WARN Act Suit v Law Office of David Stern

8/8/2019 WARN Act Suit v Law Office of David Stern

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

Case No.: 10-62302-CIV-UNGARO

RENAE MOWAT, NIKKI MACK,ARKLYNN RAHMING, and QUENNA HUMPHREY individuallyand on behalf of all other similarly situated individuals,

Plaintiffs,vs.

DJSP ENTERPRISES, INC., a Florida Corporation, DJSPENTERPRISES, INC., a British Virgin Islands Company,LAW OFFICES OF DAVID J. STERN, P.A.,DAVID J. STERN, individually, DAL GROUP, LLC,

a Delaware LLC, DJS PROCESSING, LLC,a Delaware LLC, PROFESSIONAL TITLE AND ABSTRACTCOMPANY OF FLORIDA, a Delaware LLC, andDEFAULT SERVICING, LLC, a Delaware LLC,

Defendants.______________________________________/

FIRST AMENDED CLASS ACTION COMPLAINT

Plaintiffs Renae Mowat, Nikki Mack, Arklynn Rahming, and Quenna Humphrey

individually and on behalf of all others similarly situated, by and through their counsel, bring this

action in their individual capacities and on behalf of the class of persons similarly situated as

defined below and for their First Amended Complaint allege, pursuant to their own knowledge,

or where there is no personal knowledge, upon the investigation of counsel and/or upon

information and belief, to wit:

NATURE OF CASE

1. This action seeks to recover back pay and benefits under 29 U.S.C. 2101 et seq. (theWARN Act) to redress the common course of conduct by Defendants DJSP Enterprises, Inc. a

Florida Corporation (DJSP FL), DJSP Enterprises, Inc., a British Virgin Islands corporation

Case 0:10-cv-62302-UU Document 22 Entered on FLSD Docket 01/10/2011 Page 1 of 28


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(DJSP BVI), Law Offices of David J. Stern, P.A. (DJSPA), David J. Stern, individually

(Stern), DAL Group, LLC (DAL Group), DJS Processing, LLC (DJS Processing),

Professional Title and Abstract Company of Florida, LLC (Professional Title), and Default

Servicing, LLC (Default Servicing), that terminated more than eight hundred (800) employees

without proper legal notice as part of a series of mass layoffs which began on September 23,

2010 in Plantation, Florida. Defendants mass layoffs deprived hundreds of fired workers and

their families some transition time to adjust to the prospective loss of employment, to seek and

obtain alternative jobs and, if necessary, to enter skill training or retraining that will allow these

workers to successfully compete in the job market. (20 C.F.R. 639.1(a)).

2. Defendants failed to provide these terminated employees with the sixty (60) days advancewritten notice that is required by the Worker Adjustment and Retraining Notification Act, 29

U.S.C. 2101 et seq. (WARN Act).

3. The Defendants constitute a sophisticated, integrated and interrelated real estate processing enterprise that was, at all material times, centrally controlled by a common set of

officers, directors, and managers, including but not limited to Stern. Stern, through his position

as an officer, director, shareholder, or manager of the Defendant entities, sits at the epicenter of

the centralized management and operation of the Defendants businesses where he exerts direct

control over the Defendants day-to-day operations. Since all roads lead to Stern and the

constellation of entities which he controls, Plaintiffs seeks to impose alter ego liability, and/or to

pierce the corporate veil of certain corporate entities to hold Stern liable, ot to hold Stern jointly

and severally liable for action or inaction by the corporate entities that he controls.

4. DJSP BVI is one of the largest providers of processing services for the mortgage and realestate industries in Florida and the United States. DJSP BVI provides these services itself and



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through a constellation of related entities which it controls. DJSP BVI and the other defendant

entities are the alter-ego of Stern. Defendants operated as a single employer of Defendants

employees at all material times, including the decision to terminate Plaintiffs and proposed class

members by mass layoff and the execution of these mass layoffs. Indeed, on information and

belief, DJSP BVI maintained direct responsibility for all Defendants strategic, financial, human

resources and benefits functions, and exercised control over all Defendants business plans and

decisions, including the decision to terminate hundreds of employees by mass layoffs. On

information and belief, DJSP BVI and Stern were responsible for the decision not to provide

Plaintiffs with notice under the WARN Act.

5. This Court has jurisdiction pursuant to 28 U.S.C. 1331, 1334 and 1367, as well as 29U.S.C. 2102, 2104(a)(5).

6. Venue over this matter is appropriate in this Court pursuant to 29 U.S.C. 2104(a)(5)because the acts constituting the violation of the WARN Act occurred, and the claims arose in

this district. Venue is also proper under 28 U.S.C. 1391(a) and (b). The acts complained of

occurred in the State of Florida and, at all relevant times, material hereto, the Defendants

conducted business with and through the other named Defendants who also conducted business

with and through the other Defendants and their subsidiaries and the named individual

Defendant, Stern, resides in this judicial district, and all of or a substantial part of the events or

omissions giving rise to this action occurred in this judicial district.

PARTIES

Plaintiffs

7. Plaintiff, Renae Mowat, is and was at all material times relevant hereto, a resident ofBroward county, Florida, sui juris, and a full-time employee of DJS Processing, LLC, a wholly



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owned subsidiary of DJSP BVI, at the time she was terminated on November 18, 2010.

