Debt Collector

Violations of the Texas Debt Collections Act (TDCA) : Jaffer v. Kelly M. Davis & Assocs. (E.D. Tex., 2020)

Shawn Jaffer is a Fair Debt Collections Attorney and Texas Debt Collections Act Attorney(TDCA) in Dallas, Texas. He sues Debt Collectors.

LIT COMMENTARY

Shawn Jaffer is a FDCPA Fair Debt Collections Attorney and a FCRA Fair Credit Reporting Attorney in Dallas, Texas. He sues Debt Collectors like Hopkins Law, PLLC and Kelly M. Davis & Associates, LLC.

“Defendant KDMA does not have a surety bond for debt collection and has not filed a copy such surety bond with the Texas Secretary of State.” She rushed an application obviously trying to preempt the above and after learning of the lawsuit. The complaint was submitted Nov. 21, 2019 and Kelly has a shiny new Surety Bond dated 10th December, 2019. Too late for this lawsuit, why it’s going to settlement.

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Plaintiff Shawn Jaffer (hereinafter, “Plaintiff”), a Texas resident, brings this Class Action Complaint by and through his attorneys, Shawn Jaffer Law Firm, PLLC against Defendant Kelly Davis & Associates, LLC (hereinafter “KMDA) individually and on behalf of a class of all others similarly situated, pursuant to Rule 23 of the Federal Rules of Civil Procedure, based upon information and belief of Plaintiff’s counsel, except for allegations specifically pertaining to Plaintiff, which are based upon Plaintiff’s personal knowledge for violations 15 U.S.C. § 1692 et seq., of the Fair Debt Collection Practices Act (“FDCPA”) and for violations of the Tex. Fin. Code Ann. § 292 et seq. of the Texas Debt Collection Act (“TDCA”).

INTRODUCTION/PRELIMINARY STATEMENT

Congress enacted the Fair Debt Collection Practices Act (hereinafter “the FDCPA”) in 1977 in response to the “abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors.” 15 U.S.C. §1692(a).

At that time, Congress was concerned that “abusive debt collection practices contribute to the number of personal bankruptcies, to material instability, to the loss of jobs, and to invasions of individual privacy.” Id.

Congress concluded that “existing laws…[we]re inadequate to protect consumers,” and that “‘the effective collection of debts” does not require “misrepresentation or other abusive debt collection practices.” 15 U.S.C. §§ 1692(b) & (c).

Congress explained that the purpose of the Act was not only to eliminate abusive debt collection practices, but also to “insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged.” § 1692(e).

“After determining that the existing consumer protection laws ·were inadequate.” Id. § l692(b), Congress gave consumers a private cause of action against debt collectors who fail to comply with the Act. Id. § 1692k.

The TDCA is Texas’s version of the FDCPA which aims to protect consumers against unfair collection practices and is broader in scope than the FDCPA.

JURISDICTION AND VENUE

The Court has jurisdiction over this class action pursuant to 28 U.S.C. § 1331 and 15 U.S.C. § 1692 et. seq. The Court has pendent jurisdiction over the State law claims in this action pursuant to 28 U.S.C. § 1367(a).

Venue is proper in this judicial district pursuant to 28 U.S.C. § 1391(b)(2), as this is where a substantial part of the events or omissions giving rise to the claim occurred.

NATURE OF THE ACTION

Plaintiff brings this class action on behalf of a class of Texas consumers under §1692     et seq. of Title 15 of the United States Code, commonly referred to as the Fair Debt Collections Practices Act (“FDCPA”) and under Tex. Fin. Code Ann. § 292 et seq. commonly referred to as the Texas Debt Collection Act (“TDCA”).

Plaintiff is seeking statutory and actual damages and declaratory relief.

PARTIES

Plaintiff is a resident of the State of Texas, residing in Collin County, Texas and the subject property at 11126 Abercrombie Trail, Frisco, Texas 75035 is Plaintiff’s homestead.

The creditor is Elevated Roofing, LLC (“Elevated”).

Plaintiff is alleged to pay a debt to Elevated or Defendant KDMA for an alleged obligation arising out of a transaction in which the money, property or insurance or services are primarily for personal, family, or household purposes for roof repair to Plaintiff’s family home.

Plaintiff is a natural person allegedly obligated to pay a debt to Elevated or Defendant KDMA.

Plaintiff is an individual with an alleged obligation primarily for personal, family, or household purposes arising from a transaction with Elevated for roofing repair for his family home.

Defendant KMDA is a “debt collector” as the phrase is defined in 15 U.S.C. § 1692(a)(6) and used in the FDCPA with an address at 550 Edmonds Lane, Suite 201, Lewisville, TX 75067 and can be served process upon its registered agent Kelly M Davis at the same address.

Upon information and belief, Defendant KMDA is a person that uses the mail, telephone, and facsimile and regularly engages in business the principal purpose of which is to attempt to collect debts alleged to be due another.

Upon information and belief, Defendant KMDA is a person who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.

Upon information and belief, Defendant KMDA is a person meaning an individual, partnership, corporation, association, or other group, however organized.

Upon information and belief, Defendant KMDA, is a third-party debt collector meaning a debt collector as defined by 15 U.S.C. § 1692(a)(6).

CLASS ALLEGATIONS

Plaintiffs bring this claim on behalf of the following case, pursuant to Fed. R. Civ. P. 23(a) and 23(b)(3).

The Class consists of:

a. all individuals with addresses in the State of Texas;

b. to whom Defendant KMDA sent a letter attempting to collect a consumer debt;

c. that stated that

“Unless payment arrangements are made with this office within ten (10) days from the date of this letter”;

“I will advise my client to file a lien on the subject property.”; or

“Federal law gives you thirty days after you receive this letter to dispute the validity of the debt or any part of If you do not dispute it within that period, this firm will assume that it is valid. If you do dispute it, by notifying this firm in writing to that effect, this firm will, as required by the law, obtain and mail to you proof of your original creditor”;

d. which letter was sent on or after a date one (1) year prior to the filing of this action and on or before a date twenty-one (2l) days after the filing of this action.

