Attorney Files Suit Alleges California Bar Violated American With Disabilities Act
Attorney Sean Rutledge, Managing Partner at United Law Group, has filed a lawsuit against Tim Byers and the California State Bar Association. The complaint alleges that Byers, individually and in his role as prosecutor at the Chief Trial Counsel of the California State Bar, violated Title II of Americans with Disabilities Act, and Section 504 of the Rehabilitation Act of 1973.
After being accepted by the California Bar in 2005, Sean Rutledge opened the United Law Group, with the goal of creating “a law form of the people,” a firm where people could get high quality legal representation without the exorbitant costs often charged by larger firms. As the mortgage meltdown and resulting foreclosure crisis increasingly tightened its grip on California’s homeowners, and loan modification “scams” started making headlines more frequently, United stepped in to offer homeowners a safe and dependable alternative for attempting to obtain loan modification agreements from their lenders and servicers.
Today’s United Law Group, with over 100 attorneys, paralegals, legal assistants and support staff, is one of the country’s largest foreclosure prevention law firms, but that success has ended up placing the firm at the center of the controversy surrounding loan modifications. Until recently, the position of both federal and state regulators has been that homeowners don’t need to retain legal counsel when attempting to negotiate with their lenders for a loan modification, they can simply call their lenders and servicers directly, but many have maintained that this position is simply untrue.
“A loan modification is the result of a renegotiation of the terms of an existing legally binding contract, which results in the revision of some of the material terms of that contract. To think that every consumer is going to be able to take that kind of thing on without representation by legal counsel is not realistic,” says Julie Greenfield, a mortgage banking attorney who has been practicing for over thirty years.
“Homeowners need help when attempting to negotiate a loan modification, not solely because of the contract negotiation aspect, but because servicers are dysfunctional as a result of the enormous number of loss mitigation requests they’re receiving, and their inability to provide a sufficient number of properly trained personnel to handle the volume of requests, making it very difficult for the borrowers to plow through the process,” Greenfield explains.
Although for much of this year the idea that homeowners don’t need legal representation when seeking a loan modification was widely supported by the media, lately the apparent cracks in the administration’s Making Home Affordable plan, have led many to question whether banks and servicers are fulfilling their responsibilities under the terms of the federal program, and whether homeowners have been treated fairly.
Just this past week Treasury reported that overall, only 9% of all loan modification applications have been granted by the lenders and servicers. And, according to an AP News story on August 5th, at least 30 servicers are being sued for charging illegally high fees, using illegal collection practices, and foreclosing on homes prematurely, while at least 14 have been accused of lying to homeowners about whether they would qualify for loan modifications or how low their payments would be if they did receive a modification. Not only that, but in many cases, the servicers are being accused of telling borrowers not to make payments because their applications for modification were being reviewed… and then moving to foreclose anyway.
Even the Federal Reserve’s Website now states that, although it does regulate banks, and will look into every complaint it receives from consumers regarding the banks it oversees, it does not have the authority to resolve every type of problem. Disputes over contracts, undocumented factual disputes between a consumer and a bank, matters that are the subject of a pending law suit, complaints about customer service, or disagreements over a specific bank policy or procedure not addressed by federal law or regulation… as examples, are all outside the Fed’s authority as far as obtaining a resolution is concerned, and in those instances the Federal Reserve recommends that consumers contact an attorney.
None of this, however, has thus far reduced the controversy over what constitutes legitimate loan modification assistance. Many borrowers in California, for example, have complained to the Consumer Affairs Division of the Attorney General’s office, the Department of Real Estate, the California State Bar Association, and on Websites such as the Better Business Bureau, among others. Homeowners that have not hired a law firm to represent them in the negotiations with their lenders, however, have also complained vigorously and in large number that they’ve been cheated and misled, leading one to question whether the firms accused of nonperformance are merely the closest target for consumers distressed over losing their homes to foreclosure and disappointed by the now obvious shortcomings of the administration’s program.
When the complaints started flooding into the California Bar’s complaint department in Los Angeles, the Bar was in no way equipped to handle the volume. An actual attorney must read each complaint received by the California Bar, and when they started receiving 900 – 1100 a month, instead of the handful they were used to receiving, the Bar became very concerned. And apparently, Sean Rutledge’s United Law Group, as one of the largest firms offering to represent homeowners in the negotiations with their lenders and servicers, was chosen as one of their first targets for enforcement action.
They chose a strange case to get started on though. The accusation was that Sean Rutledge had taken a client’s $1750 and never even attempted to obtain a loan modification, and I have to tell you… every single time I hear that sort of thing… and I hear it a lot… I know it’s nonsense. Why? Because it doesn’t make any sense, that’s why. If you believe that a firm will tend to act in its own best interest, then why would someone running a firm do that? If the firm had it their way, every loan mod would be granted in 48 hours and they’d all have principal reductions of 50%, interest rate drops to 3%, and no paperwork to sign, let alone lose.
