A Chicago firm claiming to have a “nationwide” network of partner lawyers—and two such local attorneys—were sanctioned by a Virginia bankruptcy judge for a number of violations, including practicing law without a license.
Judge Paul M. Black, of the U.S. Bankruptcy Court for the Western District of Virginia, ordered Upright Law LLC Feb. 12 to pay $250,000 and barred it from practicing in the district for five years.
Two Virginia lawyers, Darren T. Delafield and John C. Morgan Jr., were sanctioned $5,000 each and barred from practicing before the court for a year and 18 months, respectively.
“Upright preyed upon some of the most vulnerable in our society,” Black said, referring to consumers in financial distress.
The charges center on Upright Law’s general business practices, and include a payment scheme that was “a scam from the start,” Black said.
Black’s action resulted from complaints by the U.S. trustee’s office, which is part of the Justice Department and oversees bankruptcy practice and trustees nationwide.
The office’s executive director, Cliff White, praised Black’s decision. “Lawyers who inadequately represent consumer debtors harm not only their clients, but also creditors and the integrity of the bankruptcy system,” White said in a statement.
The Hard Sell
Upright Law markets consumer bankruptcy services online and aggressively tries to “sell bankruptcy” to clients finding it through the internet, using non-attorney sales personnel.
After getting paid, Upright Law would collect information from clients and prepare bankruptcy documents. A “partner” licensed to practice in the client’s state would finalize documents and file them in court.
But Black found improprieties. For one thing, Upright Law’s non-attorney sales force often gave legal advice—and sometimes plainly wrong advice—to clients.
The court quoted from a manipulative “play book” full of “hard sell” tactics designed to close as many “sales” (bankruptcy cases) as possible, regardless of whether a lawyer recommended that bankruptcy was in the client’s interest.
Another problem was what was called the “New Car Custody Program,” a form of payment in some cases.
When underwater debtors were prepared to surrender their cars, a company known as Sperro would tow it, sometimes hundreds of miles, to one of three states that grant a lien for towing or storage senior to other liens.
Sperro would rack up storage, towing and unloading fees before notifying secured lenders, which would pay to recover the property or abandon it. Sperro would auction the vehicle if no payment was made.
In exchange for the debtor’s cooperation, Sperro would pay bankruptcy legal fees and filing costs. Sperro was also a defendant in the suits, but it defaulted. Black ordered it to account for and disgorge its income from cases originating in his district.
Upright has been challenged in other filings. On Feb. 2 the Bankruptcy Court for the Western District of Louisiana sanctioned the firm and its local attorney for professional negligence.
Attorneys for the defendants didn’t respond to a request for comment.
Robbins was represented by William J. Charboneau and Margaret K. Garber, Roanoke, Va. The defendants were represented by Richard C. Maxwell and Christopher W. Stevens, both of Roanoke, Va., and Steven J. Katzman, San Clemente, Calif.
The case is Robbins v. Delafield (In re Williams), 2018 BL 46950, Bankr. W.D. Va., Chapter 7 Case No. 15-71767, Adversary Proceeding No. 16-07024; Chapter 7 Case No. 16-50158, Adversary Proceeding No. 16-05014, 2/12/18.
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