The Prosper "Quiet" Diary - millstones and milestones

[Investar]

Class Action Law Suit
Plaintiffs Petition For Complex Litigation Status,
Defendants Agree, Cough Up The Extra Dough

On January 8, 2009 application for approval of "Complex Litigation Designation" was filed by plaintiffs Christian Hellum, William Barnwell and David Booth on behalf of the class of actors against Prosper (William Barnwell was not yet excused). This is largely a procedural move and may explain why the lenders postponed their day in court the morning prior.

Prosper Marketplace raised no objection, apparently. On January 29, 2009 "Complex Litigation fees [were] paid filed by defendant" Christian Larsen, Ed Giegowd, Doug Fuller, James Breyer, Larry Cheng, Robert Kagle, Prosper Marketplace Inc. and Kirk Inglis. The court posted a check for $7,320.

The court voided a check from the Prosper defendants in the amount of $7,685 earlier in the day. This may have related to a sum difference between billing and due because on January 13 both parties had agreed to "dismissal without prejudice" of complaints against defendant Paul M. Hazen as originally alleged.

Hazen sits on Prosper's Board of Directors and has a long association with Wells Fargo & Co. According to the SEC filings, Hazen has no beneficial ownership in Prosper. His shares of convertible stock are held indirectly through family trusts. He is also Chairman of the Board, KKR Financial Holding LLC, which does not claim any direct interest in Prosper.

Complex civil cases are cases that require exceptional judicial management to avoid placing unnecessary burdens on the court or the litigants. Complex cases may involve such areas as antitrust, securities claims, construction defects, toxic torts, mass torts, and class actions. There was a time the Business Court handled complaints like those brought by Hellum, Barnwell, Booth, et al, but bowing to public perception that business courts are bent on assisting only the business, a new configuration was introduced a decade ago. Complex litigation departments in trial courts now handle business matters plus a broader range of the public’s disputes, including complex tort claims and other disputes involving complicated legal and factual issues. Complex litigation departments handle complex cases affecting all segments of society. Source: San Francisco court Fact Sheet (PDF)

edit to add: February 3 'heads up' over on PCASM-Prosper Class Action Suit Monitor -- following the "Complex Litigation Designation" the suit is reassigned to Judge Richard Kramer. Case management conference moved up to April 17 (was May 1st).

[deskguy]

 well, i don't have any idea what all that is about or what it means. do we have to wait until this matter is settled before prosper emerges from the quiet period, or is this a side issue we do not have to concern ourselves with.

 regardless, when prosper does get back in business, and marylanders are not excluded, i'll get around to asking you privately the secret to lending to people who want to pay off their credit cards.

 deskguy

[Investar]

...well, i don't have any idea what all that is about or what it means. do we have to wait until this matter is settled before prosper emerges from the quiet period...

Any idea? Me either, which is why I researched the procedure to see what it amounted to.
Took me an awful lot 'o words to say "not much" huh?
 
As I said in another post, the class action has nothing to do with what Prosper is doing at the SEC, won't affect timing of a re-start. The only concern we have is whether to join the class action once we know how it could benefit us. Any decision on that is quite a ways off.

[go4reward]

The word class action does not sound right to me. It raises many eyebrows. I hope Prosper comes back stronger than ever before. We need more data from the borrowers side for the lenders to be better informed.

[Investar]

The word class action does not sound right to me. It raises many eyebrows. I hope Prosper comes back stronger than ever before. We need more data from the borrowers side for the lenders to be better informed.

Yeah, "Class Action" makes it sound ominous. Sounds like we are all ganged up against Prosper when in fact, at this point there are only two lenders (of how many thousand?) and that's down from three! No doubt there's actually a good handful that have contacted the law firm but are not officially named. (I too hope the "new" Prosper will have better detailed borrower data and most importantly, genuine confirmed info on the employment and income side.)

[go4reward]

(I too hope the "new" Prosper will have better detailed borrower data and most importantly, genuine confirmed info on the employment and income side.)

I am wondering how can we communicate this info back to Prosper.

[Investar]

Class Action Law Suit
Not a Second Lawsuit Brewing

If you've looked at the court dockets, you've seen declarations by Attorney Robert S. Green in addition to those of Attorney Laurence Rosen. Prosper.com Class Action Suit Monitor (PCASM) points out that a lawsuit mentioned on the Green Welling web site is the same suit which is already being discussed.

PCASM notes, "Green Welling appears to be working together with the Rosen Law Firm." A Google search returns at least three firms named Rosen, none with an office on the west coast. Apparently Green Welling will make at least some of the physical court appearances in San Francisco on behalf of Rosen of New York.

Laurence Rosen, Atty
The Rosen Law Firm, P.A.
350 Fifth Avenue, Suite 5508
New York, NY 10118
http://www.rosenlegal.com

Robert S. Green, Atty
Green Welling LLP
595 Market Street, Suite 2750
San Francisco, California 94105
http://www.classcounsel.com/index.html   

[Investar]

Class Action Law Suit
Defendants Demur

On Wednesday, February 11, 2009 Prosper Marketplace, et al, filed an objection with the court, claiming that the Prosper lender's complaint against them was irrelevant or invalid. The "demurrer" was recognized and a March 18th date was set to hear the plea in the courtroom of Judge Richard A. Kramer.

A demurrer is a legal pleading filed by the defense. It is usually heard and decided towards the beginning of a case before the defendants give their answer (plead "not guilty" or make other pleading). The demurrer challenges whether a legal cause of action even exists considering the facts stated by the complaining party. It challenges the "legal sufficiency" of the claim.

