Debt collector accuses Lexington Law of destroying evidence in trial over credit dispute letters
insideARM has followed the lawsuit filed by Ad Astra Recovery Services, Inc. against Lexington Law, alleging that the company is engaged in “a fraudulent credit repair program designed to bombard collectors with fake credit dispute letters for the purpose of of deceiving debt collectors… and frustrating their efforts to collect legitimate debts. There were a few discovery-related developments in this case that are worth noting.
As a quick recap, Ad Astra filed this complaint in June 2018. In April of this year, the court forced Lexington Law to produce communications from its clients which resulted in the generation of the credit dispute letters that had to be sent to Ad Astra under the consumer’s signature. The court ultimately concluded that these communications were not protected by solicitor-client privilege.
The first development is that at a discovery conference, the court dismissed Lexington Law’s motion to quash and seek a protection order, two tools to prevent certain information from being provided in the litigation discovery process. This denial should not be read too much, as it was based solely on the breach of court rules rather than the merits, and the court therefore allowed Lexington Law to re-file its claims.
The second development is that Ad Astra has filed a request for sanctions against Lexington Law for the theft of evidence, which is a fanciful legal expression for the destruction of evidence due to negligence or bad faith. The petition alleges that Lexington Law knew it had a duty to preserve the evidence – in this case, copies of the credit dispute letters it sent – when this action and another were brought against it as well as under the Utah Rules of Professional Conduct for Lawyers. . According to the motion:
The defendants contend that the copies of the 594,117 letters1 sent to the plaintiff do not exist, despite the defendant’s testimony and documents which indicate the contrary. Given the defendants’ current statements that these letters no longer exist, the only logical conclusion is that the letters were destroyed in bad faith to prevent the plaintiffs from establishing that the defendants prepared and sent the letters.
The court has a hearing on the sanctions petition scheduled for Dec. 3. insideARM will monitor progress and provide updates.
The pressure is on Lexington Law for its practices, and not just because of this lawsuit. The Consumer Financial Protection Bureau (CFPB) has filed a complaint against Lexington Law back in may this year for problematic business practices. Lexington Law requested dismissal of CFPB lawsuit, arguing that the company is not responsible for the acts of third parties (those who engaged in the marketing practices alleged in the lawsuit) and also arguing that the structure of the CFPB is unconstitutional. The hearing on the motion to dismiss is scheduled for December 13.
In a separate legal action filed by The CBE Companies and RGS Financial, a jury recently found that Lexington Law’s plan to send out massive volumes of credit dispute letters was fraudulent. The jury awarded the collectors just over half a million dollars in damages and expenses, as well as a whopping $ 1,948,317 in exemplary damages. This case is still pending the entry of the court judgment against Lexington Law.
All in all, this is not a good outlook for Lexington Law, but some justice for the debt collectors who have been inundated with fraudulent credit dispute letters from this and other credit repair organizations.