The Case Against Philip Kramer, Et Al


Okay, so it figures that while I was in Arizona and Nevada filming the documentary I’m anxious to complete and release this calendar year, the fit hit the shan on several of the “mass joinder lawsuits” filed by California attorney Philip Kramer.  The California State Bar and the California Attorney General shut down four allegedly related firms on the same day, including the law offices of Philip Kramer, Christopher Van Son, Paul W. Petersen and Mitchell Stein.

Now, I know there are a lot of folks that want me to say something about this unfolding situation, and I’m sure there’s no shortage of blogs ready to convict anyone and everyone allegedly involved.  That’s not hard to do, by the way… it’s easy to parrot what the AG or California State Bar puts out in a press release.  No one needs me for that.

Okay, so before I begin looking at the situation related to Kramer and the rest, here’s how I thought I might begin:

A company driven by greed lured homeowners into a moneymaking scheme using misleading marketing and deceptive sales practices. Ultimately, the homeowners were scammed out of thousands of dollars… up to twenty grand or more, in some cases.

The homeowners were told that, by paying the company, they would save their homes from foreclosure, but they ended up losing their homes to foreclosure because the company that defrauded them, in reality, did nothing with their files. They just kept taking the money sent in by the homeowners each month while making absurd claims such as that the homeowners hadn’t sent in the right paperwork over and over again.

The scam has yielded billions for the perpetrators and continues to this day.

Am I writing about Phil Kramer?  No… those paragraphs were intended to be about Bank of America, or JPMorgan Chase, or Wells Fargo… or Citibank, GMAC, One West Bank… or any of the banksters, for that matter.  So, let’s just keep things in perspective, shall we?

I turned 50 years old a few months ago, and the last few years notwithstanding, I’ve never met anyone who was interested in, much less excited by the prospect of suing their bank.  Today, it’s obvious that millions of Americans want very much to sue their bank, and that demand has unquestionably been created, not only by the collective behavior of the banks themselves… but also by the complete and utter failure of state and federal governments to mitigate the damage… no, the carnage… being caused by the foreclosure crisis.

So, although I’m certainly not in favor of deceptive marketing or illegal sales efforts, I just want to make sure we all understand that none of it would have been possible without the bankers’ malfeasance and the government’s incompetence and/or complicity with that malfeasance.  What the banks have been allowed to do to American homeowners has been, in my mind anyway, nothing short of criminal.

To read to the California AG’s press release, you would think that a major pat on the back is in order… that they’ve taken swift and necessary action to protect the state’s consumers from unscrupulous con artists.  But that’s just not the case, I’m sorry to say.  There are countless scammers out there bilking distressed homeowners today, and no one has done much if anything to stop any number of those companies.

The cold hard truth is that scammers will exist as long as mortgage servicers are allowed to defraud homeowners with loan modification run-arounds and government’s best advice for homeowners at risk of losing their homes to foreclosure is to “call a HUD counselor or their bank directly.”  Everyone who tries to follow such advice soon discovers just how ineffective either of those avenues are and when neither proves fruitful, homeowners turn to Google search and sometimes they get ripped off as a result.

What Kramer and the others are accused of appears to involve only marketing and sales efforts, not the lawyers or lawsuits themselves.  Among other things, the suit alleges false advertising and violations of the state’s Business & Professions Code.  According to Silicon Valley’s Mercury News on August 18th

“No disciplinary charges have been filed against the attorneys by the Bar Association.

The attorney general’s lawsuit does not indicate whether the cases filed by the four law firms have any legal merit. To that end, the Bar Association will look at the circumstances of each case to see whether they should be referred to other lawyers. Clients can call the Bar Association at 213-765-1672 for more information.”

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The Case Against Kramer, et al.

Fundamentally, the California Attorney General is accusing Philip Kramer and the other named attorneys of, among other things contained in California Business & Professions Code Section 6000, “running and capping,” which is the phrase often used to describe unethical sales and marketing practices by lawyers.  The bottom-line is that it’s illegal for lawyers to pay non-lawyers referral fees or for lawyers to improperly solicit clients.  (For a copy of the complaint filed by the California AG, click HERE.)

Here’s how running and capping operations have commonly operated in the past:

A lawyer (or his agent) sends a “runner” to a hospital or accident scene, and without first being contacted by the victim, the runner tries to sign up potential clients.  This situation is where the term: “ambulance chaser” comes from.

Lawyers have also been known to engage a doctor or nurse at a hospital to “cap” a case.  This can occur when a lawyer has a friend working at the hospital, like a doctor, who tries to sign up… or “cap” a patient’s personal injury case.