8. Plaintiff, Nikki Mack, is and was at all relevant times material hereto, a resident ofMiami-Dade county, Florida, sui juris and a full time employee of DJSP BVI, DJSP FL, DAL

Group or one of its operating subsidiaries or DJSPA, at the time she was terminated on October

21, 2010.

9. Plaintiff, Arklynn Rahming, is and was at all material times relevant hereto, a resident ofBroward county, Florida, sui juris, and a full-time employee of DJSP BVI, DJSP FL, DAL

Group or one of its operating subsidiaries or DJSPA at the time she was terminated on October

21, 2010.

10. Plaintiff, Quenna Humphrey, is and was at all material times relevant hereto, a resident ofBroward county, Florida, sui juris, and a full-time employee of DJSP BVI, DJSP FL, DAL

Group or one of its operating subsidiaries or DJSPA at the time she was terminated on October

22, 2010.

11. At all times relevant and material hereto, all Plaintiffs and class members were either fulltime employees of the DJSP BVI or its subsidiaries or DJSPA, or they were temporary

employees, other than part-time employees, and are to be counted in determining that the

threshold requirements of the WARN Act are met.

12. Plaintiffs were Defendants employees who, in addition to other substantial employee benefits, earned regular compensation and were damaged by Defendants violations of the

WARN Act.

13. The individual plaintiffs identified in the above paragraphs will be known collectivelyhereinafter as Plaintiffs.



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Defendants

14. Notwithstanding corporate formalities, Defendants present a public image of a singleenterprise. Defendants operations, decision-making, personnel and processes are inextricably

intertwined and run at the direction of Stern.

15. Defendants operate and hold themselves out to the public in Florida, individually and inconcert, under the singular trade name DJSP Enterprises, Inc.

16. DJSP BVI maintains a website on which it touts itself as being one of the largestproviders of processing services to mortgage lender in Florida and judicial mortgage foreclosing

processing company in the U.S.

1

At all times material to this litigation, DJSP BVI and Stern

actively directed and controlled the daily activities of the Defendants and totally dominated the

operating subsidiary Defendants, DJS Processing, Professional Title, and Default Servicing, to

the extent that the operating subsidiary Defendants manifested no separate corporate interest of

their own and functioned solely to achieve the purposes of DJSP BVI, in that, among other

things:

a. DJSP BVIs principal assets consist of 71% of the capital stock of DAL Group,LLC which owns 100% of the capital stock of the operating subsidiaries and

b. DJSP BVI has managed and operated the human resource department functions ofthe operating subsidiaries and DJSPA, including taking information from potential hires for the

Plantation, Florida sites.

DJSP BVI

17. Defendant DJSP BVI is a British Virgin Islands Company traded under the NASDAQstock symbol DJSP (CIK #0001436612). DJSP BVI was incorporated on February 19, 2008,

1http://www.djspenterprises.com/overview.aspx



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under the name Chardan 2008 China Acquisition Corp. (Chardan 2008), with its principal

business office located at 900 South Plantation Road, Suite 400, Plantation, FL 33324. DJSP

BVI is not registered with the State of Florida.

18. Despite the fact that that its principal office is located in Florida, DJSP BVI has neverregistered with the State of Florida nor qualified itself to do business within the State of Florida,

and upon information and belief has instead relied upon the similarity and confusion with DJSP

FL, the Florida corporation that also has its principal business office located at 900 South

Plantation Road, Suite 400, Plantation, FL 33324, without distinction between the two entities on

its letterhead, corporate documentation or with the Securities Exchange Commission.

19. In fact, DJSP BVI further acknowledges in its corporate disclosure just recently filed withthis court that it owns 100% of the stock of DJSP FL, although it was not disclosed in the

Prospectus and it is not precisely known when said shares were acquired.

20. DJSP BVI (f/k/a Chardan 2008 China Acquisition Corp.), is the parent company to all ofits subsidiaries. Upon information and belief, Plaintiffs allege that Defendants are a single

employer because Defendants maintain a common corporate headquarters and have fully

integrated and interdependent business operations and share personnel policies that emanate

from a common source.

21. Prior to January 15, 2010 DJSP BVI was a shell company with only nominal assets andno revenue.

22. On January 15, 2010, DJSP BVI f/k/a Chardan 2008 entered into a transaction with DALGroup. Through this transaction, DJSP BVI acquired a controlling interest in DAL Group. In

addition, DJSP BVI became a holding company whose primary business operations are

conducted through three wholly-owned subsidiaries of DAL Group, which are: (i) DJS



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Processing, LLC; (ii) Professional Title and Abstract Company of Florida, LLC; and (iii) Default

Servicing, LLC. The organizational structure of DJSP BVI was as follows:

23. DJSP BVI is the parent entity to DAL Group, LLC and directly owned 71% of DALGroup.

24. DJSP BVI acknowledges through its public filings with the SEC that at all material timesbefore November 19, 2010 Stern was the President and Chief Executive Officer and a member

of the Board of Directors of the Company [DJSP BVI] and also an officer and manager of its

subsidiaries. DJSP BVI SEC Form 6-K at 2 (November 19, 2010).2

25. Stern and DJSPA exert significant control over DJSP BVI and its subsidiaries.26. DJSP BVI was created on January 10, 2010 and according to DJSP BVIs F-20 filed onJuly 1, 2010, DJSPA was the sole client of DJSP BVI, and it was created by Stern. The

operating subsidiaries spun off from DJSPA (solely owned by Stern) into DJSP BVI have

accounted for approximately 94%, 97%, and 98% of DJSP BVIs revenue in 2009, 2008, and

