Struggling mortgage banker PHH Corp. scored a landmark court victory last week that could have broad implications beyond the company.
The U.S. Court of Appeals for the D.C. Circuit threw out a $109 million penalty assessed in 2014 by the Consumer Financial Protection Bureau against the New Jersey-based company, which has a major mortgage operations center in Jacksonville.
It wasn’t just a ruling on the merits of the fine. The court ruled the structure of the bureau gives its director too much power and is in violation of the U.S. Constitution, so the director should not have the authority to levy the fine.
The ruling said other independent federal agencies are governed by multi-member commissions and not by a single person. To lessen the power of the individual director, the court invalidated a legislative clause that only allows the president to remove the CFPB director “for cause.”
It said the president will have more authority to supervise the director and remove him or her “at will.”
That ruling could impact a range of other actions by the bureau, such as the fines imposed last month against Wells Fargo Bank for opening unauthorized accounts. The $185 million in penalties includes $100 million to the bureau’s Civil Penalty Fund.
The bureau has not said if it will appeal the appellate court decision.
From PHH’s perspective, the court victory won’t alter its finances. Although PHH has been losing money, the company said in a Securities and Exchange Commission filing the removal of the $109 million fine will not have a material impact.
However, the ruling does remove the stigma that PHH was acting improperly.
The consumer financial watchdog agency fined PHH for violating the Real Estate Settlement Procedures Act, saying it was getting kickbacks by referring customers to certain mortgage insurers.
Besides arguing in court that the bureau’s authority was unconstitutional, the company also said in a news release Tuesday it complied with the law “in all respects.”
“We are extremely gratified that the D.C. Circuit Court of Appeals overturned the Director’s decision related to our former mortgage reinsurance activities. We are hopeful that the Court’s opinion will provide greater certainty to the entire mortgage industry regarding the industry’s reliance on long-standing regulation as to how to conduct business consistent with RESPA,” it said.
Area companies report little storm impact
Two Jacksonville-based public companies weighed in on their post-Matthew status last Monday and reported minimal impact from the hurricane.
Shopping center developer Regency Centers Corp. said its properties along the East Coast appeared to have only minor damage.
“Beyond power outages at a limited number of properties, the scope of damage has been limited to tree and debris removal and minor roof leaks, and there is no major structural damage to report,” the company said in a news release.
Regency operates 311 retail properties, mainly grocery-anchored shopping centers.
Rayonier Advanced Materials Inc. said its Fernandina Beach performance fibers plant was already shut down for scheduled maintenance and was evacuated before the storm. Its Jesup, Ga., plant continued to operate safely during the storm, it said.
Rayonier AM said the storm did not affect its financial outlook.
Deutsche Bank freezes hiring
As Deutsche Bank continues to wrestle with regulatory and financial issues, the company last week instituted a global hiring freeze, Bloomberg News reported.
Citing unnamed sources, Bloomberg said divisional chief operating officers were told Wednesday to put an immediate hold on hiring.
Deutsche Bank has about 1,800 employees in Jacksonville and during a visit to celebrate the grand opening of its new Southside offices two months ago, CEO John Cryan said he could see adding 1,000 more positions in Jacksonville.
The Germany-based bank employs about 100,000 people worldwide but has been restructuring operations and looking to cut costs.
The company’s financial issues include a potential $14 billion fine by the U.S. Department of Justice to settle charges of wrongdoing in the issuance of mortgage-backed securities from 2005-07. However, the bank said it expects to negotiate a settlement at a much lower figure.
The fine sparked rumors that Deutsche Bank may need a bailout from the German government to replenish its capital, but both the bank and government officials have denied it.
Advanced Disposal rated ‘neutral’
Just days after completing its initial public offering, Advanced Disposal Services Inc. got its first analyst coverage.
Wedbush Securities analyst Al Kaschalk rated the waste management services company at “neutral” last Monday, after Advanced Disposal priced its IPO of 19.25 million shares at $18 each on Oct. 5.
“With a geographic presence in 16 states across the Midwest, South and East regions of the U.S., Advanced Disposal is expected to benefit from a return to more normalized inflation environment, increase in construction volumes from housing recovery driving C&D volumes (starts) and favorable demographic and macroeconomic trends,” Kaschalk said in his report.