One of the many reasons these ethical rules applying to lawyers were passed is because lawyers hold a position of public trust, and they’re also in a position to easily abuse the public trust.  Obviously, soliciting an individual in the hospital who is dealing with the pain and perhaps shock that often accompanies an injury would not be ethical for a lawyer, and paying someone to do it for you, if you’re an attorney, would not be legal.

In Emmons, Williams, Mires & Leech v. State Bar (3rd Dist. 1970) 6 Cal.App.3d 565, 573, 86 Cal. Rptr. 367, the court provided the following rationale for regulating fee splitting between attorneys and non-lawyers:

“Prohibited fee-splitting between lawyer and layman carries with it the danger of competitive solicitation; poses the possibility of control by the lay person, interested in his own profit rather than the client’s fate; facilitates the lay intermediary’s tendency to select the most generous, not the most competent, attorney.”

The rules governing the professional conduct of lawyers in California are found in the California Rules of Professional Conduct (“CRPC”).  California’s Supreme Court “pursuant to statute to protect the public and to promote respect and confidence in the legal profession” approves these rules, after being adopted by California State Bar’s Board of Governors.  (According to the California State Bar website, the current CRPC is currently being revised.  To see what changes are being proposed click HERE.)

Here are a couple of noted examples of fee splitting taken from Karpman & Margolis pages 10-11 pertaining to CRPC 3-120 Financial Arrangements with Non-Lawyers:

A lawyer formed a partnership with his father, a disbarred lawyer; the father worked as law clerk, bookkeeper and office manager for his son, and also ran his own business as a tax consultant. Profits from the business were divided equally. This arrangement was found to violate this rule, to encourage improper solicitation and to constitute the practice of law by a layperson. Crawford v. State Bar (1960) 54 Cal.2d 659, 7 Cal.Rptr. 746, 355 P.2d 490.

A lawyer formed a partnership for the practice of law with a non-lawyer, split fees with the non-lawyer, and used the non-lawyer as a “runner” and “capper”. The non-lawyer signed up clients, developed medical information and negotiated settlements. Six-month actual suspension was imposed. In the Matter of Nelson (Review Dept. 1990) 1 Cal. State Bar Ct.Rptr. 178, 184-185.

I noticed that some of the marketing efforts, those used by Kassas Law, for example, stated that the firm was offering services referred to as “pre-litigation,” but In the Matter of Bragg (Review Dept. 1997) 3 Cal. State Bar Ct.Rptr. 615, allowing non-lawyer to receive a percentage of fees on “pre-litigation” matters violates CRPC 1-320, so there doesn’t appear to be any relief resulting from that distinction.

Now, I think it’s important to recognize that Philip Kramer has categorically denied any knowledge of “running and capping” or fee splitting with non-attorneys in conjunction with any of his lawsuits.  According to Kramer, he partnered only with other law firms and shared fees only with licensed attorneys who referred clients to his firm, which is generally permissible by the way.

I spoke with Kramer right after his practice was closed by the State Bar and his position is that if any fee splitting or running and capping was going on, he knew nothing of it, never authorized it, and was entirely uninvolved in it taking place.  He further points out that when I brought the “deceptive” mailer to his attention last February, he immediately sent out cease and desist letters to anyone using it to solicit clients.

So, it would seem that some portion of the case against Kramer could depend on what the state and or State Bar can prove he knew, and when he knew it.  The court appointed receiver issued his preliminary report on August 30th, and there’s no question that much of it sounds fairly damning, although there are two sides to every lawsuit and it’s worth remembering that the receiver is not providing Kramer’s defense.  (If you have questions for the court appointed receiver, click HERE.)

Another question that comes to my mind is to what degree Kramer can be held responsible for the acts of others.  In my attempts to research this issue, it seems clear that lawyers have a responsibility to supervise non-attorneys who work for their firms, but while the ABA has Model Rule 5.3(a) and 5.3(b) that provides “explicit provisions regarding supervision of non-lawyer assistants,” on the surface California “has no rule pertaining to the duty to control non-lawyer assistants.”

However, in the Discussion to CRPC 3-110 it states that…

”… the duties under CRPC 3-110 include a duty upon all California lawyers to supervise the work of non-lawyer employees and agents, and some courts have imposed liability on lawyers both for failure to supervise non-lawyer assistants and for failure to rectify a non-lawyer’s misconduct.”

The ABA’s MR 5.3(a) “provides that a partner in a law firm shall make reasonable efforts to ensure that the firm has in effect measures giving reasonable assurance that the behavior of non-lawyers will be compatible with the professional obligations of the lawyer.  MR 5.3(b) provides that a lawyer with direct supervisory authority over non-lawyers shall make reasonable efforts to ensure that the person’s conduct is compatible with the professional obligations of the lawyer.”

