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Legal Test Update – “Judgment in favor of Plaintiff”

by Doug Fuller on 10/15/09

[Opening Note: This is a two part blog – in the second part, which will posted shortly, we do a general review of the Legal test].

Unfortunately the wheels of justice move slowly. We first announced the “New Agency Test” about 23 months ago. We filed suit 18 months ago. We finally had our first scheduled trial of a contested case last week.

The case was big – a $25,000 loan that made three payments so the principal due was $23,800 (ok, actually $23,766.14). The defendant had disputed and objected every step of the way. The basis for the dispute – pick from the menu of debtor claims – (a) deceptive lending practices; (b) racism; (c) no signed contract; (d) flawed chain of title; (e) usury; (f) improper accounting of payments. Fine, we can deal with it.

Then this spring, in a case management conference, the specter of the SEC Cease & Desist was raised. The defendant amended their answer to say that since “the SEC had found that these were illegal securities – they didn’t owe the money.” The defendant’s argument continued, since this was an “investment” for the people who put up the money, it wasn’t a loan and they had no obligation to repay. In support of this position, the defendant filed 300 pages of web posts on the subject.

Our lead attorney (who I will contend is the premier debt collection attorney in California) and I spent more than 20 hours in trial prep. We assembled more than 40 POUNDS of printouts in support of every aspect of our position. We repeatedly walked through our chain of testimony – exploring different approaches. At the end of the day, we decided to put me on the stand first and attack the issues directly. Our position was simple, the issue with the SEC is a lender only issue – it has no bearing on the enforceability of the loans. We did multiple dry runs until we could present a coherent case – gently educating the court about peer-to-peer lending – in 30 minutes. Our attorney and I have worked together for more than a decade – pursuing loans for four different corporate clients. When we did our final dry run, we agreed that it was a thing a beauty.

When we arrived at the court room and checked in with the clerk there was no defendant. Courts tend to be very “consumer friendly” – we’re told to wait to see if the defendant shows up. After two hours, they call the case without the defendant present. At this point, it should be a no brainer – a default prove up. Not so, the judge reads the file and says – ”I need to prove that this is a valid debt and you have standing to sue.” My attorney says “do we need to label each exhibit, as there are more than 500 of them.” The judge says “let me see them.” We drop roughly 20 pounds of exhibits on the bench.

The look of the judge’s face was priceless – made you wish that cameras were allowed in the courtroom. At this point, the judge says – “Do you have a single piece of paper that shows the $23.8 K balance” We did. The judge then says, “Mr. Fuller, are you willing to be sworn and testify that the allegations of the complaint are true.” I was.. And then those sweet, sweet words – “Judgment to the plaintiff….”

My attorney and I said “Thank you, your honor” – walked out of the courtroom and did the ridiculously appearing routine of two guys over 50 doing a “High Five.”

Will we see anything out of this judgment? I don’t know. When we identified this account for suit, the defendant owned a house with significant equity. Now according to the Zillow estimate, the defendant is “under water” on their mortgage.

At this point, the defendant has 30 days to appeal the judgment. After that, we can avail ourselves of multiple post judgment. In addition to placing a lien on the defendant’s home, we can seek wage or bank garnishment.

The second part of this blog will be a general update on the legal test. We understand that for those unaccustomed to the pace of the legal collections process, this has been frustrating, but tests are about learning. We appreciate the participation and patience of everyone that volunteered to be part of the test.

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11 Responses

Tom Jones | October 15th, 2009 at 6:54 pm

Really after 23 months, that’s all you have?

1 success story, how about an update on the multiple failures?

Steve | October 15th, 2009 at 6:56 pm

This has to be frustrated spending so much time and the deadbeat doesn’t even show up to pursue the case. This happens in land lording often but that is small claims court without a lawyer, something entirely different.

John Roberts | October 16th, 2009 at 10:16 am

Maybe this will be a wake up call to some of the other deadbeats! Lets go after more of them! Can’t wait to hear more results. Way to go, Doug!!!


NewHorizon | October 16th, 2009 at 11:47 am

I’d rate this blog post a 4 (out of 5). I was tempted to go with 5, but I suspect I’ll reserve that for if/when you’re face-to-face with a defendant at trial.

Separately, last year August, we read, “During my July visit, I instructed AmSher to fall back to attempting to secure a payment equal to half of the monthly amount—this will at least retard the rate of roll.

On my next trip, we will evaluate the effectiveness of this approach.”

Was that evaluation ever posted?

gary varvaro | October 16th, 2009 at 3:25 pm

You say a guy that is getting 8% is better than the stock market. I beg to differ sir.

Chuckles | October 16th, 2009 at 7:18 pm

Hopefully you’ll actually have regular enforcement soon!!

Xenon481 | October 16th, 2009 at 7:50 pm

We are supposed to be excited that Prosper won a case simply because the defendant didn’t show up and that the defendant doesn’t have any money to pay anyways?

Brad | October 19th, 2009 at 1:33 am

Congratulations on your first win Doug! I hope the preparations you have made in this case significantly helps your future cases.

BTW – Where did the 300 pages of website print offs come from? Credit boards?

Shauna | October 19th, 2009 at 11:09 am

First win, congratulations! How many lawsuits have been filed and how many do you anticipate winning and how many will not be? What issues are you facing (I know some are proof of service, what else?). Is this particular defendant appealing the loss?


posted in Featured,Lenders,Prosper News 11 comments »

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