Jury Finds in Favor of The CBE Group, Inc. and RGS Financial, Inc. in Their Fraud Suit Against Lexington Law

Last week, a jury found Lexington Law and Progrexion, a related entity, guilty of fraud for its practices of sending mass credit disputes to collection agencies. The CBE Group (CBE) and RGS Financial, Inc., the plaintiffs in this case, alleged that the credit repair organizations sent them large volumes of frivolous dispute letters purported to be from consumers. In reality, the letters all contained an almost-identical signature style and accompanying envelope as disputes received from other consumers.

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CBE and RGS Financial filed their suit against Lexington Law in 2017 in state court, and the defendants removed the case to federal court in September 2017. After two years of litigation, the case came to a head with a jury trial held in late June 2019, ending with closing arguments on July 2, 2019. The jury verdict entered a verdict in favor of CBE and RGS Financial on July 3, 2019.

The final jury verdict found that the defendants committed fraud (including by failure to disclose material facts) against CBE and RGS Financial. The jury stopped short of finding that the defendants were part of a conspiracy.

The jury awarded $487,965 combined in lost time sustained in the past and $63,718 in expenses sustained in the past. The jury attributed 65% of the damages to Lexington Law and 35% to Progrexion. The jury also awarded a whopping $1,948,317 in exemplary damages. The litigation is not quite over yet—the court still needs to enter judgment, and there remains an opportunity to file post-verdict motions and an appeal.

insideARM Perspective

insideARM received comments from Malone Frost Martin PLLC, which represented CBE and RGS Financial. Xerxes Martin states, "We had a great jury that understood our story from start to finish. They understood that what the defendants were doing not only hurt CBE and RGS, but the consumer clients as well." Robbie Malone adds, "While a verdict is the first step in getting a final judgment, we are pleased the jury saw the fraudulent scheme for what it was. I am thankful for the hard work my team put in on the case and for having clients willing to go to bat like CBE Group and RGS."

The target has been on Lexington Law’s mass dispute processes lately. In addition to the above-referenced lawsuit, Ad Astra Recovery Services filed a similar suit against Lexington Law in the District of Kansas. Most recently in the Ad Astra Recovery suit, the court compelled Lexington Law to respond to discovery requests regarding communications with consumers relating to the mass credit dispute letters sent by the firm. The Consumer Financial Protection Bureau (CFPB) also filed a suit against Lexington Law targeting the credit repair organization’s marketing practices. It will be interesting to see how these cases shake out and how this will impact the practices of other credit repair organizations.