E-FILED IN COUNTY CLERK'S OFFICE PIERCE COUNTY, WASHINGTON January 0 : PM KEVIN STOCK COUNTY CLERK NO: --- SUPERIOR COURT, STATE OF WASHINGTON, COUNTY OF PIERCE BRIAN HEERSINK, individually and on behalf of a Class of similarly situated Washington residents, Plaintiff, FIDELITY DEBT SOLUTIONS, LLC, a California limited liability company; TIMOTHY E. AARON, individually; CARLA T. AARON, individually; THOMAS J. BELFANTI, individually; and JOHN and JANE DOES -, Defendants. NO. --- SECOND AMENDED CLASS ACTION COMPLAINT L INTRODUCTION 0. Many Washington residents are struggling to manage their unsecured credit card debts due to economic forces beyond their control.. Such consumer indebtedness has given explosive rise to for-profit "debt relief companies that market debt relief programs to indebted consumers through television, radio, the Internet, junk mail, and unsolicited phone calls, typically promising consumers resolution of their credit card debts for pennies on the dollar. SECOND AMENDED CLASS ACTION COMPLAINT: W SPRAOUE AVENUE. SUITE 0 SPOKANE. WA 0-0 (0) -
0. The for-profit character of such companies carries substantial risks that their debt relief programs will exacerbate, rather than lessen, the consumer's financial troubles.. Unfair and deceptive business practices endemic to "for-profit" debt relief companies have caused Washington state, sister states, and most recently the Federal Trade Commission, to adopt statutes or regulations protecting consumers from unfair and deceptive practices historically associated with "for-profit" debt relief companies.. Principal among the evils these consumer protection laws seek to prevent are predatorily high fees and exorbitant "upfront" fees.. This Class Action is brought, on behalf of Washington consumers, against some of the principal parties involved in such ongoing conspiratorial schemes to commit unfair and deceptive business practices and to evade state and federal consumer protections aimed at preventing such practices.. Defendants are engaged in a coordinated, criminal scheme to enrich themselves at the expense of indebted Washington consumers through violations of Washington's Debt Adjusting Act ("DAA"), chapter. RCW, Washington's Consumer Protection Act ("CPA"), chapter. RCW, and/or through aiding and abetting one another in such violations.. Named and proposed Class Representative Brian Heersink ("Heersink") therefore brings this action on behalf of himself and on behalf of a Class of similarly situated Washington residents for purposes of enjoining Defendants' wrongful business practices and securing recovery for common injury suffered. SECOND AMENDED CLASS ACTION COMPLAINT: W SPRAOUE AVENUE. SUITE 0 SPOKANE. WA 0-0 (0)-
0 II. PARTIES. Plaintiff Brian Heersink: Plaintiff Brian Heersink is domiciled in the state of Washington and a resident of Pierce County. Mr. Heersink is typical of many Washington consumers and families who are financially struggling.. Defendant Fidelity Debt Solutions, LLC: Defendant Fidelity Debt Solutions, LLC ("FDS") is a California limited liability company with its principal offices at Market St., nd Floor, San Diego, California. FDS does business throughout the United States, including the state of Washington. FDS is not and has never been licensed to do business in the state of Washington. FDS is engaged as a for-profit debt settlement company in that it implements, manages, and maintains the debt relief programs marketed by itself and others.. Defendant Timothy E. Aaron: Defendant Timothy E. Aaron is an individual domiciled in the state of California and residing in San Diego County, California. Timothy Aaron is one of the owners, officers, managing members, control persons, and chief moving forces behind FDS. He is the President of FDS. Timothy Aaron established FDS for the purpose of carrying out the wrongful business purposes alleged in the Complaint. At all times material to the allegations in this Class Action Complaint, Timothy Aaron helped direct the business affairs of FDS. Timothy Aaron, individually, and as an officer, director, control person, managing partner, and/or agent of FDS established, directed, and/or ratified the unfair and deceptive business practices of FDS alleged in this Class Action Complaint.. Defendant Carla T. Aaron: Defendant Carla T. Aaron is an individual domiciled in the state of California and residing in San Diego County, California. Carla Aaron SECOND AMENDED CLASS ACTION COMPLAINT: W SPRAGUE AVENUE. SUITE 0 SPOKANE. WA 0-0 ($0)-