2http://www.sec.gov/Archives/edgar/data/1436612/000114420410062550/v203512_6k.htm



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2007.3

27. Stern also exerts control over DJSP BVI because he is its largest creditor. Mr. Stern andhis affiliates received approximately $58.5 million in initial cash in exchange for

contributing their business to DAL, plus another approximately $88 million in the Stern Deferral

Note (defined herein) and post-closing cash. DJSP BVI acknowledges in its public filings with

the SEC that Stern wields significant control over DJSP BVI because, inter alia, his law firm is

the biggest client, he is the biggest creditor, and the directors that he recommended may vote to

accelerate the maturity date of debt owed to Stern by DJSP BVI.

28.

DJSP BVI has stated in public SEC filings that since January 15, 2010, the business of

the DJS Processing Division and its combined affiliates. . .represent all of our [DJSP BVIs]

operations. DJSP BVIs SEC Form 20a at 1 (January 22, 2010).

29. In other words, DJSP BVI is a holding company whose only business is to control andoperate the businesses of its subsidiaries DAL Group, DJSP FL, DJSP Processing, Professional

Title, and Default Servicing.

DJSP FL

30. On October 1, 2009 Defendant, DJSP Enterprises, Inc. (DJSPFL) was organized underthe laws of the State of Florida as a for profit corporation by Defendant Stern, who also serves

as its registered agent. As of September 29, 2010, the company, while still operating and

availing itself of the laws of Florida, was administratively dissolved by the Secretary of State of

Florida.

31. Pursuant to Florida Statute Section 607.1421(4) the directors officers and agents of adissolved corporation are liable for the actions of a dissolved corporation.

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32. DJSP FL and DJSP BVI maintain a common location at 8100 SW 10th Street, Plantation,FL 33324, and they operate as a single entity out of a single site.

DJSPA

33. DJSPA is a Florida for profit professional association, organized under the laws of theState of Florida with its principal place of business head-quarter offices at 900 South Plantation

Road, Suite 400, Plantation, FL 33324. Its registered agent is also Stern, individually, at 900

South Plantation Road, Suite 400, Plantation, FL 33324.

34. DJSPA is a law firm founded and solely owned by Stern, who was also the President andChief Executive Officer (CEO) of DJSP BVI. According to DJSP BVIs public SEC filings,

DJSPA is DJSP BVIs primary client, such that any change in the volume of foreclosures

referred to DJSP BVI by its primary client DJSPA would necessarily have a significant and

material effect on the the financial performance of DJSP BVI. DJSP BVIs SEC Form 20-F at 1

(April 2, 2010).

Stern

35. At all material times Defendant Stern was a resident of Broward County, Florida, suijuris, and has acted individually and on behalf of all corporations and/or subsidiary limited

liability companies.

36. Attorney David J. Stern is the founder and sole owner of the law firm DJSPA. Stern hasestablished a network of related entities which, in total, provide all of the legal and non-legal

services that are ancillary to and support the residential real estate foreclosure market. Pursuant

to a Stern Employment Agreement dated January 15, 2010 (the Employment Agreement)4,

between Stern and DAL Group, DJS Processing, and DJSP BVI, Stern held numerous positions

with the Defendant entities, including: Chairman of the Board and President of DAL, DJS



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Processing and DJSP BVI f/k/a Chardan 2008. The Employment Agreement and these positions

highlight the vast control that Stern has wielded over the Defendants at all material times. Stern

controls all of the Defendants through his role as founder, officer, director, and/or shareholder.

DJSP BVIs Form 20-F filed with the SEC on January 22, 2010 reflects that Stern owned

33.15% of DJSP BVIs ordinary shares.5

Stern is or has been at material times the registered

agent for all of the Defendants.

37. Specifically, Stern had an employment agreement with DJSP BVI and was the largestcreditor of the company with a post closing note, which company created upon his contribution

of shares of DAL

6

38. Upon information and belief, Stern, through his affiliates or subsidiaries was the creator,incorporator, officer, director or shareholder of all other Defendants.

39. Stern is individually liable for the actions of DJSP FL, as hereinafter alleged, at all timesthat it was administratively dissolved on and after September 29, 2010.

DAL Group, LLC

40. DAL Group is an LLC that was formed on March 20, 2007 under the laws of the State ofDelaware but is not registered as a foreign entity in the State of Florida.

41. Mr. Stern and his affiliates received approximately $58.5 million in initial cash inexchange for contributing their business to DAL, plus another approximately $88 million in the

Stern Deferral Note and post-closing cash. As a direct and proximate result of Sterns

contribution, he became the largest creditor of DJSP BVI. 7

42. DAL Group is the holding company to three operating subsidiaries: DJS Processing,4http://www.sec.gov/Archives/edgar/data/1436612/000121390010000268/f20f2010ex4vii_djsp.htm 5http://www.sec.gov/Archives/edgar/data/1436612/000121390010000268/f20f2010_djsp.htm#item6

6http://www.sec.gov/Archives/edgar/data/1436612/000114420410035982/v189473_20fa.htm

7Id.



