Co. Says Judges Back Claims In 'Mafia-Style' RICO Suit

May 3, 2017

Law360, New York (May 2, 2017, 6:47 PM EDT) -- A collections company alleging a New Jersey law firm is running a “Mafia-style” operation of filing consumer protection class actions primarily to generate attorneys' fees has blasted the firm’s request for attorney sanctions, arguing that its racketeering theory is backed up by two federal judges.

In an opposition letter to the sanctions motion by Marcus & Zelman LLC, Collection Solutions said on Saturday that evidence that its civil Racketeer Influenced and Corrupt Organizations Act, fraud, negligence and legal malpractice claims aren’t frivolous can be found in the decisions of two cases in which judges had critical words for how lawyers pursued the matters.

Ruling on the now-dismissed putative class action Gallego v. Northland Group in New York federal court, U.S. District Judge Alvin K. Hellerstein in 2015 characterized the plaintiff’s litigation process as a “cottage industry among enterprising lawyers,” Collection Solutions attorney David M. Hoffman noted in his letter to the court. The plaintiffs in the Gallego case were represented by Jones Wolf & Kapasi LLC, which is a defendant in the instant suit.

In another dismissed putative class action,  Rubin v. J. Crew Group in New Jersey federal court, U.S. District Judge Freda L. Wolfson used the phrase “litigation-seeking plaintiffs and/or their counsel ... troll(ing) the internet. ...” Hoffman said in the letter.

Collection Solutions’ RICO theory — that Marcus & Zelman and two other firms filed “spurious” Fair Debt Collections Practices Act class actions that lacked actual damages, but produced up to six-figure attorneys’ fees — was underscored by “two eminent jurists,” said Hoffman.

In moving for sanctions in April, Marcus & Zelman had argued that the litigation aims solely to tarnish its reputation and to discourage debtors from fighting predatory collection activities. The Ocean Township-based law firm had invoked Rule 11 of the Federal Rules of Civil Procedure, which sets forth that an attorney may be sanctioned if he or she has failed to make a reasonable inquiry into the legality of a pleading.

But “Rule 11 violations and frivolity, let alone bad faith, are stretches beyond credulity,” Hoffman said Saturday.

An attorney for Marcus & Zelman, Meredith Stoma Kaplan, said she wasn't impressed with the two-page reply letter and noted her clients weren't involved in the Rubin case.

Hackensack, New Jersey-based Collection Solutions principal Jeffrey A. Winters and company counsel Charles I. Turner filed their lawsuit in December, alleging that since 2013, the firms have sought out professional plaintiffs to pose as unsophisticated consumers being taken advantage of by unfair debt collection companies. The defendant lawyers’ alleged strategy was to obtain early settlements of less than $100,000 from “relatively deep-pocket defendants,” according to the complaint.

Marcus & Zelman was named as a defendant, along with Jones Wolf & Kapasi LLC in New York City and Fairfield, New Jersey, and Laura S. Mann, who has offices in Riverdale and Milford, New Jersey

Collection Solutions is represented by David M. Hoffman.

Marcus & Zelman is represented by Meredith Kaplan Stoma of Morgan Melhuish Abrutyn.

Jones Wolf is represented by Joseph K. Jones and Benjamin Jarret Wolf; Anthony Sylvester and Craig L. Steinfeld of Sherman Wells Sylvester & Stamelman LLP and Robert Modica and Scott Vincent Heck of Gordon & Rees LLP.

Laura S. Mann is represented by herself, Craig Joseph Compoli Jr. of O’Toole Scrivo, LLC, and Joseph J. McGlone and Louis A. Uccello of McElroy Deutch Mulvaney & Carpenter LLP.

The case is Jeffrey A. Winters and Collection Solutions Inc., on their own behalf and on behalf of all others similarly situated, v. Jeffrey K. Jones et al., case number 2:16-cv-09020, in U.S. District Court for the District of New Jersey.

--Editing by Kelly Duncan.


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