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AG: Colorado law firm getting paid too much in foreclosure settlement

Colorado’s attorney general is challenging a Denver law firm that recently landed a class-action settlement against one of the state’s biggest foreclosure law practices — and wants to collect $875,000 in legal fees — saying it did little more than to ride the state’s investigative coat-tails.

State investigators say they did nearly all the heavy lifting during a two-year probe into the foreclosure practices at Aronowitz Mecklenburg — an inquiry that law firm settled with the state for $13 million.

Yet attorneys at Allen Vellone are trying to collect for having done little more than copying the state’s work, according to a filing in Denver district court where the class-action is being heard.

The law firm’s requested fee “victimizes these homeowners once again,” because the money could go to them instead, the state says in the filing.

Allen Vellone argues that any reduction in its fee would be money in Aronowitz’s pockets, not for homeowners.

“The attorney general’s position does nothing to advance the public interest,” the law firm said in its response to the AG’s objection. “The attorney general is laboring under the misapprehension that (Allen Vellone) piggybacked on his office’s work. Not true.”

Allen Vellone filed their lawsuit against Aronowitz Mecklenburg — as well as one against The Castle Law Group, which is ongoing — weeks after the attorney general investigation into the law firms’ alleged overcharging of fees was made public last year.

Although AG investigations are typically kept under wraps, the inquiry went public when a different law firm under investigation for the same conduct sued to stop the AG’s investigative subpoenas. Aronowitz and Castle later filed similar lawsuits, claiming information the AG wanted was protected by attorney-client privilege.

On July 15, the attorney general filed civil lawsuits claiming misconduct by both the Aronowitz and Castle law firms.

Allen Vellone also settled their lawsuit with Aronowitz, garnering about $1.8 million for homeowners who were allegedly overcharged for the required postings on foreclosed properties of a pair of legal notices that outlined a homeowners’ rights — the same thing the state was investigating.

Aronowitz did not admit any wrongdoing in either settlement.

Allen Vellone argue the AG’s settlement covers only 2,000 homeowners who cured their foreclosure — paying off what they owed to stop the process, including the lawyers’ fees.

“This represents fewer than 10 percent of the victims,” attorney Jordan Factor said. “The AG’s settlement does nothing for the tens of thousands of Coloradans who were unable to save their homes or only able to save their homes through a loan modification. Our settlement compensates 100 percent of the victims. And not a penny of our fees comes at the expense of compensating homeowners.”

The state’s settlement covered a number of other fees the law firm allegedly overcharged — and for which homeowners will be reimbursed — while the Allen settlement dealt with a single type of fee.

The law firm “copied allegations from the state’s well-publicized investigation and re-pled them into a private class action lawsuit,” the state says in its challenge.

Allen Vellone said their fees were only $355,000, but asked for far more because of the “significant benefits” they brought to about 32,000 homeowners impacted by the overcharging practice. Also, courts routinely award class-action lawyers a multiplier of their actual costs, the law firm said.

“The $875,000 attorney fee is the product of … attorneys who slapped together a complaint based upon the state’s investigation of foreclosure postings,” the state said.

The law firm said it did its own investigation and all its work was original and independent of the AG. Only after it landed the settlement for homeowners did it work on how much it would be paid. Any settlement had nothing to do with the outcome of the AG’s case, the law firm said in its response.

Part of the $10 million Aronowitz agreed to pay the state — $3 million more was set aside should Aronowitz not live up to the agreement, including the provision that the firm sell or close in the next six months — will cover the state’s legal costs.

The majority, however, is to revert to homeowners impacted by the law firm’s alleged practices, the AG recently said.

David Migoya: 303-954-1506, or

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