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Professional Title, and Default Servicing and directly owns 100% of these entities.

DJSP Processing, Inc.

43. DJS Processing, LLC is an LLC that was formed on September 15, 2009 under the lawsof the State of Delaware, and that was registered with the State of Florida on September 28,

2009. At all times material Stern is and has been the managing member or and registered agent

for DJS Processing. DJS Processings principal place of business is the Defendants main site at

900 S. Pine Island Road, Plantation, Florida.

Professional Title

44.

Professional Title and Abstract Company of Florida, LLC (Professional Title) is a an

LLC that was formed on September 15, 2009 under the laws of the State of Delaware, and that

was registered with the State of Florida on September 28, 2009. Professional Title provides title

searches and examinations related to services provided by DJSPA and mortgage foreclosure

defendant location services to third party processors engaged by DJSPA.

45. Stern is and has been the registered agent of Professional Title at all times. ProfessionalTitles principal place of business is the site at 900 S. Pine Island Road, Plantation, Florida.

Stern Holding Company PT, Inc. f/k/a Professional Title and Abstract Company of Florida,

Inc., of which Stern is the sole director, is the managing member of Professional Title.

Moreover, Stern owns 100% of the equity in Stern Holding Company PT, Inc. Sterns SEC

Form 3 at 1 (December 28, 2010).8

Default Servicing

46. Default Servicing is an LLC that was formed on September 15, 2009 under the laws ofthe State of Delaware and that was registered with the State of Florida on September 28, 2009.

DAL Group is the managing member Default Servicing.



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47. Plaintiffs are informed and believe, and thereon allege, that each of the Defendants hereinwas, at all times relevant to this action, the agent, employee, or joint venture of the remaining

Defendants and was acting within the course and scope of that relationship. Plaintiffs are further

informed and believe, and thereon allege, that each of the Defendants herein gave consent to,

ratified and authorized the acts alleged herein to each of the remaining Defendants.

48. Upon information and belief, Stern is personally liable as an officer and/or director of thedissolved Florida corporation.

FACTS

49.

Through its three operating subsidiaries

9

, DJSP BVI provides non-legal services that are

ancillary to and support the residential real estate foreclosure market, other related legal actions

and lender owned real estate operation (REO) services. These services are provided almost

exclusively to DJSPA, which provides residential foreclosure work for approximately 12 loan

servicing firms. DJSPAs clients included all of the top 10 and 17 of the top 20 mortgage

servicers in the U.S. Consequently, DJSP BVI provides its services to these same mortgage

servicers through an agreement between DJSP BVI and DJSPA.

50. DJSP BVI has a direct and highly interconnected relationship with DAL Group, itsoperating subsidiaries DJS Processing, Professional Title and Default Servicing, and with

DJSPA, pursuant to a series of arrangements and formal and/or informal agreements between the

companies. Among other things, DJSP BVIs financial reports indicate that DJSPA performs all

non-legal services required to process foreclosure files and perform ancillary services; pursuant

8http://www.sec.gov/Archives/edgar/data/1436612/000114420410069061/xslF345X02/v206964_ex.xml

9Actually, the operating subsidiaries are owned by DAL Group, LLC. DJSP BVI owns 71% of DAL

Group, LLC. However, DJSP BVI refers to the operating subsidiaries as their own on their website andin press releases. The Company has three affiliated operation subsidiaries.

http://www.djspenterprises.com/overview.aspx#affiliates 10 http://www.sec.gov/Archives/edgar/data/1436612/000114420410035982/v189473_20fa.htm



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to a facilities sharing agreement, DJS Processing furnishes corporate and back-office services to

DJSPA, such as finance, accounting, IT and other administrative functions. DJS Processing is

the exclusive processing firm for all business undertaken by DJSPA and, subject to limited

exceptions, DJSPA is precluded from pursuing any material business not requiring the use of

DJS Processings processing capabilities.

51. The Defendants have several common officers and directors. Stern is an officer and/ordirector of DJSPA, DJS Processing, Professional Title, and DSI Default. In addition, Stern was

previously the Chairman of the Board and Director of DJSP BVI.

52.

The Defendants maintain a centralized telephone system, interconnected email system, and

shared physical plant, including common entrances and hallways and shared filing systems (both

electronic and paper).

53. DJSP BVI, DJSP FL, DAL Group, its operating subsidiaries and DJSPA maintain centralpersonnel policies related to the hiring and firing of employees and the payment of wages. These

policies were made and enforced by a central H.R. Department. The centralized H.R.

Department and Stern made the decision to effect the mass layoffs which are the subject of this

action. Moreover, Stern and the joint or shared H.R. Department carried out the subject mass

layoffs of employees.