The identities of all class members are readily ascertainable from the records of Defendant KDMA and those companies and entities on whose behalf they attempt to collect and/or have purchased debts.

Excluded from the Plaintiff Classes are the Defendants and all officers, members, partners, managers, directors and employees of the Defendants and their respective immediate families, and legal counsel for all parties to this action, and all members of their immediate families.

There are questions of law and fact common to the Plaintiff Classes, which common issues predominate over any issues involving only individual class members. The principal issue is whether the Defendants’ written communications to consumers, in the forms attached as Exhibits A, violate 15 S.C. § 1692 et seq. and the Tex. Fin. Code Ann. § 292 et seq.

The Plaintiffs’ claims are typical of the class members, as all are based upon the same facts and legal theories. The Plaintiffs will fairly and adequately protect the interests of the Plaintiff Classes defined in this The Plaintiffs have retained counsel with experience in handling consumer lawsuits, complex legal issues, and class actions, and neither the Plaintiff(s) nor his attorneys have any interests, which might cause them not to vigorously pursue this action.

This action has been brought, and may properly be maintained, as a class action pursuant to the provisions of Rule 23 of the Federal Rules of Civil Procedure because there is a well-defined community interest in the litigation:

Numerosity: The Plaintiffs are informed and believe, and on that basis allege, that the Plaintiff Classes defined above are so numerous that joinder of all members would be impractical.

Common Questions Predominate: Common questions of law and fact exist as to all members of the Plaintiff Classes and those questions predominate over any questions or issues involving only individual class members. The principal issue is whether the Defendant’s written communications to consumers, in the forms attached as Exhibit A violate 15 U.S.C. § 1692 et seq. and the Tex. Fin. Code Ann. § 292 et seq.

Typicality: The Plaintiff’s claims are typical of the claims of the class members. The Plaintiffs and all members of the Plaintiff Classes have claims arising out of the Defendants’ common uniform course of conduct complained of herein.

Adequacy: The Plaintiffs will fairly and adequately protect the interests of the class members insofar as Plaintiffs have no interests that are averse to the absent class members. The Plaintiffs are committed to vigorously litigating this matter. Plaintiffs have also retained counsel experienced in handling consumer lawsuits, complex legal issues, and class actions. Neither the Plaintiff nor his counsel have any interests which might cause them not to vigorously pursue the instant class action lawsuit.

Superiority: A class action is superior to the other available means for the fair and efficient adjudication of this controversy because individual joinder of all members would be impracticable. Class action treatment will permit a large number of similarly situated persons to prosecute their common claims in a single forum efficiently and without unnecessary duplication of effort and expense that individual actions would engender.

Certification of a class under Rule 23(b)(3) of the Federal Rules of Civil Procedure is also appropriate in that the questions of law and fact common to members of the Plaintiff Classes predominate over any questions affecting an individual member, and a class action is superior to other available methods for the fair and efficient adjudication of the controversy.

Depending on the outcome of further investigation and discovery, Plaintiffs may, at the time of class certification motion, seek to certify a class(es) only as to particular issues pursuant to Fed. R. Civ. P. 23(c)(4).

FACTUAL ALLEGATIONS

Plaintiff repeats, reiterates, and incorporates the allegations contained in paragraphs numbered above herein with the same force and effect as if the same were set forth at length herein.

On July 15, 2019, Elevated’s representative Kenny Gammons sent Plaintiff a text message saying they would do a roof repair work for $12,459.

On July 16, 2019, Plaintiff and Elevated agreed to repair the roof, repaint the fence, fix a broken window and repair and repaint the garage door from hail damage for total price of $14,314.28 which did not include gutters and downsprouts.

Elevated required half upfront before the work was to commence on July 24, 2019.

On the morning of July 24, 2019, Elevated without any explanation increased the price for the work to $17,285.31 and demanded $8,642.66 and sent an invoice stating that the remained balance due at job completion was $8,642.65 and refused to honor its original agreement.

On July 24, 2019 Plaintiff paid Elevated $8,642.66 because work was needed as the roof was leaking in the master bedroom.

On September 9, 2019 at 9:13am Elevated’s representative Kenny Gammons send the Plaintiff a text message saying “Morning Shawn… we were able to get the insurance cover your gutters & So I will get them changed out later this week. I wanted to make you aware. Thanks”

On September 9, 2019 at 9:15am Plaintiff replied back saying “Kenny we don’t want gutter [o]r downspouts” and “Not part of our agreement”.

On September 9, 2019 at 9:16am, Kenny Gammons replied saying “Ok… No problem we will just have to report it back to the insurance. Just wanted you to be aware… We will prepare the final bill and send it over. Thanks”.

On September 23, 2019 Elevated’s representative Doug Dobolek emailed Plaintiff an invoice for with a balance due of $18,504.96.

Plaintiff contacted Elevated several times to remove the charges for gutters and downspouts which were never installed but Elevated refused to adjust their bill.

Elevated is claiming that they are owed money for gutter and downspouts which were never installed because insurance disbursed funds to the Plaintiff.

Plaintiff has offered to pay Elevated the correct amount owed $5,671.62 but Elevated has refused and now demands $19,192.67 and continues to increase its balance.

On November 20, 2019 KDMA sent a collection letter (“Letter”) to Plaintiff in the Eastern District of Texas.

Defendant KDMA’s Letter threatened Plaintiff with legal arbitration action and demanding interests and attorney’s fees.

Defendant KDMA’s Letter demanded payment from Plaintiff of $19,192.67 within ten (10) days from the date of the letter.

Defendant KDMA’s Letter claimed the KDMA is a debt collector.

