State v. Orion Processing, LLC,
2015 NCBC 102.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
COUNTY OF WAKE 13 CVS 7161
STATE OF NORTH CAROLINA, ex )
rel. ROY COOPER, Attorney General, )
and THE NORTH CAROLINA STATE )
BAR, )
)
Plaintiffs, )
)
v. )
)
ORION PROCESSING, LLC, d/b/a )
World Law Processing, World Law )
Debt, World Law Group, and World )
ORDER & OPINION
Law Plan; SWIFT ROCK )
FINANCIAL, INC., d/b/a World Law )
Debt, World Law Group, and World )
Law Plan; DERIN ROBERT SCOTT; )
BRADLEY JAMES HASKINS, d/b/a )
World Law Group; and WORLD LAW )
SOUTH, INC., d/b/a World Law )
Group, )
)
Defendants. )
)
)
{1} THIS MATTER is before the Court on Defendant World Law South,
Inc.’s (“WLS”) Motion to Dismiss Plaintiffs’ Complaint for Failure to State a Claim
upon Which Relief Can Be Granted (“Motion”) pursuant to Rule 12(b)(6) of the
North Carolina Rules of Civil Procedure. The Motion is DENIED.
North Carolina Department of Justice by M. Lynne Weaver and
Michael T. Henry for Plaintiff State of North Carolina.
The North Carolina State Bar by David R. Johnson for Plaintiff The
North Carolina State Bar.
Carlton Law, PLLC by Alfred P. Carlton, Jr. for Defendant World Law
South, Inc. at the filing of the Motion. Counsel has since been allowed
to withdraw.
Gale, Chief Judge.
I. BACKGROUND
{2} Plaintiffs filed their original Complaint on May 22, 2013, bringing
claims of (1) unlawful debt adjusting, (2) unfair and deceptive trade practices, and
(3) unauthorized practice of law (“UPL”) against Swift Rock Financial, Inc. d/b/a
World Law Debt a/k/a World Law Group; Orion Processing, LLC d/b/a World Law
Processing; and Derin Scott (collectively “World Law Defendants”), and Global
Client Solutions, LLC. The allegations in the Complaint centered on a scheme by
which Defendants would, among other things, hold themselves out as a global law
firm, promise to settle consumers’ debt, provide frivolous debt-settlement advice to
consumers, supply documents and advice for consumers to file in court proceedings,
and accept payment for these services.
{3} On June 4, 2013, Hon. G. Bryan Collins, Jr. entered a preliminary
injunction order to enjoin the World Law Defendants, “together with their officers,
agents, employees, attorneys, and all persons acting in concert with them” from,
inter alia, engaging in any debt settlement practices. Preliminary Injunction Order,
State v. Swift Rock Fin., Inc., No. 13 CVS 7161 (N.C. Super. Ct. June 4, 2013),
http://www.ncbusinesscourt.net/TCDDotNetPublic/default.aspx?CID=
3&caseNumber=13CVS7161.
{4} On August 6, 2013, WLS was formed by filing articles of incorporation
with the North Carolina Secretary of State.
{5} Plaintiffs filed their Amended Complaint on June 25, 2014, which
added Bradley James Haskins and WLS as defendants, and added a claim of civil
conspiracy against all Defendants named in the Amended Complaint.
{6} WLS filed a notice of designation to designate this action as a
mandatory complex business case under Rule 2.2 of the General Rules of Practice of
the Superior and District Courts (“General Rules of Practice”) on July 8, 2014.
Plaintiffs opposed the designation on August 6, 2014. Chief Justice Mark Martin
designated this matter an exceptional case under Rule 2.1 of the General Rules of
Practice and assigned it to the undersigned on October 6, 2014.
{7} WLS filed its Motion on October 10, 2014, but did not file its brief in
support of the Motion until October 29, 2014. The Motion was fully briefed on
December 1, 2014. WLS is no longer represented by counsel. On February 18,
2015, WLS filed articles of dissolution with the Secretary of State of North Carolina,
and the Court has been advised that WLS no longer operates an active business.
The Court decides the Motion without oral argument pursuant to Business Court
Rule 15.4(a).
