On Monday, a New Jersey District Court judge granted the defendants’ motion to dismiss the claims against them in the case of Winters, et al, c. Jones, et al,. You may remember this as the RICO case; interiorARM first wrote about the lawsuit when filed in December 2016.
A copy of the judge’s order is available here.
A copy of the judge’s opinion is available here. The review is not intended for publication.
Editor’s Note: An unpublished opinion is a decision of a court that is not available for future citation as precedent because the court finds that the case does not have insufficient precedent value.
A putative class action lawsuit was filed Monday, Dec. 5, 2016, against five New Jersey law firms, alleging that the firms are conducting a “mafia-style” racketeering operation that targets Accounts Receivable Management (ARM) companies by filing false fair claims. Class action lawsuits under the Collections Practices Act (FDCPA), initiated primarily to generate attorneys’ fees.
A copy of the original complaint can be found here.
The plaintiffs in the case are Jeffrey A. Winters (Winters) and Collection Solutions, Inc., (CSI) a New Jersey company. 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 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 a New Jersey licensed attorney and the Director of Law Firms 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 directors of Marcus & Zelman, LLC (MZLLC)
The complaint alleged that beginning in 2013 and accelerating since then, the defendants conspired to operate a business plan (RICO plan) in violation of 18 USCA §1961, et seq., of the Federal RICO Statute (RICO) and of New Jersey’s similar RICO status. , NJSA 2C:4 ll, et seq. (NJRICO).
Some examples of the alleged conduct include (see a more comprehensive list in our Article from December 2016):
- Defendants are avoiding small claims courts or the immediate and unprofitable payment of nominal claims without attorneys’ fees, by filing putative bogus class action lawsuits en masse in Federal Court, on the theory that the vast majority of pocket-pocketed defendants relatively deep would view an early settlement for less than $100,000 as basically a nuisance claim; the rare disputed cases merely confirming to the defendants the practical advisability of settling early on a collective basis.
- Defendants seek out, solicit, and develop successful professional plaintiffs to pose as notional “unsophisticated consumers”; wrongly impute imaginary consequences and actual damages required to such plaintiffs, when any actual damage is likely to be avoided by consulting with the leading attorneys or defendants.
- Defendants knowingly ignoring the nearly universal absence of actual damages and lack of typicality, while falsely alleging the existence of classes of certifiable plaintiffs; while necessarily knowing that the alleged classes had little or no chance of being certified if there was a critical examination by the Court or opposing counsel of the merits of the certification.
The opinion of Judge Vazquez
Judge John Michael Vazquez’s opinion was in response to motions to dismiss plaintiff’s amended complaint. The motions were considered and granted without argument. Judge Vazquez said the First Amended Complaint (FAC) “suffers from flawed legal theories, both on the merits and as pleaded. Moreover, the plaintiff’s factual allegations are sorely lacking in light of the federal pleading requirements.”
The Court finds that the CAF fails to plead plausible factual allegations against the defendants. The FAC is riddled with unsubstantiated factual accusations and utterly conclusive language. Besides inflammatory language and conclusive allegations (including “fictitious” litigation), plaintiffs offer little more than “evidence” as “evidence” than printouts of PACER reflecting cases defendants have worked on. Plaintiffs claim that the following actions show fraud of epic proportions: (1) filing a large number of cases, (2) settling a “majority” of those cases “relatively quickly”; (3) acting as co-counsel in several cases; (4) Jones and Mann conducting a legal seminar on the FDCPA; and (5) in two cases, Abranzov and Franco, Defendants using the same general format of pleadings and the same general theory of the case. None of these facts, individually or collectively, reflect improper conduct and no reasonable inference of wrongdoing can be drawn therefrom.
In his analysis, Judge Vazquez summarized two relevant doctrines, both used by the defendants in their motion to dismiss. First, he raised the Noerr-Pennington Doctrine, which protects the First Amendment right to seek grievance redress from the government. Fundamentally, he says, this doctrine protects the right of defendants to bring the cases in question against plaintiffs.
Second, he addressed New Jersey Litigation Privilege (NJLP), which – according to New Jersey courts – “protects” any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have a logical connection or relationship to the action. (in other words, it provides immunity for defamation actions). Although he goes on to note that the NJLP is not absolute and that there are remedies for a plaintiff to allege abuse of the legal system, the plaintiffs in this case have not attempted to use those remedies.
He said these two doctrines alone potentially preclude the current case… nevertheless, he also provided other reasons to dismiss the complaint. Here are some highlights that represent the pattern of the judge’s opinion.
As for the allegations of fraud, Judge Vazquez responds:
The plaintiffs have done little more than report the PACER filings to the Court and conclusively assert that these filings prove fraud. The plaintiffs did not analyze any of the documents filed by the defendants to plausibly argue which were allegedly fraudulent and why. Yet, even if plaintiffs were able to plausibly present factual allegations, the underlying theory of wire fraud would find no legal basis. Many courts have rejected the theory that filing complaints, along with other litigation activity, can be the basis of wire or mail fraud.
As to the allegations of obstruction of justice, Judge Vazquez responds:
Plaintiffs further allege that defendants obstructed justice in violation of $1 USC § 1503 as a predicate act. The FCC provides a paragraph in support of this claim. In the first sentence, the plaintiffs state that the defendants obstructed justice “by using corrupt plaintiffs to sue in Federal Court primarily for the purpose of obtaining settlements for the principal benefit of the defendants.” Identifier. In the second sentence, the plaintiffs list the elements of a claim for obstruction of justice and state superficially that the actions of the defendants fall within those elements. These two sentences are only conclusive and totally insufficient to plead a plausible allegation of obstruction of justice.
As to the extortion allegations, Judge Vazquez comments:
… Further, NJSA § 2C:20-5 provides that “[a] is guilty of theft by extortion if he intentionally and unlawfully took the property of another person by extortion. Under the law, seven provisions (ag) list the ways a person can commit extortion. The Plaintiffs, however, do not specify under which provision(s) they believe the Defendants are liable. Further, no provision appears to apply to the alleged misconduct of the defendants. The Court therefore does not know how the plaintiffs believe the facts of this case fit within the scope of the law of extortion robbery. He will not speculate. Plaintiffs have not provided enough facts to plausibly plead extortion theft and the legal theory is suspect at best.
Similar to the model responses above, Judge Vazquez found that plaintiffs’ claims of RICO, conspiracy, fraud, negligence, and professional misconduct were insufficiently argued; he then granted the defendants’ motions to dismiss.
The judge left a small window for plaintiffs to file a second amended complaint, but added: “In light of the numerous factual and legal gaps, the Court is seriously concerned that any attempt to amend the FAC will be futile.” He gave defendants 30 days to file, but also noted that if they did, “and defendants do not believe plaintiffs have properly corrected the FCC’s numerous deficiencies, defendants may also file another motion. in penalties under Rule 11”.
When this lawsuit was first filed, it generated quite a bit of discussion within the ARM industry. The idea of an agency “fighting back” against perceived frivolous litigation was interesting. Still, most observers felt the litigation was a steep climb. Judge Vazquez effectively threw a very large bucket of ice water at the plaintiffs. The hill got even steeper.
It’s also worth noting how difficult it has been for agencies to get sanctions against consumer plaintiffs’ attorneys when they get frivolous cases dismissed. However, now that the tables are turned, the judge has clearly opened the door to sanctions against the agencies and their attorneys, should they choose to sue.