is one of the owners, officers, managing members, control persons, and chief moving forces behind FDS. Carla Aaron established FDS for the purpose of carrying out the wrongful business purposes alleged in the Complaint. At all times material to the allegations in this Class Action Complaint, Carla Aaron helped direct the business affairs of FDS. Carla Aaron, individually, and as an officer, director, control person, managing partner, and/or agent of FDS established, directed, and/or ratified the unfair and deceptive business practices of FDS alleged in this Class Action Complaint.. Defendant Thomas J. Belfanti: Defendant Thomas J. Belfanti ("Belfanti") is an individual domiciled in the state of California and residing in Orange County, California. Belfanti is one of the owners, officers, managing members, control persons, and chief moving forces behind FDS. He is the Chief Operating Officer of FDS. Belfanti owned and operated FDS for the purpose of carrying out the wrongful business purposes alleged in the Complaint. At all times material to the allegations in this Class Action Complaint, Belfanti helped direct the business affairs of FDS. Belfanti, individually, and as an officer, director, control person, managing partner, and/or agent of FDS established, directed, and/or ratified the unfair and q deceptive business practices of FDS alleged in this Class Action Complaint. 0. Unnamed Defendants, Does through, are additional persons, corporations, partnerships, companies, or other entities who have acted or are continuing to act in concert with, in partnership with, or as agents of named Defendants, who have participated in the acts and transactions alleged in this Complaint, and who have responsibility for said acts and SECOND AMENDED CLASS ACTION COMPLAINT: LAWOFF[CES W SPRAGUE AVENUE. SUITE 0 SPOKANE. WA 0-0 (0)-
0 transactions. The true names, identities, and capacities of Does through are presently unknown to Plaintiff, but are the subject of discovery anticipated in this action. III. JURISDICTION AND VENUE. This Court has subject matter jurisdiction over this action, as it is based upon violations of Washington's DAA and CPA statutes.. This Court has personal jurisdiction over each Defendant. Defendants, collectively and individually, have engaged in conduct in violation of chapter. RCW, which conduct has had an impact in Washington, giving rise to personal jurisdiction pursuant to RCW..0. Defendants also regularly conduct business in Washington by, among other things, soliciting Washington consumers, entering into contracts with Washington consumers, providing debt adjusting services to Washington consumers, and receiving fees from Washington consumers. Defendants have obtained the benefits of the laws of Washington as well as Washington's consumer market.. Venue is proper in Pierce County because the events that gave rise to Plaintiffs claim occurred in substantial part in Pierce County and Defendants transact business in Pierce County. IV. FACTS. A large number of working Washington families are struggling to pay their credit card debts because of economic forces largely beyond their control, such as a shrinking job market or lack of health insurance. SECOND AMENDED CLASS ACTION COMPLAINT: W SPRAGUE AVENUE. SUITE S0 SPOKANE. WA 0-0 (0)-
0. Such families are vulnerable to predatory businesses that entice consumers with the prospect of settling debts for pennies on the dollar. Defendants are for-profit debt adjusters engaged in soliciting Washington consumers to enroll in debt settlement programs. A. Washington's Debt Adjusting Statute. 0. In the face of endemic, unfair, and deceptive practices in the debt adjusting industry, most states, including Washington, have adopted statutes designed to protect consumers from unfair and deceptive debt adjusting practices.. Chapter. RCW, in this regard, protects Washington citizens from predatory, unfair, and deceptive business activities, including predatory fee practices, by forprofit debt adjusting businesses.. RCW..00() provides that a debt adjuster may not charge a consumer an initial fee exceeding twenty-five dollars ($.00), thus ensuring that indebted consumers are not burdened with substantial debt adjuster fees until such time as debt adjusting services are actually and successfully performed.. RCW..00() prohibits debt adjusters from charging excessive fees by providing that the total fee may not exceed fifteen percent (%) of the debt listed by the debtor on the contract.. To protect financially vulnerable Washington citizens from the practice of "front-loading" debt adjuster fees, RCW..00() provides that the fee retained by the debt adjuster from any one payment made by or on behalf of a debtor to a creditor may not exceed fifteen percent (%) of that payment. SECOND AMENDED CLASS ACTION COMPLAINT: W SPRAGUE AVENUE. SUITE 0 SPOKANE. WA 0-0 (0)-