Defendant KDMA does not have a surety bond for debt collection and has not filed a copy such surety bond with the Texas Secretary of State.

Defendant KDMA Letter threatened the filing of lien on the subject property at 11126 Abercrombie Trail, Frisco, TX 75035 within 10 (ten) days of the date of the letter.

Plaintiff’s is married and his spouse did not sign any agreement or contract with Elevated or Defendant KDMA.

The subject property is Plaintiff’s homestead.

Prop. Code Ann. § 53.254 requires the signature of both spouses when fixing a lien on a homestead. Tex. Prop. Code Ann. § 53.254(c) (2007). Denmon v. Atlas Leasing, L.L.C., 285 S.W.3d 591, 592 (Tex. App. 2009).

COUNT I

VIOLATIONS OF THE FAIR DEBT COLLECTION PRACTICES ACT

15 U.S.C. §1692e et seq.

Plaintiff repeats, reiterates, and incorporates the allegations contained in paragraphs above herein with the same force and effect as if the same were set forth at length herein.

Defendant’s debt collection efforts attempted and/or directed towards the Plaintiff violated various provisions of the FDCPA, including but not limited to 15 S.C. § 1692e.

Pursuant to 15 S.C. § 1692e, a debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt, including:

The false representation of the character, amount, or legal status any debt, § 1692e(2);

The representation or implication that nonpayment of any debt will result in the… the seizure, garnishment, attachment, or sale of any property or wages of any person unless such action is lawful and the debt collector or creditor intends to take such action 1692e(4);

The threat to take any action that cannot legally be taken or that is not intended to be taken 1692e(5); and

The use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer, § 1692e(10).

Defendant KDMA has violated § 1692e et seq. when KDMA:

falsely represented in its Letter that Plaintiff owed $19,192.67;

falsely represented and threatened that KDMA or Elevated could legally file a lien on Plaintiff’s homestead when they legally cannot;

falsely threatened Plaintiff that with breach of contract, violation of the Prompt Payment Act, and violation of the Texas Trust Funds Act when Plaintiff has offered to pay the full amount due of $5,671.62; and

used representation and deceptive means because KDMA has engaged in illegal debt collection because KDMA has is not bonded as a debt collector in Texas and has not posted a bond with the Secretary of State.

By reason thereof, Defendant is liable to Plaintiff for judgment that Defendant’s conduct violated Section 1692e et of the FDCPA, and Plaintiff is entitled to an award of statutory and actual damages, costs and attorneys’ fees.

COUNT II

VIOLATIONS OF THE FAIR DEBT COLLECTION PRACTICES ACT

15 U.S.C. §1692f et seq.

 Plaintiff repeats, reiterates, and incorporates the allegations contained in paragraphs above herein with the same force and effect as if the same were set forth at length herein.

Pursuant to 15 U.S.C. § 1692f, a debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt.

The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law, 1692f(1).

Defendant KDMA has violated § 1692f when KDMA:

falsely attempted to collect an unauthorized amount of $19,192.67;

used an unfair or unconscionable means to collect a debt when KDMA falsely threatened that it or Elevated could file a lien on Plaintiff’s homestead when they legally cannot;

falsely threatened Plaintiff that with breach of contract, violation of the Prompt Payment Act, and violation of the Texas Trust Funds Act when Plaintiff has offered to pay full amount due of $5,671.62; and

used representation and deceptive means because KDMA has engaged in illegal debt collection because KDMA has is not bonded as a debt collector in Texas and has not posted a bond with the Secretary of State.

By reason thereof, Defendant is liable to Plaintiff for judgment that Defendant’s conduct violated Section 1692f et seq. of the FDCPA and Plaintiff is entitled to an award of actual and statutory damages, costs and attorneys’ fees.

COUNT III

VIOLATIONS OF THE FAIR DEBT COLLECTION PRACTICES ACT

15 U.S.C. §1692g et seq.

Plaintiff repeats, reiterates, and incorporates the allegations contained in paragraphs above herein with the same force and effect as if the same were set forth at length herein.

15 U.S.C. § 1692g(a) reads: Notice of debt, contents: Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing —

(1) the amount of the debt;

(2) the name of the creditor to whom the debt is owed;

(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;

(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and

(5) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.

15 U.S.C. § 1692g(b) in relevant part reads: “Any collection activities and communication during the 30-day period may not overshadow or be inconsistent with the disclosure of the consumer’s right to dispute the debt or request the name and address of the original ”

Defendant KDMA did not identify the true legal name of the creditor but simply claims the creditor is Elevated Roofing.

Defendant KDMA violated 1692g(a) and 1692(b) when KDMA used confusing and inconsistent language on its Letter

“Federal law gives you thirty days after you receive this letter to dispute the validity of the debt or any part of it. If you do not dispute it within that period, this firm will assume that it is valid. If you do dispute it, by notifying this firm in writing to that effect, this firm will, as required by the law, obtain and mail to you proof of your original creditor,…”

This statement makes an unsophisticated or least sophisticated consumer believe that a dispute is required in writing.

Defendant KDMA violated 1692g(b) when it demanded payment within ten (10) days from the Plaintiff because this overshadowed and was inconsistent with the disclosure of the Plaintiff’s consumer right to dispute the debt or request the name and address of the original creditor.

Defendant KDMA violated 1692g(b) when it threatened to file a lien on Plaintiff’s homestead if payment is not made within 10 days. This overshadowed and was inconsistent with the disclosure of the Plaintiff’s consumer right to dispute the debt or request the name and address of the original creditor.

By reason thereof, Defendant is liable to Plaintiff for judgment that Defendant’s conduct violated Section 1692g et seq. of the FDCPA and Plaintiff is entitled to an award of actual and statutory damages, costs and attorneys’ fees.

COUNT IV

VIOLATIONS OF THE TEXAS DEBT COLLECTION ACT

Tex. Fin. Code Ann. § 292 et seq.

