|
Article Courtesy of The Tampa
Bay Times
By Susan Taylor Martin
Published
January 1, 2017
A judge has ruled that dozens of condominium
associations can collectively sue a Tampa debt-collection company,
potentially a major blow to the already-troubled company's prospects.
Miami-Dade Circuit Judge John H. Thornton recently certified a
class-action lawsuit that accuses LM Funding of deceptive trade
practices and charging illegally high interest rates.
|
Founded in 2008 at
the start of the foreclosure crisis by Tampa lawyer
Bruce Rodgers and his wife, Carollinn Gould, LM Funding
advances condominium associations money for maintenance
and repairs in exchange for the right to collect
delinquent fees, interest and late fees from unit
owners.
But in a lawsuit filed in Miami-Dade County, the Solaris
at Brickell Bay Condominium Association says that while
LM Funding purports to "buy" the rights to delinquent
accounts, it actually operates as a lender charging
interest in excess of the 25 percent allowed by state
law.
In 2011, LM Funding gave Solaris a $140,458 advance but
later collected $198,410 on the accounts. When Solaris
terminated the contract, LM Funding demanded an
additional $395,605 for what it said was the value of
uncollected accounts and the interest that had accrued
on them.
"Thus a debt of less than $150,00 became a debt of
nearly $600,000 in less than three years," according to
the suit.
Solaris also alleges that LM Funding entered into
"materially similar" contracts with other condominium
associations and that their claims could best be handled
on a class-action basis. |
|
The fortunes of LM Funding have fallen
sharply since the Tampa debt collection company went public in
2015. A judge recently ruled that dozens of condominium
associations can collectively sue the company.
|
On Dec. 5, the judge agreed and certified a class that could include 325
or more condo associations.
Lawyers for Solaris will also represent other members of the class.
In a statement, Rodgers predicted that LM Funding will get the suit
dismissed and continue in business "for years to come."
"The allegations in the complaint mistakenly recharacterize our business
model as a loan, rather than as a business that takes on the risk of
collecting delinquent dues from individual condo units," Rodgers said.
He added that the judge should remove himself from the case because his
wife is partner in the law firm that filed the suit.
Class-action lawsuits are relatively common, especially in cases in
which a defective product harms thousands of people. Although not
familiar with the LM Funding lawsuit, one expert said that certification
as a class is "a very important watershed" in any litigation and can
increase the pressure on the defendant to settle.
"What you have is a single litigation with a lot of aggregated claims
and potentially a fairly large damage recovery," said William H. Page, a
professor at the University of Florida's Levin College of Law. "That's
not to say it's good to face an enormous number of individual lawsuits,
but it sounds like it may be that some of these condo associations
wouldn't file at all unless in the form of a class action."
LM Funding has struggled since it went public in October 2015 and raised
about $10 million in an initial public offering. In September, the
company announced that it was cutting staff and slashing salaries,
including those of Rodgers, who went from $385,000 to $269,500, and
Gould, who went from $150,000 to $84,000. Its president left the
company.
At the time, Rodgers said the company was collecting on fewer accounts.
In its third-quarter 2016 filing with the federal Securities and
Exchange Commission, LM Funding said that it lost $914,180 on revenues
of slightly more than $1 million. After going public at $10 a share in
2015, its shares have fallen sharply, closing Monday at $4.65 apiece.
|