0. To ensure that funds received from Washington debtors are actually used to pay debts in a timely manner, RCW..() provides that debt adjusters must distribute to creditors at least eighty-five percent (%) of any funds received from the debtor and must do so within forty days of receiving those funds.. Washington's intolerance of predatory fee practices by debt adjusters is made plain in RCW..00: "If a debt adjuster contracts for, receives, or makes any charge in excess of the maximums permitted by this chapter, except as the result of an accidental and bona fide error, the debt adjuster's contract with the debtor shall be void and the debt adjuster shall return to the debtor the amount of all payments received from the debtor or on the debtor's behalf and not distributed to creditors.". Washington's strong public policy of protecting Washington consumers from debt adjusters' illegal activities is also reflected in RCW.., which declares that any violation of chapter. RCW constitutes an unfair or deceptive business practice under chapter. RCW.. Further, RCW.. provides that any person who violates any provision of chapter. RCW, or aids or abets such violation, is guilty of a misdemeanor crime. B. Defendants' Violations of Washington's Debt Adjusting Statute.. FDS is a for-profit business enterprise engaged in the business of debt adjusting. At all times material to allegations made in this Complaint, Timothy Aaron, Carla Aaron, and Thomas Belfanti managed, directed and ratified the business affairs of FDS. SECOND AMENDED CLASS ACTION COMPLAINT: W SPRAGUE AVENUE, SUITE 0 SPOKANE. WA 0-0 (0)-
0 0. Defendants engaged in a coordinated business scheme and common business enterprise in violation of chapter. RCW and chapter. RCW. Defendants aided and abetted one another in carrying out the wrongful activities alleged in this Complaint by giving one another substantial assistance and support in carrying out unfair and deceptive business practices that are the subject of this action.. Defendants, directly, through companies they own, manage or control, or through affiliate companies with whom they partner, solicit Washington consumers' participation in a debt adjusting program through the use of the Internet, mass media, telephone solicitations, emails, letters, or other channels.. Plaintiff responded to FDS's solicitation to participate in Defendants' debt settlement program.. Defendants' standardized Debt Settlement Agreement sent to Class Members states: "Fidelity Debt Solutions agrees to provide debt settlement and restructure services to Client under the terms and conditions of this Agreement (the "Service"). This Service consists of negotiating with creditors on behalf of Client for reduction of unsecured debt and formulation of a payment plan.". Class Members, including the named Plaintiff, engaged Defendants' debt adjusting services by signing and returning standardized Debt Settlement Agreements or substantially equivalent debt adjusting contracts, by making periodic debt settlement payments pursuant to the Agreements, and by paying fees specified in the Agreements. SECOND AMENDED CLASS ACTION COMPLAINT: W SPRAGUE AVENUE. SUITE 0 SPOKANE. WA 0-0 (0)-
