Tejero v. Portfolio Recovery Associates, LLC et al

Filing 52

ORDER GRANTING 42 Motion for Sanctions and Attorneys' Fees; DENYING 43 Motion for Attorney Fees and Costs. Signed by Judge Sam Sparks. (td)

I

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

18 4PR

2

P

2

CLER.
UATS

'ti..1

LUIS TEJERO,

Plaintiff,
CAUSE NO.:
AU-16-CV-767-SS

-vs-

PORTFOLIO RECOVERY ASSOCIATES
LLC and WESTERN SURETY COMPANY,
Defendants,

[I] 1 I] au

BE IT REMEMBERED on this day the Court reviewed the file in the above-styled cause,
and specifically Defendants Portfolio Recovery Associates, LLC (PRA) and Western Surety

Company (Western)'s Motion for Sanctions and Attorneys' Fees [#42], Plaintiff Luis Tejero's
Response [#45] in opposition, Defendants' Reply [#50] thereto, Plaintiff's Motion for Attorney
Fees and Costs [#43], and Defendant's Response [#44] in opposition. Having reviewed the
documents, the governing law, the arguments of counsel, and the file as a whole, the Court now

enters the following opinion and orders.

Background
I.

Factual History
As the Court previously recounted, this lawsuit concerns PRA's efforts to collect

Plaintiff's outstanding credit card debt (the Debt) after Plaintiff defaulted. Compi. [#1] ¶J 13-22.
On January 29, 2016, PRA received a faxed letter listing Plaintiff as the sender and
stating the following:

pay this debt. My
monthly expenses exceed my monthly income; as such there is no reason for you to
I am writing to you regarding the account referenced above. I refuse to

1

/

continue to contacting me, and the amount you are reporting is not accurate either. If my
circumstances should change I will be in touch.
Id. [#1-1] Ex. B (Debt Letter). Sometime during March 2016, PRA informed a consumer

reporting agency of the Debt. Pl.'s Mot. Sunmi. J. [#18] at 3. PRA reported a balance of
$2,211.00 and did not indicate the Debt was disputed. Id.

II.

Procedural History
On June 24, 2016, Plaintiff filed a complaint in this Court alleging violations of the Fair

Debt Collection Practices Act (FDCPA), 15 U.S.C.

Collection Act (TDCA), Texas Finance Code

§

§

1692l692p, and the Texas Debt

392.001-392.404, against PRA and Western.

Compi. [#1]. Plaintiff claimed PRA violated the FDCPA and TDCA by failing to report the Debt

was disputed. Compl. [#1] ¶J 12-38.' Western is the surety company for the bond PRA has on
file with the Texas Secretary of State. Id. ¶ 11.

Plaintiff filed a motion for summary judgment, which the Court denied as fact issues
remained. Order of Apr. 6, 2017 [#27]. Subsequently, Defendants filed a motion for summary

judgment, which the Court granted in part and denied in part. Order of July 27, 2017 [#36]. In
particular, the Court found Plaintiff had no standing for his TDCA claim because Plaintiff
offered no evidence he suffered actual damages, a necessary condition to establish a TDCA
claim. Id.at 7-9. On the other hand, the Court denied summary judgment on Plaintiffs FDCA

claim because a fact issue existed concerning whether Plaintiff actually disputed the Debt via the

Debt Letter. Id. at

10li. Likewise, the Court denied Plaintiffs motion for reconsideration of his

summary judgment motion. Id. at 9-11.

The FDCPA prohibits "any false, deceptive, or misleading representation or means in connection with the
collection of any debt," which includes a false representation of "the character amount or legal status of any
debt ...... 15 U.S.C. § 1692e.
1

2

Trial was set for May 2018, but the parties filed a joint notice of settlement early in

February 2018. Settlement Notice [#39]. The Court then ordered both parties to submit motions
for attorneys' fees, which are ripe for consideration.

Analysis
I.

Legal Standards

A.

Attorneys' Fees Under 28 U.S.C.

