A judge has ruled that state authorities can seek financial penalties against Colorado’s most prolific foreclosure law firm for only one year of alleged fraudulent overcharges, not several years as sought in a lawsuit.
Denver District Judge Morris Hoffman on Monday clarified an earlier ruling, saying the Colorado attorney general’s office cannot seek penalties for alleged bill-padding by the Castle Law Group prior to July 2013, .
Hoffman’s ruling left open remedial penalties, such as restitution, as well as penalties under other state laws that Attorney General Cynthia Coffman’s office alleges were broken.
Hoffman said the debt-collection act limits punitive damages to one year, removing the potential for millions of dollars in penalties should the state win its case against Castle.
“The court’s ruling was limited to civil penalties and did not address other remedies,” attorney general spokeswoman Carolyn Tyler said. “We are pursuing our full range of options to hold these firms accountable.”
Castle’s office did not respond to requests for comment.
In a related matter, a different Denver district judge has dismissed a class-action lawsuit against Castle waged by former homeowners who say they were impacted by the overcharges.
Denver District Judge Robert McGahey Jr. said the homeowners needed to wait until the state’s case is finished.
The state alleges that the Castle law firm, led by attorney Larry Castle, conspired with another of the state’s big foreclosure law firms, Aronowitz & Mecklenburg, in a multimillion-dollar scheme that defrauded tens of thousands of home owners, banks, investors and, ultimately, taxpayers.
The allegations of the state’s two-year investigation were so far-reaching that Aronowitz settled immediately — as have seven other law firms caught up in the probe and sued separately — for $10 million and agreed to sell or close the law practice within six months, while offering no admission of wrongdoing.
brought by the same attorneys who sued Castle, opting to pay roughly $2.5 million to more than 32,000 families who lost their homes to foreclosure.
Castle, however, has waged a court battle, denying the state’s allegations and pressing for a jury trial that at its earliest would occur this year. Castle is expected to take more than 150 depositions, while the state has said it would take 50.
The 40-page state lawsuit lays out a well-developed scheme that exploited nearly every facet of the foreclosure process. The law firm left virtually nothing out of its profit center: from title searches and title commitments to the posting of legal notices and costs to file a foreclosure.
Combined, the Castle and Aronowitz law firms handled more than 150,000 foreclosures in Colorado since 2006 and overcharged each by as much as $650. The total of illegitimate profits easily could have reached $97 million in less than a decade.
David Migoya: 303-954-1506, dmigoya@denverpost.com or twitter.com/davidmigoya
