A South Jersey foreclosure firm in the process of closing will not have to go into receivership because of an alleged six-figure debt to a legal advertising firm, a federal judge has ruled.
U.S. District Judge Gene E.K. Pratter in the Eastern District of Pennsylvania on March 22 denied Mansfield Advertising’s request for the appointment of a receiver for Udren Law Offices.
“There is no evidence of fraud, no evidence of irreparable injury, and nothing to suggest that the benefits of appointing a receiver outweigh the costs,” Pratter concluded in the opinion. ”The court cannot appoint a receiver in any case simply because a plaintiff likely has a meritorious monetary claim against an insolvent defendant.”
Mansfield Advertising of Philadelphia sued Cherry Hill-based Udren Law Offices in August, claiming the law firm failed to pay more than $138,000 in legal advertising fees. Udren Law represented lenders and mortgage servicers on real estate matters in Florida, New Jersey and Pennsylvania.
Udren has filed counterclaims asserting that Mansfield overcharged the law firm for its advertising services, estimating damages of over $367,000 from the alleged upcharges.
A trial is set to begin April 1.
Udren is in the process of winding down. According to Pratter’s opinion, it has sold its book of business to another firm.
Mansfield filed an emergency motion to appoint a receiver one week after filing its complaint. In arguing that motion, Pratter wrote, Mansfield “express[ed] concern that Udren’s lack of transparency about its finances may portend future fraudulent conduct.”
However, Pratter wrote in denying the initial receivership motion, Mansfield gave “no concrete evidence that Udren is spending recklessly or dissipating assets.”
After some discovery, Pratter’s opinion said, the motion still fails.
In the opinion, Pratter said the case will likely turn on whether Udren Law can prove its defense—that Mansfield charged too much for its services. That factor weighed slightly in favor of supporting a receiver, the opinion said.
However, Pratter wrote, the evidence surrounding Udren’s wind-down and its payments to Mansfield “do not give rise to an inference of fraud,” and Mansfield has not suffered any irreparable injury.
Mansfield had argued that the firm made improper payments to its principal, Mark Udren, and to employees, the opinion said. But, Udren contended in its response, shutting the firm’s doors without a proper wind-down process would have caused “chaos” for hundreds of cases.
The court agreed with Udren on that point, noting that the payments to Mark Udren consisted of his distribution from the prior year and a repayment of his loans to the firm.
“The court is not persuaded that Mansfield has presented any evidence showing fraudulent behavior,” Pratter wrote. “To the contrary, the record shows that (1) in the period before Udren Law’s insolvency, between January and July 2018, Udren Law paid Mansfield upwards of $210,000 (presumably for services unrelated to the at-issue invoices)—which is directly opposite of the narrative that Udren Law was preparing to take the money and run.”
Jessica Labella Kitain and Peter Buckley of Fox Rothschild are representing Mansfield. They declined to comment on Pratter’s order.
Daniel S. Bernheim III and Katherine Ann Hopkins of Wilentz, Goldman & Spitzer are representing Udren Law Offices. Bernheim said he has disagreed with some of Pratter’s decisions in the case, but “she’s spot-on with this one.”