What Happened to Phoenix Law Group Debt Settlement Clients?

If you paid Phoenix Law Group for debt settlement work and can’t reach anyone there, here is what happened: Phoenix Law was one of several California firms connected to disbarred attorney Tony Diab and the collapsed Litigation Practice Group (LPG). In August 2023, roughly 35,000 client files were sold through bankruptcy court to a successor called Morning Law Group. What happens to your account now depends on whether you opted in, opted out, or ignored the letter Morning Law sent you.

What Phoenix Law Group Actually Was

Litigation Practice Group was an Orange County debt relief firm that sold “debt validation” services, writing letters to creditors challenging consumer debts. At its peak in 2022, LPG reported $155 million in revenue from an estimated 50,000 to 67,000 customers.¹

The firm was secretly run by Tony Diab, a lawyer disbarred in Nevada in January 2019 for depositing a $375,000 settlement into his personal account and forging a judge’s signature on a court document. California disbarred him in December 2019. Diab reportedly kept operating anyway, using CEO Daniel Stephen March as a front man and instructing employees to call him only “Admin.”² The bankruptcy trustee later accused LPG of misappropriating up to $282 million from roughly 60,000 clients between November 2019 and March 2023.

LPG filed Chapter 11 bankruptcy on March 20, 2023.³ As it fell apart, client files were pushed out to Phoenix Law Group, Oakstone Law Group, and Gallant Law PC. A June 2023 trustee filing described all three as “alter egos” nominally owned by licensed attorneys but actually controlled by Diab, who allegedly used them to divert millions of dollars from the LPG estate.⁴ In practical terms, if your file moved from LPG to Phoenix Law, it stayed inside the same operation.

Where Your File Went After Phoenix Law

On July 2023, Bankruptcy Judge Scott C. Clarkson approved the sale of approximately 35,000 LPG client files to Morning Law Group. Morning Law’s own website gives the approval date as August 2, 2023, and says the firm operates under new ownership with operations “completely different” from LPG’s.⁵ Morning Law bought Phoenix Law’s assets, including its payment processing system, and hired many of the lawyers and staff who had worked at LPG and Phoenix Law.¹

California ethics rules require written consent before client files transfer to a successor firm. Morning Law sent clients a letter with an opt-in or opt-out choice and a 90-day deadline. If a client did not respond, consent was “presumed” and the firm kept withdrawing monthly fees from their bank accounts.¹

The response numbers are worth knowing. Only 1,745 clients affirmatively opted in. 4,673 opted out. Thousands more never responded and were treated as consenting by default. In a December 2023 court filing, Morning Law reported it had withdrawn $12.3 million from client accounts over the previous four months and projected future monthly revenue between $2.7 million and $3.3 million.

What to Do Based on How You Responded

The right next step depends on which of these describes you:

You opted in to Morning Law Group. Your file is being handled under Morning Law’s legal services model, which the firm describes as legal strategy, dispute resolution, and litigation management rather than debt consolidation. Monthly fees are for legal work; the firm does not forward them to creditors. If a creditor sues you, contact Morning Law immediately and keep copies of every court paper you receive.⁶
You opted out. Automatic withdrawals should have stopped and your file should have been returned or closed. If money is still being pulled from your account, treat it as an unauthorized withdrawal with your bank.
You never responded. You were treated as having consented. If you did not intend to continue, call your bank to stop the automatic withdrawals, then contact Morning Law Group directly to close your file. Do this in writing and keep a copy.

Whichever category you fall into, check your credit reports and court records in your county. Complaints filed with the Better Business Bureau describe clients who were sued by creditors, or in one case found liable in court, because official notices sent to their debt relief firm were ignored.⁷ If a lawsuit was filed against you while Phoenix Law had your file, you may already have a judgment on record that you don’t know about.

Getting a Refund Through the LPG Bankruptcy

Former LPG clients who believe they are owed money are creditors in the LPG bankruptcy. The general bar date for filing a proof of claim was February 23, 2024. If you missed it, your ability to recover through the estate is limited; the court can grant late claims only in narrow circumstances, and the file does not address them.

Trustee Richard Marshack is pursuing more than 200 lawsuits to recover funds, and the Chapter 11 liquidation plan was confirmed on September 9, 2024. The recovery process is expected to take years, and as of mid-2026 the docket did not reflect distributions to creditors.³ Professional fees in the case have already exceeded $8.1 million, reportedly more than has been disbursed to creditors so far.⁸ Set your expectations accordingly. You can track the case, including new adversary complaints filed as recently as March 2026, through the case’s public docket.⁹

There is also a financial dispute between Morning Law Group and the LPG estate over how much revenue Morning Law owes back to the estate. The parties agreed to mediation, and public docket records as of mid-2026 do not show a resolution. That fight is between the estate and Morning Law; it does not directly change your claim.

Complaints and Regulatory Oversight

Phoenix Law’s own BBB profile shows the firm is not accredited and has 64 complaints filed in the past three years as of June 2026. Fifty-eight are marked “unanswered,” and only two were resolved. The single BBB response on record, dated February 2026, claimed Phoenix Law is “a bankruptcy law firm” in one jurisdiction and suggested the complainant “must be looking for a different Phoenix Law.”⁷

Complaints against Morning Law Group follow a similar pattern to those against Phoenix Law: clients allege the firm collected monthly fees while performing no meaningful work, failed to negotiate with creditors, and left them facing lawsuits. Morning Law responds by pointing to its legal services model and generally denies refund requests, though it has occasionally issued partial refunds it calls a “gesture of good faith” without admitting wrongdoing.⁶

The bankruptcy court appointed Nancy Rapoport, a University of Nevada, Las Vegas law professor, as ethics monitor over Morning Law’s operations. Representatives from the Consumer Financial Protection Bureau, the California Department of Financial Protection and Innovation, and attorneys general from Pennsylvania, California, Ohio, and Oregon have joined voluntary monthly meetings about the firm’s practices. As of June 2024, Rapoport said no formal investigations or subpoenas had been issued and characterized Morning Law as “doing a good job of representing its clients ethically.”¹

If you have a live complaint about Phoenix Law or Morning Law, you can file with the CFPB, with your state attorney general, and with the California Department of Financial Protection and Innovation. Under the FTC’s Telemarketing Sales Rule, for-profit debt relief companies generally may not collect fees before a debt has been renegotiated or settled, a written agreement with the creditor exists, and the consumer has made a payment under it. Law firms that sign up clients through interstate telemarketing are covered by the same rule.¹⁰ That framework is what regulators are measuring these firms against, and it is worth citing when you write to a regulator or your bank.

Daniel Stephen March, LPG’s nominal CEO, was placed on inactive status by the California State Bar on July 1, 2024, after he stopped defending himself against ethics charges alleging he misappropriated between $78 million and $282 million.²

1
Law360. Problems Linger Amid Efforts to Clean Up Debt Firm’s Mess
2
ABA Journal. Lawyer Accused of Misappropriating $282M Allegedly Handed Firm to Disbarred Attorney
3
Omni Agent Solutions. Litigation Practice Group PC Bankruptcy Case Information
4
Debtor Protectors. Debt Settlement Scam Alert
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Morning Law Group. Please Read First
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BBB. Morning Law Group PC Complaints
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BBB. Phoenix Law Complaints
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CuraDebt. Litigation Practice Group: What Is Going On
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Omni Agent Solutions. Litigation Practice Group PC Case Documents
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FTC. Debt Relief Services and the Telemarketing Sales Rule: A Guide for Business