0. Plaintiff, like other Class Members, was obligated by Defendants' standardized Debt Settlement Agreement to make monthly payments into a "Special Purpose Account." The funds paid into these accounts were ostensibly to be used to pay debt adjuster fees owed under Defendants' standardized Agreement and to accumulate funds with which to pay negotiated settlements.. Defendants' standardized Debt Settlement Agreement required Plaintiff and Class Members to pay Defendants illegal upfront fees that consumed all or substantially all of Class Members' payments. Defendants charged a standardized "Service Fee" equal to percent of the amount of debt enrolled in the program. The Debt Settlement Agreement states "approximately % to 0% of the Service Fee will be paid upon acceptance into the program." The Agreement also required Plaintiff and Class Members to pay a monthly service fee and an additional $.0 per month for a special purpose account.. Plaintiff Heersink, for example, made his first two payments of $. per month to the Defendants in November and December, 00. Defendants kept 0 percent of Heersink's payments as their fees.. In violation of RCW., the standardized debt adjusting agreements provided for an initial fee that exceeded $.. In further violation of RCW., Defendants' standardized debt adjusting agreements called for Defendants to retain fees that exceeded percent of any one payment. SECOND AMENDED CLASS ACTION COMPLAINT: W SPRAGUE AVENUE. SUtTE 0 SPOKANE, WA 0-0 (0)-
0. Defendants charged fees to Plaintiff and other Class Members that vastly exceeded Washington's $ limit on an initial fee, that vastly exceeded percent per payment, and that amounted to more than percent of the total debt.. In further violation of RCW., Defendants' standardized debt adjusting Agreement provided for Class Members' funds to be held outside the state of Washington.. Because Defendants contracted for, received, and charged fees in excess of the maximum allowed by law, Defendants' standardized debt adjusting contracts with each Class Member, including named Plaintiff, are void, and Plaintiff and Class Members are entitled to a return of all payments not distributed to creditors, pursuant to RCW..00. \. In further violation of RCW., Defendants failed to return to Plaintiff and Class Members the amount of all payments received not distributed to creditors. Defendants' failure to return Plaintiff and Class Members' payments is ongoing. lo. Defendants Timothy Aaron, Carla Aaron, and Thomas Belfanti established, ratified, directed, carried out and/or approved of the unlawful business practices alleged in this Complaint, including the contracting for, receiving of, and making of charges exceeding those jo permitted under RCW..00, and the ongoing failure to return Plaintiff and Class 0 Member's payments.. Defendants Timothy Aaron, Carla Aaron, and Thomas Belfanti engaged in this debt-adjusting scheme on a nationwide scale and in complete disregard of state statutes that protect indebted consumers by limiting fees that could be charged for such services. State regulators across the country, including regulators in Connecticut, Oregon, and California have S E C O N D A M E N D E D C L A S S A C T I O N C O M P L A I N T: 0 ^ ^ W SPRAGUE AVENUE, SUITE 0 SPOKANE, WA 0-0 (0) -
filed enforcement actions against Defendants Timothy Aaron and Carla Aaron and their debt settlement company, including orders to cease and desist, orders to repay illegal fees and orders imposing civil penalties. Defendants nonetheless continue to violate the Washington DAA by, among other things, refusing to return all fees to Washington consumers minus funds actually distributed to creditors.. Defendants substantially assisted one another in carrying out the above- described violations of Washington law. Each Defendant established, controlled, managed, participated in, or ratified the wrongful acts and practices of the other Defendants. Defendants j. were engaged in a common and concerted business enterprise, such that each is the principal and agent of the others and each is jointly and severally liable for the misconduct of the others. V. CLAIMS A. Violation of Washington's Consumer Protection Act.. Plaintiff and the Class re-allege and incorporate the facts set forth herein as if set forth in their entirety.. Defendants are debt adjusters within the meaning of RCW..0(), and, q with respect to conduct alleged in this Complaint. They are engaged in, or hold themselves out 0 as engaging in, the business of debt adjusting for compensation.. Defendants have aided and abetted one another in violation of chapter. RCW by giving substantial assistance that proximately caused harm to named Plaintiff and to Class Members in their business and property. SECOND AMENDED CLASS ACTION COMPLAINT: LAWOFFICES W SPRAGUE AVENUE. SUITE S0 SPOKANE. WA 0-0 (0) -