54. Moreover, according to the Prospectus for DJSP-BVI for administrative convenience,each of the Defendants were permitted to participate under the 401(k) plan sponsored by DJSPA

under the Law Offices of David J. Stern, P.A., 401(k) Plan Cost Sharing Agreement, wherein the

administrative costs for such 401(k) plan will be shared were shared by each of the Defendants in

proportion to the number of employees for the applicable employer. The fees for administration

of the 401(k) plan will be billed to DJSPA and DJSPA sought reimbursement from the other



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subsidiary companies of DJSP-BVI.10

55. The joint or shared H.R. Department sent mass emails from Sterns email address tohundreds of employees advising them that they were part of a mass layoff that was effective

immediately. The emails sent to employees of the various entities refered to the Company as

a singular entity, lumping DJSPA, DJSP BVI and its subsidiaries together, and failing to

distinguish one entity from another.

56. Many putative class members are unable to accurately distinguish between Defendantsvarious companies nor readily identify whom their employer was without referring to their final

paycheck, due to the fact that there had been many changes in personnel between a Defendants

companies and all changes were seamless, often occurring without even a change in desk or

title, only reflecting a change in a change in a Defendant payee on the putative Plaintiffs direct

deposit paycheck.

57. Plaintiffs and Class Members were terminated via notice sent from the joined and lumpedtogether Defendants as a singular Company on the respective dates of September 23, 2010,

October 14, 2010, October 21-22, 2010, November 4-5, 2010, and November 18, 2010.

58. Between on or about September 23, 2010 and November 18, 2010, Defendantsterminated approximately 800 employees of their approximately total 1200 employees, without

providing them with the sixty days notice required under the WARN Act.

59. Early terminations by Defendants of Employees, such as those made in late Septemberand/or early October were made quietly, one on one, and without warning usually by a direct

supervisor or manager.

60. The Plaintiffs were full time employees as used in the Act.61. The class members, who were temporary employees, other than part-time employees, are10

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counted as employees as used in the Act because the contract for temporary employment was a

part of a long term relationship between Defendants, temporary employees and their agents.

62. All of the Plaintiffs were affected employees as used in the Act and suffered anemployment loss as defined by the Act.

63. In the time prescribed by the Act, the Defendants permanently terminated the affectedemployees.

64. Further, more than 50 employment losses occurred during a single 30 day period.65. The statutory period under the WARN Act began on July 26, 2010 which is sixty (60)calendar days before the first employment losses began on September 23, 2010.

66. Plaintiffs who voluntarily departed or took an early retirement whether in exchange forDefendants' incentives such as severance packages in some instances are also covered by the Act

as affected employees because their "departure" was not voluntary under the Act. The

Defendants intended to cause mass resignations of their employees in order to avoid liability

under the WARN Act.

67. Some Plaintiffs also resigned in the face of active criminal and civil investigationsagainst the Defendants, which investigations Defendants knew or should have known caused a

hostile or intolerable work environment and thus were not voluntary under the Act

68. Defendants actions rose to the level of coercion in some of the terminations, thus that theemployees who resigned or were terminated were affected employees under the Act.

69. Some of these employees may have been offered/provided with a severance paymentupon the signing of a release. However the severance, if any, was upon information and belief,

less than the equivalent pay had the employees received appropriate notice under the WARN

Act.



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70. On July 27, 2010, DJSP BVI announced that it knew it had to focus on its legacypopulation as new referrals had decreased.11

71. On October 14, 2010 DJSP BVI announced that it had reduced its workforce by 10%citing a reduction in file volume. Specifically, the company press release stated The suspension

of foreclosure cases has adversely impacted file volumes in each of DJPSs foreclosure, title and

REO liquidation divisions.12 There have also been reports in the press that a number of the

clients of DJSPA have or plan to suspend new referrals to the firm pending resolution of an

investigation of the law firm announced by the Attorney General of the State of Florida this past

August. Stern, the then acting Chairman and CEO commented, "Recent developments in the

industry are unprecedented. We are closely monitoring developments in the industry and will

take any necessary additional steps as dictated by these developments." See DJSP BVI Press

Release, October 14, 2010.

72. Upon information and belief, Defendants knew additional terminations were anticipated,but failed to provide employees, nor State and Local authority with advance notice as required

under the WARN Act.

73. The following week on October 21, 2010 and October 22, 2010, DJSP BVI terminatedapproximately 198 additional employees.

74. Each of the employees terminated on these days was not provided with advance noticebut was terminated in a meeting with a Human Resource Director on the same day and provided

with a termination letter. (October 21, 2010 DJSP BVI termination letter, Exhibit A).

75. The October 21, 2010 DJSP BVI termination letter (Exhibit A) sent to employeesaffected by the October 21 and 22, 2010 separation cites a loss of 75% of Defendants referral

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business in the past six months which has caused DJSP BVI to lay-off a substantial amount of

the staff across the company.

76. Again the employees were provided with no notice, severance, and barely an opportunityto gather their personal items before security badges and telephone extensions were deactivated.

77. According to the companys press release dated October 22, 201013, this reduction inworkforce brought the total number of layoffs to 300.

78. On November 4, 2010, Defendants acting in concert terminated approximately 435additional employees who were in fact employed by multiple allegedly separate corporations by

a single blast email notification sent from a uniform Human Resources Department, notably the

email was signed by Stern, without a corporate title. (November 4, 2010 DJSP BVI termination

email, Exhibit B).

