Consumer Law

Lawyers Get Paid, 1 Client Gets $5K, 125K Others Zip If Judge OKs Pact in Suit Against Law Firm

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When thousands of clients retained a Maryland-based law firm to help them reduce their consumer debt, they weren’t made aware of a few key facts, a federal class action lawsuit contends.

Among them: That the money they paid would go first to cover attorney fees to Persels & Associates. Hence, clients might wind up with little or nothing to give to their creditors, who would only be paid after attorney fees were deducted, alleges the suit. The case is being pursued in U.S. District Court in Tampa, Fla.

Now, in a controversial proposed settlement, a federal judge there is being asked to OK a pact that would provide up to $300,000 to the lawyers who brought the class action, $5,000 to the lead plaintiff and zip, zero, zilch to the 125,000 or so other plaintiffs in the class action. They may each have lost hundreds or even thousands of dollars in attorney fees to Persels & Associates, the Tampa Bay Times reports.

The firm, which is struggling with debt and says it has no money to pay a judgment, would however agree, as far as future cases are concerned, to collect no attorney fees until after it negotiates a settlement rather than getting its money upfront, the article says. It also would agree to provide clients at the outset with an estimate of fees and the amount to be paid to creditors.

Attorneys general from five states, including Florida, and a consumer advocacy group are objecting to the proposed settlement, saying that it eliminates claims with potential value for Persels clients while giving them nothing in return. Critics also argue that the law firm’s concessions concerning its handling of future cases merely require it to follow the law and legal ethics rules, as it was supposed to do from the outset.

Some also point out that lawyers connected with the firm might have personal assets that could be used for a settlement and wonder whether an investigation might reveal any law firm assets that haven’t been disclosed, the article reports.

But, said one plaintiffs attorney at a recent hearing attended by a dozen lawyers, the proposed settlement would at least resolve one significant issue:

“We got them to stop what they were doing,” said James Felman of Tampa. “We fixed the problem nobody else stepped forward to fix. … What I haven’t heard is any better idea.”

U.S. District Court Judge Thomas Wilson noted that damages in the case could total tens of millions—assuming, of course, that there was money at Persels & Associates to pay the plaintiffs. “Is there any reason to think they have it?” he asked.

Counsel for the defendant law firm and the lead plaintiff either could not be reached for comment by the newspaper or declined to comment.

Related coverage:

Get Out of Debt Guy: “Persels & Associates Named in Georgia Class Action With Host of Major Players in Debt Relief”

Get Out of Debt Guy: “Persels & Associates and Care One Settle Nationwide Class Action. Lawyers Win.”

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