FBFK Attorneys Dana Campbell and George Hampton Obtain Long-Awaited Victory for Victims of Ponzi Scheme Funded by Balboa Capital Corporation
August 07 2024 - 10:00AM
Business Wire
Fifth Circuit rules finance agreements
lacking total amount financed and cost of financing are
unenforceable as a matter of law
In a decision that has significance to small-ticket financing
companies everywhere, on July 30, 2024, the Fifth Circuit Court of
Appeals unanimously affirmed the ruling of U.S. District Judge
Barbara Lynn in favor of 16 physicians – FBFK Law clients –
who were victims of a Ponzi scheme, holding Balboa Capital
Corporation’s payment agreements unenforceable as a matter of
law.
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Dana Campbell, FBFK Shareholder/Attorney,
FBFK Law (Photo: Business Wire)
The physicians, who practice in Arkansas, Georgia, Maryland,
Nevada, and Texas, were represented by FBFK Shareholders Dana
Campbell (Dallas) and George Hampton (Orange County), along with
Shareholder J.W. Beverly (Houston), Shareholder Alyson Dudkowski
(Orange County), and Associate Stephanie Pittaluga (Orange
County).
Judge Lynn granted summary judgment against Balboa in March 2023
finding that the $11.5 million in debt claimed by Balboa was
unenforceable. Headquartered in Costa Mesa, Calif., Balboa is one
of the largest equipment financing companies in the U.S. and was
acquired by Ameris Bank Corp in 2021.
FBFK’s Dana Campbell emphasized the impact of this ruling for an
entire industry. “In opening his argument, counsel for Balboa
acknowledged that ‘this case has significance not only to the
parties to this lawsuit, but also to an entire industry of small
ticket finance companies.’ Specifically, this ruling calls into
question all financing agreements that set forth only the payment
schedule and the amount of the individual payments. In my decades
of practicing law, I’ve never been part of a case that has done
more to prevent predatory practices.”
The cases were originally filed by Balboa in 2017 in California
and Nevada and pitted victims of a Ponzi scheme against one
another. The Ponzi scheme was perpetrated by America’s Medical Home
Team (MHT) and financed by Balboa. Pursuant to the scheme, MHT
agreed to provide FBFK’s clients with licenses for medical records
software, hardware, and support services. Balboa agreed to finance
the licenses by making payments to MHT without disclosing to the
physicians the essential terms that it contended were included on
an exhibit to the Payment Agreements – “Exhibit A1” – and which the
Fifth Circuit noted failed to include the total amount financed or
the cost of the financing.
As the Fifth Circuit recognized, MHT never delivered anything of
value to the physicians and instead used Balboa's money to pay off
its debts to its prior financer and perpetuate the Ponzi scheme.
All the while, MHT kept both Balboa and the physicians in the dark
by serving as middleman and weaving a complicated web of
obfuscations.
According to FBFK’s George Hampton, “Balboa Capital Corporation
has literally entered into thousands of similar transactions. In
light of the Court’s ruling, all of these transactions must now be
reviewed to make sure that they all comply with California
law.”
Affirming Judge Lynn’s summary judgment ruling, the Fifth
Circuit held that under California law, “essential terms" of a loan
agreement include "the amount of the loan, the rate of interest,
the terms of repayment, and applicable loan fees and charges," so
"a contract involving a loan must include its amount and the terms
for repayment.” Thus, the Fifth Circuit found “the Payment
Agreements, standing alone, are unenforceable due to the absence of
material terms and the corresponding lack of mutual assent, just as
the district court concluded.”
In a separate ruling, on July 29, 2024, Judge Barbara Lynn
awarded in excess of $1 million in fees and costs incurred by the
physicians in defending the claims of Balboa Capital
Corporation.
About FBFK
With more than 20 years of legal expertise and success across
Texas and the U.S., Dallas-based FBFK is an entrepreneurial-minded,
full-service business law firm with offices in Plano, Houston and
Austin, Texas, as well as in Orange County, Calif. Driven by a
commitment to creating lasting client relationships grounded in
high-quality representation and client service, FBFK represents
clients nationwide in 40 practice areas related to business
structures and transactions, intellectual property protection and
dispute resolution. www.fbfk.law.
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Melissa Flynn, Melissa@melissaflynnpr.com, 843.817.7653