Consumer Law

Suit says debt-collection law firm submitted false affidavits, seeks to void thousands of judgments

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Updated: A debt-collection law firm has been sued by a consumer advocacy group over its alleged activities in Texas. The group contends that Hosto & Buchan participated in a massive fraud that involved submitting false affidavits on behalf of its client, Midland Funding, in court cases throughout the state.

The underlying litigation at issue in the case, which was filed last week by the Texas Association of Fraudulent Judgment Victims in Dallas County, was brought against consumers in 2007 and 2008. The Hosto firm filed false affidavits in order to obtain court judgments against thousands of consumers, the advocacy group alleges. It seeks the appointment of a chancery-court master, the reversal of thousands of judgments and sanctions, reports Courthouse News.

Two individuals are named as claimed victims, but the suit seeks class-action status to represent many more.

The Courthouse News article didn’t include any comment from the firm. However, attorney Mark Stout, who represents the Hosto firm, told the ABA Journal that it has done nothing wrong.

“The claims asserted are without merit and the firm intends to vigorously defend the lawsuit while also seeking sanctions against Mr. Teter for bringing frivolous claims,” he said in an email, referring to William Ross Teter, the lawyer who filed the suit for the advocacy group.

“Further, on at least four different occasions in the last thirty days, Mr. Teter and/or his clients have had lawsuits dismissed and/or been sanctioned under Chapter 27 of the Texas Civil Practice and Remedies Code by district courts for alleging similar claims,” the statement continues.

Examples provided by Stout to the ABA Journal include: March 2 dismissals of Dallas County claims by three individual plaintiffs against Midland Funding, which award unspecified attorney’s fees to the defendant as a sanction; a March 23 order in another Dallas County case, which awards $1,500 in attorney’s fees to Midland Funding; and a March 9 order by a federal court in Dallas. It dismisses a case brought by a fifth plaintiff against Midwest Funding and indicates that attorney’s fees will be awarded, because the federal court does not have the power to reverse state-court judgments.

None of these orders specifically names Teter.

Contacted by the ABA Journal on Wednesday, Teter said that the Hosto law firm’s alleged participation in submitting false affidavits may well have been unintentional, based on incorrect information provided by the law firm’s client. However, someone was responsible for the “fraud on a massive scale” that has been recognized by the attorney general of Texas and several other states, Teter said, and his suit is intended to ferret out who that someone is. His suit had to start with the law firm, as the final link in the debt-litigation chain, he said, but is intended to find out, through discovery, exactly what happened.

“They’re just talking … what else can they say?” he said of the firm’s contentions about him, adding: “The attorney general says that somebody committed fraud. … If I did something wrong, than so did the Texas attorney general who is now the governor.”

Teter said the individual cases against Midland were dismissed so that the class action could be pursued. Because individual plaintiffs lack the resources to fund such litigation, Teter said, he is asking the court to pursue the issue of the affidavits on its own behalf, in order to address an alleged fraud on the court.

See also: “Debt Collection Law Firm Abruptly Closes; Thousands of Cases Dismissed”

Credit Infocenter: “I Won Against Midland Funding!”

Washington Post (reg. req.): “Taking on the country’s biggest debt buyer”

Updated on March 26 to add additional comment from Hosto & Buchan and William Ross Teter.

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