Plaintiff re-alleges and incorporates by reference paragraphs in this complaint as though fully set forth herein.

Sec. 392.304(a) of the TDCA reads: “In debt collection, a debt collector may not use fraudulent, deceptive, or misleading representation that employs the following practice:

Misrepresenting the character, extent, or amount of a consumer debt, or misreporting the consumer debt’s status in a judicial or governmental proceeding; and

Using any other false representation or deceptive means to collect a debt or obtain information concerning a consumer, Sec. 304(a)(19).

Sec 392.101 of the TDCA prohibits a third-party debt collector from engaging in debt collection unless the third-party debt collector has obtained a $10,000 surety bond issued by a surety company authorized to do business in the state for the benefit of any person who is damaged by a violation of this chapter.

Defendant KDMA violated the TDCA through its deceptive means when KDMA engaged in illegal debt collection activities against the Plaintiff without obtaining and posting a bond with the Secretary of State.

Defendant KDMA violated the TDCA when it mailed the Collection Letter to the Plaintiff which contained false representations and misrepresented the amount of the debt,

DEMAND FOR TRIAL BY JURY

Pursuant to Rule 38 of the Federal Rules of Civil Procedure, Plaintiff hereby requests a trial by jury on all issues so triable.

PRAYER FOR RELIEF

WHEREFORE, Plaintiff Shawn Jaffer, individually and on behalf of all others similarly situated, demands judgment from Defendant KMDA as follows:

Declaring that this action is properly maintainable as a Class Action and certifying Plaintiff as Class representative, and Shawn Jaffer, Esq. as Class Counsel;

Awarding Plaintiff and the Class statutory damages;

Awarding Plaintiff and the Class actual damages;

Awarding Plaintiff costs of this Action, including reasonable attorneys’ fees and expenses;

Awarding pre-judgment interest and post-judgment interest; and

Awarding Plaintiff and the Class such other and further relief as this Court may deem just and

Dated:   November 21, 2019

Respectfully Submitted,

Shawn Jaffer Law Firm PLLC

/s/ Shawn Jaffer
Shawn Jaffer, Esq.

TX Bar No: 24107817
11625 Custer Rd, Suite 110-376
Frisco, TX 75035
Ph: 214-210-0730
shawn@jaffer.law
Attorney for Plaintiff Shawn Jaffer

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MEMORANDUM OPINION AND ORDER

The following motions are pending before the Court:

1. Plaintiff Shawn Jaffer’s (“Plaintiff”) Motion for Leave to File Amended Complaint (the “Motion for Leave”) (Dkt. 21), to which Defendant Kelly M. Davis & Associates, LLC (“Defendant”) filed a response (Dkt. 25); and

2. Defendant’s Motion to Stay and/or Motion to Reconsider Order Governing Proceedings (the “Motion to Stay”) (Dkt. 27), to which Plaintiff filed a response (Dkt. 30), and Defendant filed a reply (Dkt. 32).

On May 12, 2020, the Court held a hearing to address the Motion to Stay (the “Hearing”). See Minute Entry on May 12, 2020. Upon consideration, the Court finds that Plaintiff’s Motion for Leave (Dkt. 21) is GRANTED and Defendant’s Motion to Stay is GRANTED IN PART and DENIED IN PART.

In Plaintiff’s Motion for Leave, Plaintiff requests to amend his Complaint in order to add individual claims against Elevated Roofing, LLC (“Elevated”). See Dkt. 21 at 1. A Scheduling Order has not yet been entered in this case.

As the Fifth Circuit has stated, “Federal Rule of Civil Procedure 15(a)(2) states that the district ‘court should freely give leave [to amend] when justice so requires.’ ‘[T]he language of this rule “evinces a bias in favor of granting leave to amend,”‘ and ‘[a] district court must possess a “substantial reason” to deny a request.'” SGK Properties, L.L.C. v. U.S. Bank Nat’l Assoc. for Lehman Brothers Small Balance Comm. Mortgage Pass-Through Certificates, Series 2007-3, 881 F.3d 933, 944 (5th Cir. 2018) (quoting Smith v. EMC Corp., 393 F.3d 590, 595 (5th Cir. 2004)).

This is Plaintiff’s first request to amend his Complaint and it appears the only difference between Plaintiff’s Complaint (Dkt. 1) and Plaintiff’s Amended Complaint (Dkt. 22) is the assertion of claims against Elevated for violations of the Texas Deceptive Trade Practices Act.

Further, in reviewing Defendant’s pending Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6) (the “Motion to Dismiss”) (Dkt. 5) prior to considering the Motion for Leave, Plaintiff’s Complaint fails to properly plead all of the elements of Plaintiff’s claims under the Texas Debt Collection Act.

In response to the Motion to Dismiss, Plaintiff requested leave to amend the Complaint in the event the Court found the Motion to Dismiss to be meritorious, in whole or in part. See Dkt. Dkt. 9.

As Plaintiff filed his Amended Complaint prior to the Court’s review of the Motion to Dismiss, the Court finds that Plaintiff should be allowed to file a second amended complaint in attempt to correct the deficiencies identified in Defendant’s Motion to Dismiss. Accordingly, Plaintiff’s Motion for Leave is GRANTED.

IT IS THEREFORE ORDERED that Plaintiff shall file a Second Amended Complaint by August 10, 2020. If no such Second Amended Complaint is timely filed, Plaintiff’s Amended Complaint (Dkt. 21) will be considered the live pleading in this matter.

In Defendant’s Motion to Stay, Defendant requests the Court stay discovery in this matter pending the Court’s determination of whether Defendant is entitled to attorney immunity. See Dkt. 27.

At the Hearing, Defendant argued that it is a small law firm, and allowing discovery prior to the Court deciding this threshold issue would be extremely prejudicial to Defendant.

