The Volokh Conspiracy

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Volokh Conspiracy

Sealed S.C. Real Estate Case Involving Mick Mulvaney (Acting White House Chief of Staff)


Prof. Adam Levitin (Georgetown Law) has the story on his Credit Slips blog. There is some controversy about the underlying land deal, which the Washington Post covered last year; Prof. Levitin thinks Mulvaney's "move [was] allowed by the rules, but also totally in bad faith," but my UCLA colleague Prof. Lynn Lopucki disagrees, arguing that the underlying financial transaction—"strategic purchase and foreclosure of a mortgage"—is commonplace and generally not considered to be in bad faith. Prof. Levitin's post, though, focuses on the sealing of the court records in the lawsuit over the deal:

Incredibly, even the court's order is under seal. I've never seen an order deciding a foreclosure action that is under seal. It's frankly ridiculous. This is a dodgy land deal, not a state secret….

There is also an update to the post about some of the documents being available unsealed in the appellate file. I can't speak to the underlying transaction, but it does seem to me hard to justify the sealing.

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  1. Impeachment!

    1. Better Americans will settle for replacement.

  2. "(he's referred to as "John M. Mulvaney"--you'd never realize that it's Mick from the reference...)."

    OMG, court proceedings referred to someone by their legal name, not using a nick name!! Cover up!

    1. I mean, this is a very short piece submitted by Prof. Volokh that makes a very simple and easily understandable comment. Yet you still couldn’t follow along.

      1. The sealing issue is boring. Sealing issues are always boring.

        Levitin thought the name tidbit important enough to post.

        1. You don't like the actual argument so you'll try and pick a different one, eh?

          Lame, Bob. Lame.

  3. I'm impressed with all these Resistance academics who can divine and ferret out motive despite things being allowed "by the rules." They can spot "bad faith" behind every bush and tree. Impressive.

    1. You nonetheless will be wailing ceaselessly when the House of Representatives and Supreme Court are enlarged in scrupulous compliance with the rules.

  4. Can you please post the link where your "Prof. Lynn Lopucki disagrees"?

    1. No link -- I e-mailed Lynn and that's what he told me. (I learned of Lynn's views on this from Adam Levitin, whom I had e-mailed to check up on whether there were any new developments.)

    2. Unlike us where we just have to vainly search Google to find out what some expert thinks on a matter, EV can just ask them.

  5. So it is unclear if he sealed the record by following the law and the peanut gallery just thinks it is "bad faith" because they don't like him or if he really used the law to seal something which should have not been sealed. Which one is it?

    1. Two separate questions: (1) Was the original deal somehow improper? I take no view on that, but that's what the "bad faith" debate is about. (2) Is the sealing unjustified? I'm inclined to think that it was -- hard to see what justification there would be for sealing the entire file.

      1. "hard to see what justification there would be for sealing the entire file."

        It's not hard to see. "I have powerful friends" has been a winning argument for centuries.

  6. I'm wondering what Mulvaney paid the bank for the loan.

    Might show up in the court documents, ISTM.

    1. He probably paid the full value of the loan because the bank had a personal guarantee. Unless they were afraid he would file bankruptcy they probably figured that they would eventually get paid the full amount even if they had to foreclose. Maybe they would discount it some just to save the trouble of dealing with it.

  7. I can see why the guy is pissed off at Mulvaney, but the deal seems legal to me.

    Mulvaney has a 25% stake in a corporation that bought a parcel with a 2.75m loan from a bank, and 1.75 from a secondary lender in 2005. The project collapsed along with every other real estate project during the recession, and the original corporation was never going to have the money to pay off the loa. But Mulvaney didn't want a corporation he was involved with defaulting on a bank loan, a secondary investor losing their money was a different story.

    So Mulvaney, forms another corporation also as a minority owner, and buys the mortgage from the bank, forclosed on the original corporation, and the secondary investor loses his stake.

    Unless there is some evidence that Mulvaney looted the assets of the original corporation it certainly seems legal, and not uncommon place for someone to buy up an non-performing loan and forclose on the asset. Ask Elizabeth Warren, she'll tell you it's done all the time.

    1. As noted above, the main issue seems to be the sealing of the case. Can't really evaluate the merits until we have a complete picture.

      I don't recall you as one of those who would shoehorn partisan BS into your posts, but I guess that's you now.

