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Personal-injury law firm KNR accused of deceiving and defrauding its clients with kickback schemes involving chiropractors and loan companies

Wednesday, March 22, 2017

Internal emails alleged to show Kisling, Nestico, and Redick maintains unlawful kickback relationships with chiropractors and loan companies, and charges its clients for fraudulent "investigations" that never take place

CLEVELAND, OHIO - A proposed amended complaint filed today in the Summit County Court of Common Pleas by three former clients of the Ohio personal-injury law firm of Kisling, Nestico, and Redick ("KNR"), alleges that the firm and its owners, Alberto ("Rob") Nestico and Robert Redick, have intentionally deceived and defrauded their clients with kickback schemes involving a network of chiropractors and a now-defunct loan company called Liberty Capital Funding. The class-action complaint further alleges that the Defendants have engaged in a scheme to defraud their clients by charging a fraudulent "investigation fee" for so-called "investigations" that are never performed, and for basic clerical services that are not legally chargeable to the firm's clients.

Ohio law prohibits an attorney from entering an agreement with a chiropractor for mutual referral of clients, and from rewarding or compensating a chiropractor for a referral. According to internal KNR emails, provided by former KNR attorneys and quoted in the complaint, KNR routinely violates these prohibitions, treating chiropractors to tropical vacations and basing its chiropractic referrals not on its clients' needs, but on its own need to reward chiropractors for referring cases to the firm. These emails are alleged to show that KNR prioritized its relationship with a network of chiropractic clinics, operated by Texan Michael Plambeck, that was sued in various courts by both Allstate and State Farm insurance companies, including in a civil RICO suit alleging that the chiropractors worked with a network of lawyers and telemarketers in a conspiracy to inflate billings. The complaint alleges that, "KNR knew that these insurance companies, who provided coverage for the defendants in countless KNR-clients' cases, would view client treatment at Plambeck clinics as inherently suspect and treat the KNR-clients' cases accordingly. Yet KNR had no concern for this in continuing to pressure its clients to treat at [Akron Square Chiropractic] and other Plambeck clinics, thus prioritizing its own kickback arrangement with the chiropractors over the interests of its clients."

The complaint further alleges that KNR violates Ohio law's prohibition against attorneys' direct solicitation of clients by conspiring with chiropractors who cold-call car accident victims, and offer them free transportation to a chiropractic clinic, where the chiropractor will then recommend KNR as "our attorneys" and sign the clients to KNR fee agreements on site. By this practice, according to the complaint, "KNR robs its clients of their right to unconflicted counsel, and does so in the wake of painful car accidents when the clients are at their most vulnerable. KNR ropes these clients in by promising them quick cash by way of an immediate high-interest loan that KNR helps to facilitate, and then further abuses them by coercing them into unwanted healthcare, and by unlawfully diverting client funds to the chiropractors to maintain the kickback relationships."

Additionally, the complaint alleges that KNR established an illegal relationship with a loan company, Liberty Capital Funding, LLC, that provided loans to KNR clients at extremely high annual rates of 49% and higher, plus fees of $70 and up on loans as small as $250 that also accrue interest at the same rate. While Ohio law requires attorneys to "carefully consider whether [a loan] referral is in the client's best interest," emails quoted in the complaint are alleged to show that Defendant Nestico ordered KNR attorneys to direct KNR clients to take out these high-interest loans with Liberty Capital less than three weeks after Liberty Capital was formed, and a week after Nestico had requested copies of paperwork used by other loan companies referred by KNR. According to the complaint, Defendants had no legitimate reason for their blanket policy directing all KNR clients to take out loans with Liberty Capital―a brand new company with no track record, run out of the home of its CEO and only apparent employee, who had most recently worked as an insurance broker―as opposed to any of a number of financing companies that existed at the time, thus giving rise to the inference that Defendants retained an unlawful ownership interest in Liberty Capital or obtained kickback benefits for referring KNR clients for loans

Finally, the complaint alleges that KNR has engaged in a scheme to defraud its clients by charging them fees for so-called "investigations" that are never actually performed. According to the complaint, "KNR's so-called 'investigators' do nothing more than chase down car-accident victims at their homes and other locations to sign them to KNR fee agreements as quickly as possible, for KNR's exclusive benefit, to keep potential clients from signing with competitors. Yet, the complaint alleges, KNR charges its clients after the fact for having been solicited in this way by adding a misleadingly named 'investigation fee' to each client's settlement statement, taking advantage of its position of trust and its clients' natural eagerness to obtain settlement funds by conditioning disbursement of such funds on the clients' unwitting approval of the fee." In support of this claim, the complaint quotes from internal KNR emails showing that KNR personnel routinely referred to the investigation fees as "sign-up fees," as well as an email where a KNR manager scolds the staff: "We MUST send an investigator to sign up clients!! We cannot refer to [a chiropractor] and have them sign forms there. This is why we have investigators. We are losing too many cases doing this!!!!!!!" According to the complaint, KNR clients, who were promised a "free consultation," are never advised that they are charged merely for "signing up." These emails also show that 10 KNR clients were charged for so-called "investigations" purportedly performed by the same investigator on the same day all over the state of Ohio, including in Cleveland and Dayton, approximately 200 miles apart.

The class-action lawsuit against KNR, Nestico, and Redick was filed in the Summit County Court of Common Pleas, Case No. CV-2016-09-3928, with Judge Alison Breaux presiding. Named Plaintiffs Member Williams, Naomi Wright, and Matthew Johnson have asserted claims on behalf of two separate classes of KNR clients for fraud, breach of fiduciary duty, breach of contract, and unjust enrichment, as well as individual claims for deceptive trade practices under Ohio Revised Code section 1345.09. Named Plaintiffs, on behalf of the putative classes of former KNR clients, are represented by Peter Pattakos, Subodh Chandra, and Don Screen of the Chandra Law Firm.

Anyone with information may contact Mr. Pattakos by phone at 216.578.1700 or by email at KNRlawsuit@chandralaw.com.

The proposed amended complaint filed with the court is here.

Related Practice Areas
Business litigationLegal ethics & professional responsibility
Tags
knrkisling-nestico-and-redickfraudlegal-ethicsoho-rules-of-professional-responsibility

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