And please… don’t even think about taking this presentation as any sort of  exhaustive or even accurate representation of the rules involved, as with everything in the law, “it depends” and there’s something else I didn’t know… so, always check with a lawyer when you have legal questions.  If you really want to try researching the issues involved, however, Cornell University Law School has a site dedicated to discussing these and other topics, and you can find it HERE.

So, if Kramer only contracted with law firms and only shared fees with lawyers, and those firms marketed or split fees inappropriately, will the courts hold him responsible as if he had committed the acts himself?  I really have no idea, but certainly many lawyers I’ve asked to weigh in say they think it’s likely that they will.

Kramer says that when the AG and State Bar came in to take over his practice, they found six attorneys all working on the cases he filed late last December against the major banks.  Further, he points out that he has appeared on behalf of the plaintiffs in each of the cases and has been in the process of amending the various complaints in response to motions by the defense.

In fact, he told me that the day after he was shut down, even though he was not allowed to appear for the plaintiffs at that point, he went to Orange County to sit in the courtroom in case there were any questions he could answer for the court.  He also said that no one from the State Bar or California AG’s office was there to appear on behalf of the plaintiffs.

Now, I don’t know whether the State Bar or AG bears any responsibility to appear in this instance, but it does seem to me that if they were so concerned with the homeowners involved, they would have sent someone to ask for a continuance at the very least.

And that brings up another bug I have in my bonnet… was this the only way this could have been handled by the authorities?  I would argue that the answer is no.

I wrote about Kramer and the deceptive mailer on February 23, 2011… that’s a full seven months before the State Bar and AG showed up on the scene.  Seven months to determine whether the mailer was deceptive or whether there were non-lawyers and illegal fee splitting involved?  Seriously?  I’m sorry, but it seems like a long time.

Why couldn’t the State Bar and/or the AG contact Kramer and the others involved months earlier to tell everyone to cease and desist the sales and marketing that now they say was illegal or otherwise improper?  Probably wouldn’t have made the headlines like their chosen approach has, but it sure seems like it would have stopped a whole bunch of homeowners from joining the suits for the wrong reasons.

I’m not going to get into any sort of detailed analysis of the receiver’s report, frankly I simply don’t feel qualified to do so and it only presents one view of what’s gone on.  I’m also not going to comment on the declarations of others involved that claim that Kramer or Stein were present at meetings and the like.  Those who provided such declarations had every reason to shift the blame to others so their credibility is at best diminished as far as I’m concerned.

Lastly, I don’t really understand why Mr. Kramer can’t be allowed to continue representing the plaintiffs in his cases, perhaps under some sort of supervised arrangement.  No one seems to be questioning his competence, he is an experienced trial lawyer with a spotless record for the last 27 years and is A rated by Martindale-Hubble.

By the way… attorney Barbara Gilbert asked me to be interviewed on the subject of Kramer et al on Blog Talk Radio and you can listen to it by clicking here:

Listen to internet radio with legallink1 on Blog Talk Radio

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I borrowed this photo from piggybankblog.com.  Funny stuff.

The Case Against Mitchell Stein…

Mitchell Stein was barely even mentioned in the receiver’s preliminary report, and I’m not even sure what the State Bar or California AG says that he did wrong here.  One thing I do know… Stein and hundreds of homeowners in three states are not at all happy with the actions taken by Kamala Harris and they’ve filed lawsuits against the California AG to seek justice.

In fact, according to an article posted on Investors.com, under the headline: California Attorney General Kamala Harris “Acted as the Pawn of America’s Most Powerful Banks” While Violating Homeowners’ Civil Rights, Lawsuits Allege. In that post it says…

“Hundreds of homeowners and former homeowners filed lawsuits in three states alleging that California Attorney General Kamala Harris “acted as the pawn of America’s most powerful banks” when she seized their legal files and denied them the right to the legal counsel of their choice.

Suits were filed Tuesday in federal courts in New York, Florida and California, according to Erikson M. Davis, an attorney involved in the actions. Davis said he expect homeowners to file against Harris in additional states.


Rather than protecting consumers, Defendant Harris’ actions primarily benefitted Bank of America, which has sought repeatedly to discredit attorney Stein ever since he filed the original lawsuit against Bank of America in 2009, a lawsuit that the attorney general herself described as the “granddaddy” of mass joinder bank cases.”

To check out the suits filed against Harris here are the case numbers:

U.S. District Court Southern District of New York: Case 11CIV 6230.