Many modern courts view the demurrer as a procedural delay and an unnecessary encumbrance to due process. The pleading has been abolished in many jurisdictions including the federal court system. A number of larger state systems, including California, retain the demurrer.

Court Registry of Actions: case number CGC-08-482329
Superior Court of California, County of San Francisco
Site may be down at times (due to high traffic they are upgrading).

[go4reward]

A lot of interests in the outcome of this Prosper law suit. Prosper members are still anxious for more Prosper related news based on the high hits of the website. Good finds, Investar.

[Investar]

SEC cleans up their desk, does some office filing

Ever astute Prosper lender, Fred93 told his blog readers that Prosper's "offer of settlement" the Securities and Exchange Commission (SEC) accepted last year has now been archived for public viewing. Nothing new from the SEC here, just a tidbit for those of us following Prosper progress closely.

Prosper's "offer of settlement" is adjunct to the Cease and Desist Order the SEC announced on November 24, 2008. You can read a transcription of the Prosper "offer" document on Fred's blog. He points out the SEC's Cease & Desist order itself makes much better reading. It actually sets the stage by explaining the context of the their action.

Fred said, "When I read the SEC Cease & Desist order, and saw that it said the SEC had accepted Prosper's offer of settlement, I wondered whether the offer contained some elements not found in the SEC's public Cease & Desist order. I wondered whether Prosper had agreed to any specific actions that had not been made public. Turns out, there aren't any such agreements in the offer. The offer says that if the SEC agrees to end the matter by issuing the Cease & Desist, then Prosper won't argue about it." -- Fred93's Blog

[Investar]

Community Payments for Borrowers Also Barred at Shut-down

Over at Prosper and Lending Club Loan Discussions lenders recently made a discovery. When attempting to make a Community Payment a message returned, "We're sorry, but lenders from the state of (individual state name) cannot make community payments." Lenders from California to Oregon, Indiana to Connecticut, Florida and Texas met with the same result. So I emailed Prosper....

SUN 02/22/09 2PM EST
Sent to Prosper thru "...com/help/support.aspx" portal

It has come to my attention I cannot make Community Payments
at this time. This is a change you have made to my status since
circa October 1, 2008, apparently without notice. In addition, I find
no reference on the HELP pages related to this change. Can you
please explain/advise? This prohibition seems contrary to the Len-
der Agreement I signed. Thank you for every detail you are able to
disclose at this time.

Sincerely,
omit name
aka
'Investar'

I received Prosper's rather curt reply the next afternoon....

Dear omit name,

Unfortunately, the community payment option had to be suspended
also when Prosper entered into a quiet period. Thank you for using
Prosper, please let us know if you have any further questions.

For future reference, your Prosper support case number is omit.

Sincerely,
Prosper Customer Support

So I guess the upside is, our memory is refreshed and we all know how one goes about making a community payment if ever we are allowed to do so again. Thanks for the research guys (and gals) at Prosper and Lending Club Loan Discussions.

[Investar]

NASAA Settlement Far From Settled

As of February 25, 2009 the 50 states action against Prosper has not concluded according to a Prosper lender close to the matter. "I just called my contact in the Florida Office of Financial Regulation and the final agreement has not been signed yet, and Prosper hasn't paid the fine yet. He also told me Florida has not signed on to the agreement." It was thought at least three states may abstain the agreement and pursue their own remedy, Oregon, Missouri, and Florida.

In a press release December 1, 2008 the North American Securities Administrators Association (NASAA) announced that state securities regulators reached a $1 million settlement in principle with Prosper Marketplace, Inc. to resolve matters relating to the sale and offer of unregistered securities. Earlier in the year a working group of regulators from approximately 20 jurisdictions was formed to seek a collaborative approach to the issue. NASAA's membership consists of the securities administrators in the 50 United States, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. Canadian and Mexican authorities are also members. Read the December 1 NASAA press release here.

[go4reward]

What about Maryland and Pennsylvania? Any status on them yet?

[Investar]

What about Maryland and Pennsylvania? Any status on them yet?

Unfortunately, no. Again this week, I quietly updated our States Eligible At LendingClub that offers our clue about who will participate on the 'new' Prosper. Unfortunately, the date I most recently did my homework was all I had to change. Nothing's happened (that we can see) since Virginia came aboard there in early December.

Deskguy was quizzing Maryland on the LendingClub issue but I presume he's had little success poking behind their veil. I don't plan to 'attack' Pennsylvania until Prosper actually re-emerges. Learning how Maryland and Penna end up treating the 'old' Prosper via NASAA could be interesting, but probably not helpful.

[deskguy]

Deskguy was quizzing Maryland on the LendingClub issue but I presume he's had little success poking behind their veil. I don't plan to 'attack' Pennsylvania until Prosper actually re-emerges.
-------------------------------------
 the state authorities in maryland have not responded to my query and after two months or so i'm not expecting much. just got off the phone with meredith at lendingclub and she says maryland has not rejected its application but has simply not responded. she sounds optimistic - well, she's paid to be, isn't she - but i'm not.

 however, she did say i could open an IRA with lendingclub's agent and invest that way. i think she used the word 'invest' but now that i think about it she could mean invest in the notes, which i'm not interested in, but not sure that means i could lend. she said she'll email me some information so i'll know more later.

 fyi, there is no need to delete meredith's name from this because she is an authorized spokeswoman for lendingclub.

 deskguy