Until a “threshold immunity question is resolved, discovery should not be allowed.” Harlow v. Fitzgerald, 457 U.S. 800 (1982).

The Texas attorney immunity doctrine is “intended to ensure loyal, faithful, and aggressive representation by attorneys employed as advocates by avoiding the inevitable conflict that would arise if they were forced constantly to balance their own potential exposure against their client’s best interest.” Ironshore Europe DAC v. Schiff Hardin, LLP, 912 F.3d 759, 765 (5th Cir. 2019) (quoting Cantey Hanger, LLP v. Byrd, 467 S.W.3d 477, 481, 483 (Tex. 2015)).

In determining whether a law firm is a “debt collector” under the Fair Debt Collections Practices Act and the Texas Debt Collection Act, and thus, not protected by attorney immunity, the Fifth Circuit has identified a list of factors for courts to consider, including:

the number of lawsuits filed and collection letters mailed, the percentage of time debt collection activities consume, the share of total lawsuits filed that were dedicated to debt collection, the number of creditor clients and the length of the firm’s relationship with them, the frequency and nature of the non-collection work in which the firm engages, and the number of firm attorneys and other employees dedicated to debt collection activities. – Reyes v. Steeg Law, L.L.C., 760 F.App’x 285, 287 (5th Cir. 2019).

Attorney immunity is intended to protect attorneys from the costs of unnecessary litigation; however, limited discovery may be necessary in order to determine whether attorney immunity applies.

See Swank v. Citimortgage, Inc., Case No. A-13-CV-711 LY, 2014 WL 12464925, at *4 (W.D. Tex. Jan. 27, 2014) (“[At least three federal courts have concluded attorneys can be held liable under the TDCA if the evidence shows that they satisfy the definition of ‘debt collectors.'”);

Garcia v. Jenkins/Babb LLP, Case No. 3:11-CV-3171-N-BH, 2013 WL 3789830, at *6 (N.D. Tex. July 22, 2013) (denying the defendant law firm’s motion to dismiss based on attorney immunity wherein the plaintiff alleged the defendant law firm sent plaintiff a letter stating the law firm was a debt collector in attempt to collect a debt and instructing the plaintiff to remit payment for the debt owed to the law firm).

The Court finds discovery is necessary as to Defendant’s attorney immunity defense.

While the Court recognizes that Plaintiff is adding Elevated as a defendant to this suit, the Court will not have jurisdiction over Plaintiff’s claims against Elevated if Defendant is dismissed from this suit.

As such, Defendant’s Motion to Stay is GRANTED IN PART and DENIED IN PART, as set forth below.

IT IS THEREFORE ORDERED that discovery in this matter shall be limited only to whether Defendant is entitled to attorney immunity until the Court decides this threshold issue.

So ORDERED and SIGNED this 27th day of July, 2020.

/s/_________
KIMBERLY C. PRIEST JOHNSON
UNITED STATES MAGISTRATE JUDGE

IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS AUSTIN DIVISION

PHILLIP SWANK AND JENNICE SWANK,   Plaintiffs,

v.

CITIMORTGAGE, INC., AND BARRETT § DAFFIN FRAPPIER TURNER & ENGEL, LLP,  Defendants.

1 § A-13-CV-711 LY

 

REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE

TO:      THE HONORABLE LEE YEAKEL UNITED STATES DISTRICT JUDGE

Before the Court are Defendant Barrett Daffin Frappier Turner & Engel, LP’s Rule 12(b)(6) Motion to Dismiss Plaintiffs’ Amended Complaint, filed January 3, 2014 (Clerk’s Dkt. #51); and Plaintiffs’ Response to the Motion to Dismiss of Barrett Daffin Frappier Turner & Engel, filed January 17, 2014 (Clerk’s Dkt. #53).

The motion was referred by United States District Judge Lee Yeakel to the undersigned for a Report and Recommendation as to the merits pursuant to 28 U.S.C. § 636(b), Rule 72 of the Federal Rules of Civil Procedure, and Rule 1(d) of Appendix C of the Local Rules of the United States District Court for the Western District of Texas.

After reviewing the pleadings, relevant case law, as well as the entire case file, the undersigned issues the following Report and Recommendation to the District Court.

I.     BACKGROUND

On July 26, 2013 Plaintiffs Phillip Swank and Jennice Swank filed this action in the 335th Judicial District Court of Bastrop County, Texas.

They named as defendants CitiMortgage, Inc. (“CitiMortgage”), and Barrett Daffin Flapper Turner & Engel, LP. (“Barrett Daffin”). The action was removed to this court on August 16, 2013. Plaintiffs filed an amended complaint on October 15, 2013.

Plaintiffs allege on December 17, 2007 Phillip Swank entered into an equity loan refinancing the original mortgage loan used to purchase real property located at 118 Saddle Court, Bastrop, Texas (“the Property”).

The loan was in the principal amount of $277,900 with an interest rate of 7.375% per annum. The lender was CitiMortgage. According to Plaintiffs, they timely made all payments until June 2011. (Plf. Am Compl. ¶ 5).

Plaintiffs state they began discussions with CitiMortgage in 2009 about refinancing their loan again to obtain a better interest rate. They further state they also discussed placing taxes and insurance into an escrow account so CitiMortgage would collect those amounts and make payments in lieu of Plaintiffs. According to Plaintiffs, although no contracts were signed making those changes, CitiMortgage accepted the payments at the lower interest rate and began to escrow money for taxes and insurance. Plaintiffs allege they believed those changes had been made and their loan modified under the Home Affordable Modification Program (“HAMP”). Plaintiffs further allege they made the reduced payments, and CitiMortgage paid the taxes and insurance out of escrow, from April 2009 until June 2011. (Id. ¶ 6).

According to Plaintiffs, in June 2011 they were told they had not been approved for a loan modification and the only way they would qualify was if they were in default.Plaintiffs allege they were told to withhold some payments.

