Fasten Your Seatbelts For The Case Of This Mafia-Style Consumer Litigation Operation

A putative class action lawsuit was filed on Monday, December 5, 2016 against five New Jersey law firms alleging that the firms are running a “Mafia-style” racketeering operation that has been targeting ARM (Accounts Receivable Management) companies by filing spurious Fair Debt Collection Practices Act (FDCPA) class actions, initiated primarily to generate attorneys’ fees.

The case is Winters, et.al. v. Jones, et. al, (Case No 2:16-cv-09020, U.D. District Court, District of New Jersey).  A copy of the Complaint can be found here.

The Plaintiffs in the case are Jeffrey A. Winters (Winters) and Collection Solutions, Inc., (CSI) a New Jersey Corporation. Winters is the sole shareholder of CSI. CSI also operates under the trade name of United Credit Specialists (UCS). CSI and UCS are primarily engaged in debt collection services.

The named Defendants are:

• Joseph K. Jones, Esq. (Jones), and Benjamin J. Wolf, Esq. (Wolf). They are attorneys licensed to practice in New Jersey, New York, and Connecticut, who practice as principal Members of Jones, Wolf & Kapasi, LLC (JWKLLC).
• Laura S. Mann, Esq. (Mann). Mann is an attorney licensed in New Jersey and the principal of the Law Offices of Laura S. Mann, LLC (MannLLC)
• Ari H. Marcus, Esq. (Marcus) and Yitzchak Zelman, Esq. (Zelman). Marcus and Selman are attorneys licensed to practice in New Jersey and New York and are the principals in Marcus & Zelman, LLC (MZLLC)

The complaint alleges that starting in 2013 and accelerating since, Defendants have schemed to operate a business plan (RICO Plan) in violation of 18 USCA §1961, et seq., the Federal RICO Statute (RICO), and the similar New Jersey RICO Statute, NJSA 2C:4 l-l, et seq. (NJRICO). 

Editor’s Note: The Racketeer Influenced and Corrupt Organizations Act, commonly referred to as the RICO Act or simply RICO, is a United States federal law that provides for extended criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization. The State of New Jersey has a similar State Statute.

A sampling of the alleged nefarious conduct includes the following:

• Since about early 2013, Jones, Wolf, JWKLLC, Mann, MannLLC, Marcus, Zelman, and MZLLC, in cooperation with other independent attorneys and individuals serving in various capacities; have conspired to, and have been operating a classic, Mafia style, racketeering "Enterprise" in violation of the Federal and New Jersey RICO Statutes.

• Defendants avoid Small Claims Courts or unprofitable immediate payment of nominal claims without attorney's fees, by filing spurious putative class actions in Federal Court en masse, on the theory that the vast majority of the relatively deep-pocketed defendants would view a quick settlement for under $100,000 as basically a nuisance claim; with the rare contested case only confirming to Defendants the practical advisability of settling early on a class basis.

• Defendants search out, solicit, and develop professional Plaintiffs retained to pose as theoretical "least sophisticated consumers"; falsely imputing imaginary consequences and the requisite actual damages to those Plaintiffs, when any actual damages are likely prevented by consultation with referring attorneys or Defendants.

• Defendants knowingly ignoring the almost universal absence of actual damages and lack of typicality, while falsely alleging the existence of certifiable plaintiff classes; all the while necessarily knowing that the alleged classes had little or no chance of being certified if there was any critical examination by the Court or adversary counsel of the propriety of certification.

• Defendants settled the spurious class actions while solely considering the class action attorney’s fees; without any consideration or concern for the quality or amount of the settlement's benefits provided to the alleged class.

• Defendants filed separate lawsuits on behalf of a single alleged class representative against each of several defendant victims, instead of filing a single lawsuit against the several defendant victims.

• Defendants filed separate lawsuits on behalf of several alleged class representatives against a single defendant victim, instead of filing a single lawsuit including the several alleged class representatives against that single defendant victim and/or seeking some form of lasting relief from that single defendant.

• The collective activity evidences the unprofessional, improper, and RICO Plan-implementing practice of multiplying lawsuits to secure increased attorney's fees as opposed to reducing the number of lawsuits filed to increase individual client benefits and over-all efficiency.

insideARM Perspective

Normally insideARM does not write a story about the mere filing of a lawsuit as there are always two sides to any litigation and the Defendants have not yet had an opportunity to file an Answer to the Complaint.  However, we are making an exception in this case.

The allegations in the Complaint highlight conduct that is sensational, dramatic and, scandalous. Yet, for many ARM firms the alleged conduct may feel quite very familiar.  

ARM businesses spend a significant portion of their budget defending what are often perceived as frivolous claims. The senior management discussion is whether to spend money to defend or spend money to make a case go away. The pure accounting decision is generally that it costs less to settle than to defend.  The emotional impulse is to defend or “fight back.”  It appears that CSI and Winters have chosen to not just defend a lawsuit, they have chosen to fight back.

insideARM will continue to monitor this case and report developments. We suspect there will be many twists and turns.  As aging stage actress Margo Channing, Bette Davis said in the movie All about Eve, “Fasten your seatbelts, it's going to be a bumpy night.”