II. ANALYSIS
{8} To evaluate a motion to dismiss under Rule 12(b)(6), the Court asks
“whether, as a matter of law, the allegations of the complaint, treated as true, are
sufficient to state a claim upon which relief may be granted under some legal
theory, whether properly labeled or not.” Harris v. NCNB Nat’l Bank of N.C., 85
N.C. App. 669, 670,
355 S.E.2d 838, 840 (1987). The Court must liberally construe
Plaintiffs’ Amended Complaint, and should not dismiss it unless it appears beyond
a doubt that Plaintiffs could prove no set of facts in support of their claims that
would entitle Plaintiffs to relief. See Crouse v. Mineo,
189 N.C. App. 232, 237,
658
S.E.2d 33, 36 (2008). The Court does not provide a full recounting of Plaintiffs’
allegations here, but instead notes only those allegations relevant to its disposition
of WLS’s Motion.
{9} WLS argues that all of Plaintiffs’ claims against WLS depend either on
Plaintiffs’ claim that WLS is involved in unlawful debt adjusting under section 14-
423 of the general statutes or on Plaintiffs’ UPL claim, brought under sections 84-
2.1, 84-4, or 84-5 of the general statutes. WLS asserts that Plaintiffs’ Amended
Complaint fails to allege that WLS receives any consideration in advance of the
services that it performs and that Plaintiffs must allege as such in order for WLS’s
activities to fall within the definition of “debt adjusting” under section 14-423. WLS
seems to argue this based on a strained reading of paragraph 141 of the Amended
Complaint, in which Plaintiff quotes a portion of subsection 14-423(2) that defines
“debt adjusting” as including activities where payment is received in advance of
debt settlement. Without further elaboration, WLS summarily asserts that
“[n]othing in the Amended Complaint has been alleged that would create a claim for
UPL against World Law South,” (Def. WLS Reply Br. 4.), citing Rule 5.5(d)(2) of the
Revised Rules of Professional Conduct of the North Carolina State Bar (“Rules of
Professional Conduct”) and its associated comments in an effort to support an
argument that WLS may use the services of out-of-state attorneys to provide
services to consumers within North Carolina.
{10} The Court’s determination that the Amended Complaint survives
WLS’s Motion is easily made. The merits of the Motion deserve little analysis. But,
this Court is statutorily required to issue an opinion explaining its reasoning for
ruling upon a motion made pursuant to Rule 12(b)(6). See N.C. Gen. Stat. § 7A-45.3
(2013).
A. Unlawful Debt Adjusting
{11} Plaintiffs’ Amended Complaint alleges that WLS was formed at the
direction of Defendant Haskins for the purpose of avoiding the preliminary
injunction entered by Judge Collins prior to WLS’s addition to the case, and to
enable Defendants to continue conducting their debt-settlement activities in North
Carolina under a new corporate identity that is free of the injunction. Defendant
Haskins was a member of WLS’s initial board of directors and is alleged to be the
principal managing agent of WLS and to have “directed, controlled, participated in,
and had knowledge of” WLS’s activities. (Am. Compl. ¶ 41.) The Amended
Complaint further alleges that WLS is a continuation of the same entities that had
previously operated under the World Law name, in addition to being a separate
member of a civil conspiracy perpetrated by the World Law Defendants.
{12} The North Carolina Debt Adjustment Act (the “Act”) provides a cause
of action to the Attorney General to “enjoin, as an unfair or deceptive trade practice,
the continuation of any debt adjusting business or the offering of any debt adjusting
services.” N.C. Gen. Stat § 14-425 (2013). If a defendant is found to have violated
the Act, the Court may, in addition to enjoining the activity, award civil penalties of
up to $5,000.00 per violation. See N.C. Gen. Stat. § 75-15.1 (2013). WLS makes no
effort to claim an exception under section 14-426.
{13} Contrary to the assumption that WLS seems to make in its brief, it is
immaterial that the Amended Complaint only quotes certain language from section
14-423, which defines “debt adjusting,” because Plaintiffs’ unlawful debt adjusting
claim is based on violations of the Act as a whole. Section 14-423(2)’s full text
includes within its definition of “debt adjusting” the collection of fees at any time if
those fees are paid as consideration for debt adjustment services:
“Debt adjusting” means entering into or making a contract, express or
implied, with a particular debtor whereby the debtor agrees to pay a
certain amount of money periodically to the person engaged in the debt
adjusting business and that person, for consideration, agrees to
distribute, or distributes the same among certain specified creditors in
accordance with a plan agreed upon. Debt adjusting includes the
business or practice of any person who holds himself out as acting or
offering or attempting to act for consideration as an intermediary
between a debtor and his creditors for the purpose of settling,
compounding, or in any way altering the terms of payment of any debt
of a debtor, and to that end receives money or other property from the
debtor, or on behalf of the debtor, for the payment to, or distribution
among, the creditors of the debtor. Debt adjusting also includes the
business or practice of debt settlement or foreclosure assistance
whereby any person holds himself or herself out as acting for
consideration as an intermediary between a debtor and the debtor's
creditors for the purpose of reducing, settling, or altering the terms of
the payment of any debt of the debtor, whether or not the person
distributes the debtor's funds or property among the creditors, and
receives a fee or other consideration for reducing, settling, or altering
the terms of the payment of the debt in advance of the debt settlement
having been completed or in advance of all the services agreed to
having been rendered in full.