The Bar, however, seems to have a difficult time assessing a situation involving loan modifications. In the case of Rutledge, they chose a case that made no sense whatsoever. The client in question had only been a client for a few days before deciding to request money back… and the client did receive a refund 72 hours after signing the standard release. There was simply nothing to object to, and yet the Bar had released the name Sean Rutledge for no apparent reason. Or perhaps they’re really that lost, in which case I’d love to show them where it’s at.
According to the complaint, beginning in 2008, Rutledge began to suffer from complications related to his condition, Type 1 Diabetes, including elevated blood sugar levels and severe hypoglycemia that on one occasion resulted in a trip to the hospital where an ER doctor sewed his eyebrow shut after Rutledge suffered a severe seizure. It became clear to Rutledge and his partners that the stress and strain of his leadership position at the firm was causing his health to suffer and he would have to alter his medical treatment, reduce his work schedule, and limit his other activities, as well.
It was in May of 2008 that Rutledge received a letter from Byer at The State Bar of California, stating that charges were being brought against him for alleged violations of the California Code of Ethics. The letter offered Rutledge the chance to avoid the charges being filed, but he would have to meet with Byer to discuss this option on a date provided by Byer. On that date, however, Rutledge was scheduled to receive his insulin pump and be trained in its use.
Rutledge contacted Byer to tell him that he was certainly willing to meet with him, but that the date was problematic as a result of his medical condition. Byer refused to move the date, and so Rutledge retained legal counsel. His attorneys contacted and spoke at length with Byer whose tone was now hostile. Byer again refused to offer any kind of accommodation for Rutledge, and is alleged to have told Rutledge’s attorneys: “UNDER NO CIRCUMSTANCES WILL I GRANT THAT LITTLE AL CAPONE ANY ACCOMMODATION AT ALL.”
According to Rutledge, after speaking with Byer, his attorney said that she would be unable to represent him, telling him that the State Bar had decided to “go after him,” and that they were not “playing by the rules.” He wrote and sent a letter to the Bar to formally request that a reasonable accommodation be granted, so he could attend without foregoing his scheduled medical treatment.
Rutledge claims that Byer never responded to his letter, and instead contacted the Orange County Register, informing them that the Bar had finally gone after one of those “evil loan mod lawyers.” Rutledge says he was never informed that charges were being filed and that he only found out when he received a call from the OC Register asking for a statement concerning the matter.
Rutledge’s suit alleges that, as an individual with a disability, within the meaning of the ADA and the Rehabilitation Act (42 U.S.C. Section 12102(A); 29 U.S.C. Section794) the Bar, which has received federal financial assistance, was obligated to make an accommodation in order to allow him to both receive his medical treatment and attend the meeting with Byer, but instead he was “denied nondiscriminatory, safe access to judicial proceedings under the control of The State Bar of California and State Bar attorney, Byer.” His complaint also states that the Bar is in violation of federal civil rights laws by failing to comply with federal nondiscrimination statues, including the Americans with Disabilities Act of 1990 (“ADA”), 42 U.S.C, Section 12101, et seq., and Section 504 of the Rehabilitation Act of 1973, 29 U.S.C. Section 794.
And if that was all there was to it, this story would come to a close… but according to the complaint filed by Rutledge and his attorneys, things then took a turn from the merely offensive into the realm of the bizarre. Rutledge was told that the Bar had a recording of someone threatening that they would “kill Rutledge,” and he immediately called Bar Investigator, Alma Cueto to ask about what he had been told.
Rutledge claims that Ms. Cueto laughed off the death threat rumor, telling him that he had better stop offering loan modifications or somebody was going to “finish his career.” Rutledge says that Cueto acknowledged that the Bar was “going after” him irrespective of any alleged ethics violations, because United was offering loan modification services to clients, and “if he was smart, he would quit.”
Rutledge’s suit claims that, as a result of the Bar’s conduct, he has suffered injuries, including severe emotional distress, apprehension of danger, embarrassment, anguish, pain, exhaustion, inconvenience, delay, inability to refuse access to the court system, denial of his constitutional rights, and exacerbation of his diabetic complications.
His complaint also stated that he would “gladly engage the Bar in any baseless allegations it has chosen to make against him, not for ethics violations, but for the type of law he practices.”
# # #
Martin Andelman is the feature writer for ML-Implode and a staff writer for The Niche Report magazine. He has interviewed hundreds of homeowners at risk of foreclosure, dozens of firms offering assistance, and written more than 120 articles on topics related to loan modifications over the past year. He is an unapologetic and outspoken advocate for homeowners. You can find his popular column, Mandelman Matters, on www.ml-implode.com.