State v. Orion Processing, LLC,
2017 NCBC 20.
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 )
OPINION, DEFAULT JUDGMENT and
Law Processing, World Law Debt, World )
PERMANENT INJUNCTION AGAINST
Law Group, and World Law Plan; SWIFT )
DEFENDANTS SWIFT ROCK
ROCK FINANCIAL, INC., d/b/a World )
FINANCIAL, INC., BRADLEY JAMES
Law Debt, World Law Group, and World )
HASKINS, and WORLD LAW SOUTH,
Law Plan; DERIN ROBERT SCOTT; )
INC.
BRADLEY JAMES HASKINS, d/b/a )
World Law Group; WORLD LAW )
SOUTH, INC., d/b/a World Law Group; )
__________________________________ )
And GLOBAL CLIENT SOLUTIONS, )
LLC; )
)
Defendants. )
)
1. THIS MATTER is before the Court on Plaintiffs’, the State of North
Carolina, ex rel. Josh Stein, Attorney General and the North Carolina State Bar,
Motion for Judgment by Default Against Defendants Swift Rock Financial, Inc.,
Bradley James Haskins, and World Law South, Inc. (“Plaintiffs’ Motion”). For the
reasons expressed below, Plaintiffs’ Motion is GRANTED, and the Court hereby
enters its final judgment.
North Carolina Department of Justice, by M. Lynne Weaver, Special Deputy
Attorney General, for Plaintiff the State of North Carolina ex rel. Josh Stein,
Attorney General.
The North Carolina State Bar, Katherine Jean, Counsel, and David R. Johnson,
Deputy Counsel, for Plaintiff the North Carolina State Bar.
Blanchard, Miller, Lewis & Isley, P.A. by E. Hardy Lewis for Defendant Orion
Processing, LLC.
Gale, Chief Judge.
I. INTRODUCTION
2. Plaintiffs, the State of North Carolina (“the State”), and the North
Carolina State Bar (“State Bar”) filed a complaint in Wake County Superior Court
alleging Defendants collectively have engaged in a scheme offering illegal debt
adjusting services and unauthorized legal services to North Carolina consumers in
violation of the statutes prohibiting debt adjusting, the unauthorized practice of law,
and unfair and deceptive trade practices.
3. The Plaintiffs’ present motion seeks the entry of a default judgment and
a permanent injunction against Defendants Swift Rock Financial, Inc., Bradley
James Haskins, and World Law South, Inc.
4. The Court concludes that, based upon the record, including the verified
Complaint and Amended Complaint and their accompanying exhibits—the
averments of which are deemed admitted by the defaulting Defendants’ default, the
Plaintiffs’ Motion should be GRANTED.
II. PROCEDURAL HISTORY
5. Plaintiffs in this case are the State of North Carolina, by and through
its Attorney General, Josh Stein, and the North Carolina State Bar, a state agency.
Plaintiffs have standing to bring this action pursuant to N.C. Gen. Stat. §§ 75-15,
14-425, and 84-37.
6. Plaintiffs filed their original Complaint on May 22, 2013.
7. On May 23, 2013, the Court entered a Temporary Restraining Order,
enjoining Defendants Orion Processing, LLC (“Orion”), Swift Rock Financial, Inc.
(“Swift Rock”), and Derin Robert Scott (“Scott”), and all persons in active concert with
them, from soliciting or enrolling North Carolina customers in Defendants’ debt
settlement program, from collecting further fees from North Carolina customers for
illegal debt adjusting services, and from engaging in the unauthorized practice of law
in North Carolina.
8. On June 4, 2013, the Court entered a Preliminary Injunction Order,
continuing the terms of the Temporary Restraining Order.
9. Swift Rock failed to appear or to file an answer or other responsive
pleading, and an entry of default was entered against Swift Rock on September 26,
2013.
10. Plaintiffs filed an Amended Complaint on June 25, 2014, naming World
Law South, Inc. (“WLS”) and Bradley James Haskins (“Haskins”) as additional
named defendants.
11. On October 6, 2014, the Chief Justice designated the case as exceptional
pursuant to Rule 2.1 of the General Rules of Practice for the Superior and District
Courts and assigned the undersigned, James L. Gale, as the presiding judge. The
parties agreed that the Local Rules of the North Carolina Business Court would apply
to this case even though it was not designated as a mandatory complex business case.
12. WLS, through counsel, appeared in the action, and on October 10, 2014,
WLS filed a motion to dismiss.
13. On February 27, 2015, Orion filed a voluntary petition for bankruptcy
protection under Chapter 11 of the U.S. Bankruptcy Code in the United States
Bankruptcy Court for the Western District of Texas.