§ 1927

28 U.S.C. § 1927 provides that "[a]ny attorney or other person admitted to conduct cases

in any court of the United States or any Territory thereof who so multiplies the proceedings in
any case unreasonably and vexatiously may be required by the court to satisfy personally the

excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct." To
find a party multiplied proceedings "unreasonably" and "vexatiously," there must "be evidence

of bad faith, improper motive, or reckless disregard of the duty owed to the court." Procter &
Gamble Co.

v.

Amway Corp., 280 F.3d 519, 525 (5th Cir. 2002). Section 1927 authorizes

"shifting fees that are associated with the persistent prosecution of a meritless claim." Id.
(quotation omitted). "To shift the entire cost of defense," the party requesting sanctions "must

prove, by clear and convincing evidence, that every facet of the litigation was patently

meritless..

.

and counsel must have lacked a reason to file the suit and must wrongfully have

persisted in its prosecution through discovery, pre-trial motions, and trial

.

.

.

." Id. at 526

(emphasis in original) (internal citations omitted).
B.

Attorneys' Fees Under 15 U.S.C. § 1692k(a)(3)
A party prevailing on an FDCPA claim is entitled to "the costs of the action, together

with any reasonable attorney's fee

. . .

." 15 U.S.C. § 1692k(a)(3); see also Hester v. Graham,

Bright & Smith, P.C., 289 F. App'x 35, 44 (5th Cir. 2008). However, if the court finds an

3

FDCPA action "was brought in bad faith and for the purpose of harassment, the court may award
to the defendant attorney's fees reasonable in relation to the work expended and costs." Id. The

terms "bad faith" and "harassment" indicate "more than simply bad judgment or negligence" and
imply "the conscious doing of a wrong because of a dishonest purpose or moral obliquity."
Rodriguez

v.

IC Sys., No. EP-16-CV-00186-DCG, 2017 WL 2105679, at *2 (W.D. Tex. May 12,

2017) (first citing Cunningham

v.

Credit Mgmt., L.P., No. 3:09CV-1497G, 2010 WL

3791049, at *2 (N.D. Tex. Sept. 27, 2010); and then citing Grant

v.

Barro, No.

07-194JJB

DLD, 2007 WL 3244986, at *1 (M.D. La. Nov. 1, 2007)).
B.

Sanctions under Federal Rule of Civil Procedure 11
Rule

11

permits the Court to impose an appropriate sanction if a pleading, motion, or

other paper is presented for any improper purpose, such as to harass or needlessly increase the
cost of litigation, or

if the claims or arguments therein are frivolous. See

"[T]he central purpose of Rule

thus.

. .

11

FED.

R.

Civ. P.

11(b).

is to deter baseless filings in district court and

streamline the administration and procedure of federal court." Cooter & Gel! v.

Hartmarx Corp., 496 U.S. 384, 393 (1990). The court must carefully choose sanctions that
further the purpose of the Rule and should impose the least severe sanctions that would

adequately deter its violation. See Thomas

v.

Capital Security Servs., Inc., 836 F.2d 866, 875-76

(5th Cir. 1988). When warranted, sanctions may include an order directing payment to an

opposing party of some or all of the reasonable attorneys' fees or costs incurred as a result of the
violation. See
1191

FED.

R.

11(c)(2); Merriman v. Security Ins. Co.

CIV. P.

of Hartford,

100 F.3d 1187,

(5thCir. 1996).
The Court also possesses inherent power to "protect the efficient and orderly

administration of justice

.

.

.

[and] to command respect for the court's orders, judgments,

ru

procedures, and authority." In re Stone, 986 F.2d 898, 902 (5th Cir. 1993). Included in this
inherent power is "the power to levy sanctions in response to abusive litigation practices." See
Mendoza

II.

v.

Lynaugh, 898 F.2d 191, 195-97 (5th Cir. 1993).

Application
As directed by this Court, the parties filed cross-motions for attorneys' fees. Arguing he

is a prevailing party, Plaintiff contends he is entitled to the payment of costs and attorneys' fees

under 15 U.S.C.

§

1

692k(a)(3). By contrast, Defendants claim sanctions are appropriate against

Plaintiff's counsel under both 28 U.S.C.

§

1927 and 15 U.S.C.

