Full-Court Press
It’s not just lawyers who are out to make money off your legal problems.
If you’ve ever been evicted, ensnarled in a property lien or lost a small-claims case, chances are good that news of it will wind up in the hands of a growing number of self-employed researchers and information “wholesalers” who are mining local courthouses for information they can sell to credit-reporting agencies and other companies you probably wouldn’t want to share your troubles with.
Some of these case harvesters even use court records to seek out feuding parties in small-claims cases, then offer them such services as dispute mediation or monetary award recovery.
As public documents, court records are available for review by anyone, free of charge. And overhead that low appears to provide much of the allure of this relatively obscure industry.
“The courts churn out new records every day,” said Laura Bais, who for the last 11 years has been able to support herself and a son by trading in such legal “products” as small-claims judgments and “unlawful detainers”--a court filing by landlords seeking to evict tenants.
“It’s a growth industry, and conventional wisdom holds it’s largely recession-proof,” said Bais, who at 35 is the sole proprietor and employee of Golden Bear Information Service, based out of her San Bernardino County home. “People are always going to be suing people.”
And the avalanche of documents those suits touches off can prove to be a gold mine.
Jean Chalais, 30, of West Covina has made $22,000 so far this year selling mostly small-claims information to wholesalers, who in turn sell to companies such as credit-reporting firms Equifax, TransUnion and Experian.
Maxine Sweet, Experian’s vice president for consumer education, said her company relies almost exclusively on information wholesalers and their subcontractors to compile its credit reports. “There’s no way we could send our own people out for that” information, she said. “There’s just too much of it.”
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Last year more than 100,000 small-claims cases and unlawful detainers were filed in the Los Angeles Judicial District alone. The district encompasses Los Angeles and three neighboring communities, or about half the county. On top of that, the Sheriff’s Department last year processed 68,103 personal property levies, including wage garnishments, property liens and bank account levies.
While there are no statistics on the number of people trawling the court system for marketable information, Los Angeles County court officials say they have noticed a steady increase in requests for permission to peruse cases.
At Van Nuys Municipal Small Claims Court, for instance, the number of businesses keeping weekly appointments to review cases last year doubled to eight, said Marcia Skolnik, spokeswoman for the Los Angeles Judicial District, which oversees a network of 12 courthouses.
Fran Pettaway, who with just six months under her belt is among the new crop of case harvesters, has an appointment at the Los Angeles County Courthouse every Tuesday from 9 to 11 a.m. But Pettaway, like many start-up owners, has a day job to contend with. She sells insurance and, more often than not, pays others to keep the courthouse appointment for her.
Courthouse clerks set out stacks of small-claims cases, and people like Pettaway finger through each file looking for plaintiffs with monetary awards of more than $1,000. It’s not worth the trouble to pursue anything less, she said.
The normal take from each appointment, Pettaway estimates, is roughly 50 “leads,” people to whom she sends letters offering to collect monetary awards on their behalf.
Court officials say Pettaway’s is largely a seller’s market, given the difficulty plaintiffs have collecting small-claims judgments. While the court decides the outcome of small-claims cases, its obligation ends there.
“The court is a judicial agency, not a collection agency,” Skolnik said. “The court’s function is to act as a neutral arbiter and not to engage in the process.”
Stephen Dem, an Encino attorney who has presided over small-claims cases for five years, estimates that more than 85% of small-claims judgments he awards go unpaid. Part of the problem, he said, is that most defendants have little regard for the proceeding or, for that matter, the judgment.
“The majority of cases I hear, the defendant doesn’t even show up,” Dem said. “If they don’t even come to court, they’re probably not going to be too willing to pay the judgment.”
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Enter Pettaway’s No Escape Judgment Recovery Service. Often with the help of a private investigator, she tracks down defendants’ assets and then gets legal permission for plaintiffs to levy bank accounts, garnish wages or place liens on property to recoup the judgment.
In six months, Pettaway says, she has recovered a total of $15,000 from a dozen cases. From that she has taken a 20% commission, along with a flat fee of at least $200 for each case. “I don’t expect to turn a profit at this rate; I would have to devote more time and energy,” she said.
Pettaway learned the ropes of judgment recovery after she herself sought collection assistance last year to recoup a $500 small-claims award. She eventually hopes to quit her day job and work at her new vocation full time.
“I like setting my own pace and doing my own thing,” she said. “I’m like any American--I want to realize the entrepreneurial dream.”
Veteran court information gatherers say the field has grown in part because a steady offering of “how-to” books and manuals advertised in business magazines and on the Internet attracts many who share Pettaway’s dream.
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But Bais warns would-be newcomers that some correspondence courses are scams. She should know: She fell for one herself.
Answering what she called a “get-rich-quick” ad in the back of a magazine, Bais paid $89 to learn how to trade in unlawful detainers. The program even offered her $2 for the name of every delinquent tenant she could find once she completed the course.
Bais said she gathered and mailed along 1,000 names, but instead of a check for $2,000, she received back only her $89 fee and a letter stating that her services had been terminated because the program didn’t trust the “integrity” of her work.
“I knew I had been burned,” Bais said. “But instead of sitting around feeling sorry for myself, I thought I better do something about it.”
Having just added a new car to her list of monthly expenses, Bais decided to strike out on her own, using some of the contacts she had made. She got her first client in less than a week, and more quickly followed. She now oversees a regular client list of 35 companies and subcontracts 23 researchers to cover courthouses from Sacramento to San Diego.
“It’s a good business,” she said. “And you’re never going to run out of work.”
Despite the abundance of cases, however, not all who try the business succeed.
Edna Scott and business partner Bobbie Walker had to pull the plug on their Pomona-based judgment recovery service after the first year. Although they contracted 125 cases, the pair were unable to collect a judgment on any, either because the defendants had left town or had no assets.
“It costs a lot of money trying to find the defendant,” Scott said. “But if you don’t collect, you can’t recover your expenses. It’s a very difficult business. I wouldn’t recommend it to anyone.”
