California Appeals Court Allows Homeowner's Class Action Suit Alleging Loan Modification Misconduct Against Attorney To Continue

In Southern California, Metropolitan News Enterprise reports:

• The Fourth District Court of Appeal has ruled that a former client can proceed with a suit alleging that Irvine attorney Sean Rutledge, who resigned from the State Bar in November amid accusations of loan modification misconduct, engaged in capping and charged illegal fees.

• Reasoning that Cu Phan established a probability of prevailing on his claims, Div. Three on Friday in an unpublished opinion affirmed an order denying Rutledge’s motion to strike Phan’s complaint as a strategic lawsuit against public participation.

• Phan filed a class action in September 2009 claiming that Rutledge and his firm, United Law Group Inc., violated state law by using telemarketers to make cold calls to individuals who were in default or faced foreclosure on home loans. Under state law, Phan contended, such conduct constitutes “capping,” a practice sometimes referred to in other contexts as “ambulance chasing.”

• He also alleged that Rutledge and the firm required clients to pay purportedly “non-refundable” advance fees. Rutledge, who was admitted to the State Bar in 2008, tendered his resignation with disciplinary charges pending,(1) and his firm filed for bankruptcy protection following Phan’s suit. He was ordered enrolled as an inactive member earlier that month under Business and Professions Code Sec. 6007 for an alleged pattern of client neglect involving failing to perform, failing to communicate, and/or failing to refund unearned fees in 14 matters.

For more, see C.A.: Suit Accusing Attorney of Capping Can Proceed.

For the court's ruling, see Phan v. Rutledge, No. G042983 (Cal. App. 4th District, Div. 3, September 10, 2010).

(1) Reportedly, State Bar Court Judge Richard Honn wrote that Rutledge “promised to help troubled homeowners—many of whom were in arrears or on the brink of foreclosure—modify their home loans and maintain financial stability,” but instead “took their money and time and offered little or nothing in return,” leaving them in a worse position than when they sought his help.