Collection Law Firm Hit with $5.2 million Class Action Verdict

[FICOrebound]

A collection law firm in Pennsylvania must pay $5.2 million to defendants that accused it of charging unauthorized administrative and attorney fees and interest on the fees as it collected delinquent real estate taxes.

Portnoff Law Associates was the target of a class action lawsuit filed on behalf of consumers that fell behind in their property taxes in the areas that Portnoff served from November 27, 2000 to November 26, 2002. Portnoff, based in Norristown, Pa., represented 22 municipalities and school districts in Pennsylvania at the time. The firm specializes in municipal fee and delinquent tax collection.

At issue was a $35 administrative fee Portnoff charged to the class plaintiffs to cover collection costs and subsequent interest and penalties charged on the fee. The lawsuit claimed that some 16,100 consumers were impacted; the class was led by three plaintiffs.

David A. Searles from Philadelphia-based law firm Donovan Searles, LLC, lead attorney for the class, told insideARM that appellate case law disallowed the fees. Searles also said that the case was initially filed in November 2002 and had moved from state court to federal court and then back to state court before being tried in September of last year. The decsion against Portfoff was announced Wednesday in the Philadelphia Court of Common Pleas.

In his ruling, Judge Mark I. Bernstein paints a picture of dissent between statutory and case law that spans several years. A 2001 ruling by the Pennsylvania Commonwealth Court that attorneys fees could not be added to delinquent tax debts was upheld by the state Supreme Court in 2003. In August of 2003, the Pennsylvania legislature amended the law that forbade the addition of attorneys fees to tax debt and made it retroactive to 1996. However, that amendment was declared unconstitutional in 2005 by the Commonwealth Court due to its retroactive nature.

Portnoff and its law firm did not return calls.

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