U.S. District Court Southern District of Florida: Case 0:11-CV-61967-WJZ

U.S. District Court Central District of California: Case LACV-117303-CBM(MRWx)

Stein is obviously outraged at being shut down and removed from trying his own cases… he points out that he filed the first such case against Bank of American in 2009 and now on its fourth amended complaint, it is still proceeding in California’s courts.  He says that his firm had nothing to do with any mailings or telemarketing efforts and that none of his clients were obtained through such means.

Mitchell Stein went to my high school a couple of years ahead of me… we grew up in the same neighborhood, so I’m not surprised he’s going to fight and fight hard.  It’s a Pittsburgh thing, and being Jewish doesn’t hurt either.

He says he attended a few meetings in the fall of 2010 with Kramer and Brookstone Law, another firm marketing a multi-plaintiff lawsuit modeled after Stein’s original suit against BofA, but that he decided not to go forward with the proposed partnership.  Kramer and Brookstone decided to go their separate ways as well.

Personally, I never did see any marketing materials from Stein’s firm… I saw quite a few that mentioned his Ronald v. Bank of America lawsuit, but they all came from other law firms marketing Kramer’s lawsuits and mentioning Stein, it seemed to me, to add some credibility to their pitch.

And while Kramer admits that he had problems controlling “affiliated law firms” and policing their marketing tactics and that he may be held responsible for things that happened on his watch, Stein is adamant that he had no involvement in any sort of fee splitting, deceptive advertising or running and capping whatsoever.

I did hear about a few emails allegedly between Stein and Kramer that appeared on the California AG’s website, one of which supposedly contained a discussion about how the two lawyers were excited about the prospect of making a lot of money, or something like that.  Honestly, and not having seen them personally, this sort of thing doesn’t offend me in the least.  Trial attorneys are all money motivated to some degree and being excited about a proposed new venture’s prospects for profits isn’t enough to get my dander up.

So, in answer to any questions related to why I haven’t written anything until now about the developing story of Philip Kramer et al, the reasons are quite simple:

  1. I’ve been busy filming and editing my documentary about the real foreclosure crisis and how it is destroying families, communities and our economy.
  2. It takes me time to read the facts of a case and talk to those involved so I can write something at least semi-intelligent that someone might want to read.  I started writing this article after dinner last night and I’m just finishing it at 5:57 AM… it’s a lot of work.
  3. I don’t write about something unless I think my view matters.  I was quite sure that there would be lots of people writing about Kramer’s firm being shut down… boasting of how they knew it all along or otherwise jumping for joy.

You have to understand that while I’m happy to see any and all deceptive sales practices targeting homeowners stopped, I take no pleasure in seeing Philip Kramer prevented from suing Bank of America or any of the other banksters, all of whom in my mind deserved to be sued for the next hundred years for what they’ve done.

And with countless scams still out there around every corner, I’m not ready to cheer because the California AG finally did something to prevent such sales practices.  Nor am I thrilled that over the last TWO YEARS the California State Bar took some sort of action against 20 lawyers in California, especially after telling the public that there were thousands of lawyers scamming homeowners.

I first published the “alert” about the deceptive mailer used in conjunction with the marketing of the Kramer lawsuits.  And late last February, I interviewed Phil Kramer and on the 23rd of that month published his denials of having anything to do with said marketing.  About a month later, I also published another “warning” for consumers related to the same mailing showing up again in St. Louis.  Most recently I posted a podcast during which I interviewed Mr. Kramer so people could hear directly from him and not from some deceptive sales presentation.  And now this… and I’ll continue to follow the story… but, it’s time to get back to work educating the American public and doing whatever I can to stop the banks from continuing to destroy my country.

So, lastly… I can only say that I hope homeowners won’t give up on fighting the bankers as a result of what’s happened to Philip Kramer and the others.  If you paid his firm, you still have a lawsuit and may be able to get another lawyer to amend your complaint and move forward.

Or you can probably withdraw your name from the suit and start over… ultimately you may be able to get some or even all of your money back from the California State Bar’s recovery fund, and even if you can’t… you need to pick yourself up and realize that the battle your fighting is also being fought by millions of American homeowners… and it’s only just begun.

Don’t let the banks win… don’t sit on the sidelines… fight for what’s right… for the American middle class… for our democracy… for our children.  Because we certainly can’t leave them with the banking industry controlled mess we refer to as “our government” today, can we?

No we can’t and we won’t.

Mandelman out.

Please stay tuned to Mandelman Matters in the days, weeks and months to come… please keep telling others to read the articles you find most important.  I realize that I’ve been missing in action this past month or so, but it’s not because I’ve been laying by the pool, although I do admit to some of that.  Stay tuned because I’m about to take things up a few notches and I’m going to need your help.


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