§

1692k(a)(3) because Plaintiff's

counsel abused the FDCPA, brought this lawsuit in bad faith, failed to communicate Defendants'

offer of settlement to Plaintiff, and needlessly continued this case.

The Court declines to award attorneys' fees under 28 U.S.C.

§

finds the actions of Plaintiff's counsel merit sanctions under 15 U.S.C.
Rule of Civil Procedure

11

1927.2

§

Instead, the Court

1692k(a)(3) and Federal

and therefore awards Defendants reasonable attorneys' fees and

costs. The Court first reviews why the conduct of Plaintiff's counsel warrants sanctions before

examining a reasonable fee award for Defendants.
A.

Conduct of Plaintiffs Counsel
The Court sanctions Plaintiff's counsel for three overarching reasons. First, Plaintiff's

counsel violated the scheduling order entered in this case. The scheduling order required "[t]he

parties asserting claims for relief [to] submit a written offer of settlement to opposing parties by

October 5, 2016, and each opposing party [to] respond, in writing, by October 19, 2016." Order

of Sept. 28, 2016 [#13] ¶ 2. The scheduling order also mandated the parties "retain the written
offers of settlement and responses as the Court will use these in assessing attorney's fees at the
The Court refuses to award attorneys' fees under 28 U.S.C. § 1927 in part because the Plaintiff in this
case did not "persist[] in. . . prosecution through discovery, pre-trial motions, and trial." See Procter & Gamble Co.,
280 F.3d at 526.
2

conclusion of trial." Id. On October 4, 2016, Defendants offered Plaintiff $1,101.00 plus
reasonable attorneys' fees and taxable costs to conclude this suit.

See

Defs.' Motion Sanctions

[#42-1] Ex. A (Offer).
It is undisputed Plaintiff failed to submit a written offer of settlement and failed to

respond in writing to Defendants' settlement offer.

See id.

[#42]

¶11

1,3; Resp. Defs.' Mot.

Sanctions [#45] (failing to offer any evidence or statement Plaintiff's counsel submitted an offer

of settlement or responded to Defendants' offer); Pl.'s Mot. Att'ys' Fees [#43] (same). As a
result, Plaintiff violated this Court's scheduling order. On this ground alone, the Court finds the

conduct of Plaintiff's counsel merits sanctions.
Second, Plaintiff's counsel continued to litigate this case despite a settlement offer from

Defendants that Plaintiff indicated would make him whole. Plaintiff's deposition, taken March
14, 2017, reveals Plaintiff never rejected or responded to Defendants' settlement offer

of

$1,110.00 plus attorneys' fees and costs. Defs.' Mot. Att'ys' Fees [#42-2] Ex. B (Pl.'s Dep.) at

51:19-52:15. Rather, Plaintiff indicated in his deposition a $1,000 payment would make him
whole and conclude this case. Id. at 52:18-54:1. Despite evidence Plaintiff suffered no actual
damages and numerous warnings from the Court that this case only concerned a technical

violation, this lawsuit

continued.3

Even after Plaintiff stated under oath $1,000 would satisfy his

harm, Plaintiff's counsel did not settle this lawsuit. Instead, Plaintiff's counsel filed a motion for

summary judgment, which this Court denied, and a motion for reconsideration of that denial. See

Pl.'s Mot. Summ. J. [#18]; Mot. Recons. [#32].
Third, Plaintiff's counsel brought this lawsuit in bad faith and for harassment purposes.

As the Court previously remarked, this case is nearly identical to several other FDCPA cases
Where a plaintiff suffered no actual damages and only alleges a technical violation of the FDCPAas is
the case herethe plaintiff can recover a maximum of $1,000 plus costs and attorneys' fees. See 15 U.S.C. §
1 692k(a).

pending in the Western District of Texas. Plaintiff's counsel represents a series of individual
debtor plaintiffs who all faxed a letter with the exact same language to debt collectors they then
sued for failing to acknowledge the debt was disputed. Compare Debt Letter, and Amended

Complaint {#53-l] Ex. F (Ozmun's Letter), Ozmun
No.

1

:16-cv-940,

v.

Portfolio Recovery Associates LLC et al.,

with Complaint [#1-1] Ex. A (Palomo's Letter), Palomo

Associates, LLC et al., No.

l:16-cv-628,

Midland Funding, LLCetal.,No.

v.

