Friday, May 23, 2003
Attorney General’s Office Says:
State Bar Action Won’t Affect Lockyer Suit Against Trevor Law Group
From Staff and Wire Service Reports
Attorney General Bill Lockyer will continue his unfair practices suit against three Beverly Hills attorneys accused of filing frivolous lawsuits to extract settlement money from thousands of small businesses, regardless of the ultimate disposition of State Bar disciplinary charges, a spokesman said yesterday.
“We’re looking for restitution for their victims and civil penalties,” Tom Dresslar said. “Even if they’re disbarred, we’re not going away.”
Lockyer is also continuing his investigation into at least four other law firms accused of abusing the Unfair Competition Law to extort cash from small businesses, Dresslar said.
The spokesman’s comment came one day after State Bar Court Judge Richard A. Honn issued a 126-page ruling placing Damian Trevor, Allan Hendrickson and Shane Han of the Beverly Hills-based Trevor Law Group on involuntary inactive enrollment.
The three will not be allowed to practice pending the outcome of formal disciplinary proceedings, which the State Bar’s Office of Chief Trial Counsel has 45 days to initiate.
Lockyer has previously called TLG “a shakedown operation designed to extract attorneys fees from law-abiding small business owners” and accused it of having “abused one of the state’s most important consumer protection statutes and dishonored attorneys.”
The attorney general is seeking full restitution of the proceeds of settlements, plus $1 million in civil penalties for the lawyers’ actions, including the filing of 22 lawsuits naming as defendants more than 2,200 auto repair shops, more than 1,000 restaurants and markets and about 210,000 “Does.”
Trevor Law filed the actions based on notices of regulatory violations they found on government agency Web sites, which regulators deemed insufficient to warrant disciplinary action, according to the Attorney General’s Office and the findings of the State Bar Court judge.
One settlement offer, printed on red paper, read: “Either pay even more money to fight in court or settle out of court and get on with business.”
Honn on Wednesday detailed a long list of ethical violations he said the three committed in threatening and filing suit against more than a thousand small businesses, mostly restaurants and auto repair businesses, for alleged violations of Business and Professions Code Sec. 17200, the same statute under which the TLG attorneys are being pursued by Lockyer.
The targets were apparently identified from public information available over the Internet, indicating they had been warned or cited for possible violations of consumer protection laws.
Many of the targets were owned by recent immigrants, and a number told the State Bar that they settled, for a few hundred or a few thousand dollars each, even though they had done nothing wrong, because they couldn’t afford to defend themselves.
At a legislative hearing in January, Hendrickson testified that the Trevor Law Group had sued between 2,000 and 5,000 businesses on behalf of a one-man, for-profit organization called Consumer Enforcement Watch Corp., which state records show shares the same address as the law firm. (Suits against thousands of defendants were coordinated before Los Angeles Superior Court Judge Carl West and dismissed.)
That testimony was misleading, Honn said.
In fact, TLG had created Consumer Enforcement Watch as a “shell corporation” under the law group’s control, the hearing judge said, in order “to defraud the public and generate income.” Settlement funds wired to the corporation’s account were completely withdrawn and transferred to the account of the law firm.
The lawyers attempted to “legitimize” the alter ego corporation, Honn said, by listing a Sacramento resident as an officer of the corporation without his consent and listing Hendrickson’s wife, who had no other role, as agent for service of process.
TLG also brought suit against more than 1,000 restaurants on behalf of a charity, Helping Hands for the Blind. The Chatsworth-based group said it bowed out because it had not agreed to the massive strike against the restaurant industry.
Honn said the lawyers had entered into an “unconscionable” contingency arrangement under which the lawyers were to receive 82.5 percent of all sums collected from suits and settlements brought on the charity’s behalf. The president of Helping Hands, the judge found, agreed to the arrangement after rejecting the lawyers’ original request for a 90 percent contingency.
The judge further found that the lawyers engaged in “moral turpitude, dishonesty, or corruption” by, among other things:
•Lying to the targets of demand letters by claiming that others had settled suits for between $6,000 and $26,000;
•Sending out proposed settlement agreements that purported to release the targets from claims by others, when in fact they had no power to grant such a release;
•Violating court-ordered stays on discovery by demanding, “in order to pressure settlement,” that defendants produce business records.
•Continuing to telephone targeted business owners, demanding settlement, after being notified the businesses were represented by counsel;
•Offering to drop a suit in exchange for the defendant becoming an expert witness against other business owners; and
•Using “coercive settlement tactics” by threatening to send the sheriff to seize business assets, without explaining that this can only be done after a judgment is entered.
TLG attorney Kevin Gerry did not return a call seeking comment. During the hearing before Honn last month, he contended that his clients were simply using “hardball tactics” and trying to earn a living.
Copyright 2003, Metropolitan News Company