Weinstock, Friedman & Friedman P.A. in Baltimore, a large legal collection firm, is reviewing “huge volumes” of former Mann Bracken cases that were dismissed last week by Maryland District Court Chief Judge Ben Clyburn, Sidney S. Friedman, a managing partner at Weinstock, Friedman & Friedman, tells Collections & Credit Risk.
Clyburn dismissed an estimated 20,000 to 25,000 lawsuits handled by legal collection giant Mann Bracken after the Rockville, Md. firm notified Maryland’s district court clerks that it is shutting down by the end of the month (Collections & Credit Risk, Jan. 15). Mann Bracken said it could not access the case files and may not be able to find substitute counsel.
Friedman said his lawyers are reviewing files to decide whether they are within the statute of limitations and eligible to be re-filed. If so, the firm then will confer with specific clients to see if they want to continue to pursue their claims.
“It comes down to deciding if it is economically worthwhile to go forward. Large balances are much more attractive than smaller ones,” he says. “Are the people working? Is real estate involved? How determined is the client? The client sets the tone. We’re the hired messenger.”
Mann Bracken's troubles follow the November bankruptcy and subsequent liquidation of affiliate Axiant LLC. In the Chapter 11 filing, that company revealed it owes Mann Bracken more than $10.5 million, making the firm Axiant’s largest unsecured creditor.
Axiant provided phone, computer and staffing and support services to Mann Bracken. In late December, Axiant's bankruptcy plan was converted to Chapter 7 liquidation.
Mann Bracken filed motions in some of its cases this month stating that Axiant’s failure left the law firm unable to handle litigation, according to a cease-and-desist order by Maryland's Collection Agency Licensing Board.
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 also had stopped cashing collection checks.
Mann Bracken was under pressure from lawsuits, as well. In Washington, D.C., the Better Business Bureau had given the firm its lowest rating and several lawsuits accused it of using illegal tactics against borrowers whose bills had fallen into default.
Mann Bracken, which has 24 offices nationwide, was formed in 2007 by the merger of three of the five largest collection firms in the country, including legal giant Wolpoff & Abramson LLP. The three firms’ non-legal support services were consolidated into Axiant.
As a formality, Maryland Commissioner of Financial Regulation Sarah Bloom Raskin suspended Mann Bracken from performing any collections work. The suspension follows an investigation by Raskin's office that confirmed the firm already had stopped doing business - including failing to cash checks sent to the firm concerning collection-related issues. "This is yet another in a string of problems we are uncovering as the collections industry has made a headlong rush for our state's courtrooms," Raskin says.
The state’s State Collection Agency Licensing Board in 2009 investigated a large Mann Bracken client, Encore Capital Group of San Diego and its subsidiaries - Midland Funding LLC, Midland Portfolio Services LLC and Midland Credit Management Inc. - for multiple violations of collection laws.
Under terms of a settlement, the companies agreed to pay $1 million in civil penalties, become licensed collectors in Maryland and change their business practices. In September, the state's DLLR said the companies had violated federal and state laws by refusing to validate bad debts when challenged (Collections & Credit Risk, Sept. 18).
Encore Capital is the third-largest debt buyer in the U.S. with more than $240 million in revenue from purchased debt in 2008, according to Collections & Credit Risk.
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