0. Defendants were each generally aware of their roles in the overall wrongful activities of one another at the time that assistance was rendered.. Defendants' business practices including, but not limited to, contracting for, charging, and receiving excessive fees, failing to timely distribute consumers' funds to creditors, failing to return Class Member's funds minus fees distributed to creditors, engaging in unfair business schemes, failing to disclose material facts, and aiding and abetting unlawful conduct constitute unfair or deceptive acts or practices committed in trade or commerce directed at Washington consumers, including Plaintiff and members of the Class. Pursuant to RCW..00, Defendants' debt adjusting agreements with Washington consumers are void I ob initio, illegal, and otherwise unenforceable.. Defendants' actions constitute unfair or deceptive acts or practices in trade and commerce that impact the public interest.. Each Defendant knew that the conduct of the other Defendants constituted a breach of duties to Plaintiff and Class Members. Defendants gave substantial assistance and/or lo encouragement to each other in breaching their duties. Defendants thereby aided and abetted j q one another in violating RCW.. 0. Defendants' unfair and deceptive business practices proximately caused injury or harm to Plaintiff and Class Members in their business or property.. Plaintiff and Class Members are entitled to judgment against Defendants, jointly and severally, for harm suffered, including, but not limited to, reimbursement of all sums paid SECOND AMENDED CLASS ACTION COMPLAINT: LAWOKFICES W SPRAGUE AVENUE. SUITE 0 SPOKANE. WA 0-0 (0) -
for debt adjusting services, less any amounts paid to scheduled creditors, plus pre-judgment interest, treble damages, attorney fees, and costs of litigation.. Defendants' wrongdoing is continuing in nature, constituting an ongoing threat and source of injury to the Washington public and to Class Members.. The Washington public and Class Members remain generally unaware that Defendants' debt adjusting enterprise is illegal.. Defendants, on a continuing basis, are engaged in securing and refusing to return illegal and unowed fees from Class Members. Class Members remain unaware that the fees being paid are illegal and unowed.. The Washington public and Class Members will suffer continuing, immediate, and irreparable injury absent the issuance of injunctive and equitable relief. 0. Pursuant to RCW..00, named Plaintiff is entitled to an order enjoining Defendants' unfair and deceptive business practices.. Further, Class Members have no complete, speedy, or adequate remedy at law with respect to Defendants' continuing misconduct., q. Preliminary and final injunctive relief is necessary to prevent further injury to 0 the Washington public and to Class Members.. This action is brought on behalf of a Class composed of the following individuals: All residents of Washington for whom Fidelity Debt Solutions, LLC agreed to provide debt settlement services pursuant to a "Debt Settlement Agreement" or the substantial equivalent SECOND AMENDED CLASS ACTION COMPLAINT: LAWOFFICES W SPRAGUE AVENUE. SUITE 0 SPOKANE, WA 0-0 (0) -
. Excluded from the Class are Defendants, any entity in which Defendants have a controlling interest or which has a controlling interest in Defendants, and Defendants' employees, legal representatives, assignees and successors. Members of the proposed Class are so numerous that joinder is impracticable. There are questions of law and fact common to the Class, including those delineated in paragraph below.. The claims and defenses of the named Plaintiff are typical of the claims and defenses of the proposed Class.. Named Plaintiff is a member of the proposed Class and will fairly and adequately protect the interests of the proposed Class. Defendants have acted or refused to act on grounds generally applicable to Class * Members currently participating in Defendants' debt adjusting program, making final injunctive relief appropriate respecting such Class Members as a whole and rendering certification appropriate under CR (b)() 0. Further, core common questions of law and fact central to claims of the Class jo predominate over individual questions, rendering certification appropriate under CR (b)(). 0 Core common questions of law and fact include a. Whether Defendants are debt adjusters or otherwise engaged in debt adjusting within the meaning of chapter. RCW; SECOND AMENDED CLASS ACTION COMPLAINT: W SPRAGUE AVENUE. SUITE S0 SPOKANE. WA 0-0 (0)-
