## Facts

- A Chapter 13 debtor and other consumers brought a putative class adversary proceeding against United States Consumer Council, Inc. (USCC), its principal Jack Rhode, and related individuals.
- USCC marketed itself as a “consumer council” offering financial counseling to distressed debtors, using branding and representations that suggested governmental or public affiliation.
- In practice, USCC largely provided referrals to specific attorneys for Chapter 13 filings rather than individualized counseling.
- USCC charged consumers approximately $195–$260 for these “services,” despite the availability of free attorney-referral services through bar associations.
- The consumer base included financially vulnerable individuals facing foreclosure, unemployment, disability, or imminent bankruptcy.
- The bankruptcy court issued findings and recommendations concluding USCC’s practices were unlawful and that Rhode was personally responsible; the district court adopted those findings and later entered scheduled monetary judgments for numerous class members.

## Issues

1. Whether USCC’s marketing and sales practices constituted unfair or deceptive acts under New Jersey consumer-protection law.
2. Whether USCC’s contracts and fees were unconscionable because the fee was grossly excessive relative to the value delivered and the availability of equivalent free referrals.
3. Whether USCC’s principal officer/shareholder could be held personally liable for the unlawful practices and resulting statutory remedies.
4. Whether Rhode was entitled to relief from a default judgment entered against him in the adversary proceeding.

## Decision

- The district court adopted the bankruptcy court’s report and recommendations and granted the plaintiffs’ summary-judgment motion in part.
- The court concluded that USCC’s conduct was unfair and deceptive and that its fee arrangements with consumers were unconscionable.
- The court held Rhode personally liable with USCC and entered joint and several monetary judgments in favor of numerous class members.
- In related proceedings, the district court denied Rhode’s motion to set aside the default judgment.

## Legal Principles

- Misrepresenting the nature of a service (marketing “counseling” while primarily selling attorney referrals) can constitute a deceptive practice under state UDAP statutes when the misstatements are material to consumers’ decisions to pay.
- A contract term or fee may be unconscionable when the price charged is grossly excessive relative to the seller’s costs and the value received, especially where equivalent services are available at no charge and the seller targets consumers in severe financial distress.
- Corporate officers who personally direct or participate in unfair or deceptive practices may be held individually liable, including for statutory monetary remedies, alongside the corporation.
- A party seeking to set aside a default judgment must show sufficient grounds (including excusable neglect and a meritorious defense); failure to do so supports leaving the default in place.

## Conclusion

The court converted the bankruptcy court’s consumer-protection findings into enforceable relief, holding that USCC’s misleading “financial counseling” pitch and excessive referral fees violated New Jersey consumer law and were unconscionable, and imposing joint and several monetary liability on USCC and its controlling principal.


In re Fleet, 103 B.R. 578 (E.D. Pa. 1989)