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A Philadelphia law firm has agreed to pay more than $450,000 to settle a federal class action suit brought by consumers who said the firm used unfair and deceptive practices in collecting debts — including sending out letters from non-lawyers that threaten the filing of a lawsuit. U.S. District Judge Eduardo C. Robreno has preliminarily approved the proposed settlement between Hayt Hayt & Landau and a class of about 52,000 plaintiffs. Robreno found that the settlement is “fair and reasonable” partly because the defendant firm’s insurance company, Lexington Insurance Co., was defending the case under a reservation of rights and would have refused to pay any larger sum awarded at trial. “Because the defendant’s insurance company has agreed to settle this case for $453,500, this settlement agreement provides the best opportunity to resolve these claims efficiently and provide legitimate recovery for all members of the class,” Robreno wrote in his 38-page opinion in Fry v. Hayt Hayt & Landau. And since the Fair Debt Collection Practices Act caps damages at $500,000 or 1 percent of a company’s net worth, the settlement is close to the maximum that the class could have won at trial, Robreno found. Each plaintiff will receive a pro-rata share of the settlement after $80,000 in notification costs and $150,000 in attorney’s fees are subtracted. But the exact amount of each plaintiff’s share will not be known until the deadline for filing claims, since awards will be paid only to those class members who do not opt out and who submit claim forms. The suit was filed by attorneys James A. Francis and Mark D. Mailman of Francis & Mailman and Michael D. Donovan and David A. Searles of Donovan Miller on behalf of anyone who received one of the allegedly deceptive form letters from the Hayt firm within the past six years. The suit accused the Hayt firm of violating the federal Fair Debt Collection Practices Act, as well as Pennsylvania’s Unfair Trade Practices and Consumer Protection Law and the deceptive acts and practices statutes of other states. The lead plaintiff in the suit, Robert F. Fry Jr. of Philadelphia, was the subject of collection efforts by Chrysler Financial, which, in turn, hired the Hayt firm to collect the $9,511 debt. Fry claims that the first letter he received from the Hayt firm used threatening language and a tone that “was obviously intended to evoke immediate payment from the consumer.” The suit alleged that the letter violated federal law because it failed to effectively advise Fry that he had the right to dispute the validity of the alleged debt. Although the letter contained the validation language mandated by the law, the suit said the language was “contradicted, overshadowed and obscured … so as to confuse or make uncertain what the least sophisticated consumer’s rights are under the law.” The first paragraph of the letter said that the firm had been instructed to secure payment of the outstanding balance and demanded in all capital letters that Fry make “payment in full at this time or contact our office immediately.” The suit alleges, “The least sophisticated consumer would never proceed to the validation language further down the page.” An unsophisticated consumer would also interpret the letter as being authorized or issued by an attorney, the suit said, when, in fact, the only individual’s name on the letter was “Shawn Fox,” identified as an “account representative.” The suit alleged that the Hayt firm “acted in a false, deceptive and unethical manner when it designed, compiled and furnished the letter knowing that it would be used to create the false belief in consumers that an attorney in a large, established law firm was personally participating in the collection of a debt when in fact no such attorney was so participating.” CLASS CERTIFIED Robreno found that the proposed class meets all of the requirements of Rule 23 of the Federal Rules of Civil Procedure because the same letter was sent to thousands of debtors. “The superiority of a class action, rather than several individual lawsuits, is apparent in this case, in which tens of thousands of individuals seek relief for violations of federal and state law regarding a nearly identical debt collection letter,” Robreno wrote. Robreno also ruled that the lead plaintiff, Robert F. Fry, is entitled to an award of up to $1,300 in damages and may receive an “incentive award” of $1,000 for his work in bringing the case on behalf of the class. To be eligible for the incentive award, Robreno ruled that Fry must submit an affidavit showing the time he spent on the case and the tasks he performed “with particularity,” along with a suggested hourly rate of compensation. Jonathan Justin Greystone, Samantha L. Miller and Anita J. Murray of Margolis Edelstein represented the Hayt firm.

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