On an early weekday morning, I arrive at a hotel-lobby coffee shop in Los Angeles to meet Josh Denbeaux, who's in town to talk with an expert witness. He has a stack of legal briefs forming a wall around him, as he's working on at least ten cases at once. He details them all for me, giving background sketches of clients, their plight, and who, exactly, back in New Jersey—where he practices law—has obstructed a fair resolution.
"This judge is either a knave or a fool," he says casually.
Denbeaux has a self-confidence that belies the cases his firm, Denbeaux & Denbeaux, takes on. He came to prominence representing several detainees at Guantánamo Bay, challenging the relentlessness of the national security state. Later, he moved into the similarly desperate legal realm of foreclosure defense, taking on powerful financial institutions on behalf of victimized homeowners. And now, with a change in legal strategy, he believes he can get good outcomes for his clients and, more important, put a stop to the lending industry's continued disregard for the law.
There's no real career advantage to consistently standing up for some of the most alienated, voiceless groups in our society. But Denbeaux has scratched out a role for himself, working on behalf of whatever semblance of justice can be had amid massive institutional resistance.
When I ask Denbeaux what attracts him to cases many attorneys would consider lost causes, he replies, "Well, I don't lose."
Denbeaux was destined to join the family business; both his parents are lawyers (his father started the firm, and his mother remains a partner). He graduated from Seton Hall University Law School in 1994, where his father, who participated in marches at Selma and once defended members of the Black Panthers, now teaches. "I didn't graduate from law school to say, 'Let's wait ten years and rep prisoners at Guantánamo,'" Denbeaux tells me. "But I always took weird cases."
Denbeaux started out in commercial and insurance law, but in 2004 he and his father became two of the handful of attorneys willing to offer pro bono representation for Guantánamo detainees after the Supreme Court ruled that they could challenge their detentions. These lawyers informally describe themselves as the "Guantánamo Bay Bar Association." Denbeaux initially represented two Tunisian nationals, Rafiq Alhami and Mohammed Abdul Rahman.
Beginning in 2006, Denbeaux and his father, Mark, jaded by the government's claims and the conditions at Guantánamo ("It's a miserable place, it's the stench of human despair," Denbeaux told the CBS Evening News at the time), began publishing a series of studies about detainee treatment through the Seton Hall University Law School. The first report used Defense Department data from military tribunals to illustrate that the vast majority of Guantánamo detainees were not part of al Qaeda, but rather bystanders in Afghanistan and Pakistan who had been delivered in exchange for bounties. Both Alhami and Rahman fit this description, they say.
Subsequent studies questioned the evidence justifying continued detention and the self-serving military tribunals process, discovered that all GTMO interrogations were videotaped, analyzed detainee releases and found them more dependent on prisoner nationalities and geopolitical relations than security risk, and dismissed overhyped warnings of widespread recidivism. The reports continue to this day; the last one, depicting Guant´ånamo as "America's Battle Lab," was released in January.
The most important studies challenged the official story of three alleged suicides at Guantánamo on June 10, 2006. Denbeaux and his father were approached by a whistle-blower, Sergeant Joseph Hickman, a guard on duty that night, who witnessed the supposed suicide victims being led away to a secret site. Hickman believed that the detainees were murdered, suffocated by rags stuffed down their throats. Mark Denbeaux had his law students corroborate the story, Josh became Hickman's lawyer, and together they issued several studies backing up Hickman's claims. (The guard subsequently wrote a book on the case.)
Denbeaux's proudest moment came in 2007. "We had a client (Mohammed Rahman). The State Department said, 'We will release him to Tunisia,'" he tells me. "I said, 'I don't think the guy will survive two steps on the tarmac.'" The State Department refused to change the venue, so Denbeaux appealed to a federal district court in Washington, DC. There, Judge Gladys Kessler ordered the US not to release Rahman because of the high probability of physical harm. "So I successfully kept my client in Guantánamo," Denbeaux said. "I'm very proud of that."
Rahman and Denbeaux's other client, Rafiq Alhami, were eventually released to other host nations, but Denbeaux still represents several clients working through the military commissions process.
One guy working for me said, 'Represent homeowners, everyone's getting screwed.'
He financed the detainee work out of his own savings, but after the financial crisis, the law firm suffered from lack of income. "One guy working for me said, 'Represent homeowners, everyone's getting screwed,'" he says.
At least 10 million homes have been foreclosed on since the housing bubble collapsed in 2006. New Jersey is one of 22 "judicial foreclosure" states, which means a lender must get a court to sign off before they foreclose on a debtor. Most of the cases go unchallenged, as struggling homeowners typically have no money to afford a lawyer, let alone a way to overcome the shame of asking for help.
