Law Firm or Law Fail? Debt Settlement Company’s Legal Footing Called into Question

The first major volley in the lawsuit filed by plaintiffs Yellowstone Capital and EBF Partners (“Everest Business Funding”) against a debt settlement company and their alleged ISO partners has been exchanged. And it’s a doozy.

Three of the eight defendants, Mark D. Guidubaldi & Associates, LLC (d/b/a Protection Legal Group) aka PLG, Corporate Bailout, LLC, and PLG Servicing, LLC have sought to collectively dismiss the complaint on the grounds that they are attorneys “engaged in the practice of law with the Merchants as their clients.”

PLG, a self-described “multi-jurisdictional law firm that practices law in various jurisdictions nationwide,” argues in their motion papers that those employed by Corporate Bailout and PLG Servicing carry out certain administrative and support tasks for PLG. And it’s okay that no one at either of those companies are attorneys, they claim, because PLG supervises it all. That enables them to be covered as attorneys in an attorney-client relationship, they assert.

If true, they might want to try harder at supervising. As you might remember, Corporate Bailout, a telemarketing debt settlement firm, was featured on the cover of the New York Post earlier this year after being sued for running an operation “so sexually aggressive, morally repulsive, and unlawfully hostile that it is rivaled only by the businesses portrayed in the films ‘Boiler Room’ and ‘The Wolf of Wall Street.’”

Corporate Bailout’s principal office is in New Jersey. PLG, the law firm, is based in Illinois. Can it really be that the former is considered a law firm through a relationship with the latter?

Whoa, not so fast, says an amended complaint filed by the plaintiffs on Tuesday, which argues that not even PLG is a legitimate law firm. “In fact, none of the Debt Relief Defendants is a law firm engaged in the provision of legitimate legal service,” they contend. “PLG is not even registered as a law firm in Illinois, as required by the rules of the Illinois courts,” they add.

If true, then this case could potentially have far-reaching consequences beyond simple tortious interference.

Some excerpts from this bombshell allegation:

PLG has one employee who is a lawyer, but does not as a rule advise or represent its customers. The advice those merchant customers receive is given by non-lawyers at Corporate Bailout and PLG Servicing, who approach and recruit merchants in ways no lawyer subject to the Rule of Professional Conduct 7.3 would ever be permitted to solicit clients. The non-lawyer personnel at Corporate Bailout and PLG Servicing are not supervised by the solitary lawyer at PLG, but by [Mark] Mancino and [Michael] Hamill, who are not lawyers – an arrangement that, if PLG were a law firm engaged in the provision of legitimate legal services, would violate Rule of Professional Conduct 5.3. To the extent that any of the advice the non-lawyers at Corporate Bailout and PLG Servicing give to merchants in furtherance of the Debt Relief Defendants’ tortious activity is legal advice at all, giving it violates the prohibition on the unauthorized practice of law. PLG orchestrates this activity, which damages the merchants as well as their Merchant Cash Advance Providers, in flagrant and deliberate disregard of the law.

[…]

Although the merchants are told that they are paying the funds into an “escrow account,” in reality PLG does not treat the funds like client escrow funds; it pays itself from them from the beginning, regardless of whether it is providing any services, and with no differentiation between client funds and funds payable to PLG. If PLG really were a law firm engaged in the provision of legitimate legal services, its practices with respect to client funds would be barred by the Rule of Professional Conduct 1.15.


– plaintiffs in the Amended Complaint (<-- click to download a copy)

Plaintiffs have also added Michael Hamill as an individual defendant. Fellow co-defendants Mark Mancino, American Funding Group, Coast to Coast Funding, LLC, ROC Funding Group, LLC, and ROC South, LLC did not file a response to the original complaint.

Sean Murray is the President and Chief Editor of deBanked and the founder of the Broker Fair Conference. Connect with me on LinkedIn or follow me on twitter. You can view all future deBanked events here.