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Georgia 'Lawsuit Factory' Hit With $3.1M Fine

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By Jonathan R. Tung, Esq. on December 30, 2015 5:59 AM

Frederick J. Hanna & Associates, a Georgia-based 'lawsuit mill,' resolved a lawsuit brought against it by the Consumer Financial Protection Bureau. The CFPB's complaint alleged that the law firm and its three principal partners relied on faulty, questionable evidence and misleading court filings in order to continue operating a lawsuit factory.

The settlement number is $3.1 million in penalties payable by Hanna without the firm admitting any wrongdoing.

Original Suit

The CFPB sued Hanna last year for alleged violations of federal consumer protection laws. Some of the more troubling allegations contained in the complaint involve the abuse of the court system in a systematic mechanism designed to intimidate payments from those who either owed nothing, or whose debt could not be verified. Hanna would sue to collect debt on behalf of its clients whose names include JP Morgan, Discover, and Bank of America.

Lawsuit Mill

Contained in the complaint are details as to how the firm was able to handle and send out so many demands for payment. In order to handle the numbers, non-attorneys would be used at the most basic level to review debts. This first level of employee would make a quick determination to bring suit or not.

However, in order for it to have the sheen of being a legal practice, it would be reviewed by an actual licensed attorney at the last minute -- with the attorney taking usually less than that -- a minute, before stamping his approval. With this system, one attorney was able to sign 130,000 debt collection letters over a two year period, about 1,300 per week.

Consent Order

The consent order will allow Hanna to pay the penalty, discontinue its mill practice and continue on. It is the best possible outcome because it allows the firm to proceed without admitting any wrongdoing. For its part, the firm has rejected any notion that its practices were inconsistent with federal law and that it had deviated from any previous ethical practice standards.

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