Lawsuit over Iowa Judicial Branch’s debt collection sparks new accusations

A law firm sued for alleged illegal acts while working on behalf of the Iowa Judicial Branch says the opposing lawyers in the case have “padded” their legal bills and may have initiated the case for their own financial gain.

A federal lawsuit filed in the fall of 2020 alleges the law firm of Linebarger, Googan, Blair & Sampson, which is one of the nation’s largest collectors of money owed to governmental agencies, has used deceptive, high-pressure tactics to force Iowans to pay their court-ordered fines and penalties.

The Linebarger firm has countered that it is not a debt-collection company but a “law firm that has represented the Iowa Judicial Branch pursuant to a contract for services.” It says the terms “debt,” “debt collection” and “debt collector” are not applicable to its work “because government fines and legally imposed fees” are not legally considered debt.

The lawsuit was filed on behalf of two Iowans by a California public-interest group called Public Justice; the Terrell Marshall Law Group of Seattle; and attorneys working for Iowa Legal Aid. It seeks to hold the Linebarger firm accountable to the provisions of both the federal Fair Debt Collection Practices Act and the Iowa Debt Collection Practices Act.

Court records indicate the two Iowans on whose behalf the case was filed settled their claims with Linebarger last September for an undisclosed amount. Their attorneys, including those at Iowa Legal Aid, are now battling with Linebarger over an apparent agreement by Linebarger to pay “reasonable” attorney fees.

In recent court filings, Linebarger argues that it is “apparent that plaintiffs’ counsels were running the meter” in term of legal expenses, and says it “is fair for the court to ponder” whether the lawsuit was filed for the benefit of the two Iowa plaintiffs or for “the financial benefit of plaintiffs’ counsel.”

The plaintiffs’ lawyers are seeking payment of more than $232,000 in fees, but Linebarger argues that records show those lawyers spent more than a year building a case and “targeting” Linebarger before they even had a client to represent.

“The four lawyers in this case spent significant time trying to create a claim before they ever had an actual client,” Linebarger alleges. “The lawyers were looking for a client to ultimately justify their misuse of fee-shifting statutes to educate themselves on the law — or, in other words, as a full-employment or continuing-education program for lawyers and paralegals.”

Linebarger says the plaintiffs’ lawyers would never be allowed to bill clients for work performed 18 months in advance of being hired by those same clients, so their courtroom adversary shouldn’t be expected to pay those costs, either. Some of the time that’s being billed, Linebarger says, represents time the lawyers spent trying to “market themselves to potential clients in an attempt to generate business.”

Excluding the expenses that were incurred before the plaintiffs’ lawyers signed up any clients would reduce the demand for legal fees by $127,331, Linebarger claims.

Alexander Vincent Kornya, the litigation director and general counsel at Iowa Legal Aid, has told the court the demand for fees reflects work on initial disclosures and discovery requests; investigations and factual background development; and the time spent participating in mediation and settlement conferences.

“We have eliminated time that was arguably administrative in nature and made reductions to time that arguably could have been spent more efficiently,” Kornya told the court. “The remaining time was reasonably and necessarily expended to secure the rights of plaintiffs.”

The court has yet to rule on the reasonableness of the attorneys’ fees.

The Iowa Judicial Branch hired Linebarger in 2010 to collect money owed to the state. As part of that contract, the state was to pay Linebarger 25% of all debt that is collected. However, when Linebarger sent collection notices to Iowans, the firm allegedly added 25% onto the amount that was owed and characterized the total as the court-ordered obligation. It allegedly instructed the recipients to pay that amount to the state or face contempt-of-court action and the possible revocation of their driver’s licenses.

Between 2012 and 2018, Linebarger allegedly collected more than $58.6 million from Iowans pursuant to the company’s contract with the Judicial Branch. During the same period, Linebarger — which employs just two attorneys licensed in Iowa — received nearly $12 million in collection fees, according to the lawsuit.

With at least 2,300 governmental clients nationwide, Linebarger reportedly collects 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.