Denbeaux learned as much as he could about banks and mortgages. He offered free consultations to homeowners and sought to obtain attorney's fees from the banks if he won the cases. He retained Hickman, the former Guantánamo guard, as a private investigator. And he quickly recognized that mortgage companies and their lawyers repeatedly broke the law.
Banks routinely lied to homeowners seeking loan modifications, pushing them into foreclosure. And courts saw an epidemic of false, forged, and backdated documents manufactured by mortgage companies out of necessity to prove ownership of the loans. Low-level employees "robo-signed" affidavits, verifying information about loan files without any underlying knowledge of them. "I have 3,500 closing files on my servers. There's nothing I haven't seen yet," Denbeaux says.
Many of Denbeaux's clients had the ability to make modified payments and keep their homes, but the mortgage servicers refused to work with them.
"Here's the similarity [between foreclosure defense and detainee representation]: The lawyers have no authority," Denbeaux tells me. "At Guantánamo, I thought I could speak to a lawyer. That's what we need to do to settle a case. Foreclosures, same thing. The house is worth two hundred and fifty thousand dollars, and the loan is three hundred thousand, so can't we discuss doing something in the middle? The bank lawyer would say no. Why not? They're not authorized to discuss anything."
New Jersey judges initially didn't want to hear these allegations. "You have to be self-motivated and not shy away from the adversity of what we deal with in the courts," says Adam Deutsch, an associate attorney at Denbeaux & Denbeaux who specializes in defending consumers. Eventually, the firm's aggressive advocacy made judges take notice. Denbeaux's attorneys started to consistently win cases by arguing that lenders could not prove ownership of the loans. In other cases, Denbeaux & Denbeaux won damages against lenders that violated state consumer protection laws by selling mortgages borrowers couldn't afford to pay off. The courts would eventually put a hold on new foreclosure filings, and in 2011, the Superior Court of New Jersey appointed a "special master" to oversee foreclosure procedures in the state. As a result, plaintiff lawyers had to personally attest to the truthfulness of their foreclosure cases or face penalties.
But this only held mortgage companies' illegal activities in check for so long. "There was a 12-month period where enforcement was in favor of the homeowners," says Deutsch. "Now it's swung back." Fatigued New Jersey judges, who sometimes hear 25 cases a day, often give wide latitude to bank plaintiffs.
"The judges don't care, they're tired," Denbeaux says. "I have judges regularly accepting bank certifications to settle disputes between my client and theirs without even consulting me. It's really embarrassing. They opt in the direction of speed over accuracy."
I didn't graduate from law school to say, 'Let's wait ten years and rep prisoners at Guantánamo,'" Denbeaux told me. "But I always took weird cases.
One of the more egregious examples of how banks gamed courts and government regulators comes from the Wells Fargo "Pick-a-Pay" mortgage case. During the bubble years, Wachovia Bank and its subsidiaries sold half a million of these loans, which had low initial payments that shot upward within a couple years. Homeowners could never afford these deals, but they were enticed into them by the initial low terms and frequently slipped into foreclosure when the payments reset.
Wells Fargo bought Wachovia in 2008, and assumed legal responsibility for the Pick-a-Pay loans. At the end of 2010, nine states reached "assurances" with Wells Fargo, a settlement giving Pick-a-Pay victims cash compensation, a shot at a loan modification, and the right to sue for additional relief.
But Wells Fargo then made a second class-action settlement, which it offered to unwitting Pick-a-Pay customers. If homeowners cashed the $178.04 check representing their settlement compensation, they relinquished their right to sue Wells Fargo in the future. So the second class-action effectively nullified the assurances with the states. "I never met a single person who got a penny from the assurances," Denbeaux says.
Denbeaux suddenly saw all his Pick-a-Pay cases dismissed because the borrowers, Wells Fargo claimed, had given up their right to challenge foreclosure actions. Wells Fargo also promised loan modifications in the class-action settlement that were never granted; they instead stole the homes with impunity from people already abused by fraudulent loans, according to Denbeaux's report.
Like he did in the Guantánamo cases, Denbeaux wrote a detailed study of the Pick-a-Pay debacle and distributed it to state attorneys general. But officials ignored all his requests to do anything about it. "I couldn't get the deputy AG to take my call in New Jersey," Denbeaux tells me. "It's a seemingly endless cycle of misleading, deceptive, and exploitative practices, in response to [Wells Fargo's] misleading, deceptive, and exploitative practices."
One of Denbeaux's Pick-a-Pay victims, Michelangelo Malleo of Manasquan, New Jersey, applied four times for a loan modification under the settlement, but never got help. Instead, Wells Fargo told Malleo to stop paying to qualify, then used the default to file for foreclosure and set an eviction date of August 21, 2014.
Weeks before eviction, Malleo received a letter from Home Start Housing Center promising they could get him out of foreclosure. After submitting his information, Home Start sent him an offer—on Wells Fargo stationery—approving him for a loan modification with a lower monthly payment.
