Mann Bracken ordered to cease collections 

Posted: 7:34 pm Thu, January 14, 2010
By Caryn Tamber
Daily Record Legal Affairs Writer

Tens of thousands of Maryland debt-collection lawsuits will be dismissed, while the massive collections firm that filed them appears to be collapsing.

Maryland District Court Chief Judge Ben Clyburn made the decision to dismiss Mann Bracken LLP’s suits without prejudice. Earlier this month, the firm notified individual District Court clerks that it would shut down by the end of the month. The firm said it would try to obtain new counsel but might not do so in time, so it requested stays or dismissals.

At the same time, the state has suspended Mann Bracken’s debt collection license and ordered it to cease collections activities.

Although the suits that were dismissed could be refiled, Clyburn said, it was not fair to leave the current cases up in the air because Mann Bracken has been irresponsible.

“The bottom line is, we’ve taken action so that the citizens will not be inconvenienced, and we’ve taken action so that the judges are aware that some of these refilings may be barred by the statute of limitations,” Clyburn said.

Clyburn estimated that Mann Bracken has between 20,000 and 25,000 cases statewide.

Efforts to reach Mann Bracken lawyers Thursday were unsuccessful.

Mann Bracken’s implosion comes on the heels of bankruptcy troubles for Axiant LLC, which provides its phone, computer, staffing and support services.

Axiant filed a Chapter 11 bankruptcy petition in November. A plan to sell its assets fell through, and in late December, the bankruptcy was converted to Chapter 7 liquidation.

The bankruptcy filing showed Axiant owes Mann Bracken more than $10.5 million, making the firm Axiant’s largest unsecured creditor by far.

According to the cease-and-desist order by the state’s Collection Agency Licensing Board, Mann Bracken filed motions in some of its cases this month, saying Axiant’s demise means it cannot handle litigation.

The order says the state began investigating Mann Bracken on Jan. 4 after hearing from consumers who were unable to contact the firm because its phones were disconnected. Mann Bracken had also stopped cashing collections checks.

On the same day, the board found out that Mann Bracken was notifying the district court clerks it would shut down.

The Collection Agency Licensing Board concluded that Mann Bracken no longer qualifies to be a licensed debt collector, does not have the resources to continue its existing litigation or other collections activities, and cannot respond to the public, according to the order.

There have been reports elsewhere that Mann Bracken, a national firm, is closing. An Atlanta TV station visited the firm’s office there last week and found it, as the reporter put it, “unmanned and broken.” That report, on WSB-TV, suggested the firm might soon file for bankruptcy.

Hiring new counsel

The current iteration of Mann Bracken was formed in 2007 by the merger of, as the company’s Web site puts it, three of the five largest collection firms in the country. One of those firms was Rockville-based Wolpoff & Abramson LLP. (The three firms’ non-legal support services were consolidated into Axiant, according to the cease-and-desist order.)

Just last month, the collections licensing board concluded its investigation of a major Mann Bracken client, the Encore/Midland family of debt-buying companies. It reached a settlement with Midland under which the companies agreed to pay $1 million in civil penalties, become licensed collectors in Maryland and change their business practices.

A lawyer who represented Midland in settlement negotiations said his client is still calculating the monetary damage of having so many cases dismissed.

“We’re going to do whatever we have to do in the court system to take care of the cases that have been filed and we’ll have to hire new counsel to handle whatever’s left over and move on,” said James P. Ulwick of Kramon & Graham P.A., who is also defending Midland in a class-action suit by alleged debtors.

Annapolis consumer-rights lawyer Peter A. Holland, who has gone up against Mann Bracken repeatedly and is one of the class lawyers in the suit against Midland, praised the recent developments concerning the law firm.

“It’s a great day for Maryland consumers that the state of Maryland has shut down Mann Bracken and that the District Court has ordered the dismissal of all pending cases,” he said.

He has been critical of debt buyers and collections law firms for buying expired debt and then trying to collect on it.

“What has happened here, with Midland Funding and with Mann Bracken, is we’re seeing come home to roost the problem of junk-debt buying, which is a multibillion-dollar-per-year industry, and … the buyers of debt, credit card debt, very often cannot prove ownership of the debt,” Holland said. “The business model for Mann Bracken has been to file an ungodly number of lawsuits and then hope for default judgments.”

Mark Kaufman, the state’s deputy commissioner of financial regulation, said Maryland is being vigilant in regulating collections agencies as they take their cases to the court system.

“Litigation-related collections is a large and growing business and it needs to be looked at, and we’re trying to look at it pretty aggressively, and we think this combined with the Encore/Midland [investigation] suggests that,” he said.

Short notice

Chief Judge Clyburn said Mann Bracken’s initial letter notifying the courts that it would shut down was sent to the clerk in sparsely populated Garrett County, “almost like it was sent out in a way to kind of stall the effort.”

“You would think they would have the courtesy to send it to me,” he said.

He fumed over the idea of a firm with tens of thousands of cases giving the court less than a month’s notice that it would shut down.

“That’s outrageous, and that’s something for the Attorney Grievance Commission to sort out,” Clyburn said.

Bar Counsel Melvin Hirshman, who handles attorney discipline matters, said Mann Bracken is on his radar screen but declined to comment further.