79. It was noted in the Prospectus, that Stern and DJSPA were key to the success of DJSPBVI and a noted risk factor because [i]f Mr. Stern becomes unable to perform his duties under

his employment agreement for any reason or otherwise chooses not to perform such services, it is

possible that the client relationships of [DJSPA], and therefore the volume of referrals that we

receive from [DJSPA], would suffer, materially reducing our revenues and profitability. In

addition, as a result of this relationship with both us and [DJSPA], Mr. Stern may encounter

conflicts of interest in the execution of his duties on behalf of us. These conflicts may not be

resolved in a manner favorable us. For example, he may be precluded by his ethical obligations

as an attorney or may otherwise be reluctant to take actions on behalf of us that are in its best

interests but are not in the best interests of DJS, his law firm, or its clients. Further, as a licensed

attorney, he may be obligated to take actions on behalf of DJS or its clients that are not in our

12http://ir.djspenterprises.com/releasedetail.cfm?ReleaseID=518764

13http://ir.djspenterprises.com/releasedetail.cfm?ReleaseID=521969



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best interests. Mr. Stern has other direct and indirect relationships with us that could cause

similar conflicts including as our largest creditor.14

80. Meanwhile, publicly DJSP BVI announced that it has instituted further staff reductions asa result of announcements by Fannie Mae and Freddie Mac that they had terminated their

relationships with DJSP BVIs primary client, DJSPA. DJSP BVI has reduced its staffing levels

by an additional 416 employees bringing the total number of layoffs to more than 700 since the

reduction in staff was disclosed in a 6-K filing with the Securities and Exchange Commission.

DJSP BVI Form 6-K15, Exhibit No. 99.116 at (November 4, 2010).These actions demonstrate the

close relationship and enterprise between DJSP BVI and DJSPA, and the singular control Stern

exercised over both entities, as well as all other Defendants.

81. Defendants were aware of their obligations under the WARN Act, as they filed a WARNNotice with the State of Florida on or about November 9, 2010, but upon information and belief

said notice only applied to the period of November 4-12, 2010 but did not eliminate the

Defendants responsibility under the WARN Act.

82. The single WARN Notice filed by Defendant November 4, actually covered employeesof several different companies without distinction to corporate entity.

83. By failing to disclose their true intentions to make mass layoffs in advance, Defendantsdeceived their employees from looking for other work and/or making contingent plans while

Defendants continued to operate unabated.

84. As a result of Defendants discontinuance of service of employees without notice,hundreds of jobs in the South Florida Area have been lost.

85. Any suggestion that the employees are in lay-off status rather than termination does not14

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match the reality reflected by the companys press release that over 700 jobs have been

eliminated.

86. Moreover, DJSP BVI has not been honest and upfront with the remaining approximately200-300 employees to advised them that the company may not be able to continue in business as

has now been suggested by the default of their business loans, rent and temporary forbearance

agreement to attempt to salvage the remaining business operation, which may not survive.

87. The remaining employees still have not received appropriate notice under the statute thatmight permit them to look for other employment, retrain, or otherwise make arrangements to

avoid the possibility of unemployment without notice as required under the WARN Act.

CLASS ACTION ALLEGATIONS

88. Plaintiffs bring this action as a class action under Federal Rule of Civil Procedure 23(a),(b)(1) and (3) and the WARN Act (29 U.S.C. 2104(a)(5).

89. Plaintiffs bring this action for themselves and on behalf of a class of all similarly situatedemployees. The Class or Class Members Plaintiffs seek to certify are defined as:

All employees of the Defendants who were terminated from employment atDefendants Plantation site without being provided sixty (60) days written noticeof a mass layoff before the date of their termination. Excluded from the Class areany part time employees.

90. Excluded from the Class are Defendants and the legal representatives, heirs, successorsand assigns of any excluded person and members of the federal judiciary.

91. Upon information and belief, Plaintiffs estimate that the class comprises at least sevenhundred (700) Class Members and the Class is so numerous that joinder of all Class Members is

impracticable. The members of the class can be identified and located using information

contained in the Defendants human resources records.

16http://www.sec.gov/- Archives/edgar/data/1436612/000114420410057829/v201096_ex99-1.htm



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92. There are common questions of law and/or fact common to the class that predominateover any questions affecting only individual Class Members. The questions of law and fact

common to the class arising from Defendants actions include, but are not limited to the

following:

a. Whether the provisions of the WARN Act apply;b. Whether Plaintiffs and Class Members are affected employees as used in the

Act;

c. Whether Defendants employee terminations beginning September 23, 2010constitute a termination and/or mass layoff under the WARN Act;

d. Whether Defendants failed to provide the notices required by the WARN Act (29U.S.C. 2102(b));

e. Whether Defendants can avail themselves of any of the provisions of the WARNAct which permit lesser periods of notice;

f. The appropriate formulae to measure damages under the WARN Act (29 U.S.C. 2104(a)(2)); and

g. The appropriate definitions and formulae to measure payments to potentiallyoffset damages under the WARN Act (29 U.S.C. 2104(a)(2)).

93. Plaintiffs claims are typical of those of the Class Members. Plaintiffs and the ClassMembers were subjected to the same kind of unlawful conduct and the claims of Plaintiffs and

the Class Members are base on the same legal theories and questions of law and fact pursuant to

the WARN Act.