14. On March 13, 2015, WLS’s counsel filed a notice of discharge,
termination, and withdrawal from the proceeding. Subsequently, on April 6, 2015,
the Court entered an Order allowing WLS’s counsel’s withdrawal.
15. Haskins failed to appear, plead, or otherwise defend himself in this
action. Plaintiffs filed an Affidavit of Service of Process on Defendant Bradley James
Haskins on May 22, 2015. The Court entered an Entry of Default against Haskins
on June 3, 2015. Haskins never filed a motion to set aside the Entry of Default or
otherwise responded to the Entry of Default entered against him.
16. On November 9, 2015, WLS’s motion to dismiss was denied.
17. WLS failed to file an answer and an entry of default was entered against
WLS on February 19, 2016.
18. On December 19, 2016, Plaintiffs filed Plaintiffs’ Motion for Judgment
By Default Against Defendants Swift Rock, Haskins, and WLS. Defendants Swift
Rock, Haskins, and WLS did not file any response motions or motions to set aside the
entries of default.
19. On January 4, 2017, Haskins emailed the Court regarding this action,
asserting that Plaintiffs have improperly served Haskins with the documents in this
matter and that Plaintiffs should have served the documents to Haskins at his
address in Europe. The Court forwarded this correspondence to Plaintiffs so that all
parties were aware of the communication.
20. Because Defendants Haskins, Swift Rock, and WLS did not respond to
Plaintiffs’ Motion nor did they file motions to set aside their entries of default, the
Court finds that Plaintiffs’ Motion is ripe for disposition.
III. SUMMARY OF FACTS
21. As detailed in Plaintiffs’ Complaint and Amended Complaint, and the
additional evidence presented with the Motion for Summary Judgment, Orion offered
illegal debt adjusting services to financially distressed consumers in North Carolina
and other states, initially under its own name and later under the name “World Law
Group” or one of several “World Law” names. After beginning its operations under
the World Law name in 2010, Orion, together with Haskins and WLS, also began
providing its debt adjusting customers with legal services, held itself out as a law
firm, and told its customers that it was providing the services of attorneys. At no
time was Orion a law firm or otherwise authorized to provide legal services to its
customers in North Carolina.
22. On January 14, 2008, Scott formed Swift Rock, a Texas company, for the
purpose of offering and engaging in debt adjusting. Swift Rock marketed debt
settlement services directly to consumers and enrolled consumers in debt settlement
plans.
23. On June 2, 2008, Scott formed Orion as a Texas limited liability
company. Scott is the sole member and manager of Orion. After Orion was formed,
the functions of Swift Rock and Orion were divided. Swift Rock focused on marketing
to and enrolling financially distressed consumers with substantial amounts of credit
card debt, representing that it was experienced in negotiating substantially reduced
settlements with consumers’ creditors to reduce or eliminate consumers’ debts
without bankruptcy.
24. Orion focused on servicing the customers once they were enrolled in the
debt settlement program. Once customers were enrolled by Swift Rock, Orion’s
employees confirmed the sale, performed any ostensible debt negotiation services,
and handled all further communications with the customer and the customer’s
creditors.
25. Once consumers were enrolled in the debt settlement program, Orion
instructed customers to stop paying their creditors. Instead, customers were
instructed to make monthly payments into their debt settlement program under the
promise that Orion would use the funds to negotiate settlements of the customer’s
debts for considerably less than the amount owed. Customers’ funds were held by a
third party, Global Client Solutions, LLC (“Global”).1
1 Global is a third party payment processor that acted as an escrow agent. Global debited
the customer’s bank account monthly and deposited those funds in a “special purpose
account” in the customer’s name in a third party bank. Global disbursed Orion’s and Swift
Rock’s fees from the customer’s special purpose account, pursuant to the customer’s debt
settlement agreement. If and when a settlement was reached, Global disbursed payment to
the customer’s creditor. Global was named as a third-party Defendant in the case solely for
injunctive purposes, in order to ensure the cessation of the disbursement of further illegal
fees to Defendants. Global is unrelated to the Defendants, and Plaintiffs voluntarily
26. The customer’s monthly payment included Orion’s and Swift Rock’s fees.
These fees included advance fees for joining the program and recurring monthly fees
for Orion’s services. Whatever amounts remained from these monthly payments after
Orion’s and Swift Rock’s fees were deducted were to be accumulated for eventual use
in settling the customer’s debts. As a result of the deduction of these advance fees, a
customer typically had to participate in the program for two to four years before
sufficient funds accumulated to offer creditors.
27. Swift Rock and Orion operated in this fashion until approximately
sometime in 2010.
