Tens of thousands of Coloradans whose homes were foreclosed on since 2009 by law firm Aronowitz & Mecklenburg will share in a massive class-action lawsuit settlement over allegations the lawyers regularly inflated fees that homeowners were forced to pay to save their house.
The settlement, on paper since April but only now getting court approval, comes just days after the Denver law firm agreed to a separate $10 million deal with state investigators to settle an investigation into the same alleged misconduct.
The law firm — owned by Robert Aronowitz, his daughter, Stacey Aronowitz, and her husband, Joel Mecklenburg — is to dissolve in the next six months, according to terms of their settlement with the Colorado attorney general’s office.
But not before the firm pays back roughly $2.5 million to more than 32,000 families — money the lawyers allegedly overcharged for the posting of legal notices in the cases.
The law firm denies it did anything wrong, but agreed to the settlement to avoid costly litigation, according to a copy of the 164-page document filed in Denver district court.
A number of legal steps must happen before more than 32,000 families —the approximate number of foreclosures the lawyers have filed since Aug. 1, 2009 — are likely to see a check, including a judge approving the final deal, a process that could take weeks.
“We’re really happy with it, and people will be getting back what they deserve,” attorney Jordan Factor of Allen & Vellone told The Denver Post. “Certainly they’ll get as much as we felt we could prove if we had taken this to trial.”
Identical lawsuits ongoing
Attorneys for Aronowitz called the settlement “a relief.”
“They are happy to be the only firm in the state who put the investigation and litigation behind them,” attorney Richard Benenson said. “It was in our best interests to resolve it all and move on.”
Nearly identical civil lawsuits seeking class-action status and alleging the same conduct against The Castle Law Group and against attorney Michael Medved’s firm are ongoing.
An attorney general fraud lawsuit nearly identical to the one filed Tuesday against Aronowitz was filed that day against the Castle firm.
Those affected in the Aronowitz settlement should see a check ranging from $20 to $225 in the next couple of months, depending on which of three classes they belong to. Postcards have been mailed advising homeowners of the settlement.
Some people might get more than one payment, such as those who cured more than one foreclosure, even on the same house.
The law firm is accused of charging $125 each to post on homes facing foreclosure a pair of notices that detail a homeowner’s rights to seek financial help and about a court hearing called a Rule 120.
The attorney general investigation alleged the overcharges were intentional, and that the actual cost was closer to $25, but because Aronowitz lawyers hired a company they owned — Xceleron — to do the postings, they controlled the costs.
The lawsuit’s plaintiffs — Rodrick Kemp, Linda Donna, Richard Lemesany, and Martin and Michaelie Wingo — each are to receive an additional $10,000, though the Wingos will share that amount. Another $875,000 will be paid to cover legal fees.
Donna lives in Denver and cured her foreclosure in May 2012. The bill Aronowitz submitted that she paid included $125 charges for each of the two legal postings, according to a copy of the document filed with the Denver public trustee’s office.
The class-action lawsuit was filed last year by attorneys at Allen & Vellone in Denver when news of an attorney general investigation into alleged fraud by the state’s largest foreclosure law firms went public.
That happened when Aronowitz and his biggest competitor, The Castle Law Group led by attorney Larry Castle, sued Attorney General John Suthers over investigative subpoenas that sought documents the lawyers claimed were protected by attorney-client privilege.
The three classes and the payouts include:
• Homeowners who paid a county public trustee what they owed on a mortgage, including the lawyers’ fees, and stopped the foreclosure process, known as a cure. They will get $225 per foreclosure;
• Those who stopped a foreclosure through a loan modification. They will receive $100 only if they opt-in on the settlement, up to a maximum $1.1 million to be paid out for all;
• Homeowners who lost their house to foreclosure auction for a price that was less than what they owed. They will receive $20 per foreclosure.
Investors not included
Investors who purchased properties at county foreclosure auctions are not covered by the settlement because they were not plaintiffs, although they also were required to pay the lawyers’ bills, which included the posting costs.
Also not covered by the settlement are other fees the attorney general alleges were overcharged, including up to $100 for a one-page document, called a “statement of qualified holder,” that purportedly takes seconds to fill out.
Expenses charged for the filing of nonexistent Rule 120 lawsuits, revealed by The Post last year, also are not part of the settlement.
By accepting the payments, homeowners cannot sue for any other charges they might have overpaid in the foreclosure.
Aronowitz’s $10 million settlement with the attorney general will be used largely to cover legal fees in the case and future consumer education. Only a few homeowners with current foreclosure cases are to be reimbursed.
Like Aronowitz, Suthers’ office filed a lawsuit against the Castle firm alleging the same conduct of intentionally overcharging foreclosure fees.
The state’s lawsuits came after a two-year investigation following a number of Denver Post stories about the state’s foreclosure process, public trustees and the law firms.
David Migoya: 303-954-1506, dmigoya@denverpost.com or twitter.com/davidmigoya
About the Aronowitz settlement:
• Who’s impacted? Any home-owner with a Colorado foreclosure filed Aug. 1, 2009, through April 24, 2014, by Aronowitz & Mecklenburg.
• What’s alleged? The law firm wrongly charged $125 for each of two legal notice postings on a foreclosure property when the actual market rate was $25, which the law firm denies.
• Who can collect? Homeowners who cured their foreclosure, stopped the process with a loan modification, or lost their home in a foreclosure sale that was for less than what they owed.
• Who is not included? Homeowners who lost their house to auction for a price at or above what they owed; auction buyers who purchased a foreclosed property; banks and financial institutions.
• What’s next? About 32,000 homeowners should receive a postcard advising them of their eligibility. Only those with a loan modification must opt in for payment. All others are automatic.
• When will I see a check? By the end of September.
• How do I get more information? Call 844-272-9603 or go to KempForeclosureSettlement.com.
• Is this different than the attorney general settlement for $10 million? Yes. They are separate lawsuits.
• Am I due any money from the AG settlement? Only if you have a current open foreclosure with other factors present. Contact the AG for additional information at 800-222-4444 or go to coloradoattorneygeneral.gov/complaint.
• What if my foreclosure was handled by The Castle Law Group? Those cases remain in litigation, and no settlements have been reached.
