Proposed Settlement in Nationwide Class Action Against Debt-Relief Law Firms Is Insufficient, Public Citizen Tells Court
Dec. 16, 2011
Proposed Settlement in Nationwide Class Action Against Debt-Relief Law Firms Is Insufficient, Public Citizen Tells Court
Settlement Requires Thousands of Class Members to Release Their Claims for Nothing
WASHINGTON, D.C. –A proposed class-action settlement between a debt-adjustment law firm and its clients should be rejected, Public Citizen said in a brief filed yesterday in the U.S. District Court for the Middle District of Florida in Tampa on behalf of an objecting class member.
A class of more than 120,000 people alleges that the law firm and an affiliated credit counseling company offered to help consumers settle their debts with their creditors but instead took large fees from the consumers. Additionally, the law firms are alleged to have misrepresented their debt-settlement services, failed to assist their clients and discouraged their clients from responding to creditors even when the consumers were sued.
Often in settlements in cases against debt-adjustment firms, the plaintiffs recover most or all of the money they paid to the debt adjustor. But under the proposed settlement, wronged members of the class would give up their right to take legal action against the defendants but get nothing in return. The defendant law firms and affiliated credit counseling company would make a payment to the American Bar Foundation ($100,000), to the settling attorneys (up to $300,000) and to the named plaintiff in the class action ($5,000), and would be responsible for the costs of administering the settlement. The more than 120,000 other consumers in the class would be forced to surrender any claims that they have against the defendants but not get a penny.
“The release under the proposed settlement is of staggering breadth,” said Michael Kirkpatrick, the Public Citizen attorney representing a member of the class who objects to the proposed settlement. “The release sweeps far beyond the conduct at issue in this lawsuit to grant defendants blanket immunity for any type of claim. The settlement is unfair because in exchange for giving up their legal rights, class members get nothing in return. A settlement that provides no value to the class should be rejected.”
“Class counsel and the representative plaintiff should not be rewarded for selling out the class,” said Scott Michelman, another Public Citizen attorney working on the case.
In addition to the problem of class members getting nothing in this settlement, Public Citizen argues that the proposed payment to the American Bar Foundation is improper because the foundation has no connection to the interests of the class and so would not benefit class members even indirectly.
The defendant law firm involved in the settlement is Persels & Associates, LLC; also named as defendants are its associated and predecessor entities Ruther & Associates, LLC and Legal Advice Line, LCC, along with Persels & Associates attorneys Jimmy M. Persels, Neil Ruther, Robyn R. Freedman. The other defendant is an affiliated debt management company, CareOne Services, Inc.
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Public Citizen is a national, nonprofit consumer advocacy organization based in Washington, D.C. For more information, please visit www.citizen.org.