The ERC Specialists lawsuit landscape now runs in two directions at once: since 2023, clients of the Orem, Utah advisory firm have sued it for allegedly steering them into Employee Retention Credit claims they didn’t qualify for, while ERC Specialists has filed its own suits against more than 40 customers to collect unpaid contingency fees. An October 2025 federal ruling in Utah has made client suits significantly harder to sustain by holding that businesses who kept part of their credit through the IRS amnesty program cannot show a concrete injury.
What Clients Are Alleging
The client suits share a common shape. Businesses say ERC Specialists overstated its expertise, pushed them toward credits they were not entitled to, and charged a contingency fee (usually 15 percent of the credit received) for work an ordinary tax preparer could have done. Several complaints also target the firm’s general counsel, Rocky Crofts, arguing that a lawyer collecting a contingency fee on a tax filing violates federal professional-conduct rules.
A Henderson, Nevada bakery, Yayas Kitchen LLC, sued in the U.S. District Court for the District of Nevada in September 2023, alleging the firm falsely claimed expertise beyond that of an ordinary tax preparer and used a referral agent to promise an expedited credit. Yayas sought the return of a $170,000 fee. ERC Specialists counterclaimed for $203,000 tied to more than $1.3 million in credits it helped secure. The case settled in December 2023.
Nurturing Direct Homecare Inc., a New York provider, sued in the Eastern District of New York in June 2023 with a more serious accusation: that an ERC Specialists consultant forged the owner’s signature on the engagement contract. The plaintiff asked the court to void the contract and nullify about $540,000 in fees on roughly $3.7 million in credits it says were improperly filed. ERC Specialists denied the allegations and filed a third-party complaint against the consultant, Marvin Pishchik. A settlement conference was held in December 2025; the case remained open in early 2026.
Colonial Wholesale Distributing LLC, a Florida wholesaler, filed suit in Florida state court in November 2023 alleging the unauthorized practice of law, improper tax return preparation, and unconscionable contract terms. It asked the court to declare no fee was owed. The case was still open in early 2026.
MB Automotive Specialists, Inc. sued in Cook County, Illinois in 2024, arguing the 15 percent contingency fee violates federal Circular 230 rules and that the fee structure gave the firm an incentive to inflate credit amounts without properly checking eligibility.
Quality Telecom Consultants filed in the District of Utah in September 2024, naming CEO Mark Sullivan, chief product officer Justin Atkinson, Crofts, and other executives as defendants under the federal RICO statute. In October 2025, Judge Howard Nielson dismissed the statutory claims but let a breach-of-contract claim proceed. The case was active as of March 2026.
ERC Specialists’ Suits Against Its Own Clients
On the other side of the docket, ERC Specialists has filed more than 40 collection actions against customers who did not pay the contingency fee, many of them in Utah. The suits rest on the firm’s standard agreement, which calls for 15 percent of the issued credit and routes payment through an escrow entity called Elite Contract Service, LLC.
Some of those collection suits have faltered on jurisdiction. In ERC Specialists v. Schoolmates, NFP, a federal judge in Utah dismissed the case without prejudice in August 2025 for lack of personal jurisdiction over an out-of-state defendant. The court noted a similar dismissal earlier that year in a collection suit against a Florida pool-supply company. ERC Specialists pointed to a Utah state court ruling going the other way on similar facts, but the federal judge was not persuaded.
The Greenway Ruling and Why It Matters
The most important decision so far came on October 8, 2025, in Greenway Equipment Sales, Inc. v. ERC Specialists, LLC, before Judge Kimball in the U.S. District Court for the District of Utah.
Greenway, a Maine-based John Deere equipment wholesaler, sued in October 2024. It alleged that ERC Specialists “knowingly induced” it to file an inflated claim, used hard-sell tactics and misleading testimonials, and discouraged it from consulting its own CPA. Greenway brought federal RICO and Utah state-law claims and sought damages tied to the $72,965.70 fee it had paid.
The court never reached the merits. It dismissed for lack of Article III standing, ruling that Greenway had not suffered a concrete injury. The court’s math: Greenway received $729,657 in ERC funds. It voluntarily entered the IRS Voluntary Disclosure Program and repaid 80 percent, keeping $145,931. Subtracting the $72,965.70 fee left roughly $72,965 in Greenway’s pocket. The court called that a “net positive financial outcome.”
The court also rejected Greenway’s alternative theories of harm. Fear of a future IRS audit or clawback was “speculative” and “not concrete or imminent” because the agency had taken no adverse action. Legal and consulting fees the company incurred to check its own eligibility could not be used to “manufacture standing.” And the engagement contract itself included clauses stating that Greenway would not rely on ERC Specialists’ representations about eligibility, and that the firm was not required to return fees if the IRS later disqualified the credit.
With the federal claim gone for lack of jurisdiction, the court declined supplemental jurisdiction over the state-law claims. The dismissal was under Rule 12(b)(1), which generally means without prejudice, though the ruling did not say so explicitly. The underlying fraud and false-advertising allegations were never adjudicated.
The court cited Tri-Cities Restoration LLC v. ERC Specialists, LLC, a July 2025 ruling from a different Utah federal judge reaching the same conclusion for the same reason: the plaintiff’s net-positive position after the Voluntary Disclosure Program defeated standing.
The Bind for Businesses Who Used the Firm
Read together, Greenway and Tri-Cities create a difficult pattern for aggrieved clients. A business that entered the Voluntary Disclosure Program to avoid penalties and kept even a portion of the credit may not be able to show a concrete financial injury in federal court, because the retained credit exceeds the fee it paid. A business that did nothing and waited faces the opposite problem: without an IRS action against it, the harm is treated as speculative.
The legal standard driving these outcomes comes from the Supreme Court’s 2021 decision in TransUnion LLC v. Ramirez, which held that “an injury in law is not an injury in fact.” A plaintiff seeking damages must show concrete, particularized, actual or imminent harm, not just a statutory violation or an abstract risk.
Not every theory has failed. The Quality Telecom judge dismissed RICO and statutory claims but allowed breach of contract to proceed, suggesting contract-based claims may travel further than fraud or racketeering claims where standing is contested. State courts, which do not apply Article III, are another potential venue; the Colonial Wholesale case in Florida remains pending.
IRS Exposure Behind the Litigation
The court fights sit on top of a wider federal enforcement push. The IRS imposed a moratorium on processing new ERC claims in September 2023 and closed most remaining claims by the end of 2025. A law passed in July 2025 disallowed certain unpaid claims filed after January 31, 2024. As of June 2025, the agency had processed nearly 5 million ERC claims and issued roughly $235 billion in refunds.
IRS Criminal Investigation reported 323 investigations involving more than $2.8 billion in potentially fraudulent claims as of late 2023. The agency has sent up to 30,000 recapture letters seeking to recover more than $1 billion in erroneous claims and extended the audit statute of limitations for all ERC claims to six years. Fraud cases can be pursued indefinitely.
The Voluntary Disclosure Program’s second round closed in November 2024. Businesses that took credits they were not entitled to still face repayment, penalties, and interest. Because ERC Specialists typically prepared only the payroll tax amendment (Form 941-X) and did not handle income-tax returns, clients often have to sort out the downstream consequences with their own accountants, some of whom may be ethically barred from helping if they cannot independently verify eligibility.