Lawsuit against Orlando law firm KEL could become class action
A lawsuit against Orlandobased KEL law firm, which has changed its name to LawyerASAP, is moving to the class certification stage after the firm lost an appeal.
The suit is over bankruptcy fees paid to the once-busy firm over a period of years, and it seeks punitive damages of $1 million.
The firm is led by Orlando attorney Matt Englett. The lawsuit was filed by a former client of his firm, Orlando resident Loyd Cadwell.
The suit accuses the firm of telling its bankruptcy clients to pay their legal fees with a credit card — which courts have held is illegal because new debts are prohibited in the days before filing a bankruptcy, and during the bankruptcy.
A federal judge in Orlando, Paul G. Byron, had thrown out the suit, concluding that there was no allegation that Englett’s firm “acted with an improper purpose or with intent to manipulate the bankruptcy system.”
But the U.S. Court of Appeals for the 11th Circuit has kicked the lawsuit back to Byron’s court, overturning his decision. The appellate opinion said “the district court erred in concluding that Cadwell was required to allege that KEL’s advice was given for some additional, invalid purpose.”
Englett, managing partner of KEL and now head of LawyerASAP, provided a statement in response to questions about the lawsuit when it was filed: “It is KEL’s policy never to take a credit card payment for Bankruptcy retainers. Due to the active litigation we cannot comment further.”
The lawsuit says Cadwell paid his bankruptcy fees to KEL in January using a Discover credit card and a BJ’s credit card, and his credit card statements attached to the suit have KEL charges on them. Cadwell decided to switch to a new law firm, which noticed the prior fee payment on credit cards. Jacksonville law firm Mickler & Mickler filed the proposed class action on behalf of Cadwell.
Cadwell’s attorneys have started to introduce evidence that other KEL clients were also advised to use credit cards. The suit could draw in thousands of clients for KEL’s busy bankruptcy practice over the past few years. KEL boomed during and just after the Great Recession, handling foreclosure defense and bankruptcy among other things.
The suit seeks the return of all bankruptcy legal fees paid to KEL with credit cards, which it says were about $1,700 for Cadwell. Other bankruptcy attorneys have told the Orlando Sentinel it is common knowledge in the legal world that bankruptcy fees can't be paid with credit cards.
Incurring new credit card debt just prior to a bankruptcy was a big issue in discussions about the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act. The credit card industry spent millions on lobbying for changes in prior law, to specially state that debt relief agencies, including law firms, cannot advise clients to rack up new debts prior to filing a bankruptcy.
Before that reform, it was known that some financial or legal professionals would tell clients to buy things on credit before filing for bankruptcy because those debts would be erased.