Lawsuit Against Company Accused of Charging Disabled Veterans $20K for Benefits Halted by Bankruptcy

A federal class-action lawsuit accusing a medical company of deceptive practices and upcharging disabled veterans up to $20,000 for Department of Veterans Affairs (VA) benefits is halted due to the company filing for bankruptcy.

Trajector Holdings, LLC and 21 affiliated entities filed for Chapter 11 bankruptcy on July 23, in the midst of a pending nationwide class-action lawsuit filed by the law firm Aylstock, Witkin, Kreis & Overholtz. Trajector is accused of excessively charging disabled veterans for VA disability claims assistance that federal law requires be provided free of charge. Court records show the company’s estimated liabilities significantly exceed its assets, according to the suit.

Military.com previously reported how the Pensacola, Fla.-headquartered firm filed the class-action case on April 10 in the U.S. District Court for the Central District of California, alleging that Florida-based companies Trajector, Inc. and Trajector Medical, LLC, performed services on veterans’ behalf, such as assistance with the preparation of VA disability claims, without proper VA accreditation and in violation of federal law.

The 58-page complaint accuses Trajector of charging exorbitant fees that go beyond what can be charged by VA accredited representatives who assist with claim preparation, ranging between $4,500 to more than $20,000.

But the bankruptcy filing triggers an automatic stay that halts the class action in the Northern District of Florida. That is, unless a bankruptcy judge permits it to proceed and pulls veterans who claim they were unlawfully charged for VA claims assistance out of a jury trial and into bankruptcy proceedings.

“Bankruptcy doesn’t erase what Trajector did. It also doesn’t mean that our claims just go away,” Jennifer Byrd, head of AWKO’s VA disability practice, told Military.com. “Everything for the class action is stayed, pending what happens in the bankruptcy. A lot of the questions that all of us have will be answered by the bankruptcy judge or the trustee.

“What we want veterans to know is that all those veterans who pay Trajector to prepare their disability claims now should have current claims as unsecured creditors in bankruptcy, and we can ask questions, provide guidance to anyone who wants to kind of get in that arena as a creditor veteran. We want to make sure that their rights are protected.”

If the bankruptcy gets thrown out as illegitimate, Byrd said that disaffected veterans move right back into being protected through class actions. But if not, they need to be there within the bankruptcy and have a voice with the bankruptcy judge.

“[If] you look at the gross revenue versus what they say their actual debts are, there should be money for these veterans that Trajector has used and basically stolen money,” Byrd added. “Unfortunately, Trajector is not going to provide us [with] a list of all the affected veterans, so we need to get the word out there to let these veterans know that there is this possibility as unsecured creditors in the bankruptcy.

“At the end of the day, this is all about protecting veterans and protecting the integrity of the VA system—and making sure that anyone that Trajector’s harmed gets their day in court. If that’s within the bankruptcy court, so be it. We obviously would prefer not to have it go that route, but either way, we need these veterans to know that there’s a possibility for them to be unsecured creditors.”

Trajector’s Defense

When Military.com originally reported the filing of the class-action lawsuit in April, Trajector spokesperson Steve Zenofsky told Military.com that the company doesn’t file VA claims; rather, it allegedly charges fees only for independent medical evidence that veterans ask them to prepare.

He touted the company’s Google ratings and reviews, adding that veterans only pay the company if their VA disability benefits increase based on the evidence Trajector helps them develop.

“The complaint is without merit, and the company intends to defend itself vigorously,” Zenofsky said at the time.

Military.com asked Zenofsky about whether the timing of the bankruptcy filing is intentional given the ongoing class-action lawsuit, which Byrd said has no finite number of veterans but estimates it’s “in the hundreds, if not thousands.” Zenofsky referred Military.com to a company statement issued July 23.

Trajector said it voluntarily filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Middle District of Florida, Jacksonville Division, as a mode of financial restructuring that allows the company “to address liquidity and debt pressures, while continuing to operate throughout the process, and support its long-term stability.”

“This restructuring is a strategic step to strengthen our financial position so we can continue carrying out our mission: helping Americans with disabilities pursue the benefits for which they qualify for,” CEO James S. Hill, II said in prepared remarks. “Our team remains focused on taking care of our clients, and we believe this process will help us build a stronger financial base for the future.”

Mark C. Healy, Trajector’s chief restructuring officer, said that following a review of all options, it was “determined that Chapter 11 restructuring was the best path to continue operating and preserve value for stakeholders.”

Trajector’s ‘Texas Two-Step’

From the perspective of Byrd and the plaintiffs, Trajector’s timing and explanation doesn’t carry much legal weight.

“I won’t say that it’s unusual,” Byrd said. “It is a little bit of a surprise in this particular instance because Trajector Holdings, I think they grossed like $279 million last year. And in their bankruptcy filing, they specifically were talking about this secured loan that they have that’s like $62, almost $63 million. The vast difference in how much they made versus what they’re claiming is their biggest secured debt.”

Numbers don’t add up, she added, questioning whether Trajector pursued the “Texas two-step” strategy deemed controversial as a company will typically split into separate entities to move legal debts to a new company that takes on said debts.

Byrd and her fellow legal counsel is at that stage, trying to determine how legitimate the bankruptcy filing actually is and whether it will stand in bankruptcy court. The case was moved to Northern Florida out of convenience and having all filings consolidated under one court.

“Trajector’s spent years profiting off disabled veterans, charging them thousands and thousands of dollars, even though they knew federal law required something different for these things to be done free of charge. … All of a sudden, they filed this saying that they’re in financial distress.

“I just don’t buy it. I think that this is a company that’s running to the bankruptcy court rather than facing a jury or a judge for what they’ve done to these veterans. At the end of the day, our plan is to use the discovery process to figure out, did they move assets for creditors? Are they doing this Texas two-step thing?”

VA Role and Legal Limbo

Unfortunately, Byrd said, the veterans seeking some type of financial reprieve in this case must wait for the legal chips to fall. There is no timetable for when the bankruptcy case will be heard.

Asked about the VA’s role in all of this, as it’s their claims being allegedly exploited by Trajector, Byrd said the VA is not explicity linked to either the class-action suit or the new bankruptcy matter. However, the VA in the past has sent cease-and-desist letters and has talked about so-called “claim sharks” using veterans for their own financial gain.

“I’m an accredited agent with the VA,” Byrd said. “You can go to the OGC’s (Office of General Counsel) website, look my name up. You can do that for accredited CSOs, and the VA has been really vocal about that and pretty good at sending the mailings.

“But that’s as far as they’ve been able to go because they’ve had no teeth, because there’s no law. To be able to do anything about it as far as the class actions and the bankruptcy go, they wouldn’t have anything to do with it. But from what I can understand, the people at the VA that I have talked to—they’re very interested in seeing what happens because they know the harm that these companies have caused to veterans.”