28. In late 2009, because of abuses by the debt settlement industry, in a
rule-making proceeding, the Federal Trade Commission (“FTC”) proposed
amendments to the federal Telemarketing Sales Rule (“TSR”) that would prohibit
debt relief providers, including debt settlement companies, from collecting advance
fees prior to actually settling consumers’ debts. (FTC Telemarketing Sales Rule, 74
Fed. Reg. 41988 (proposed August 19, 2009)).
29. Seeking a means of continuing Orion’s and Swift Rock’s debt settlement
business and apparently believing that the proposed FTC regulation exempted law
firms, during the spring of 2010, Scott met with Haskins in Fort Lauderdale, Florida.
Haskins, who is licensed as an attorney in Texas, represented that he was the
principal of a large international law firm called the “World Law Group.” In reality,
there was no large, international law firm headed by Haskins.
dismissed Global as a Defendant on June 10, 2015. The use of the term “Defendants” in this
Order does not refer to Global.
30. Orion and Haskins agreed to jointly continue providing Orion’s and
Swift Rock’s debt settlement services under the “World Law” name. Orion’s Chief
Operating Officer David S. Klein (“Klein”) executed a Memorandum of
Understanding (“MoU”) on behalf of Orion with “World Law Group LLP” that recited
an effective date of July 18, 2010. The MoU provided that Orion would continue to
negotiate and settle debts on behalf of customers while World Law would purportedly
provide Orion’s customers with legal services.
31. After reaching an agreement with Haskins, in April 2011, Orion filed an
assumed name certificate with the clerk for Travis County, Texas, identifying “World
Law Debt” as an assumed name of Orion. Orion, holding itself out as “World Law
Debt,” including on Internet websites, offered to provide the services of attorneys to
customers. The Defendants’ form contracts with consumers (called “Client Service
Agreements” (“CSAs”)) included provisions representing that “World Law Debt”
would provide a local attorney who would provide legal advice “throughout the
representation.” The CSAs included this statement:
The local attorney will review CLIENT’S case files, consult with
CLIENT, explain to CLIENT their [sic] options if served or
threatened with a lawsuit, and prepare and deliver to client,
ready for client to file, a full response to any debt collection
lawsuit filed against CLIENT, stemming from an accepted and
enrolled trade line, while advising the CLIENT with regards to
state and/or federal debt collection laws.
32. Orion continued to provide debt adjusting services to consumers
following its agreement with World Law. Defendants’ CSAs purported to reflect that
the customer was contracting with a World Law entity—variably identified as “World
Law Debt,” “World Law Group,” or “World Law Plan”—and that World Law would
provide an attorney for the debtor in addition to providing debt adjusting services.
Orion’s employees handled all of the debt adjusting services. Orion’s employees held
themselves out to consumers as being “paralegals” and “litigation specialists” with
the “law firm” “World Law,” “World Law Group,” and later, “World Law South,”
although there was no such law firm.
33. In many instances, customers who followed Orion’s instructions to stop
paying their creditors were sued by their creditors for non-payment. Orion’s
employees advised customers to forward all legal pleadings and documents to Orion
and represented that “World Law” attorneys would provide legal assistance to the
customers. Even though the CSAs stated customers would receive the assistance of
an attorney licensed in the customer’s state, no known North Carolina attorneys
actually communicated with Orion’s employees or with North Carolina customers to
give advice about their lawsuits.
34. Instead, Orion employees received prepared form pleadings from
anonymous “World Law” email addresses, such as [email protected],
and Orion employees could not identify who had prepared them or where they had
been prepared. The prepared “answers” to lawsuits were all based on the same
document template; in almost every instance only the name of the parties, the court
caption, and information about the customer’s account differed. The form answer
asserted patently frivolous defenses and claims that had no legal or factual basis,
which caused some customers to be sanctioned by courts.2 Orion also provided
customers with prepared form responses to discovery and motions for summary
judgment. These documents also made false statements of fact or contained frivolous
responses. Orion employees instructed customers that the legal documents had been
prepared specifically for their case by a “World Law” local attorney. Orion’s
employees forwarded these legal documents to customers and advised them to sign
the documents as pro se defendants, and instructed the customers on how to serve
them on the plaintiff-creditor and file them with local courts. Virtually identical
frivolous pleadings were filed in more than 120 cases brought by creditors against
World Law’s customers in North Carolina courts.
35. Orion’s employees also instructed customers to make various assertions
and claims in court using scripts provided by Orion. If the hearing was one in which
judgment might be awarded, such as summary judgment, a person who represented
himself or herself as being with “World Law” sometimes contacted the customer by
email and instructed the customer to demand “federal arbitration” at the hearing.
Customers were not told what arbitration involved or that they would have to pay an
arbitration fee. In response, many courts denied consumers’ requests for arbitration
or imposed deadlines on consumers to initiate arbitration. Other courts allowed the
requests.
