Debt Relief Peddlers and Nationwide Class Earn Approval of $1.4 Million Settlement

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By Eleanor S. Tyler

A $1.4 million settlement between a nationwide class and companies that sold debt relief services is fair and adequate, according to an Oct. 1 decision by the U.S. District Court for the Northern District of California, which gave final approval to the settlement (Estrella v. Freedom Financial Network LLC, N.D. Cal., No. 3:09-cv-03156-SI, 10/1/12).

Challenged Conduct

The plaintiffs sued on behalf of a putative class of individuals who paid for debt reduction services between 2005 through 2009.

The plaintiffs alleged that Freedom Financial Network LLC, Freedom Debt Relief Inc., and Freedom Debt Relief LLC (the “Freedom defendants”), and others violated the Credit Repair Organizations Act (CROA), 15 U.S.C. §1679b; California's unfair competition law, Cal. Bus. & Prof. Code §17200; California's Consumer Legal Remedies Act, Cal. Civ. Code §1750 et seq.; and California's “prorater” statute, Cal. Fin. Code §12315.1.

The plaintiffs also sued Rocky Mountain Bank and Trust (RMBT), where they were instructed to set up a special purpose account by the Freedom defendants; and Global Client Solutions LLC, which administered the accounts. The plaintiffs reached a $500,000 settlement with these defendants.

The court preliminarily approved the settlement amount but, based on reservations about the distribution plan, ordered the parties to provide additional briefing on the issue.

Shortly thereafter, the Freedom defendants reached a settlement with the plaintiffs. The court preliminarily approved the $1.4 million settlement in May 2012.

Approval of Settlement

Judge Susan Illston finally approved the settlement, which she estimated--added to the existing $500,000 settlement--would result in payments of approximately $185 to 5,102 claimants.

The court awarded $633,333 to class counsel from the fund. The court also approved incentive awards to named plaintiffs Estrella and Artia of $3,000 each and to plaintiffs Hall and May of $1,000 each.

Remaining settlement funds are to be distributed pro rata based on the amount of fees (net of refunds) paid by each respective claimant to the Freedom defendants for debt settlement services.

The settlement releases all claims against the defendants by a nationwide class of debt relief customers of Freedom between 2004 and the date of judgment who opened a special purpose or similar account with RMBT (or another bank) administered by Global Client Solutions who did not receive a full refund of fees that they paid to the Freedom defendants.

Counsel for plaintiffs: Barron Edward Ramos, Hess-Verdon & Associate, Newport Beach, Calif.; David R Markham, James Michael Treglio, and R. Craig Clark, Clark and Markham, San Diego; Stuart C. Talley, Kershaw Cutter & Ratinoff LLP, Sacramento, Calif.; Mark John Tamblyn, Wexler Wallace LLP, Sacramento, Calif.; Richard Wayne Epstein, Greenspoon Marder PA, Fort Lauderdale, Fla.; Charles E. Ames, Charles E. Ames, P.C., Carrollton, Texas; Thomas Andrew Crosley, The Crosley Law Firm, P.C., San Antonio, Texas; counsel for defendants: Christopher James Steskal, Jennifer Corinne Bretan, Kevin Peter Muck, and Marie Caroline Bafus, Fenwick & West, San Francisco; Haas A. Hatic and Rebecca F. Bratter, Greenspoon Marder PA, Fort Lauderdale, Fla., Peter C. Lagarias and Robert S. Boulter, Lagarias and Boulter, San Rafael, Calif., Allen Ruby, Skadden Arps Slate Meagher & Flom, LLP, Palo Alto, Calif.

By Eleanor S. Tyler

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