Affiliated businesses owned by one of Colorado’s top foreclosure law firms can be held liable for millions of dollars in inflated costs the state alleges were siphoned in thousands of foreclosure filings during the height of the housing collapse, the state Supreme Court held.
In a 29-page ruling released Tuesday, the court determined that a Denver District Court judge erred in barring evidence Colorado Attorney General Cynthia Coffman’s office says will show a number of companies affiliated with the Castle Law Group were complicit in the scheme that relentlessly tagged on the overcharges.
The ruling gives Coffman’s office — which began the under former Attorney General John Suthers — a critical victory in its civil lawsuit against Larry Castle, his wife, Caren, and the law firm they built into one of the largest handling foreclosures. The and has been embroiled in a quagmire of legal battles ever since.
“This case is about ensuring the fairness and integrity of the foreclosure process, including for homeowners at risk of losing their homes,” Coffman said in a press release. “I look forward to proving my allegations at trial and holding these defendants accountable.”
Lawyers for The Castle Law Group, which has since closed operations, did not immediately respond to efforts to reach them.
to hold the companies liable for tens of millions of dollars in overcharges they say came in the form of routine services such as property postings and other fees. Coffman said the amount is about $12 million.
The fees are allowed by law but are limited to the amount a lawyer actually paid or was billed for a service or expense such as mailing costs, property inspections, title searches and court docketing charges. The charges are tacked on to the overall cost of a foreclosure and the unpaid mortgage amount, then paid by the homeowner facing foreclosure, the foreclosing bank or investors who buy the property at public auction.
Castle tried to argue that simply by having disclosed the prices that were being charged — in some cases as much as five times higher than what lawyers in other foreclosure cases were charging — that the state could not claim the practice was deceptive and could not be punitive. He also argued that the costs were “actual, necessary and reasonable.”
The Supreme Court disagreed.
“Disclosure of a price charged does not automatically insulate a party from claims that the price is deceptive,” the court wrote, adding that showing what other businesses typically charged for the same service “is directly relevant” to showing how the alleged scheme worked.
In a series of stories that uncovered problems within the state’s foreclosure system and some of the foreclosure law firms’ practices, how law firms often charged homeowners the costs of filing foreclosure lawsuits even though the cases never actually existed.
, Aronowitz & Mecklenburg, which settled and eventually closed its doors.