2 For example, the “answers” routinely stated that the customer never opened the credit card
accounts at issue, even though the customer previously had not disputed that they owed the
debts, and in fact, had instructed World Law to settle the same debts.
36. If the court allowed arbitration, Orion employees often submitted an
arbitration claim on behalf of the customer to the American Arbitration Association
(“AAA”). All such claims were virtually identical. In almost all instances, the
customer’s representative was identified as Haskins.
37. Under Defendants’ World Law scheme, Orion continued to charge steep
advance fees to customers, including those in North Carolina. Fees charged by Orion
to North Carolina customers under the CSAs included—a $199 initial enrollment fee,
a monthly fee of $84.95 designated as an “attorney fee,” a “bundled legal service” fee,
and a “debt settlement” fee, which was charged each month and was based on the
amount of the consumer’s enrolled debts. Virtually all of the fees were collected in
advance of any attempt by Orion to settle a customer’s debts. On a monthly basis,
Global disbursed these fees to Orion or, at Orion’s direction, to Swift Rock or to third
parties that had enrolled the customer, except for a monthly bank fee of $9.45, which
was retained by Global. Orion authorized Global to pay “World Law” $20.00 per
month from each enrolled consumer’s account as an “attorney administration fee.” At
Orion’s authorization, this $20.00 monthly “attorney administration fee” was
disbursed by Global into a bank account in the name of a WLD Price Global, Inc., a
then-dissolved business corporation solely owned by Haskins.
38. These activities persisted in North Carolina until the Temporary
Restraining Order and Preliminary Injunction Order was entered by this Court.
After the Preliminary Injunction Order was entered by the Court, Global continued
to draft customers’ accounts for Defendants’ fees, but Global held the fees in suspense
in customers’ accounts and did not disburse any fees to Orion, Swift Rock, or any
third parties, except for Global’s bank fee.
39. Following the Court’s entry of its Preliminary Injunction Order, in
August 2013, Haskins caused to be created Defendant “World Law South, Inc.,”
(“WLS”) which was a North Carolina corporation. Notwithstanding the Preliminary
Injunction Order’s express provision that its terms applied to all persons “acting in
concert” with Defendants, WLS attempted to maintain that, while its business was
“identical” to that of “World Law Group,” because WLS was not an original named
defendant and was not expressly named in the Court’s Preliminary Injunction Order
(because it had not yet been formed), WLS could therefore provide debt adjusting and
legal services to consumers. Defendants then proceeded to operate under the WLS
name in communications with North Carolina customers’ and customers’ creditors.
40. Defendants continued to perform debt settlement services to existing
customers. Orion continued to provide legal documents to North Carolina customers
with instructions for filing them in North Carolina courts, sometimes under the name
“World Law South,” and to initiate arbitration proceedings on behalf of North
Carolina customers.
41. Most customers’ debts were not settled,3 and many customers’ debt
situations were significantly worsened as a result of their participation in
3 Defendants’ failure to settle customers’ debts and misrepresentations to customers are
evidenced by Court-appointed Trustee James K. Pendergrass, Jr.’s status report from
February 2015, showing that, five months after WLS sought “immediate relief” from the
Court for the handling of customers’ funds after Global terminated its relationship with
Defendants in September 2014, and WLS was subsequently unable to deposit customers’
checks at a financial institution – the Trustee was able to verify the existence of only 41
Defendants’ program. Under the terms of the World Law CSA, much of customers’
monies were earmarked for Defendants’ advance fees. As a result, many customers
were unable to accumulate sufficient funds to settle their debts, their debts were not
settled, and their creditors went unpaid—causing many creditors to sue the
customer-debtors, and/or forcing some customers into bankruptcy.
42. The sole person at “World Law Group” who management of Orion
understood to be in charge of and responsible for “World Law Group” and with whom
they communicated was Haskins.
43. On August 17, 2015, the federal Consumer Financial Protection Bureau
(“CFPB”) filed a civil enforcement action against Defendants in the U.S. District
Court for the Southern District of Florida, alleging that Defendants had engaged in
violations of the federal TSR by collecting illegal advance fees from consumers for
debt relief services4 and had engaged in unfair and deceptive practices. The CFPB
obtained a nationwide injunction prohibiting Defendants from engaging in debt relief
and related legal activities, and the federal court appointed a Receiver to assume
control over Defendants’ enterprise, which was shut down.
44. Since early 2010, at least 1,427 North Carolina consumers have entered
into agreements (“Client Service Agreements”) for debt relief services that were
provided by Orion through Orion’s arrangement with Haskins (d/b/a World Law
actual agreed-upon settlements with customers’ creditors, out of 1130 checks and negotiable
instruments received from customers, which was an actual settlement rate of 3.6 percent.