Malleo says he sent in his payment, but that day, two sheriffs and a moving truck came to evict him. Wells Fargo claimed to Denbeaux to have never heard of Home Start. After initially insisting that Wells Fargo must accept the terms of the approved modification, days later Home Start returned Malleo's check and rescinded the offer. Malleo moved out of the house last October. "The web of deceit is overwhelming," Malleo says. "The embarrassment, the disgrace that has occurred is amazing."
Denbeaux repeatedly tried to get the courts and Wells Fargo lawyers to reverse the eviction based on the signed agreement. But he chose to end appeals, because he had no hope of a positive ruling. "It has all the elements of embezzlement," he said.
If you have enough cases, then you can control the battlefield and make a difference.
Despite the widespread belief that the foreclosure crisis has ended, Denbeaux & Denbeaux's caseload continues to grow as homeowners stream into the firm's office in a converted house in Westwood, New Jersey. While judges still tend to side with banks, recent rulings in New Jersey make it easier to sue for denying approved loan modifications and other consumer protection violations. Denbeaux & Denbeaux now has 16 attorneys, many of them former law students from Mark Denbeaux's Seton Hall classroom, eager to go to war for their clients.
The firm's latest strategy is to go around state courts. There are a host of consumer protection laws, from the Truth in Lending Act (TILA) to the Fair Debt Collection Practices Act (FDCPA) to the Real Estate Settlement Procedures Act (RESPA), where regulatory oversight has shifted from the Federal Reserve to the Consumer Financial Protection Bureau, which was created in 2010 with the sole responsibility to safeguard consumers from financial scams. Not only does CFPB have a dedicated staff to go after financial predators, they grant private attorneys a taste of the action as well. "It means there's a private right of action every time a [loan] servicer screws a homeowner," Denbeaux says.
In other words, instead of futilely trying to convince state judges who've made up their minds about deadbeat homeowners, Denbeaux's lawyers can raise the stakes.
"Say we've got someone who paid on time and the bank says they didn't," Denbeaux says. "I ask for the servicing records. If they don't respond within five days I can file suit in federal court."
Federal courts have proven more willing to enforce the law; even the Supreme Court (which has lately been pro-business) ruled unanimously against Bank of America subsidiary Countrywide last month, giving homeowners the right to rescind their mortgages if their lenders don't provide proper disclosures.
Federal consumer protection penalties are relatively modest—between $1,000 and $4,000 per violation—but federal courts can also demand disclosure of whatever documents have been requested, bringing to light facts that state court judges cannot deny. Federal courts could also add on additional damages if the violations led to wrongful foreclosures.
"We're not necessarily requiring the court to decide who's right and who's wrong, just to enforce the law," says Denbeaux. "If you have enough cases, then you can control the battlefield and make a difference."
Of course, some experts are skeptical of this approach. "An isolated case here or there won't change anything," says Adam Levitin, a law professor at Georgetown University. "It would take nationwide scale or a truly extraordinary decision by a federal court of appeals to see anything happen."
"We have looked long and hard to removal to federal court," adds Thomas Ice, a foreclosure defense lawyer in Palm Beach, Florida. "There may be some documents you can get that are valuable. But every time I look at it, I look at how does this help the client?"
But Denbeaux & Denbeaux, believing that a large volume of cases could play a critical role, has already filed around 20 complaints under one consumer-protection law and has 60 more coming under another. "In state court it's been years of battling not just the adversary but fighting the court as well," says Deutsch, the staff attorney. He believes that enough of these cases can really change loan-servicer behavior across a variety of sectors. "This extends beyond mortgages to student-loan debt, credit-card debt, medical debt. This can bring awareness across the board to your rights as a consumer."
Denbeaux has an even bigger plan: He wants to track complaints into his office and use them to build class-action cases. The Consumer Financial Protection Bureau has a similar complaint database, but Denbeaux thinks he can find more violations. When I point out how ambitious that sounds, Denbeaux chuckles. "If you don't aim high..."
We're trying to make the law egalitarian, make access to the courts egalitarian. I think I have ways to get there.
The lending industry has tremendous resources at its disposal to bulldoze over consumers. Only dedicated advocates can nudge the system in a better direction, and even then, they face hardships, particularly the stigma attached to breaking up a good racket for lenders and their attorneys. In a way, defending debtors is almost more radical than defending Guantánamo detainees. At least prisoners have the constitutionally guaranteed right to an attorney; according to the lenders, homeowners shouldn't dare to ask for fair treatment until they pay what they owe. Denbeaux is a threat to a financial system that has a dangerous amount of power in this country.
"I've got a small office in an old house," says Denbeaux. "I've surrounded myself with smart, dedicated young people. We're trying to make the law egalitarian, make access to the courts egalitarian. I think I have ways to get there."
Follow David Dayen on Twitter.