Judge approves debt-collection settlement
Posted: 6:41 pm Thu, March 10, 2011
Daily Record Legal Affairs Writer
A federal judge in Baltimore agreed Thursday to the terms of a settlement between a major debt collector and 10,000 people who said they were illegally pursued by the company before it was licensed.
The terms of the U.S. District Court settlement mean Midland Funding LLC will drop all 10,168 cases and cannot refile the lawsuits or sell the debt to another company.
The company will set up a $200,000 fund for the class and pay $130,000 in lawyers’ fees.
Class attorney Peter A. Holland said he was pleased Judge Richard D. Bennett approved the settlement in the final fairness hearing.
“Having a lawsuit hanging over your head can mean denial of a job, denial of an apartment, denial of a loan at a time when we’re in the worst financial time since the great depression,” he said. “Way beyond the dollars, it’s the release of an albatross around their neck.”
According to court documents, the settlement class consists of Maryland residents who were defendants in open Midland cases anytime from Sept. 10, 2006 — three years before the class action was filed — through Jan. 15, 2010, when Midland received its license.
“I think that Midland is pleased to resolve the case and it’s in full compliance with all of its obligations under the law. It was always our belief that we were always in full compliance with the law, but [now] we’ve resolved everything,” said Midland’s attorney James P. Ulwick, who practices at Kramon & Graham PA in Baltimore.
Each class member can claim up to $100 from the common fund. Unclaimed funds will go to the University of Maryland School of Law in honor of recently deceased bankruptcy attorney and consumer advocate Alexander Gordon IV.
Holland said the money will go to the school’s Maryland Public Interest Law Project to fund summer grants for students to work with legal services agencies on the Eastern Shore.
He said he expected about $115,000 to go into the fund, which, according to Bennett’s final order, would provide grants for three to four students each summer for five years.
“We’re very excited that it’s kind of targeted to the Eastern Shore, because the University of Maryland is very dedicated to urban areas, but low-income people are not limited to urban areas; they live in rural areas as well,” said Holland, who has an eponymous law firm in Annapolis.
Class representatives Delvell Johnson and Denise Roarty will receive incentive payments of $2,000 and $2,500, respectively. Johnson was pursued by Midland’s lawyers at Mann Bracken LLP for a Citibank debt of $15,000 to $20,000; Roarty was said to owe about $7,000 on a Target account.
Holland said he did not know the total value of the claims Midland will be dismissing, because the defense did not provide that data. However, he said a conservative estimate would be $10.2 million, assuming each class member was sued for $1,000.
The putative class action alleged “the planned, prolonged, illegal, and systematic abuse of thousands of Maryland residents and consumers by Midland.” It claimed “routine” and “assiduous” violations of the Fair Debt Collection Practices Act, the Maryland Consumer Protection Act and the Maryland Consumer Debt Collection Act.
Holland also represented the plaintiffs in a separate but similar class action lawsuit against LVNV Funding LLC. In that case, the plaintiffs alleged that LVNV violated state and federal law by improperly filing collection lawsuits without proper licensing.
That settlement could result in the dismissal of 3,500 lawsuits and $150,000 paid to the class lawyers. Class representatives Jason Hauk and Freddy Velazquez will each receive $2,000.
Also in February, Bennett issued an opinion in a third case, Bradshaw v. Hilco Receivables LLC, in which the judge found that Hilco violated the Fair Debt Collection Practices Act and state laws by pursing debts in court without being licensed.
“What that means is … if you’re going to come in and purchase debt and sue people you’d better comply with the law,” Holland said.
Daily Record legal affairs writer Brendan Kearney contributed to this article.