They state they did so beginning in July 2011 in order to qualify for a new loan under HAMP. Plaintiffs allege, “[d]espite assurances to the contrary and two years of the approved changes in practices, CitiMortgage eventually denied the new loan application anyway.” (Id. ¶ 7). In the meantime, Plaintiffs’ house burned to the ground on September 4, 2011. (Id.).

Plaintiffs allege a separate branch of CitiMortgage sent notice of default to each of them. The notices purported to notify them of a failure to pay their mortgage payments timely from as far back as October 2010. According to Plaintiffs, neither of the notices was received by them. Rather, they received telephone communications, as described above, “asking them to withhold payments to make themselves eligible for HAMP–a program they already believed had been implemented.” (Id. ¶ 8).

Plaintiffs next allege:

Moreover, in August 2011 CitiMortgage’s attorneys, Barrett Daffin Flapper Turner & Engel, LP, sent a notice to the Swanks advising them that Barrett Daffin were now attempting to collect the loan, that it had been accelerated, and that the Swanks owed, as of August 29, 2011, $297,425.70.

This notice and action were in contravention of the oral communications from CitiMortgage’s loan department. The amount was apparently based upon the original terms of the loan (7.375%/$1919/month/Swanks pay taxes and insurance), but it was not based upon the terms as modified in 2008 (4%/$1760/month/Citi pays taxes and insurance).

Accordingly, Barrett Daffin’s notice of default was itself a misrepresentation of the terms of the mortgage, and it contradicted what CitiMortgage itself had represented to the Swanks.

(Id. ¶ 9).

Plaintiffs state they received a check from their insurance company to pay for the loss of their  home  in  the  fire.  According to Plaintiffs, they tendered the check to CitiMortgage.

CitiMortgage refused to accept it, instead insisting Plaintiffs rebuild their home “despite Barrett Daffin’s extant threat to foreclose–upon the premise that the loan would be refinanced at then-lower market interest rates of less than 4%.” (Id. ¶ 10).

Plaintiffs allege they rebuilt their home and CitiMortgage paid the builder out of the insurance proceeds. However, they state refinancing of their loan was repeatedly denied, despite the statements of various representatives of CitiMortgage that the loan would be refinanced.

Plaintiffs further allege, during the rebuilding period, they were told not to make payments to CitiMortgage while the loan modification was being processed. (Id.). According to Plaintiffs, they received communications from the Collection Department at CitiMortgage suggesting HAMP refinancing or some other program was in progress.

However, at the same time, Barrett Daffin was giving notice of acceleration based on an alleged default. Plaintiffs allege there has been no default until the one “fabricated” in June 2011. (Id. ¶ 11).

Plaintiffs further allege CitiMortgage, through Barrett Daffin, initiated a lawsuit to foreclose on the Property in May 2013. They state, at the same time, a representative of CitiMortgage contacted them, encouraged them to refinance their mortgage and sent them new documents to initiate the process of refinance. (Id. ¶ 12).

Plaintiffs seek equitable relief reinstating and reforming their loan agreement and preventing CitiMortgage from foreclosing on the Property, based on the misrepresentations of CitiMortgage. (Id. ¶¶ 14-18).

Plaintiffs assert a cause of action against Barrett Daffin under the Texas Debt Collection Act based on misrepresentations in the course of collecting a debt. (Id. ¶ 19).

On October 31, 2013 CitiMortgage filed a motion to dismiss Plaintiffs’ claims against it. On December 30, 3013, the undersigned recommended the motion be granted. Barrett Daffin has now filed a motion to dismiss Plaintiffs’ claims against it. Plaintiffs have filed a responsive pleading and the matter is now ripe for review.

III.     STANDARD OF REVIEW

When evaluating a motion to dismiss for failure to state a claim under Rule 12(b)(6) the complaint must be liberally construed in favor of the plaintiff and all facts pleaded therein must be taken as true. Leatherman v. Tarrant Cnty. Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 164, 113 S. Ct. 1160, 1161 (1993); Baker v. Putnal, 75 F.3d 190, 196 (5th Cir. 1996).

Although Federal Rule of Civil Procedure 8 mandates only that a pleading contain a “short and plain statement of the claim showing that the pleader is entitled to relief,” this standard demands more than unadorned accusations, “labels and conclusions,” “a formulaic recitation of the elements of a cause of action,” or “naked assertion[s]” devoid of “further factual enhancement.” Bell Atl. v. Twombly, 550 U.S. 544, 555-57, 127 S. Ct. 1955, 1965-66 (2007). Rather, a complaint must contain sufficient factual matter, accepted as true, to “state a claim to relief that is plausible on its face.” Id., 550 U.S. at 570, 127 S. Ct. at 1974. The Supreme Court has made clear this plausibility standard is not simply a “probability requirement,” but imposes a standard higher than “a sheer possibility that a defendant has acted unlawfully.”  Ashcroft v. Iqbal, 456 U.S. 662, 678, 129 S. Ct. 1937, 1949 (2009).

The standard is properly guided by “[t]wo working principles.” Id.

First, although “a court must accept as true all of the allegations contained in a complaint,” that tenet is inapplicable to legal conclusions and “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id., 556 U.S. at 678, 129 S. Ct. at 1949-50.

Second, “[d]etermining whether a complaint states a plausible claim for relief will … be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id., 556 U.S. at 679, 129 S. Ct. at 1950.

Thus, in considering a motion to dismiss, the court must initially identify pleadings that are no more than legal conclusions not entitled to the assumption of truth, then assume the veracity of well-pleaded factual allegations and determine whether those allegations plausibly give rise to an entitlement to relief.

If not, “the complaint has alleged–but it has not ‘show[n]’–‘that the pleader is entitled to relief.’” Id., 556 U.S. at 679, 129 S. Ct. at 1950 (quoting FED. R. CIV. P. 8(a)(2)).

