A tipster (send in your tips here) forwarded me a couple of documents from a case filed on March 27, 2012 by JEM Group and CDS Client Servicers against Legal Helpers Debt Resolution.
JEM Group President and CEO is Joanne Garneau, a staunch investor of time, energy and resources in the concept of attorney model debt settlement model with Legal Helpers Debt Resolution (AKA Law Offices of Macey Aleman, Hyslip & Searns).
According the the amended complaint filed on April 2, 2012 in this case the Plaintiffs JEM Group and CDS Client Services under David Henson, apparently feel they have been harmed by Legal Helpers Debt Resolution for terminating relationships with backend servicer companies.
The following allegations are from the complaint which you can read in full here.
In August 2009, Macey, acting on behalf of himself, his law partners, and LHDR, represented to Garneau that LHDR could legally contract with outside debt settlement service providers to assist in the negotiation and settlement of consumer debts. “Macey assured Garneau that if any licensing, regulatory or compliance issues arose in any state, especially in its home state of Illinois, defendant could and would completely handle those issues.”
Effective August 31, 2009, Garneau caused her affiliated company, Nationwide Support Services, to enter into a reciprocal referral agreement with LHDR whereby Nationwide would provide non-legal administrative support and marketing services for LHDR. In January 2010 the contract was assigned from Nationwide to the JEM Group.
“For its part under the Agreement, LHDR acknowledged that as a national law firm it was subject to the regulation of state bars, codes of professional responsibility, and various agencies regarding the practice of law, sharing of fees, and relationships with non-attorneys.”
“The Agreement contained an indemnity provision under which LHDR agreed to indemnify, defend and hold harmless JEM and CDS harmless from and against any and all third-party lawsuits, actions, investigations and proceedings, and related costs and expenses (including attorney’s fees) resulting solely from LHDR’s negligence or willful misconduct.”
“On March 19, 2012, LHDR agreed in the Illinois AG Action to enter into settlement discussions and, without any admission or finding of liability, agreed to the terms of an order that preliminarily enjoins them, and any of their Strategic Alliance Partners, including JEM Group and CDS, from charging, collecting, or receiving any fees in violation of the Debt Settlement Consumer Protection Act.”
“On March 22, 2012, LHDR, through its attorneys, sent JEM and CDS demands for two large “contribution deposits” to fund potential settlements of the Illinois AG Action and Washington Class Action, with said deposits to be made no later than March 29, 2012. LHDR warns that “if the full amount of these payments are not made in the indicated timeframe, LHDR will take all necessary and appropriate legal action” against the service provider, and its owners, in order to “protect and enforce LHDR’s rights and the rights of the other back-end service providers of LHDR that do comply with their respective contribution payment obligations.”
On March 30, 2012 JEM Group and CDs received termination letters from LHDR that stated the companies “are no longer permitted to contact the debt service clients” they had been servicing and those clients “will be transitioned or directed to LHDR.”
More Action in the Case
Apparently as this thing has moved rapidly ahead the Plaintiffs have asked the court for a Temporary Restraining Order against LHDR. No surprise, LHDR objects to that.
In LHDR’s filed response the apparent broken relationship between JEM and CDS with LHDR is evident. LHDR states, “The requested TRO would interfere with the existing attorney-client relationship of approximately 9,000 clients, mislead these clients to use the services of an unauthorized vender, and effectively order a law firm to give its business to outside vendors who have failed at their jobs.”
LHDR indicates they have beefed up their internal staff to handle the clients, “including recognized industry leaders and experts.” One person supervising and managing operations at LHDR is none other than Ryan Sasson of Elimadebt fame. In Sasson’s declaration filed in the case he states, “I have been in the debt settlement business for over six years, including as the owner and supervisor of an outside administrator debt settlement company, Fusion Client Services.” He says, “In my career in this industry, I have handled, serviced, or supervised approximately 10,000 clients seeking debt settlement resolution, nearly all of who had debts on multiple credit cards.”
Sasson is apparently to be responsible for sucking all the clients from JEM and CDS. He says, “My responsibilities to LHDR include ensuring that LHDR’s organizational needs are met to service the influx of debt settlement clients being in-sourced from JEM and CDS (among others).”
Sasson states he determined that in order to handle the 9,000 incoming clients he would need to hire 50 employees “in customer service and negotiation rolls. in my experience, the typical ration of debt settlement clients to Agents for debt settlement ranges from approximately 500:1 to 1,200:1.
LHDR also asserts in its response against the TRO that “JEM and CDS failed to settle numerous claims when the debts should have been settled.”
LHDR also claims that JEM and CDS refused to turn over client records to LHDR.
According to statements by LHDR, this termination of outside backend servicers is claimed to result in the loss of jobs and some companies will cease operations.
You can read the full LHDR response here.
This will be interesting.
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