Advanced Disposal’s stock has traded above its initial price since the IPO, staying mainly close to the $20 level. Kaschalk set a 12-month price target of $21 for the stock.
“With catalysts (inflation, debt repayment and limited inorganic growth) well known, we see limited upside surprise to EBITDA margin and view the shares as fully valued and look for a better entry point,” he said.
Advanced Disposal, headquartered in Nocatee in St. Johns County, has been losing money because of high interest costs, and plans to use proceeds from the IPO to pay down debt.
Kaschalk forecasts the company to end 2016 with an adjusted net loss of 29 cents a share but to have an adjusted profit of 9 cents a share next year.
Fortress Investment considers FEC sale
Ever since private equity firm Fortress Investment Group LLC bought out the Florida East Coast Railway in 2007, we’ve been waiting for the historic railroad company to go public again with an IPO, just as Advanced Disposal’s private equity owners did.
Instead, Fortress is considering an outright sale of the 351-mile railway that runs from Jacksonville to Miami, according to a Bloomberg story last week.
Again citing unnamed sources, Bloomberg said Fortress is working with investment bankers to consider its options for Jacksonville-based Florida East Coast, which could be sold to another private equity firm or to a railroad company.
Ruby Tuesday remodels target Jacksonville
Although Ruby Tuesday Inc. has been closing restaurants nationwide, it is targeting Jacksonville for a key marketing initiative.
The restaurant chain expects to remodel 11 to 13 sites in the Jacksonville and Charlotte markets by the end of this year as part of its “Fresh Start” initiative to revamp its menu.
“We continue to believe a fresh look is necessary to keep our brand competitive in the market today,” interim CEO Lane Cardwell said during Ruby Tuesday’s quarterly conference call two weeks ago.
“By transforming most of the Ruby Tuesday restaurants in two markets, we will have a greater impact on our brand image. We plan to support these grand re-openings with significant social media coverage,” he said.
Ruby Tuesday operates 615 restaurants in 42 states and 14 foreign countries, after closing 95 restaurants in August.
According to its website, it has six remaining restaurants in the Jacksonville metropolitan area. As the Daily Record reported, the company has filed permit applications to remodel its three Duval County locations.
After completing the Jacksonville and Charlotte remodels, the company expects to do six to eight more remodels in the first half of 2017, Cardwell said.
Patriot Transportation gains from state deal
Patriot Transportation Holding Inc. last week reported a deal with the state of Florida that will result in a $1.28 million pre-tax gain for the Jacksonville-based trucking company.
Patriot said in an SEC filing it was paid $1.33 million by the state in return for a restrictive easement over its 25.2-acre terminal facility in Tampa.
The easement prohibits residential development on the site and also prohibits hotel development on a portion of the site.
The gain will have a significant impact on final results for Patriot’s fourth quarter, which ended Sept. 30. The company had pre-tax earnings of $5.9 million in the first nine months of the fiscal year.
ParkerVision sues Apple in Germany
ParkerVision Inc. has added a lawsuit against Apple Inc. in Germany to its wide range of patent infringement lawsuits.
Jacksonville-based ParkerVision alleges Apple has illegally used its technology, which the company says improves the performance of wireless devices, in products including the iPhone and iPad sold in Germany.
ParkerVision also has a case pending against Apple and two other major manufacturers before the International Trade Commission, which is scheduled for a hearing in March.
The latest lawsuit is the second filed by the company in Munich Regional Court.
ParkerVision also has a lawsuit pending against the German subsidiary of LG Electronics Inc., which is scheduled for a hearing next month in Munich.
Drone Aviation gets defense contract
Drone Aviation Holding Corp. last week announced it was awarded a $400,000 contract to supply its electric tethered drones to a U.S. Department of Defense customer.
That’s not a big amount, but Jacksonville-based Drone Aviation only had $927,464 in revenue for the first half of the year and it hopes this contract will lead to more business.
“We expect this initial award to generate valuable data and deployment experience, something we intend to leverage to convert our prospect pipeline into tethered drone sales to customers in the government and commercial markets,” CEO Jay Nussbaum said in a news release.