(Interim Monthly Status Report by Trustee [February 2015], at pages 3-4, filed March 11,
2015.)
4 The federal debt relief services rule, which prohibits the collection of advance fees for debt
relief services, became effective on October 27, 2010.
Group, and later d/b/a WLS). From early 2010 until September 1, 2014, North
Carolina customers paid a total of at least $8,549,095.03 into the “World Law” debt
settlement program. When Global terminated its business relationship with
Defendants effective September 1, 2014, Global issued refunds to North Carolina
customers of Defendants’ fees that had been withheld from Defendants and retained
in customers’ special purpose accounts pursuant to the Court’s Preliminary
Injunction Order of June 4, 2013, together with any amounts that had been set aside
to pay customers’ creditors—leaving a total of at least $3,170,306.00 in fees that were
paid to Defendants that have not been returned to consumers or disbursed to
consumers’ creditors.
IV. ANALYSIS
45. Under Rule 55 of the North Carolina Rules of Civil Procedure, “[w]hen
default is entered due to a defendant’s failure to answer, the substantive allegations
contained in plaintiff’s complaint are no longer in issue, and for the purposes of entry
of default and default judgment, are deemed admitted.” Luke v. Omega Consulting
Grp., LC, 194 N.C. App. 745, 751,
670 S.E.2d 604, 609 (2009) (citing Blankenship v.
Town & Country Ford, Inc.,
174 N.C. App. 764, 767,
622 S.E.2d 638, 640 (2005)).
Thus, under Rule 55, judgment by default may be entered by a court upon an entry
of default and finding that the complaint supports the recovery sought by Plaintiffs.
N.C. R. Civ. P. 55. See, e.g., Webb v. McJas, Inc.,
228 N.C. App. 129, 133,
745 S.E.2d
21, 24 (2013).
46. On January 4, 2017, Haskins emailed the Court regarding this action,
asserting that Plaintiffs have improperly served Haskins with the documents in this
matter and that Plaintiffs should have served the documents to Haskins at his
address in Europe. Haskins, however, filed no motion to set aside the Entry of
Default entered against him or response to Plaintiff’s motion for entry of default
judgment. Haskins’ email clearly demonstrates that Haskins knows how to contact
the Court, is aware of the Court’s web domain address, and has access the Court’s
website. Haskins, like the general public, has access to the entire docket for this
action through the Court’s website. Further, Haskins is a trained and licensed
attorney. Because Haskins, Swift Rock, and WLS have not filed any proper motion
to set aside the entries of default or otherwise responded to Plaintiffs’ Motion for
Judgment By Default, the Court finds it appropriate to enter default judgment
against Haskins, Swift Rock, and WLS.
47. Defendants have engaged in a joint enterprise to provide illegal debt
adjusting and legal services, and therefore they are jointly and severally liable for all
actions of their co-conspirators. “A conspiracy is generally defined as an agreement
between two or more individuals to do an unlawful act or to do a lawful act in an
unlawful manner.” Burton v. Dixon, 259 N.C. 473, 476,
131 S.E.2d 27, 30 (1963). “If
a conspiracy is formed and an overt act, causing damage, is committed by any one or
more of the conspirators in furtherance of the conspiracy, all of the conspirators are
liable.”
Id. at 476,
131 S.E.2d at 30. “The liability of the conspirators is joint and
several.”
Id. at 477,
131 S.E.2d at 30; see also Dickens v. Puryear,
302 N.C. 437, 456,
276 S.E.2d 325, 337 (1981); Neugent v. Beroth Oil Co.,
149 N.C. App. 38, 53,
560
S.E.2d 829, 838 (2002). A joint enterprise is the pursuit of a common purpose by two
or more persons or entities for their mutual benefit. BDM Invs. v. Lenhil, Inc., No.
11 CVS 449,
2012 NCBC LEXIS 7, at *70–71 (N.C. Super. Ct. Jan. 18, 2012);
Slaughter v. Slaughter,
93 N.C. App. 717, 720,
379 S.E.2d 98, 100 (1989). When the
parties to a joint enterprise or joint venture agree to pursue illegal activity, there is
a conspiracy, and each conspirator is jointly and severally liable for any resulting
harm from the overt act of one of the parties. Burton,
259 N.C. at 477,
131 S.E.2d at
30; Dickens,
302 N.C. at 456,
276 S.E.2d at 337. Plaintiffs’ Amended Complaint
amply pleads that all Defendants, including Orion, Swift Rock, Haskins, and WLS
have acted together in a common illegal enterprise. Therefore, they are jointly and
severally liable for all acts of the enterprise.
