This morning I had a rare opportunity to go down to the court house and watch a motion argued in the case State of NC vs. Consumer Law Group and Michael Metzner. It was a motion to dismiss and attorney Richard Epstein from Greenspoon Marder flew in from Florida to represent Consumer Law Group.
In October 2010 I reported on the suit by the State of North Carolina against Consumer Law Group. Today’s hearing was on a motion to dismiss brought by the Defendants.
Richard Epstein appeared from Greenspoon Marder and made the argument that the case should be dismissed because the law firm was exempt from state regulation including the Debt Adjusting Act. It was an interesting argument since it did not address the underlying issues alleged by the State in their original case regarding unfair and deceptive sales practices. See the original report for more information on the claims and allegations.
Epstein argued that debt adjusting is by it’s very nature the practice of law and something lawyers do on a regular basis. I guess if that’s the case than every debt relief enterprise in the country is operating illegally and engaging in the unauthorized practice of law.
However he stated that it was his position that non-lawyers can engage in debt settlement and debt adjusting as long as they operate under contract or in a relationship with a lawyer. In this case the underlying non-lawyer firm operating with Consumer law Group is American Debt Negotiators out of Florida.
The Defendant’s wanted the case to be dismissed from civil court and said only the North Carolina Bar Association had any jurisdiction over their actions as lawyers. Epstein argued he found the State’s case offensive in the allegations made against the attorney model debt settlement company.
Phil Lehman from the State Attorney General’s office represented the State in this matter and said Consumer Law Group had been “perpetrating a debt settlement scam,” misrepresented claims made about the actual performance they could deliver and took advance fees but failed to deliver the actual service.
Lehman said that Consumer Law Group was not a true law firm but essentially operating as a business as a debt adjuster. He said callers to CLG were told they were being represented by a law firm but that was not true.
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The State alleged that a large percentage of the fees paid by consumers actually went to American Debt Negotiators, which is not the typical relationship a law firm has with a sub-contractor nor something a “legitimate” law firm would do.
While Consumer Law Group did eventually register as an interstate law firm with the State Bar of North Carolina, Lehman pointed out that the simple fact they registered did not make them a law firm licensed to do business in the state. The registration was only an administrative matter and did not grant authority. He also said that only one of the Defendants in this matter was a lawyer and he was not admitted to practice law in North Carolina.
One of the positions argued by CLG was they should be exempted from prosecution since under the North Carolina Consumer Practices Act, members of learned professions were exempt but Lehman responded that CLG should not be exempted since the majority of services they offered were entrepreneurial services rather than professional services.
Epstein responded to the State’s position that the NC Bar should be dealing with this issue and not the Attorney General office. Low and behold a representative of the NC Bar Association was in the courtroom and watched the proceeding.
The judge said she would rule on the motion within the week.
Update: 3-30-2011
On March 25, 2011 the judge ruled the State did have “sufficient facts and legal claims in its Complaint to withstand the defendants’ Motion to Dismiss.” – Source
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