Consent judgments in a lawsuit brought by the Florida and Connecticut Attorneys General have been entered against five individuals and one law firm for their part in an alleged “mass-joinder” mortgage rescue scam.
The lawsuit, filed in the U.S. District Court for the Middle District of Florida and captioned The State of Florida, et al. v. Berger Law Group, P.A., et al. Case No. 8:14-cv-1825-T-30MAP, alleged that eight individuals and five companies, operating under the names Resolution Law Group and Berger Law Group, engaged in a mortgage rescue scam in which they sold homeowners the opportunity to participate in a so-called “mass-joinder” multi-plaintiff lawsuit that would purportedly enable them to avoid foreclosure and obtain loan modifications. As alleged in the complaint, homeowners typically paid a $6,000 upfront fee to join as a plaintiff in a lawsuit and often were required to pay a $500 monthly fee to remain represented in the case. A copy of the Amended Complaint is available here.
The mass-joinder lawsuits would typically involve dozens of homeowners and assert claims against dozens of mortgage lenders and servicers. The allegations of wrongdoing, however, were pleaded very generally, and, in one example of questionable uniformity, often related to the use of the Mortgage Electronic Registration System, Inc. (MERS). Almost all of these and similar mass-joinder suits were abandoned or dismissed at the pleading stages. The AGs’ lawsuit alleged that the defendants almost never obtain the promised results. The suit asserted claims under Florida’s and Connecticut’s unfair trade practices statutes, as well as Sections 1042 and 1097 of the Consumer Financial Protection Act (CFPA)—part of the Dodd-Frank Act—which authorize a state Attorney General to bring civil actions to enforce the CFPA and the federal Mortgage Assistance Relief Services Rules (Regulation O), respectively. The Middle District of Florida entered a temporary restraining order and subsequently a preliminary injunction, freezing certain of the defendants’ assets and placing several of the law firm defendants in receivership.
The consent judgments, entered between December 2014 and March 2015, permanently enjoin the defendants from engaging in a broad range of mortgage and consumer financial-related services. Specifically, they prohibit any direct or indirect offering or marketing of mortgage assistance relief products and services, debt relief products and services, and any other consumer financial product or service. The consent judgments also impose a permanent ban on telemarketing and commercial telephone solicitation of any kind, as well as a ban on misrepresenting any product or service in violation of Regulation O and Florida's and Connecticut’s unfair trade practice laws. These defendants are further barred from collecting or attempting to collect any payment from any consumer who signed up to participate in a mass-joinder lawsuit. The defendants must comply with ongoing compliance monitoring. The sole law firm to enter into the consent judgment, the Berger Law Group, agreed to remain in receivership. Furthermore, the consent judgments provide for significant monetary penalties, totaling approximately $3.1 million.
For mortgage lenders and servicers defending against the handful of mass-joinder actions pending across the country, these consent judgments offer compelling support for the dismissal of such actions.
