Most Charges Upheld in Debt Collector Fraud Suit

By NICK MCCANN - Courthouse News - January 6, 2011

A class action against a debt purchaser, law firm and process-service company, which allegedly conspired to obtain millions of dollars in default judgments through "sewer service," can proceed to trial after a federal judge in New York upheld most of the claims.

The plaintiffs claim that the law firm Mel S. Harris & Associates obtained default judgments against them for failure to answer collections complaints, but the alleged debtors say they never knew about the court dates because they were not served with summons and complaints as required by law.

So-called "sewer service" refers to process servers who file affidavits in court purporting to have delivered court papers, but have actually thrown the documents into sewers outside the debtor's home. Among companies that only pay process servers for completed service, employees rely on sewer service to get paid, the class claims.

The debt-purchasing company Leucadia National and shell companies L-Credit and LR Credit filed over 100,000 consumer debt collection actions since 2006 in New York City civil court. The class action claims the Mel S. Harris & Associates law firm represented Leucadia 99 percent of the time, and Leucadia regularly hired the Samserv process-serving agency.

U.S. District Judge Denny Chin noted from the complaint that a single Mel Harris employee named Todd Fabacher signed 40,000 affidavits claiming the debt claims were accurate.

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Most Charges Upheld in Debt Collector Fraud Suit