Antitrust Law Daily Wrap Up, CONSUMER PROTECTION—MDLa: Summary Judgment Denied in RICO and Louisiana Unfair Trade Practices Action Against Agents of Debt Elimination Service, (Mar 21, 2013)

By Tobias J. Gillett, J.D., LLM.

Purchasers of an allegedly fraudulent debt elimination service could not obtain summary judgment with respect to their claims, including those for violations of the Racketeer Influenced and Corrupt Organizations (RICO) Act and the Louisiana Unfair Trade Practices Act, against two purported agents of the service, because the purchasers did not provide sufficient evidence to support their motions, and because settlements in a state action against the service did not have res judicata effect as to the liability of the agents, the federal district court in Shreveport, Louisiana has ruled (Smith v. New Leaf Associates, LLC, March 19, 2013, Foote, E.).

According to the purchasers’ complaint, New Leaf Associates, LLC is a company offering debt elimination services to consumers. The purchasers asserted that the two remaining individual defendants in the case were agents and principals of a company, Quantum Business Consultants, LLC, that acted as New Leaf’s marketing division. The agents allegedly sold debt elimination services with the claim that debt could be terminated without affecting a consumer’s credit score. However, the purchasers claimed that New Leaf never provided any services in exchange for the up-front fees they paid.

The purchasers asserted that the agents had committed fraud and violations of the Racketeer Influenced and Corrupt Organizations (RICO) Act, the Louisiana Unfair Trade Practices Act, and the Credit Repair Organizations Act. The present decision addressed three motions for summary judgment or partial summary judgment filed by the purchasers that the court reviewed together.

On July 10, 2009, the court had dismissed a previous motion for partial summary judgment filed by the purchasers on the ground that one of the defendants had not filed any responsive pleadings. The purchasers claimed that, since that defendant had now filed responsive pleadings, the case was now ripe for summary judgment.

The court disagreed, concluding that the purchasers’ evidence was not sufficient to support summary judgment. The new evidence attached to the motion for summary judgment consisted of affidavits from two named plaintiffs purporting to show, through attached copies of cashier’s checks, that the individual defendants had received and deposited money from the purchasers. However, the attachments consisted only of checks payable to “Quantum Business Consultants,” one with no certified mail receipt, and the other with a receipt containing the signature of a third individual.

The court observed that no “presumption of delivery exists for certified mail when the requested return receipt is not received by the sender.” Here, one affidavit lacked any certified mail receipt, and the other contained a receipt that did not show a connection “between the entity to whom the check was drafted and the entity to whom the certified mail was delivered.” Neither affidavit served to prove that the individual defendants had either received or negotiated the checks.

The only remaining evidence in support of the motions for summary judgment were stipulated settlements filed in a case brought by the Florida Office of the Attorney General against New Leaf Associates in Florida state court, in which both individual defendants confessed judgment. The purchasers contended that these settlements had res judicata effect in the present case.

The court again disagreed. Under Florida law, four requirements are necessary for res judicata to apply to a case: “(1) identity in the thing sued for; (2) identity of the cause of action; (3) identity of the persons and parties to the actions; and (4) identity of the quality or capacity of the persons for or against whom the claim is made.” Here, the purchasers had not been parties to the previous action, so res judicata could not apply. Moreover, the purchasers had not supplied “any documentation regarding the substance of the Florida litigation,” so the record lacked any basis for concluding that the causes of action shared a common identity.

Furthermore, even if the Florida judgments could have res judicata effect, the settlements would not have disposed of the liability issue. Both stipulations for settlement in the Florida litigation regarding the individual defendants contained statements expressly denying liability. Therefore, the settlements could not be used to determine the individual defendants’ liability in the present case.

The court thus denied all of the purchasers’ motions for summary judgment.

The case is Civil Action No. 3:05-00919.

Attorneys: Robert Wickliffe Fenet (Fenet Law Firm, PLC) for Richard Smith.

Companies: New Leaf Associates, LLC

Cases: ConsumerProtection RICO StateUnfairTradePractices LouisianaNews