Ethics Rules Help Distressed Lender Beat Collection Suit

Ethics rules forbid law firms from assigning the rights to sue clients for unpaid fees, a federal judge in Florida held Feb. 9.

The decision—which took up a question that few courts have squarely addressed—extinguished a collection suit against a distressed mortgage lender accused of stiffing its foreclosure counsel.

The lender, Statebridge Company LLC, convinced the U.S. District Court for the Middle District of Florida to invalidate a contract that gave a collection agency the right to sue for $429,527 owed to the allegedly bilked law firm.

Statebridge argued that it intended to challenge the reasonableness of the underlying fees, ...