When the housing market crashed, Castle Law Group, Colorado’s largest foreclosure law firm, took advantage of the situation by “inflating costs of posting legal notices…conspiring with companies that did the work and its own competitors to fix the price at far more than what it actually cost,” alleged the Colorado state attorney general’s office in a lawsuit against the firm earlier this year. The state had already filed suits against Castle Law as early as 2014, claiming, among other things, that the group hiked the amount of money it charged banks to post foreclosure notices. And “formed Colorado American Title to capitalize on the title searches needed in foreclosure work” while profiting from “charging for title policies that were never actually issued.”
The Accused Castle Law Group
In short, the state accused Castle Law Group of overcharging banks for foreclosure-related work in the middle of the housing crisis and, possibly most offensive, coming out of the housing crash about $12 million richer than the firm went into it. Interestingly, this series of lawsuits was not unique. In January 2017, The Denver Post noted that a number of firms were defendants in similar suits levied by the Colorado AG and, “All of the other cases brought by the AG have settled.”
Fighting the Law
The Colorado firm, Castle Law Group, however, opted not to settle and, nearly a year later, the firm has been vindicated after a Denver district judge ruled the Colorado AG’s office must pay the group’s legal fees it accrued while fighting the charges. The judge said the AG “was wrong to bring and pursue most of this case,” adding, “The evidence, or lack of evidence, at trial was nothing short of breathtaking.” The judge added that he did not believe the AG acted in “bad faith,” however, stating, “I don’t doubt that every one of them…subjectively thought this was a righteous case; they probably still do.”
The judge mostly sided with Castle Law on charges of conspiring to “pad billings” in order to make money off of banks, affected homeowners, and the real estate investors that eventually bought foreclosed homes at auction.
However, the firm was convicted of failing to disclose indirect financial interest in the summons-posting company that handled foreclosure notices. They had to pay a civil penalty just under $120,000 for this infraction, but avoided the $16-to-$26 million penalties that the AG’s office originally sought. By comparison, another firm sued in similar circumstances that settled eventually closed after reaching a $10 million settlement and agreeing to pay affected homeowners an additional $2.5 million as part of a class action settlement.