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Debtors File Class Action Alleging Attorneys Conspired to DefraudA federal class action alleges that lawyers in Texas and California conspired to defraud debtors by "masquerading as attorney referral services, unregulated debt negotiators and exempt attorneys." The plaintiffs allege that the defendants run a nationwide operation "promoted by television and internet advertising" to defraud individuals who are "drowning in credit card and unsecured debt."
Texas Lawyer2009-08-18 12:00:00 AM
In a federal class action suit filed on Aug. 6, the plaintiffs allege two Texas lawyers conspired with others to defraud debtors who sought help because of credit card and unsecured debt and to "evade" Texas laws that regulate consumer debt management services, attorney-client solicitation and lawyer advertising.
"By masquerading as attorney referral services, unregulated debt negotiators and exempt attorneys, the defendants collaborate to evade strict state consumer protection regulations enacted to protect unknowing debtors," the plaintiffs allege in James R. Wall, et al. v. Debt Relief Group LLC, et al., filed in the U.S. District Court for the Western District of Texas.
Plaintiffs' attorney Charles E. Ames of Carrollton, Texas, says the plaintiffs did not get the debt relief they expected.
"They did not get debt relief, and they've been harmed because these people did not follow the requirements of the Texas statute" that regulates the debt-relief business, he says.
The two Texas lawyers named as defendants in the plaintiffs' original class action complaint, Robert Ancel Palmer III and Scott R. Seideman, each did not return two telephone messages left at their offices.
The defendants also include Debt Relief Group LLC (DRG) of Irvine, Calif.; The Palmer Firm of Dallas and Irvine, Calif., and its registered agent in California, attorney Gregory M. Fitzgerald; The Seideman Law Firm of Dallas and Irvine, Calif.; Epic Financial Management of Irvine, Calif., and its registered agent Keith J. Waring; and Joan Kearns of Irving, Texas.
Of those defendants, only Kearns could be reached for comment before presstime on Thursday. Fitzgerald did not return a telephone message, and a call to a telephone number listed online for Epic Financial Management was not answered. Waring's home telephone was unlisted in an online telephone directory, and Debt Relief Group did not have a telephone listing.
Kearns says she does not know the other defendants.
"All I have is a Web domain name, and I just refer people who need help to different places [for] debt settlement," Kearns says. "I'm not affiliated with a company called Debt Relief Group. ... I'm just a consumer advocate." Kearns says she plans to change the domain names of her Web sites.
The plaintiffs, three residents of San Antonio, bring a participatory liability-conspiracy cause of action against all the defendants and also bring causes of action under the Debt Management Services Act, which is Chapter 394 Subchapter C of the Texas Finance Code. The plaintiffs allege the defendants failed to register with the Texas Office of the Consumer Credit Commissioner.
The plaintiffs allege in the complaint that the defendants run a nationwide operation "promoted by television and internet advertising to defraud debtors that are drowning in credit card and unsecured debt." They allege that each defendant has violated provisions of the Debt Management Services Act and that the plaintiffs' contracts with DRG and The Palmer Firm are void because they violate §394.215(a) of the Texas Finance Code.
Plaintiffs James R. Wall, Vickie L. Wall and James W. Bagby allege that around 1995 Seideman and his firm "conceived, developed and copyrighted" a group of debt management forms used by other defendants to defraud debtor-clients. They allege the DRG attorney-client agreement is one of the forms copyrighted by Seideman, and it was created to give potential debtor-clients "the false impression of services to be provided and the aura of legitimacy." They allege that Epic Financial Management, operating closely with DRG, and Waring "functioned as the solicitation and intake processor" for the debtors who were referred to The Palmer Firm.
The plaintiffs allege they responded to advertisements created by Kearns that were online at www.debtreliefgroup.org and www.debtreliefgroup.net and they entered into agreements with DRG and The Palmer Firm. They allege the defendants never informed them the agreements violated the Texas Finance Code.
"DRG served as the 'front' to provide the debtor client referral source to the Palmer Firm for debt management services disguised as legitimate legal services," the plaintiffs allege in the complaint.
The plaintiffs allege that, according to State Bar of Texas records, neither The Palmer Firm nor The Seideman Law Firm applied for approval to advertise through www.debtreliefgroup.net, www.debtreliefgroup.net or www.debtreliefgroup.info.
As of Texas Lawyer's presstime, a debt-relief testimonial from Kearns was online at www.debtreliefgroup.org, but clicking on the other two sites' addresses takes the user to a Web site sponsored by GoDaddy.com, which is a domain name registrar.
The plaintiffs seek certification under Federal Rule of Civil Procedure 23 for a class that is comprised of all U.S. consumers who are or were debtors who executed a client agreement with DRG and a legal services agreement with The Palmer Firm for the purpose of negotiations to settle debt.
Ames says he can't estimate the number of individuals in the class, but he says "there are a lot."
The plaintiffs seek unspecified actual damages, treble damages, statutory damages and penalties, attorney fees, and prejudgment and postjudgment interest.
The suit is assigned to U.S. District Judge Orlando L. Garcia in San Antonio.