III.     ANALYSIS

Barrett Daffin contends Plaintiffs’ claims against it should be dismissed on the ground it is immune from suit. Barrett Daffin maintains it is not liable as it was acting as legal counsel and representing a client in undertaking the actions on which this suit rests.

Under Texas law, attorneys are generally not liable to a third party for actions taken in connection with representing a client. See FinServ Cas. Corp. v. Settlement Funding, LLC, 724 F. Supp. 2d 662, 671 (S.D. Tex. 2010) (so long as attorney is engaged in conduct as part of discharge of duties in representing client, conduct not independently actionable); Reagan Nat’l Adver. of Austin, Inc. v. Hazen, 2008 WL 2938823, at *2 (Tex. App.–Austin July 29, 2008, no pet.) (“Texas courts have long held that attorneys cannot be held civilly liable for damages to non-clients, under any theory of recovery, for actions taken in connection with representing a client”); Alpert v. Crain, Caton & James, P.C., 178 S.W.3d 398, 406 (Tex. App.–Houston [1st Dist.] 2005, pet. denied) (attorneys not generally liable to non-client third party for statements made or actions taken in course of representing client); Toles v. Toles, 113 S.W.3d 899, 910 (Tex. App.–Dallas 2003, no pet.) (attorneys generally not liable to opposing party for conduct in representing client); Mendoza v. Fleming, 41 S.W.3d 781, 787 (Tex. App.–Corpus Christi 2001, no pet.) (“A lawyer is generally authorized to practice law to perform his duties as a lawyer without making himself liable for damages”); Renfroe v. Jones & Assoc., 947 S.W.2d 285, 288 (Tex. App.–Fort Worth 1997, writ denied) (under Texas law, attorneys cannot be held liable to non-client for wrongful litigation conduct).

The purpose of this grant of qualified immunity is to protect the social interest in the duty of attorneys to provide their clients zealous legal representation, Alpert, 178 S.W.3d at 405; Chapman Children’s Trust v. Porter & Hedges, L.L.P., 32 S.W.3d 429, 441 (Tex. App.–Houston [14th Dist.] 2000, pet. denied); Renfroe, 947 S.W.2d at 288.

As set forth above, Plaintiffs’ sole claim against Barrett Daffin is under the Texas Debt Collection Act (“TDCA”) for making misrepresentations in the course of collecting a debt.

Specifically, Plaintiffs maintain Barrett Daffin incorrectly represented in the acceleration letter of August 2011 that they were in default of their mortgage obligation and also misrepresented the amount of the default.

Plaintiffs also allege Barrett Daffin misrepresented they were in default in filing an application for foreclosure in Texas state court. (Plf. Am Compl. ¶ 19).

However, Barrett Daffin does not cite, and the undersigned is not aware of, any cases in which a claim under the TDCA was dismissed on the ground that the party sued was a law firm entitled to immunity.

See McDaniel v. JPMorgan Chase Bank, N.A., 2012 WL 6114944, at *6 (E.D. Tex. Dec. 10, 2012) (noting court was unable to unearth any cases in which a claim under the TDCA was dismissed on ground of attorney immunity).

Rather, at least three federal courts have concluded attorneys can be held liable under the TDCA if the evidence shows that they satisfy the definition of “debt collectors.”

See Hunt v. BAC Home Loans Servicing, LP, 2012 WL 219330, at *9 (S.D. Tex. Jan.24, 2012) (denying dismissal of attorney defendants based on litigation immunity for claims brought under TDCA);

Eads v. Wolpoff & Abramson, LP, 538 F. Supp. 2d 981, 988 n.1 (W.D. Tex. 2008) (rejecting application of litigation immunity to claim under TDCA);

Gibson v. Grupo de Ariel, LLC, 2006 WL 42369, at *4 (N.D. Tex. Jan. 9, 2006) (declining to dismiss claim under TDCA against law firm, noting definition of third-party debt collector includes attorneys who collect debt on behalf of client if attorney has non-attorney employees regularly engaged in collection activities).

As Plaintiffs point out, Barrett Daffin specifically identified itself as a debt collector in the August 2011 acceleration letter. (Plf. Resp. Ex. A).

Whether a defendant is a debt collector is a fact-based determination. See Catherman v. First State Bank of Smithville, 796 S.W.2d 299, 303 (Tex. App.–Austin 1990, no pet.) (finding question of status as debt collector to be evidentiary issue, and concluding evidence was insufficient to find attorneys to be “debt collectors” as matter of law).

Because Barrett Daffin has failed to point to authority which establishes attorneys are exempt from liability under the TDCA as a matter of law, and because Barrett Daffin specifically identified itself as a debt collector, the undersigned declines to find the motion to dismiss should be granted on the basis of attorney immunity.

Barrett Daffin also moves to dismiss on the ground that Plaintiffs have not stated a claim under the TDCA.

In pertinent part, the TDCA prohibits a debt collector from “misrepresenting the character, extent, or amount of a consumer debt, or misrepresenting the consumer debt’s status in a judicial or governmental proceeding.” TEX. FIN. CODE § 392.304(a)(8).

To violate the TDCA using a misrepresentation, “the debt collector must have made an affirmative statement that was false or misleading.“ Verdin v. Federal Nat’l Mortg. Ass’n, F. App’x , 2013 WL 4126785, at *3 (5th Cir. Aug. 15, 2013) (internal quotation omitted).

Plaintiffs allege Barrett Daffin misrepresented the extent or amount of their debt in the acceleration letter of August 2011. Specifically, they contend the amount of the mortgage debt owed is incorrect, as well as the assertion that they were in default.

As set forth above, Plaintiffs’ conclusion that their debt was misrepresented is based on their contention that the terms of their mortgage obligation were orally modified by CitiMortgage, and the debt amount asserted in the acceleration letter was incorrectly based on the written agreement, rather than the oral modification. ((Plf. Am Compl. ¶ 9).