b. Whether Defendants are engaged in a common course of illegal conduct toward the Class by charging, receiving, or retaining an initial fee of more than twenty- five dollars ($.00); c. Whether Defendants are engaged in a common course of illegal conduct toward the Class by charging, receiving, or retaining fees in excess of fifteen percent (%) of any one payment; d. Whether Defendants are engaged in a common course of illegal conduct toward the Class by charging, receiving, or retaining total fees in excess of fifteen percent (%) of consumers' debt listed by the debtor on the contract; e. Whether Defendants engaged in an ongoing common course of illegal conduct by failing to return Class Member's payments; f. Whether Defendants have aided and abetted one another and others in violating chapter. RCW; g. Whether individual Defendants established, controlled, managed, participated in, or with knowledge ratified the wrongful business practices of other, n Defendants; and 0 h. Whether injunctive relief is appropriate to protect Washington consumers from the ongoing illicit business activities of Defendants.. The class device is a superior method of adjudicating Class Members' claims as compared to other available methods for fairly and efficiently adjudicating this controversy. Class Members are financially distressed individuals who are unlikely to have any meaningful SECOND AMENDED CLASS ACTION COMPLAINT: LAW0FFICES W SPRAGUE AVENUE. SUITE 0 SPOKANE. WA 0-0 (0)-
0 recourse against Defendants absent collective pursuit of their claims under CR. Class Members are unaware that Defendants' conduct is illegal and that they have been financially victimized. The value of Class Members' claims, taken individually, is such that their claims have negative value and cannot, as a practical matter, be pursued on an individual basis. VI. DEMAND FOR RELIEF THEREFORE, Plaintiff, individually and as representative of the proposed Class, pray for relief as follows:. An order certifying Class Members' claims pursuant to CR (b)() and/or (b)(), appointing named Plaintiff as representative of the proposed Class or such other Classes as the court may deem appropriate, and appointing undersigned counsel as Class Counsel;. An award of damages against Defendants, jointly and severally, to include an amount equaling all payments made, less those amounts distributed to creditors;. An award of exemplary damages, jointly and severally, in the amount of three times the damage suffered by each Class Member;. A final order enjoining Defendants from business activities violating chapter. RCW or chapter. RCW, including but not limited to ordering Defendants to comply RCW..00 and return all payments received from Plaintiffs and Class Members not distributed to creditors. An award of prejudgment interest;. An award of costs of litigation; SECOND AMENDED CLASS ACTION COMPLAINT: W SPRAGUE AVENUE. SUITE 0 SPOKANE. WA 0-0 (0)-
. An award of attorney fees pursuant to chapter. RCW; and. Such other and further relief as the Court deems just or equitable. DATED this th day of January, 0. The Scotx^w'Growi^P.S. By: ṀATtHEW J/ZJJGHETTO, WSBA #0 DARRELLyrSCOTT, WSBA #0 BOYD M/MAYO, WSBA # ANDREWS. BIVIANO, WSBA #0 W. ^prague Avenue, Suite 0 Spokane, Washington 0 Telephone: (0) - -AND- Terrell Marshall Daudt & Willie PLLC TOBY J. MARSHALL, WSBA # ERIKA L. NUSSER, WSBA #0 North th Street, Suite 00 Seattle, Washington Telephone: (0)-0 Attorneys for Plaintiff 0 SECOND AMENDED CLASS ACTION COMPLAINT: W SPRAGUE AVENUE, SUITE 0 SPOKANE. WA 0-0 (0)-
CERTIFICATE OF SERVICE I hereby certify that on the day of January, 0, caused to be served a true and correct copy of the foregoing document as indicated, addressed to the following: Jeff Smyth _ Shaunta Knibb Law Office of Smyth & Mason, PLLC 0 Fifth Avenue, Suite 0 Seattle, WA Attorney for Defendant Timothy E. Aaron and Carla T Aaron Fidelity Debt Solutions, LLC c/o Timothy E. Aaron, Registered Agent c/o Jeff Smyth and Shaunta Knibb, Attorneys Law Office of Smyth & Mason, PLLC 0 Fifth Avenue, Suite 0 Seattle, WA VIA FIRST CLASS MAIL S VIA EMAIL m VIA HAND DELIVERY VIA FACSIMILE VIA FIRST CLASS MAIL VIA EMAIL S VIA HAND DELIVERY VIA FACSIMILE BRIANNA BLEDSOE, Paralegal The Scott Law Group, P.S. 0 SECOND AMENDED CLASS ACTION COMPLAINT: W SPRAOUE AVENUE, SUITE 0 SPOKANE. WA 0-0 (0) -