Ford files $100-million suit over alleged ‘Lemon Law' scheme by L.A. lawyers
In a complaint filed early Wednesday in Los Angeles federal court, the Dearborn, Mich.-based car manufacturer claimed the lawyers violated the Racketeering Influenced and Corrupt Organizations (RICO) Act by working together to carry out the alleged fraud for years.
Describing the invoices it received from California lawyers as a 'magical mystery tour of fictitious billings,' Ford claimed that attorneys named in the lawsuit took advantage of a statute designed to protect consumers from faulty products, including cars.
Under the Song-Beverly Consumer Warranty Act, commonly known as California's Lemon Law, automakers are required to pay for legal work, court fees and related expenses associated with defective vehicles.
That requirement, Ford alleged, has created an opportunity for lawyers to pad their bottom line by claiming more hours than they actually worked or reporting having been in more than one place at the same time.
The complaint alleged that Steve B. Mikhov was the 'ringleader of the criminal enterprise' and that he and Knight Law Group, the Los Angeles-based firm where he was a founding partner, 'orchestrated' the scheme.
Emails and phone messages seeking comment from Knight Law Group were not immediately returned Wednesday, nor were requests for comment made via email addresses and cellphone numbers for Mikhov listed in online databases.
Ford, which is being represented by New York-based Kasowitz Benson Torres LLP, claimed in the complaint that an investigation uncovered payments of legal fees that reflected work that never could have happened.
For instance, the auto giant alleged that Knight partner Amy Morse 'billed more than 20 hours per day on at least 66 occasions, 34 of which exceeded 24 hours, including an ostensibly heroic but physically impossible 57.5-hour workday in November 2016.' Morse did not immediately respond to an email seeking comment Wednesday.
Edward McNally, a former federal prosecutor and lawyer for Ford at Kasowitz Benson Torres, described how the alleged scheme worked in an emailed statement.
'When you look at any single legal bill for a single case it might show only one or two hours for a given lawyer on a given day—nothing to draw suspicion,' he said. 'However, when Ford searched across public filings, as alleged in the complaint, the conduct in this case was carried out through a sophisticated and unlawful enterprise of attorneys and law firms that spread their fraudulent and inflated bills across thousands of cases and against many auto makers.'
The other defendants who benefited from the alleged conspiracy, Ford claimed, include Knight partner Roger Kirnos and former Knight paralegal Dorothy Becerra; L.A.-based Altman Law Group and its founder and former member attorney, Bryan C. Altman; and San Diego-based Wirtz Law APC and Richard Wirtz, its founder and managing partner.
Emails and phone messages seeking comment from Kirnos, Altman Group, Wirtz Law, Altman and Wirtz were not immediately returned Wednesday. Contact information for Becerra could not be located immediately Wednesday.
Daniel J. Fetterman, a former federal prosecutor and partner at Kasowitz Benson Torres, said the firm's automaker client has been in contact with federal authorities.
'Ford reported this conduct to the United States Attorney's Office and has been cooperating with a grand jury subpoena served on it in the fall of 2021,' Fetterman said. Ciaran McEvoy, a spokesman for the U.S. Attorney's Office in L.A., declined to comment Wednesday.
Sherman 'Tiger' Joyce, president of the American Tort Reform Assn., said via email that the alleged fraudulent scheme 'is an affront to the civil justice system and these lawyers who have harmed consumers by needlessly dragging out and driving up costs of litigation should be held accountable.'
Ford claimed in its filing that the scheme 'has an informal governing structure that at certain times operates as a command hierarchy,' meaning it had a chain of command. The arrangement, Ford alleged, violated the RICO Act, which has played a central role in cases against high-profile organizations including Italian crime families, Mexican drug cartels and the Hells Angels motorcycle gang. Ford argues it is owed civil damages under the federal racketeering law.
The automaker's lawsuit said the attorneys involved 'associated with one another in the Enterprise for the common purposes of preparing and filing fraudulent fee applications and billing records, negotiating fraudulent settlements, splitting inflated fees, and funneling fraud proceeds into attorney distributions and extravagant purchases.'
Ford said the nine-figure damage total it is seeking would recoup what it lost in allegedly bogus payouts, along with thousands of hours investigating the alleged scheme and what the company described as the harm to its reputation it sustained as a result of representations the lawyers allegedly made in court and online about the amounts they recovered from the automaker.
Kyla Christoffersen Powell, president and chief executive of the Civil Justice Assn. of California, said in an emailed statement that the alleged fraud scheme highlighted longstanding problems with the state's Lemon Law.
'The shocking attorney conduct outlined in today's filing by Ford underscores the need for the Legislature to consider additional reforms to the lemon law that remove perverse incentives for attorneys,' she wrote.
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