However, as Barrett Daffin points out, in a recommendation issued December 30, 2013, the undersigned rejected Plaintiffs’ claim that their mortgage obligation had been orally modified by CitiMortgage.

The basis of the rejection was twofold.

First, the undersigned concluded Plaintiffs’ contention of an oral modification subsequent to a written agreement was not a sufficient basis for equitable reformation under Texas law. See Comiskey v. FH Partners, LLC, 373 S.W.3d 620, 633 (Tex. App. Houston [14th Dist.] 2012, pet. denied) (“court is without power to make a contract that the parties did not make; an actual agreement reached prior to the drafting of the instrument involved is a prerequisite to an action for reformation”); See also Sw. Sav. Ass’n v. Dunagan, 392 S.W.2d 761, 768 (Tex. Civ. App.–Dallas 1965, writ ref’d n.r.e.) (if instrument expresses intention of parties at time agreement is reduced to writing there is no occasion to reform it).

Second, the undersigned found Plaintiffs’ claim of a binding oral modification fails because it is barred by the statute of frauds. See Castillo v. Ocwen Loan Servicing, L.L.C., F. App’x , 2013 WL 4840494, at *3 (5th Cir. Sep. 12, 2013) (material modification to loan agreement that exceeds $50,000 is subject to statute of frauds; putative oral contract to modify mortgage loan reducing payments barred by statute of frauds).

The undersigned also rejected Plaintiffs’ contention that their partial performance or claim of promissory estoppel were sufficient to provide an exception to the statute of frauds. See Castillo, 2013 WL 4840494, at *3 (district court properly concluded payments were not unequivocally referable to terms of oral agreement, noting payments could have been made to satisfy original mortgage contract); See Miller v. BAC Home Loans Servicing, L.P., 726 F.3d 717, 726 (5th Cir. 2013) (plaintiffs’ failure to allege mortgage holder promised to sign document that comports with statute of frauds, which would have promises to modify mortgage, was fatal to reliance on promissory estoppel); Martins v. BAC Home Loans Servicing, L.P., 722 F.3d 249, 257 (5th Cir. 2013) (promissory estoppel does not overcome statute of frauds, where plaintiff alleges only oral agreement, not promise on part of mortgage holder or its agents to sign agreement validating oral agreement that would satisfy statute of frauds); Hern Family Ltd. P’ship v. Compass Bank, 863 F. Supp. 2d 613, 625 (S.D. Tex. 2012) (rejecting partial performance exception to statute of frauds where plaintiffs’ actions could have been intended to pay already existing debt owed defendant).

Accordingly, as Plaintiffs’ claim of a misrepresentation of the amount of their mortgage debt, and default thereof, are rebutted by the written mortgage documents, they have not alleged facts which show Barrett Daffin violated the TDCA in the August 2011 acceleration letter.

Plaintiffs also contend Barrett Daffin violated the TDCA by filing a foreclosure action in Texas state court. They maintain in so doing Barrett Daffin misrepresented that they were in default. To the degree this claim is based on Plaintiffs’ contentions regarding the oral modification of their mortgage, it fails for the reasons set forth above and in the undersigned’s December 2013 recommendation.

Moreover, as set forth above, Plaintiffs themselves admit they ceased paying even the reduced payments in approximately June 2011.

Although they maintain their default was induced, their admission that they were in default forecloses their claim that Barrett Daffin violated the TDCA by representing they were in default. See Miller, 726 F.3d at 723 (TDCA claim based on alleged misrepresentation of debt fails where plaintiffs were aware they had mortgage debt and had defaulted). Accordingly, Barrett Daffin’s motion to dismiss should be granted.

IV.    RECOMMENDATION

The undersigned RECOMMENDS that District Court GRANT Defendant Barrett Daffin Flapper Turner & Engel, LP’s Rule 12(b)(6) Motion to Dismiss Plaintiffs’ Amended Complaint (Clerk’s Dkt. #51). Plaintiffs’ claims against Defendant Barrett Daffin Flapper Turner & Engel, LP should be dismissed with prejudice.

V.    OBJECTIONS

The parties may file objections to this Report and Recommendation. A party filing objections must specifically identify those findings or recommendations to which objections are being made. The District Court need not consider frivolous, conclusive, or general objections. See Battle v. United States Parole Comm’n, 834 F.2d 419, 421 (5th Cir. 1987).

A party’s failure to file written objections to the proposed findings and recommendations contained in this Report within fourteen (14) days after the party is served with a copy of the Report shall bar that party from de novo review by the District Court of the proposed findings and recommendations in the Report and, except upon grounds of plain error, shall bar the party from appellate review of unobjected-to proposed factual findings and legal conclusions accepted by the District Court. See 28 U.S.C. § 636(b)(1)(C); Thomas v. Arn, 474 U.S. 140, 150-53, 106 S. Ct. 466, 472-74 (1985); Douglass v. United Servs. Auto. Ass’n, 79 F.3d 1415, 1428-29 (5th Cir. 1996) (en banc).

To the extent that a party has not been served by the Clerk with this Report and Recommendation electronically, pursuant to the CM/ECF procedures of this District, the Clerk is ORDERED to mail such party a copy of this Report and Recommendation by certified mail, return receipt requested.

SIGNED on January 27, 2014.

MARK LANE, United States Magistrate Judge.

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Laws In Texas is a blog about the Financial Crisis and how the banks and government are colluding against the citizens and homeowners of the State of Texas and relying on a system of #FakeDocs and post-crisis legal precedents, specially created by the Court of Appeals for the Fifth Circuit to foreclose on homeowners around this great State. We are not lawyers. We do not offer legal advice. We are citizens of the State of Texas who have spent a decade in the court system in Texas and have been party to during this period to the good, the bad and the very ugly.

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