A Cook County judge won’t end a lawsuit from Chicago City Hall accusing a law firm and its contractor of operating a debt resolution scam, as the judge says the city's consumer fraud action doesn't amount to illegal attempts to regulate the practice of law.
The lawsuit dates to July 2022 when lawyers from the city’s Affirmative Litigation Division filed a complaint in Cook County Circuit Court against Burnette Legal Group, which does business as Monarch Legal Group, and Strategic Financial Solutions, which the complaint said administers the program in question.
“Strategic Financial Solutions works with a number of fraudulent debt settlement outfits, including, for example, Carolina Legal Services, a debt settlement law firm that recently closed following an investigation by the North Carolina State Bar and the suspension of the attorney in charge of the law firm,” according to the city’s complaint.
The city alleged Timothy Burnette advertises Monarch as a debt relief agency while hiring “a variety of third-party non-lawyer contractors to perform debt settlement work and repeatedly fails to provide legal representation to consumers when they are sued by creditors despite contracting to do so.”
According to the city, the firms’ business model starts by targeting people “with significant credit card debt” and promising to negotiate and settle obligations for less than the owed amount. Enrollment in such programs requires “significant advance fees,” the city alleged, and although a company doesn’t need an attorney to ask a creditor to reduce debt, the 2010 Illinois Debt Settlement Consumer Protection Act “requires debt settlement companies to register with the state and restricts practices likely to harm consumers.”
Because that law doesn’t regulate lawyers, the city alleged, the specter of fraud is raised when a corporate entity purports to engage in the practice of law as a means of avoiding state oversight.
In a decision filed Sept. 8, Cook County Judge Sophia Hall denied a motion to dismiss the complaint.
In arguing for dismissal, Burnette said the city isn’t able to sue because the Attorney Registration and Discipline Commission - which is overseen by the Illinois Supreme Court - is the only entity allowed to pursue the type of fraud and deception claims in the city’s complaint. Burnette also argued he can’t be personally liable for conduct attributed to Monarch.
However, Hall wrote, the only evidence supporting that position is a declaration from Burnette claiming the defendant entities were using legal knowledge while resolving clients’ debt.
“Any facts that would evidence the use of legal knowledge would easily be available to defendants who run the debt resolution practice, and who hired attorneys to participate in the process,” Hall wrote.
To suggest the ARDC is the only entity that could determine whether the defendants actually practiced law, Burnette cited a 1998 Illinois Supreme Court opinion, Cripe v. Leiter, a matter involving a law firm accused of violating the state’s Consumer Fraud Act. But Hall said “the Supreme Court did not prohibit a court from determining whether allegations in a consumer fraud claim constituted an effort to regulate the practice of law.”
Hall further said Burnette essentially argued “the mere fact of a law license shields a lawyer from liability under the consumer fraud ordinances” and further that a client retainer agreement shows lawyers were practicing law. But Hall said the city properly cited several other cases in which courts were allowed to determine if a lawyer could face a Consumer Fraud Act complaint.
Regarding Burnette’s personal liability, Hall said the city’s evidence included Monarch’s website naming Burnette as “responsible for the content of this site,” along with other allegations he directly participated in the conduct the city is calling unfair and deceptive. She also said the city doesn’t have to meet the same pleading standards of a private consumer fraud claim and declined to dismiss on grounds of insufficient allegations.
Burnette has been represented by attorneys from the firm of Rathje Woodward LLC, of Wheaton.
The city’s lawyers include Corporation Counsel Celia Meza and Rachel Granetz, Stephen Kane, Peter Cavanaugh and Rebecca Hirsch.