      1. So the fact that Warren was a predatory flipper in OK is now partisan BS?

        1. Ah, whataboutery...

        2. If it’s irrelevant it sure is.

          Just like if I Kramer’s in here and said there were no WMDs in Iraq.

        3. Luckily Sen. Warren released her tax forms so we can check her financial situation.

          Just like all candidates do.

          1. "Just like all candidates do."

            Fake news

      2. Well I don't think it's just partisan BS, I'm just pointing out that not everyone who saw opportunities and made money off of others misfortunes during the Great Recession were predatory capitalists, some were predatory socialists.

        1. Ah, so it is explicit whattaboutery.

          1. No it's not whataboutism, because it doesn't look like either of them did anything wrong.

            Unless of course you do think Warren did something wrong, and in that case I'm all ears.

            1. I don't know anything about banking and whatnot.

              I'm talking about the sealing of unknown provenance.

              Y'all seem to want to talk about anything but.

          2. One man's "whataboutery" is another man's "doublestandardsery."

            1. No, because Kaz isn't arguing a double standard, he's just arguing that there should be no standard on this because Warren.

        2. Not much of a free market type, are you?

        3. I don't see anything predatory about buying non-performing loans, foreclosures or bank REOs. The people are going to, or have, lost their houses regardless. Warren didn't cause the recession so being in a position to ultimately profit from it is not predatory at all.

    2. It might have just been a matter of time before Paragon Bank foreclosed, which likely wouldn't have left Fonville any better off. But that wouldn't have given him much of a case either, and this one survived a 2018 motion to dismiss.
      Aren't cases with imaginary facts more fun than ones with the boring stodgy kind of facts?

    3. While I despise Mick, I have to agree that it's hard to see the fault in the business dealings here. The mezz lender - the "secondary investor" you've described here - made a bad debt on a property whose value declined significantly. If you agree to be junior to the mortgage lender, then you're junior. You're taking the first loss. Sorry about it.

      It "feels" a little shady, but I can't see anything actually untoward about it. We call this an "opportunistic" transaction and it indeed happens all the time.

  8. Well I'm certainly not condoning the sealing of the case, but the Washington Post interviews the secondary investor at length, and I don't think he is covering anything up.

    I was just commenting on the transaction as described by the WaPo, but if I had to speculate on why the record was sealed, I'm guessing that it may have to do with Mulvaney not wanting to disclose info about the other investors in the corporation.

    1. Could be, or it could be to avoid disclosing what Mulvaney actually paid for the loan.

      Congressman gets favorable treatment from bank. Would hardly be surprising.

      1. Just because it's sealed doesn't mean the judge couldn't make that determination as nothing was outside his purview. Well in that case they could just seal that information, and claim it was strategic business data which may affect the value of the property in a future sale. That kind of competitive data is often sealed. But there was no need to seal the rest of it.

        1. Sure, but SC judges are elected, (SC justices are chosen by the General Assembly) so there could easily be political motivations in play.

          Plus, I don't know why this sort of transaction would be considered "strategic business information." Of course, it's all guesswork so long as the record is sealed.

  9. It is reliably reported that Mr. Mulvaney lied twice and in writing to the government about the relevant transaction(s) and has admitted his written statements were falsehoods. It seems reasonable to want to know why he sought to conceal court records.

  10. Professor Volokh runs a First Amendment clinic which among its activities has filed motions to intervene in cases and unseal sealed files in various courts around the country, most of them involving obscure people, and has blogged about these activities periodically.

    This is just another sealing case that happens to involve someone well-known. The fact that the person is a public figure in an important administration position very likely has relevance to what Professor Volokh and his clinic does. It may make the case for unsealing stronger and may have some persuasive power with the judge even if not a direct factor in the legal analysis. And it makes the case more noteworthy to blog about.

    But I doubt it’s intended as a political comment.

    1. Do you expect Prof. Volokh or the clinic he operates to tangle with prominent movement conservative Mick Mulvaney (rather than an obscure citizen, or a Democrat, or a liberal, or a libertarian, or a RINO)?

  11. I think it's wrong to seal the documents just to save a public figure, or anyone else really, some embarrassment. Wiping out the second is cringe worthy for sure. The second lien holder was a chump for not getting a personal guarantee so he really has only himself to blame. Still actively working to wipe him out does leave a bad taste.

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