48. The agreement between Orion and Haskins (doing business as World
Law Group, and later as WLS) under which Haskins agreed to provide legal services
to Orion’s and Swift Rock’s debt adjusting customers created a joint enterprise. Since
the activities of the joint enterprise consisted of illegal activities in North Carolina,
debt adjusting and the unauthorized practice of law, Orion, Swift Rock, and Haskins
entered into a conspiracy to violate North Carolina law. See McAdams v. Blue, 3 N.C.
App. 169, 173,
164 S.E.2d 490, 493–94 (1968). Each conspirator is jointly and
severally liable for any resulting harm from the overt act of one of the parties. Burton,
259 N.C. at 476–77,
131 S.E.2d at 30.
49. The Debt Adjusting Act, N.C. Gen. Stat. § 14-424, prohibits any person
from offering, attempting to engage, or engaging in “debt adjusting,” as that term is
defined in
N.C. Gen. Stat. § 14-423.
N.C. Gen. Stat. § 14-424 (2015). “Debt adjusting”
is defined as follows:
“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.
N.C. Gen. Stat. § 14-423(2) (2015).
50. Defendants’ activities plainly constitute “debt adjusting” under N.C.
Gen. Stat. § 14-423. North Carolina customer-debtors paid Defendants on a monthly
basis for debt relief services, including debt settlement services, with the
understanding that Defendants would negotiate substantially reduced settlements of
customers’ debts with their creditors, and that their creditors would be paid out of
the monies accumulated in their World Law debt settlement program. Defendants
collected substantial fees from customers for those services, with the vast majority of
Defendants’ fees being collected in advance of any settlements being reached with
customers’ creditors.
51. Pursuant to N.C. Gen. Stat. § 14-425, the offering of debt adjusting
services or the continuation of any debt adjusting business is an unfair and deceptive
practice, in violation of
N.C. Gen. Stat. § 75-1.1.
N.C. Gen. Stat. § 14-425 (2015).
52. By engaging, or offering or attempting to engage in, debt adjusting—
including by holding itself out as an intermediary between North Carolina consumer
debtors and the debtors’ creditors for the purpose of reducing, settling, or altering the
terms of the payment of debtors’ debts, and by collecting fees in advance of the
settlement of debtors’ debts—Defendants, doing business under various “World Law”
names, have violated N.C. Gen. Stat. §§ 14-423 and 14-424.
53. N.C. Gen. Stat. § 84-2.1 states that the practice of law in North Carolina
is “defined to be performing any legal service for any other person, firm or corporation,
with or without compensation,” including “preparing or aiding in the preparation of
any petitions or orders in any probate or court proceeding” and “assisting by advice,
counsel, or otherwise in any legal work; and to advise or give opinion upon the legal
rights of any person, firm or corporation. . . .”
N.C. Gen. Stat. § 84-2.1 (2015).
54. N.C. Gen. Stat. § 84-4 provides that “it shall be unlawful for any person
or association of persons, except active members of the Bar of the State of North
Carolina admitted and licensed to practice as attorneys-at-law, to appear as attorney
or counselor at law in any action or proceeding before any judicial body” or “to give
legal advice or counsel. . . .”
N.C. Gen. Stat. § 84-4 (2015).
55. N.C. Gen. Stat. § 84-5 provides that a corporation may not engage in the
practice of law, including any advertising or holding out that it can provide attorneys
or legal services.
N.C. Gen. Stat. § 84-5 (2015).
56. Defendants Swift Rock and WLS are not law firms authorized to provide
legal services in North Carolina.
57. Defendants Swift Rock and WLS are business companies that are
prohibited from engaging in the practice of law in North Carolina under N.C. Gen.
Stat. § 84-5.
58. Haskins is not licensed or otherwise authorized to practice law in North
Carolina.
59. Defendants’ agreement with customers makes clear that Defendants
contracted with customers to provide legal services, including a “local” attorney to
review the customer’s files and to advise on options with respect to any actual or
threatened lawsuits. This is an obvious violation of the prohibition against
corporations practicing law under N.C. Gen. Stat. § 84-5.
60. The documents Defendants provided to North Carolina customers were
legal documents. The documents consisted of answers to be filed in lawsuits,
responses to discovery requests, and responses to motions for summary judgment.
61. Defendants gave legal advice to customers, including specific
instructions to customers on how to file and serve the prepared pleadings and what
to say to courts.
62. By representing in communications with North Carolina customers and
with customers’ creditors, that Defendants, doing business as “World Law,” could
provide the services of attorneys, including providing a local attorney to customers,
Defendants have violated N.C. Gen. Stat. §§ 84-4 and -5.
