LOS ANGELES (Legal Newsline) - A Florida-based, family-owned company known for its silver supplements is fighting back against a California law firm that, it argues, uses “for-hire plaintiffs” in class action lawsuits to extort hefty payouts from corporate defendants like itself.
Natural Immunogenics Corp. filed its complaint against Newport Trial Group in the U.S. District Court for the Central District of California Monday.
In its 74-page complaint, NIC, the maker of “Sovereign Silver” and other dietary supplements and homeopathic products, accuses the Newport Beach law firm of fraud, unfair competition, malicious prosecution, extortion and other claims brought, in part, under the federal Racketeer Influenced Corrupt Organizations Act.
“For at least the past five years, the Defendants have acted in concert and conspired to file state and federal lawsuits against corporate defendants across the country on false pretenses, seeking to extort large payouts in the form of legal fees, damage awards, legal costs, and/or settlements from those defendants,” wrote Peter Arhangelsky of Arizona law firm Emord & Associates PC, for the plaintiff.
“The Defendant Newport Trial Group (NTG) and its above-named attorneys and agents worked in concert to operate an unlawful enterprise by paying individuals to assume the role of plaintiffs, who in fact had no bona fide basis for suit, and to initiate and maintain fabricated class action suits in order to extort money from those defendants.”
NIC alleges NTG paid plaintiffs to sign false affidavits, pleadings and legal filings, suborning perjury.
“NTG and its attorneys relied on their employees or agents to recruit putative plaintiffs for hire, most often young individuals or recent college graduates in need of money and willing to participate in NTG’s fraudulent scheme,” the company wrote.
“NTG and its attorneys filed demonstrably false statements in support of those fabricated cases, and collectively obtained tens of millions of dollars in settlement payments from those threatened with suits and defendants.”
NIC alleges it is one of the firm’s many victims.
In March 2012, Andrew Nilon -- also a named defendant in NIC’s lawsuit -- sponsored a lawsuit against NIC for false advertising, unfair competition and violations of California’s Consumer Legal Remedies Act.
“That lawsuit was fraudulent,” NIC’s lawsuit states. “NTG paid Andrew Nilon approximately $900 to assume the role of plaintiff in litigation in which NTG fabricated charges against NIC.”
Nilon hadn’t even purchased NIC’s product at the time his lawsuit was filed, it notes.
“Natural Immunogenics endured more than three years of litigation based on NTG’s fraudulent claims,” the company wrote of Nilon’s lawsuit. “NIC suffered substantial harm to its reputation and goodwill stemming from NTG’s false allegations and suffered financial losses resulting therefrom.”
NIC alleges NTG, to date, has unlawfully obtained more than $300 million through their lawsuits, much of which can be linked to the firm’s scheme to “fabricate” lawsuits.
Last year, NTG was accused of committing various ethical violations in a putative class action filed against Public Storage.
According to a Law360 report, the plaintiffs alleged the storage company and its NTG attorneys paid at least one witness to provide favorable testimony, among other violations.
The plaintiffs, which sued Public Storage for allegedly charging usurious rates for insurance on its units, filed a motion to disqualify the firm.
“The facts underlying this suit define one of the largest frauds perpetrated by lawyers on the courts in American history,” Arhangelsky wrote for NIC.
“This Court should therefore issue the relief requested in this Complaint to protect the integrity of the judicial system, to ensure that those attorneys, associates, and agents who abused the judicial process and engaged in tortious activity are made to account for their wrong-doing and ill-gotten gains, and to halt the abuses and damages stemming from their tortious and unlawful actions.”
Among the other named defendants in NIC’s lawsuit: Scott J. Ferrell, NTG’s founding member; attorneys Ryan M. Ferrell, James B. Hardin and Victoria C. Knowles; and firm investigator Andrew Lee Baslow.
NTG, according its website, claims to offer a “unique approach” to litigation:
“We handle only those cases where we believe strongly enough in our clients’ position that we will share their risk of loss,” it states.
But NIC argues the firm’s approach has fueled a “steady and profitable stream” of class action litigation by actively recruiting, soliciting and paying individuals to front as plaintiffs in prospective lawsuits.
“The individuals who accepted payment often had little knowledge about NTG’s case, rarely reviewed documents filed on their behalf, often did not purchase the products at issue, and collaborated with NTG to fabricate legal claims that would appear facially legitimate to corporate defendants and the courts,” the company alleges.
“When making threats of litigation and when filing suit, NTG operated not as a law firm, representing the interests and defending the rights of bona fide plaintiffs in accordance with the law, but instead as an unlawful and corrupt enterprise, extorting money by targeting defendants and concocting charges against them through fabricated suits, building legal allegations through fraudulent plaintiffs, and concealing its fraudulent conduct through claims of legal privilege (including the attorney/client privilege) and refusals to participate in meaningful discovery.”
NIC seeks the following:
- An award of exemplary or punitive damages;
- An award of threefold damages;
- A permanent injunction enjoining the defendants from providing or receiving any payment, compensation, remuneration or otherwise in exchange for the provision of testimony, evidence or statements for use in litigation, other than such payments expressly permitted by law and applicable rules of professional responsibility;
- A preliminary order barring NTG and its attorneys from continuing to furnish legal services or legal advice to the individually-named defendants during the pendency of the litigation;
- An order requiring the defendants to file with the federal court a compliance plan under oath describing the method and manner in which the defendants intend to comply with the injunction(s), including a description of any new operating procedures and policies, to be filed within 30 days after service of an injunction;
- An award of costs and reasonable attorney fees and expenses;
- An accounting of all defendants’ profits, revenues, accounts and proceeds received or obtained, directly or indirectly, or arising out of the defendants’ history of “malicious prosecution,” unfair competition, RICO violations and all other allegations presented, including a full accounting of all gross revenues derived from NTG’s alleged “legal services” after Jan. 1, 2009;
- General damages for loss of goodwill or harm to NIC’s reputation;
- Pre-judgment and post-judgment interest on the damage awards; and
- An order adjudging all of the defendants jointly and severally liable.
Arhangelsky declined to comment further on his client’s complaint, explaining that it is “active” litigation.
From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.