94. Plaintiffs will fairly and adequately protect the interests of the class the Plaintiffsrepresent. Plaintiffs interests do not conflict with the interests of the class, and the Plaintiffs



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intend on prosecuting this action vigorously.

95. Plaintiffs have retained experienced counsel qualified in class litigation and counsel arecompetent to assert the interests of the class.

96. The unlawful acts of Defendants, as alleged herein, constitute a course of conductcommon to Plaintiffs and each Class Member. Prosecution of separate actions by individual

Class Members would create a risk of inconsistent of varying adjudications which would

establish incompatible standards of conduct for Defendants and/or substantially impair or impede

the ability of the individual Class Members to protect their interests.

97.

Upon information and belief, Defendants, and each of them, have acted or refused to act

on grounds generally applicable to the Class.

98. Questions of law and/or common to the Class Members, including the issues identifiedabove, predominate over questions affecting only individual Class Members, and a class action is

superior to other available methods for fair and efficient adjudication of the controversy. Class

action treatment will allow a large number of similarly situated individuals to simultaneously

pursue their common claims in a single forum in an efficient manner, without unnecessary

duplication of effort and expense that would be required if numerous individual actions were

pursued. However, the affected employees must opt-in to this litigation so that his or her right to

damages can be determined and quantum of damages can be calculated by the court.

COUNT I

Alter Ego Piercing the Corporate Veil of DJSP BVI

99. The Plaintiffs, on behalf of themselves and other persons similarly situated, repeat and re-allege the allegations of the preceding paragraphs as if fully restated herein.

100. As alleged above, at all relevant times herein, DJSP BVI, by its complete exercise of



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dominion and control, is the alter ego of DJSP FL, DAL Group and its operating subsidiaries

DJS Processing, Professional Title, and Default Servicing, which constitute a single employer.

Indeed, as set forth above, there is a high interdependency of operations; there is commonality

between management, directors and officers; there is a consolidation of financial, strategic, legal

and human resources operations; and, at all relevant times, DJSP BVI has used and continued to

use DAL Group and its operating subsidiaries and the assets of these entities for its own

purposes.

101. Moreover, DJSP BVIs control was so extensive and complete that it, along with Stern,made the decision to terminate the employees of DAL Group and its operating subsidiaries by

mass layoffs, without notice.

102. DJSP BVIs and Sterns joint decision to terminate employees by mass layoffs withoutnotice violated the WARN Act and proximately caused Plaintiffs and members of the proposed

class to suffer damages including, among other damages, the loss of wages during the statutory

notice period under the WARN Act.

COUNT II

Alter Ego Stern

103. The Plaintiffs, on behalf of themselves and other persons similarly situated, repeat and re-allege the allegations in paragraphs one through eighty-five (1-85) as if fully restated herein.

104. As alleged above, at all relevant times herein Stern, by his complete exercise of dominionand control over said entities, is the alter ego of DJSPA, DJSP BVI, DJSP FL, DAL Group and

its operating subsidiaries DJS Processing, Professional Title, and Default Servicing. The

foregoing entities combine to constitute a single employer, all under the direction and control of

Stern personally. Indeed, as set forth above, there is a high interdependency of operations; there



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is commonality between management, directors and officers; there is a consolidation of financial,

strategic, legal and human resources operations; and, at all relevant times, Stern has used and

continued to use DJSPA, DJSP BVI, DJSP FL, DAL Group and its operating subsidiaries and the

assets of these entities for his own purposes.

105. Moreover, Sterns control was so extensive and complete that he, along with DJSP BVI,made the decision to terminate the employees of DJSPA, DJSP BVI, DAL Group and its

operating subsidiaries by mass layoffs without notice.

106. Sterns decision to terminate employees by mass layoffs without notice violated theWARN Act and proximately caused Plaintiffs and members of the proposed class to suffer

damages including, among other damages, the loss of wages during the statutory notice period

under the WARN Act.

107. DJSP FL was administratively dissolved at the time that the subject mass layoffsoccurred.

COUNT III

Violations of the United States Worker Adjustment and Retraining Notification Act

108. The Plaintiffs, on behalf of themselves and other persons similarly situated, repeat and re-allege the allegations of the preceding paragraphs as if fully restated herein.

109. At all times material herein, Plaintiffs, and similarly situated persons, have been entitledto the rights, protections and benefits provided under the WARN Act, 29 U.S.C. 2101 et seq.

110. The WARN Act regulates the amount of notice an employer must provide to employeeswho will be terminated due to mass layoffs, as well as the back pay and other associated benefits

an affected employee is due based on a violation of the required notice period.

111. Defendants were, and are, subject to the notice and back pay requirements of the WARN



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Act because Defendants, individually and collectively are a business enterprise that employs 100

or more employees, excluding part-time employees, as defined in the Act. 29 U.S.C.

2101(1)(A).

112. Defendants willfully violated the WARN Act by failing to provide the required notice.113. Section 2103 of the WARN Act exempts certain employers from the notice requirementsof the Act. 29 U.S.C. 2103(1)-(2). None of the WARN Act exemptions apply to Defendants

failure to provide required notice to Plaintiffs and Class Members. Accordingly, Plaintiffs and

Class Members must receive the notice and back pay required by the WARN Act (29 U.S.C.

