butler & Hosch PA and its founder, Robert Hosch, of violating the Worker Adjustment and Retraining Notification Act by failing to give proper notice to employees before enacting layoffs.

Judge Bloom ruled that it was inappropriate to attempt to impose liability on Hosch because the WARN Act only applies to business enterprises, a term which does not include individuals.

On May 15, Hosch’s mortgage banking industry law firm Butler & Hosch, P.A. filed an Assignment for the Benefit of Creditors to Florida law firm Michael E. Moecker & Associates, an action analogous to Chapter 7 bankruptcy.

The class action lawsuit was filed by two former high-level Butler & Hosch employee, Gianna Hillis and Stephen Regal, who claimed that fair warning was not given to any of the firm’s employees before the firm closed.

Michael Tessitore, Hosch’s lawyer in the matter, said he welcomed the outcome.

“I’m pleased with the ruling. The individual claims against Bob Hosch are gone and should not be included in any subsequent complaint,” Tessitore said.

Hosch has been accused of shutting down his firm and abandoning his clients.  

Former employees and creditors have filed a number of lawsuits, many of which make serious and salacious allegations of misconduct and financial mismanagement.

In an exclusive interview with HousingWire in July, Hosch denied the allegations. An attorney for Hills and Regal told HousingWire that Hosch was disingenuous with his denial.

Tessitore said that while Butler & Hosch was experiencing substantial growth, unforeseen problems created by third parties prevented the firm from meeting its payroll obligations.

He further argued that there were problems not only with integrating the default assets from MSW, but also with miscalculations in its banking relationship and a funding formula that was flawed.

“The reasons Butler & Hosch and the affiliated companies failed the week of May 15th will be revealed in the lawsuits that have been filed or that will be filed in the near future,” Hosch said. “The lawsuits will provide a more accurate story of the why the companies failed by growing too fast as well as entering into the wrong relationships. This has been devastating for everyone.

 “It is a huge concern that law firms in the business are failing. I intend to figure out what the industry can do to fix it,” he said.

Before its sudden closing in May, Butler & Hosch had been quickly expanding its presence across the country over the last few years, buying up default assets in a number of markets. At the time the doors closed, the firm handled 60,000 foreclose cases nationwide and it’s not known how many will end up being dismissed.

Many of those cases came from a slew of acquisitions of both default assets and smaller law firms as Butler & Hosch looked to grow its presence.

In February 2014, the firm acquired Seattle, Wash.-based Regional Trustee Services Corporation. Before that in 2013 the firm also acquired Cal-Western Reconveyance LLC, once one of the largest trustee companies in the nation, after the trustee company's then-parent Prommis Solutions had filed for Chapter 11 bankruptcy protection earlier in the year.

A full list of HousingWire’s coverage of the firm’s history and acquisitions can be found here.

At least part of the challenge for the firm was that entire foreclosure industry has seen a dramatic slowdown.

According to the latest report from CoreLogic, the number of foreclosures nationwide decreased year over year from 46,000 in August 2014 to 36,000 in August 2015, representing a decrease of 68.9% from the peak of 117,357 completed foreclosures in September 2010.

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