Almost one year ago, we discussed an investigation by the Colorado Attorney General into the alleged inflation by foreclosure attorneys of certain foreclosure costs, and, subsequently, allegations of more widespread falsification of fees and costs by attorneys handling foreclosures in Colorado. At the time, I expressed the view that if there was anything to these allegations,"there are going to be some lawyers in Colorado who are in deep water without a life jacket. I hope they're all strong swimmers."
Last week, the Denver Post reported that at least one of the firms involved in the scandal had decided to haul itself out of the deep water by paying beaucoup bucks to settle with the State of Colorado and with class action attorneys.
Tens of thousands of Coloradans whose homes were foreclosed on since 2009 by law firm Aronowitz & Mecklenburg will share in a massive class-action lawsuit settlement over allegations the lawyers regularly inflated fees that homeowners were forced to pay to save their house.
The settlement, on paper since April but only now getting court approval, comes just days after the Denver law firm agreed to a separate $10 million deal with state investigators to settle an investigation into the same alleged misconduct.
The law firm — owned by Robert Aronowitz, his daughter, Stacey Aronowitz, and her husband, Joel Mecklenburg — is to dissolve in the next six months, according to terms of their settlement with the Colorado attorney general's office.
But not before the firm pays back roughly $2.5 million to more than 32,000 families — money the lawyers allegedly overcharged for the posting of legal notices in the cases.
The law firm denies it did anything wrong, but agreed to the settlement to avoid costly litigation, according to a copy of the 164-page document filed in Denver district court.
"Avoiding costly litigation." Are they worried about their own counsel padding, churning, or upcharging? Just wondering.
Before becoming misty-eyed over how damaged homeowners will now be made whole, pay attention to how the $2.5 million is being divvied up.
Those affected in the Aronowitz settlement should see a check ranging from $20 to $225 in the next couple of months, depending on which of three classes they belong to. Postcards have been mailed advising homeowners of the settlement.
Some people might get more than one payment, such as those who cured more than one foreclosure, even on the same house.
The lawsuit's plaintiffs — Rodrick Kemp, Linda Donna, Richard Lemesany, and Martin and Michaelie Wingo — each are to receive an additional $10,000, though the Wingos will share that amount. Another $875,000 will be paid to cover legal fees.
The three classes and the payouts include:
• Homeowners who paid a county public trustee what they owed on a mortgage, including the lawyers' fees, and stopped the foreclosure process, known as a cure. They will get $225 per foreclosure;
• Those who stopped a foreclosure through a loan modification. They will receive $100 only if they opt-in on the settlement, up to a maximum $1.1 million to be paid out for all;
• Homeowners who lost their house to foreclosure auction for a price that was less than what they owed. They will receive $20 per foreclosure.
Investors who purchased properties at county foreclosure auctions are not covered by the settlement because they were not plaintiffs, although they also were required to pay the lawyers' bills, which included the posting costs.
Also not covered by the settlement are other fees the attorney general alleges were overcharged, including up to $100 for a one-page document, called a "statement of qualified holder," that purportedly takes seconds to fill out.
Expenses charged for the filing of nonexistent Rule 120 lawsuits, revealed by The Post last year, also are not part of the settlement.
By accepting the payments, homeowners cannot sue for any other charges they might have overpaid in the foreclosure.
Aronowitz's $10 million settlement with the attorney general will be used largely to cover legal fees in the case and future consumer education. Only a few homeowners with current foreclosure cases are to be reimbursed.
Yes, once again,members of the "class" get peanuts and the big winners in both cases are the plaintiffs' attorneys. Sure, the few named class action plaintiffs get $10,000 each, but the class action plaintiff's lawyers get 80 times as much. The rest of the allegedly adversely affected borrowers get between $20 and $225.
In fairness, it appears that if there was wrongful conduct (and the law firm that settled has neither admitted nor denied that fact), it has been "deterred," at least with respect to the settling law firm. According to the Post, the settling law firm is going to be "dissolved," although I've read other reports that suggests that it may be sold rather than liquidated. It will be an enterprising buyer who would buy that firm's business, especially in light of the fact that the residential foreclosure heyday is long past. Then again, Colorado has legalized recreational marijuana use, so there's always hope.
The other two accused firms have decided to slug it out. Apparently, paying their own trial attorneys is not yet a sufficient inducement to lead them to pay off the plaintiffs' counsel and the state to just go away and leave them alone.
The American litigation system: everyone wins, as long as "everyone" is a trial lawyer.