2101(1)(A)).

114. Plaintiffs and Class Members have been damaged by Defendants conduct constitutingviolations of the WARN Act and are entitled to damages for their back pay and associated

benefits for each day of the violation. Defendants have not acted in good faith nor with

reasonable grounds to believe their acts and omissions were not a violation of the WARN Act.

115. Defendants did not announce their operational restructuring until after it began masslayoffs of its employees.

116. Defendants, it subsidiaries and agents made false representations and statements evenbefore sending out its letters of terminations or the WARN Notice finally filed with the State of

Florida on or about November 9, 2010.

117. DJSP BVI is the parent or controlling entity liable under the Act to the affectedemployees.

118. Between September 23, 2010 and November 18, 2010, Stern, purportedly acting onbehalf of DJSP BVI and its operating subsidiaries, notified hundreds of Defendants employees

by written letter and email that, effective immediately, they were terminated. At all times that



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Stern performed these acts, DJSP FL was administratively dissolved pursuant to Florida Statute

607.1421.

119. Notice was required to be received, not merely given, sixty (60) calendar days beforeseparation, and although most employees received their notice by electronic mail

communication, they were only given a matter of hours or less to gather their personal

belongings, which is a further violation of the Act.

120. Defendants notice that was finally provided to the State and the termination lettersprovided to the affected employees disclose the reason for termination was decline in business

which had occurred over the past six month; and therefore Defendants do not meet the

exemption requirements under the Act of a faltering business or unforeseeable changes in

business circumstances

121. Defendants knew of should have known that their own conduct was the cause of theactual change in business circumstance, as evidenced by their public statements through their

SEC filings, and were thus foreseeable.

122. Defendants cannot allege in good faith that the terminations were unforeseeable due to business circumstances as the circumstances were a) not unexpected conditions outside the

employers control and therefore, b) not sudden or dramatic but in part because of their very own

actions which they knew of long before the terminations

123. Defendants had plenty of advance opportunity to provide notice to Plaintiffs andMembers of the Class of the potential for mass layoffs and/or terminations, and instead willfully

chose to remain silent in violation of the WARN Act.

124. On September 8, 2010 in a recorded statement to the Public Investors of DJSP BVI,discussing the second quarter results, Defendant Stern advised that staff levels could not stay at



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their current levels, but no such information was ever published to the Employees nor filed with

the State, nor local authority as required by the Act.

125. Thus, the Defendants are employers as used in WARN.126. Plaintiffs are affected employees as defined under the WARN Act. 29 U.S.C. 2101(a)(5).

127. None of the affected employees were provided advance written notice or in thealternative appropriate pay and benefits due under the WARN Act.

128. Some of the affected employees were constructively discharged by Defendants.129.

Defendants were aware of their liability under the WARN Act notice and payment

requirements and wrongfully and knowingly failed to provide notice as required for their own

economic gain.

130. Business circumstances do not absolve the Defendants of liability under the Act.131. Each Plaintiff is entitled to the amount of back pay and benefits for the period of theviolation of the Act by Defendants, jointly and severally.

132. Plaintiffs have been required to retain counsel in this matter to protect Plaintiffs rightsand have incurred attorneys fees and costs in this matter.

PRAYER FOR RELIEF

WHEREFORE, Plaintiffs demand judgment against Defendants and an Order providing

for:

1. Certification of the Class pursuant to Rule 23 of the Federal Rule of Civil Procedure;certifying Plaintiffs as representatives of the Class and designating their counsel of record as

counsel for the Class;

2. A declaration that Defendants are alter egos of DJSP BVI and Stern respectively and



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therefore subject to liabilities for the WARN Act claims from employees or former employees of

Defendants;

3. Finding that each of the Defendants has violated the WARN Act and therefore holdingDefendants jointly and severally liable to Plaintiffs and the Class in an amount to be determined;

4. Compensatory damages in an amount equal to at least the amounts provided by theWARN Act (29 U.S.C. 2104(a));

5. Reasonable attorney fees and costs;6. Pre-judgment interest as may be determined by statute and rule; and7.

Such other and further relief as the Court may deem necessary or appropriate

DEMAND FOR JURY TRIAL

Plaintiffs, on behalf of themselves and all others similarly situated, hereby demand a trial

by jury of all issues so triable.

Dated: January 10, 2011

__/s/ Seth Lehrman________Gary Farmer FLBN 914444Seth Lehrman FLBN 132896Steven Jaffe FLBN 390770Mark Fistos FLBN 909191

FARMER, JAFFE, WEISSING,EDWARDS, FISTOS & LEHRMAN, P.L.425 North Andrews Ave., Suite 2Fort Lauderdale, FL 33301Tel.: 954-524-2820Fax: [email protected]

Chandra Doucette FLBN 412716Attorney at Law621 NW 53rd Street, Suite 240Boca Raton, FL 33487(561)995-1490 office



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(561)995-1499 [email protected]

Dawn M. Rapoport FLBN 13176Rapoport Law Group

1314 East Las Olas Blvd. # 121Fort Lauderdale, FL 33301(954)712-7457 office(954)337-3759 [email protected]

Attorneys for Plaintiffs


Documents

WARN Act Suit v Law Office of David Stern