The Virginia State Bar chose to dismiss discipline charges against an attorney who refused to abide by a lien claimed by a pre-settlement loan company, reports Virginia Lawyers Weekly.
Stephen M. Smith, a lawyer out of Hampton, VA, argued in court that the loan company was using the VSB as a way to collect a payoff that was almost nine times greater than the original advance to his client.
The VSB’s Office of Bar Counsel charged Smith with failing to promptly pay client funds to those who are entitled to them, but dropped the charges last month.
Lawsuit loans, or more properly known as pre-settlement funding plans, give cash to personal injury claimants who expect to recover money for their injuries. If the claimant doesn’t recover the money quickly from the lawsuit, fees can mount.
Smith worked with an auto-accident client who took a $26,500 advance in 2005 from a company called Pre-Settlement Finance, based out of New York. That sum turned into a $236,971 bill when the client settled her lawsuit in 2010.
Smith told the bar that his client didn’t want to pay anything to PSF, but Smith had withheld $50,000 from her $3-million settlement and offered it to PSF, who refused the money.
Smith said he took the validity of PSF’s claim seriously and acted in good faith, but found that the agreement was “both usurious and champertous,” and therefore he found it to be invalid. The loan company had only filed a bar complaint, and not sought legal repercussions or entered into arbitration in an attempt to solve the dispute.
A three-judge Hampton Circuit Court panel heard the bar’s case against Smith, and when the bar dropped the charges, the two parties decided to file a motion to dismiss with prejudice. The case was dismissed on Oct. 21.
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