Federal Judge OKs RICO Conspiracy Class Action Against Law Firm in ‘Sewer Service’ Case
Posted Jan 4, 2011 2:44 PM CST
By Martha Neil
A federal judge in New York has given a green light to a racketeering conspiracy class action filed against a law firm.
The suit contends that the firm and a client consumer debt purchaser, along with a process serving company, schemed to obtain thousands of default judgments in state court there through "sewer service" and false affidavits provided by a law firm employee.
Although the law firm, Mel Harris & Associates, said it is protected by a "litigation exception" from having statements made in court filings used as the basis of suit, Judge Denny Chin nixed the argument, according to the Forbes blog Full Disclosure.
Chin is a judge on the New York City-based 2nd U.S. Circuit Court of Appeals who was sitting by designation in the Southern District of New York case when he ruled on the motion to dismiss.
As many as 100,000 individuals could be entitled to damages for default judgments allegedly obtained without serving the defendants with court papers, the article says. So-called sewer service refers to a practice of purporting to serve defendants with process but instead tossing the court paperwork into the sewer in front of their homes.
Armed with the default judgments, the defendants were able to obtain wage garnishments and levies on bank accounts, which also gave them leverage to pressure consumers into settlements, Chin wote in his Dec. 29 opinion on the defendants' motion to dismiss.
A New York Law Journal article reprinted in New York Lawyer (reg. req.) provides further details, noting that while Chin did dismiss some claims against individual defendants and determine that a single conspiracy, rather than multiple conspiracies, was alleged as defined in the federal Racketeer Influenced and Corrupt Organizations Act, he allowed pendent claims to proceed against the law firm under state law.
Among them, a state statute permits a lawyer to be held liable for damages if he or she engages in "any deceit, or collusion, or consents to any deceit or collusion, with intent to deceive the court or any party."
As Chin explains in his opinion, one law firm employee allegedly signed some 40,000 affidavits saying that he had personal knowledge of the accuracy of the debts at issue in the collection actions, even though the client debt purchaser reportedly obtained many of them, for pennies on the dollar, with minimal supporting paperwork.
Thus, the judge writes, "Assuming 260 business days a year," the employee "had to have personally (and purportedly knowledgeably) issued an average of 20 affidavits of merit per hour, i.e., one every three minutes, over a continuous eight-hour day."
The articles don't include any response from the defendants, and a lawyer with Kaufman Dolowich Voluck & Gonzo, who is representing Mel Harris & Associates,declined to comment when contacted by the ABA Journal.
ABA Journal: "Payback: Lawyers on Both Sides of Collection are Feeling Debt’s Sting"
ABAJournal.com: "New York AG Sues 35 Law Firms, Seeks to Void 100,000 Default Judgments"
Updated at 2:59 p.m. to reflect no comment from Kaufman Dolowich firm.