63. By preparing and providing court pleadings and other legal documents
to North Carolina customers to represent themselves pro se, Defendants violated N.C.
Gen. Stat. §§ 84-4 and -5.
64. By providing legal advice to North Carolina customers on defending
lawsuits, Defendants violated N.C. Gen. Stat. §§ 84-4 and -5.
65. The Unfair and Deceptive Practices Act, N.C. Gen. Stat. § 75-1.1,
prohibits any person from engaging in an unfair or deceptive practice in or affecting
commerce. Defendants’ adjusting activities and provision of legal services to North
Carolina consumers are activities in or affecting commerce in this State.
66. By engaging, or offering, or attempting to engage in, debt adjusting,
Defendants have violated N.C. Gen. Stat. § 75-1.1.
67. By making false or misleading representations to consumers—including
that: (a) “World Law Group,” “World Law South,” and/or “World Law” was a law firm,
when it was not; (b) Defendants would provide a local attorney to customers to
represent them in legal actions brought by their creditors, when Defendants did not
provide a local attorney, and customers never spoke with or had access to any
attorney, let alone a local attorney; (c) The pleadings, legal documents and legal
advice provided by Defendants to customers had been prepared specifically for their
situation by a local attorney, when in fact, they were form pleadings and no identified
attorney had prepared them; (d) Defendants would settle customers’ debts for reduced
amounts with their creditors and save customers money, leaving them in better
financial situations, when in fact, in most instances, customers’ debts were not settled
and customers lost money due to Defendants’ onerous front-loaded fee scheme; (e)
State and federal laws required customer funds to be held in an attorney or attorney
based trust account, when no such laws existed; and (f) Customers’ funds would be
placed into an attorney or attorney based trust account, when they were not—
Defendants have violated N.C. Gen. Stat. § 75-1.1.
68. Pursuant to N.C. Gen. Stat. § 75-15.1 and § 14-425, Plaintiffs are
entitled to an award of the disgorgement of all amounts paid by North Carolina
consumers into Defendants’ debt settlement program that have not previously been
refunded or paid to consumers’ creditors.
69. Pursuant to N.C. Gen. Stat. § 75-15.2 and § 14-425, in any suit brought
by the Attorney General, in which the defendant is found to have violated
N.C. Gen.
Stat. § 75-1.1, the Court may impose a civil penalty of up to $5,000 for each violation.
Further, in any action brought by the Attorney General under Chapter 75, where it
is shown that an action or practice when committed was specifically prohibited by a
court order, the Court may, in its discretion, impose a civil penalty up to $5,000 per
violation. In determining the amount of the civil penalty, the Court is to consider all
relevant circumstances, including, but not limited to, the extent of the harm caused
by the conduct constituting a violation, the nature and persistence of such conduct,
the length of time over which the conduct occurred, and any corrective action taken
by the defendant.
70. Based upon this record, the Court finds that an award of civil penalties
is justified. From its inception, Orion’s and Swift Rock’s collection of advance fees for
their debt adjusting services was in violation of North Carolina law. Defendants
formulated their “World Law” scheme in a willful, express attempt to evade upcoming
federal rules by cloaking their debt settlement services as purported legal services.
As set forth above, by falsely representing to consumers that they would provide them
with legal representation – including a local attorney – who would represent them
and negotiate with their creditors, Defendants deceptively induced vulnerable,
financially-strapped consumers to pay them substantial monies for settlement of
their debts. Instead, Defendants provided virtually no meaningful services to
consumers and caused them substantial harm, leading many consumers to be sued
by their creditors, and to file for bankruptcy, and even causing some to be sanctioned
by courts because of Defendants’ false pleadings.
71. Further, as set forth in Plaintiffs’ Complaint and Amended Complaint,
prior to filing suit in 2013, both the State and the State Bar issued cease and desist
letters to Defendants, warning them that their activities constituted illegal debt
adjusting and the unauthorized practice of law in North Carolina. Notwithstanding
Plaintiffs’ notifications, Defendants continued their activities unabated. Only after
this Court issued its Preliminary Injunction Order were the payment of illegal fees
to Defendants halted through Global’s cessation of turning over fees to Defendants
and its holding of Defendants’ fees in customers’ accounts. However, notwithstanding
the Court’s Preliminary Injunction Order, Defendants continued to provide form legal
pleadings to customers to be filed in North Carolina courts, continued to purport to
represent North Carolina customers in arbitration, and continued to provide legal
advice to North Carolina customers. These activities prompted Plaintiffs to file a
motion for contempt, which was accompanied by substantial evidence of Defendants’
violations. Defendants’ activities only ceased after the CFPB brought a federal
enforcement action against Defendants and a federal court appointed a receiver to
shut down Defendants’ illegal operation, at which time Plaintiffs’ motion for contempt
was withdrawn as moot.
