Secret settlement in Iowa Judicial Branch debt collection dispute
A dispute over the legality of work performed on behalf of the Iowa Department of Justice has been settled out of court, with the terms of the contract being kept confidential.
The upshot is that the public may never know if a law firm that collected $58.6 million from Iowans through a contract with the Iowa Department of Justice — while making nearly $12 million in fees to itself confiscated – acted illegally by using fraudulent high-pressure tactics to use force paying court-ordered fees.
A federal lawsuit filed in the fall of 2020 by Iowa Legal Aid and two other entities alleges that the law firm of Linebarger, Googan, Blair & Sampson was hired by the Iowa Judicial Branch in 2010 to collect monies owed to the state.
As part of this agreement, the state was to pay Linebarger 25% of all debt collected. However, when Linebarger sent collection notices to Iowans, the company allegedly added 25% to the amount owed and described the total amount as a court-ordered obligation. It allegedly ordered the recipients to pay that amount to the state or face a contempt of court and possible confiscation of their driver’s licenses, all in violation of the federal Fair Debt Collection Practices Act and the Iowa Debt Collection Practices Act.
Linebarger has responded that it is not a debt collection agency, but “a law firm representing the Iowa Judicial Branch pursuant to a service agreement.” The terms “debt,” “collection,” and “debt collector” do not apply to his work, “because government fines and statutory fees” do not legally qualify as debt.
Court filings show the parties signed a settlement agreement last September, though the two sides are still fighting in court over legal fees in the case. The terms of the settlement were not disclosed, and in recent court filings, attorneys for the plaintiffs told the judge that both sides had agreed that “they will not publicly disclose any terms of the settlement.”
Under Iowa law, public entities are prohibited from entering into secret settlement agreements to resolve court cases and other disputes.
In this case, however, the Iowa Department of Justice is not a party to the settlement, although the case involves work performed on its behalf. And although Iowa Legal Aid receives some public funding for its work, it is a nonprofit organization that serves as plaintiffs’ counsel, not plaintiffs.
It is possible that a key element of the lawsuit is yet to be addressed by the judge in the case. The Linebarger law firm has contested the attorneys’ fees claimed by plaintiffs’ attorneys, arguing in part that the lawsuit was unfounded. The judge may need to rule on this issue, albeit indirectly, simply to settle the legal fees dispute.
Iowa calculates poor defense differently
Alexander Vincent Kornya, litigation director and general counsel for Iowa Legal Aid, said Friday that while he could not comment on any aspect of the settlement, the lawsuit itself “is about accountability — specifically, about private law firms that pay debt to the… Government enlists are beyond the reach of the laws that govern their peers. We believed they were responsible when we filed the case that they broke the law and we still believe that.”
He noted that Linebarger’s contract with the Iowa Department of Justice ended in January 2021 after lawmakers assigned the collections portfolio to the Iowa Department of Revenue. Even so, Kornya said, the issues raised in the lawsuit could surface again.
“For example,” he said, “we have heard that the Iowa Department of Treasury has contracted with Transworld Inc. — a well-known national private collection agency — to collect debt on behalf of the State of Iowa. Transworld’s activities may or may not include a role in the collection of the same court debts that were being collected from Linebarger at any given time. To the extent that there may be similar problems in the future – with Transworld or any other private sector contractor collecting debt on behalf of the state – we hope this case will create some sense of accountability and compliance with the law, who have regulated the private sector debt collectors for 50 years.”
Kornya noted that the lawsuit against Linebarger did not focus on unpaid fines and penalties, but rather on needy defense fees. The consequences for poor people who don’t pay their attorney’s fees are far greater than for wealthy people who hire a private attorney, he said. Poverty people who owe needy defense fees can have their criminal cases denied, their tax refunds offset, and — as alleged in the Linebarger lawsuit — they can be threatened with a driver’s license suspension or even jail time.
Kornya also noted that while 45 states charge some type of fee for in-need defense, Iowa differs in that the fee represents the actual cost of the defense. Most states impose a cap that results in a much lower fee, he said.
Additionally, he said, a person in Iowa is billed for penniless defense whether they win or lose their case, and many people are also charged those fees in noncriminal cases.
A spokesman for the Iowa Department of Justice declined to comment Friday.
The dispute over lawyers’ fees continues
As part of the ongoing litigation over attorney’s fees in the Linebarger lawsuit, the firm has accused Linebarger Iowa Legal Aid and its co-attorney of “running the meter” on their expenses and said it was “fair that the court should consider it.” thinks”. whether the lawsuit was filed for the benefit of the plaintiffs or “for the financial benefit of plaintiffs’ counsel.”
Kornya said Friday that in this case, Iowa Legal Aid and its partners have more clients than they can handle and there is no need to drive more “business” their way.
“We provide free civil justice services to approximately 14,000 Iowans each year that affect access to basic necessities of life,” he said. The lawsuit, he added, aims to “reduce the number of people in crisis walking through our doors who are unable to make a living because of unjustified and unlawful threats of jail, disqualification from driving and other penalties.” “.
With at least 2,300 government clients across the country, Linebarger reportedly takes on more than $1 billion in government debt each year, but has come under scrutiny for its debt collection tactics and has been accused of threatening debtors with arrest and jail.