CORPUS CHRISTI, Texas (Legal Newsline) - A Texas personal injury firm has defeated federal class action claims brought by clients who claim they were ripped off via a $195 administrative fee.
The lawsuit against Herrman & Herrman sought to tie the firm and its members together as a conspiracy that violated the federal Racketeering Influenced and Corrupt Organizations Act. But Texas federal judge Drew Tipton March 28 dismissed federal claims with prejudice.
"Plaintiffs' first argument is that Defendants fraudulently misrepresent the $195 administrative fee during a prospective client's initial screening 'as a cost-saving measure that benefits pre-litigation clients' when in reality it 'is mostly profit,'" Tipton wrote..
"This does not rise to the level of a fraudulent misrepresentation for two reasons. First, Plaintiffs offer no support beyond the contractual language itself that Herrman & Herrman employees misrepresented the $195 administrative fee as a cost-saving measure.
"Second, even if the court were to assume that Herrman & Herrman employees characterized the... fee as lacking any element of profit, such statements are merely puffery and not a criminal misrepresentation."
The suit, filed April 14 in Corpus Christi federal court, says the firm has defrauded clients of more than $600,000 in the past three years. It did so by charging a $195 administrate fee to cover copies, postage, phone calls, scanned documents and faxes for pre-litigation clients, the suit says.
The firm pushes this pre-litigation fee on clients by telling them they have to pay “all expenses” if a lawsuit is filed – “The representation agreement leaves the client with the impression that the $195 ‘administrative fee’ is designed to save pre-litigation clients money,” the suit says.
One plaintiff says she paid $195, but the firm only spent $18.60 for her expenses and pocketed the rest. Another plaintiff says her expenses were only $7.55.
Assuming the same mark-up established by the three plaintiffs, lawyers estimate $632,537.10 in pocketed expenses money on 3,510 estimated clients. Mikell West and Robert Clore of the Bandas Law Firm are representing the plaintiffs.
A June motion to dismiss from the firm said the plaintiffs didn't show acts alleged to be mail or wire fraud, like emails among the defendants, are strong enough to meet stringent civil RICO pleading standards.
Tipton agreed holding the allegations to do not rise to wire fraud because they don't allege a scheme "to defraud that employed false material representations" furthered by "the use of mail or interstate wires" with "the specific intent to defraud."
"The fee has a reasonable basis, and there have been no fraudulent misrepresentations involved with the fee," Tipton wrote.
The allegations started in state court, but plaintiffs voluntarily dismissed that case. Tipton dismissed state-law claims without prejudice, leaving the plaintiffs a chance to re-file them in a state court.