Id § 14-423(2) (emphasis added).
{14} The Amended Complaint is replete with allegations that Defendants,
including WLS, have collected fees for debt settlement services both in advance of
and subsequent to the completion of some or all of Defendants’ debt adjusting
services. The Amended Complaint also contains allegations that tie WLS to the
acts of the other Defendants. (See, e.g., Am. Compl. ¶ 3 (stating that “[World Law
Defendants] have collected illegal advance fees for debt settlement services”); Am.
Compl. ¶ 5 (noting that the World Law Defendants sometimes collect fees for a year
or more before paying consumers’ creditors); Am. Compl. ¶ 18 (alleging that the
World Law Defendants have collected more than sixty-four percent of all consumer
payments as fees); Am. Compl. ¶ 88 (alleging that the World Law Defendants collect
the majority of their fees prior to any attempt to negotiate settlements with
creditors); see also, e.g., Am. Compl. ¶¶ 89–92, 94, 142, 148, 157.)
{15} These allegations are sufficient to state a claim for unlawful debt
adjusting for which relief can be granted.
B. UPL
{16} In its reply, WLS states that “[i]t is not necessary for World Law South
to brief or further explain its Motion to Dismiss as to the claim asserted by
Plaintiffs for Unauthorized Practice of Law.” (Def. WLS Reply Br. 3.) Although
WLS’s compliance with Business Court Rule 15.3 is dubious, the Court proceeds to
examine whether Plaintiffs’ have adequately stated a UPL claim against WLS.
WLS did not aid the Court’s effort. Without further elaboration, WLS cites Rule 5.5
of the Rules of Professional Conduct, which governs the Unauthorized Practice of
Law, but makes no attempt to apply that rule to the specific allegations in the
Amended Complaint. These bare-bones assertions are insufficient to support the
Motion.
{17} North Carolina prohibits the practice of law by persons or associations
that have not been admitted and licensed by the North Carolina State Bar. N.C.
Gen. Stat. § 84-4 (2013). The phrase “practice law” is broadly defined, and the
prohibitions on the practice of law include appearing as an attorney before a judicial
body, holding oneself out as being competent to give legal advice, preparing legal
documents, or otherwise providing the services of a lawyer. See
id. § 84-2.1. These
prohibitions generally apply to corporations as well. Id. § 84-5.
{18} Plaintiffs allege that WLS is a North Carolina corporation and is not a
law firm, so that any efforts of WLS to hold itself out as a law firm or to practice law
within North Carolina are in violation of chapter 84. The Amended Complaint
contains extensive, specific allegations against the World Law Defendants and WLS
individually that, taken as true, state a UPL claim against WLS. (See, e.g., Am.
Compl. ¶ 6 (alleging that the World Law Defendants claim that their services are
attorney-based and that they are a global law firm); Am. Compl. ¶ 8 (noting that no
consumers have ever spoken to a North Carolina-licensed attorney, and that almost
all services are performed by non-attorneys); Am. Compl. ¶ 68 (claiming that the
World Law Defendants have sent solicitations to consumers that claim that they are
legal advocates that are licensed in North Carolina); Am. Compl. ¶ 70 (quoting a
representation on a World Law-related website that states that defendants are a
“global law firm,” and that consumers will be assigned legal assistants, a team of
attorneys, and a “state and federal attorney”); see also, e.g., Am. Compl. ¶¶ 71–73,
76–78, 82–84, 95–103, 109–10, 111–28, 132, 134, 135.)
{19} These allegations are sufficient to state a UPL claim against WLS.
III. CONCLUSION
{20} WLS’s Motion to Dismiss is DENIED.
{21} This Order & Opinion shall be served on WLS by service on its
registered agent, CT Corporation System, at 150 Fayetteville Street, Box 1011,
Raleigh, North Carolina 27601.
IT IS SO ORDERED, this the 9th day of November, 2015.
/s/ James L. Gale
James L. Gale
Chief Special Superior Court Judge
for Complex Business Cases