V. JUDGMENT AND PERMANENT INJUNCTION
For the reasons set forth herein, it is hereby ORDERED, ADJUDGED and
DECREED that:
1. Plaintiffs’ Motion for Judgment by Default Against Defendants Swift
Rock Financial, Inc., Bradley James Haskins, and World Law South, Inc. is hereby
GRANTED.
2. Pursuant to Rule 65 of the North Carolina Rules of Civil Procedure,
Swift Rock Financial, Inc., Bradley James Haskins, and World Law South, Inc. and
their agents, servants, employees, officers, members, directors, affiliates,
subsidiaries, representatives, attorneys, successors, heirs, and assignees, and any
other person acting under their direction and control, including through any
corporation, trust, or other device, are permanently enjoined from engaging in, or
providing substantial assistance to others engaging in any acts or activities
constituting debt adjusting, the practice of law, or unfair and deceptive trade
practices in North Carolina, including but not limited to being enjoined from the
following:
A. Advertising, soliciting or offering debt adjusting services or legal
services, directly or indirectly, to North Carolina consumers;
B. Performing or engaging in any debt adjusting services or
performing or providing any legal services, directly or indirectly,
for or on behalf of North Carolina consumers; or
C. Receiving or collecting any money or other consideration from any
North Carolina consumer for debt adjusting services or legal
services.
3. As used in this injunction, “debt adjusting services” mean and include
the following:
A. The offering or undertaking to negotiate, resolve, settle, or
compromise debts of North Carolina consumers, including the
offering or performance of any debt adjusting service for or on
behalf of North Carolina consumers as that term is defined in
N.C. Gen. Stat. § 14-423;
B. Any “debt relief service” as that term is defined in the
Telemarketing Sales Rule, 16 C.F.R. § 310.2(m); and
C. Any related, analogous, or similar service which is offered for the
purported purpose of assisting North Carolina consumers with
debt relief, relief from consumers’ creditors, or increasing
consumers’ access to credit; including but not limited to relief
from student loans, mortgage loans, or the provision of credit
repair services.
4. As used in this injunction, “legal services” mean and include the
following:
A. Offering or performing any legal service for another person, firm,
or corporation in North Carolina, including legal services
specifically defined and identified in N.C. Gen. Stat. §§ 84-2.1,
84-4, and 84-5;
B. Preparing, offering to prepare, assisting in the preparation of, or
providing legal pleadings, including but not limited to answers,
discovery responses, affidavits, or motions, to or for use by
consumers in North Carolina, including pleadings provided to the
consumer for pro se filing or use;
C. Providing legal advice to consumers in North Carolina, including
but not limited to advice concerning defense of lawsuits brought
against the consumer, instructions on filing any pleadings or
other documents with a court or tribunal, or instructions to
consumers on statements and legal arguments to present to a
court or other tribunal;
D. Communicating with any court, tribunal, or creditor as an
attorney or other representative of the legal interests of a North
Carolina consumer whether identified as an attorney, a paralegal,
or any other title or designation; and
E. Advertising or holding out in any medium, including television
advertising and the internet, to North Carolina consumers as an
attorney or as having an ability to provide attorneys, legal
services, or the services of an attorney.
5. This Injunction shall be construed broadly to include any subterfuge,
device, or practice engaged in by Swift Rock Financial, Inc., Bradley James Haskins,
or World Law South, Inc. in an effort to evade the dictates of this Injunction.
6. In accordance with N.C. Gen. Stat. § 84-37 and N.C. R. Civ. P. 65, no
bond is required for entry of this injunction.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that, pursuant to
N.C. Gen. Stat. §§ 14-425, 75-1.1, and 75-15.1, the State shall have and recover of
Swift Rock Financial, Inc., Bradley James Haskins, and World Law South, Inc.,
jointly and severally, the principal sum of three million, one hundred and seventy
thousand three hundred and six dollars ($3,170,306.00), for consumer restitution and
consumer protection purposes. Pursuant to
N.C. Gen. Stat. § 75-15.2 and § 14-425,
the State shall further have and recover of Swift Rock Financial, Inc., Bradley James
Haskins, and World Law South, Inc., jointly and severally, the sum of six million
dollars ($6,000,000.00) for civil penalties.
As claims against all other parties have been resolved by prior orders or
judgments, this Default Judgment and Permanent Injunction constitutes the final
adjudication of all claims involving all parties and the Court’s final judgment. The
action is therefore DISMISSED and further action shall be limited to enforcing
judgments that have been entered.
IT IS SO ORDERED, this the 7th day of March 2017.
/s/ James L. Gale
James L. Gale
Chief Business Court Judge