Portfolio Recovery

and Complaint [#1-1] Ex. E (Jones's Letter), Jones

v.

1:16-cv-592.

Plaintiff's deposition reveals Plaintiff's counsel wrote the Debt Letter and Plaintiff
merely reviewed it. Pl.'s Dep. at

22:23-23:23.

As the two lead attorneys representing Plaintiff

assert they have "substantial experience in FDCPA litigation," there is no legitimate reason why

Plaintiff's experienced counsel should have repeatedly failed to draft a letter clearly
communicating the debt was disputed. See P1.'s Mot Att'ys' Fees
¶

6,

[#43-1]

Ex. B (Wood Decl.)

Ex. C (Chatman Deci.) ¶ 6.

Instead, the evidence shows Plaintiff's counsel is involved in a scheme to force
settlements from debt collectors by abusing the FDCPA. Plaintiff's counsel represents
unsophisticated debtors who cannot afford to pay their credit card debt and sends the same

ambiguously worded letter on each debtor's behalf to the respective debt collector. Viewing the
letter as it was intended by Plaintiff's counsel, the debt collector understands the letter to say the

debtor cannot afford to pay the debt. The debt collector then fails to mark the debt as disputed
and Plaintiff's counsel files suit for violation of the FDCPA. Facing the high costs of discovery
and trial, the debt collector settles the lawsuit, paying the debtor's attorneys' fees.

The actions of Plaintiff's counsel subvert Congress's intentions in enacting the FDCPA.
Congress articulated three purposes for the FDCPA: "[(1)] to eliminate abusive debt collection

7

practices by debt collectors, [(2)] to insure that those debt collectors who refrain from using
abusive debt collection practices are not competitively disadvantaged, and [(3)] to promote

consistent State action to protect consumers against debt collection abuses." 15 U.S.C.

§

1692(e).

Rather than merely holding debt collectors accountable for abusive practices, Plaintiff's counsel
deliberately exposes debt collectors to liability, inhibiting debt collection and increasing its costs.
Thus, the Court finds Plaintiffs counsel brought this lawsuit in bad faith.
Because Plaintiff's counsel violated the scheduling order in this case, continued to litigate

this case despite a settlement offer from Defendants that Plaintiff indicated would make him
whole, and brought this lawsuit in bad faith, the Court sanctions Plaintiff's counsel by awarding
Defendants reasonable attorneys' fees.
B.

Reasonable Attorneys' Fees
Defendants request $13,377.76 in attorneys' fees and $572.62 in costs. The Court finds

Defendants' requested attorneys' fees and costs reasonable and awards Defendants a total of
$13,950.38.
The Fifth Circuit uses a two-step process to calculate attorney's fees. Heidtman

of El Paso,

v. Cnty.

171 F.3d 1038, 1043 (5th Cir. 1999). First, a court calculates a "lodestar" figure "by

multiplying the number of hours reasonably expended by an appropriate hourly rate in the
community" for "similar services by lawyers of reasonably comparable skill, experience and

reputation." Id.; Blum

v.

Stenson, 465 U.S. 886, 895-96 n.h

(1984). In so doing, the court

considers whether the attorneys demonstrated proper billing judgment by "writing off

unproductive, excessive, or redundant hours." Walker
99 F.3d 761, 769 (5th Cir. 1996).

v.

US. Dep 't of Hous. & Urban Dev.,

After calculating the lodestar, the court may increase or decrease it based on the
following factors: (1) the time and labor required by the litigation; (2) the novelty and difficulty

of the issues; (3) the skill required to perform the legal services properly; (4) the preclusion of
other employment by the attorney; (5) the customary fee; (6) whether the fee is fixed or

contingent; (7) the time limitations imposed by the client or circumstances; (8) the amount

involved and results obtained; (9) the experience, reputation, and ability of the attorney; (10) the
undesirability of the case; (11) the nature and length of the professional relationship with the
client; and (12) the award in similar cases. Heidtman, 171 F.3d at 1043 n.5 (citing Johnson

v.

Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir. 1974), abrogated on other

grounds by Blanchard v. Bergeron, 489 U.S. 87 (1989)).
Here, Defendants provide the time sheets of their attorneys, demonstrating they expended

ninety-five hours defending this case. See Defs.' Mot. Att'ys' Fees [#42-2] Ex. D (Time Sheets).
The Court finds this number reasonable as Defendants filed an answer, completed discovery,
filed a motion for summary judgment, and defended against an opposing motion for summary

judgment as well as a motion for reconsideration. Furthermore, Defendants show the rates they
charged are appropriate for the Austin, Texas community. For example, Defendants charged an
hourly rate of $225 for the work of a senior partner, $200 for that of a junior partner, and $175
for an associate. See Defs.' Mot. Att'ys' Fees [#42-2] Ex. C (Malone Deci.). Such rates are in

line with, if not below, the rates of the Austin legal market and are in line with what this Court
has previously awarded.4 See Ozmun

v.

Portfolio Recovery Assocs., LLC, No. A-16-CA-940-S5,

2018 WL 912286, at *3 (W.D. Tex. Feb. 15, 2018); Am. Acad.

of Implant Dentistry v. Parker,

This Court frequently looks to the State Bar of Texas Hourly Rate Report as a reference on reasonable
hourly rates in the relevant legal market. See State Bar of Texas Department of Research and Analysis, 2015 Hourly
Fact Sheet (2015), https://www.texasbar.com/AM/Template.cfm?Section=Demographic and Economic Trends&
Template=/CM/ContentDisplay.cfm&ContentID=34 182.

No. AU-14-CA-00191-SS, 2018 WL 401818, at *6_7 (W.D. Tex. Jan. 11,2018). Thus, the Court
finds the request of $13,377.76 in attorneys' fees reasonable.

Plaintiff objects to Defendants' requested attorneys' fees, arguing Defendants' fees
should be reduced because Defendants improperly seek compensation for clerical work. Resp.

Defs.'s Mot. Att'ys' Fees [#45] at 11-14. For example, Plaintiff complains drafting motions,
reviewing filings, preparing exhibits, and preparing email responses to the Court are clerical
tasks for which Defendants cannot be compensated. Id. at 13-14. But the activities to which

Plaintiff objects are legal in nature, not clerical. Cf Tow v.

Speer,

No. CV H-i 1-3700, 2015 WL

12765414, at *9 (S.D. Tex. Aug. 17, 2015) (identifying scanning, creating notebooks, creating
spreadsheets, and preparing mailings as clerical tasks). The Court therefore declines to reduce

Defendants' award of attorneys' fees.
Finally, the Court also finds Defendants are entitled the cost of obtaining the transcript of

Plaintiffs deposition and the photocopies necessary for use in this case.

See

28 U.S.C.

§

1920

(authorizing a court to tax as costs fees for printed transcripts and for making copies of
materials). The Court thus awards Defendants $572.62 in costs.

Conclusion
The Court sanctions Plaintiffs counsel for violating this Court's scheduling order,

continuing to litigate this case despite a settlement offer from Defendants that Plaintiff indicated
would make him whole, and bringing this case in bad faith. The Court therefore awards
Defendants $13,950.38$13,377.76 in attorneys' fees and $572.62 in costs.

Accordingly,
IT IS THEREOFRE ORDERED that Plaintiff Luis Tejero's Motion for Attorney

Fees and Costs [#43] is DENIED;

10

IT IS FURTHER ORDERED that Defendants Portfolio Recovery Associates,

LLC and Western Surety Company's Motion for Sanctions and Attorneys' Fees [#42] is

GRANTED;
IT IS FURTHER ORDERED that Plaintiffs counsel in this case SHALL PAY

THIRTEEN THOUSAND, NINE HUNDRED FIFTY AND 38/100 DOLLARS
($13,950.38) to Defendants Portfolio Recovery Associates, LLC and Western Surety

Company for attorneys' fees and costs incurred as a result of this litigation; and
IT IS FINALLY ORDERED that,

if there are no pending issues in this case, the

parties SHALL FILE a final notice of settlement with a proposed order dismissing this
case. If any issues remain, the parties SHALL FILE a notice so advising the Court.

SIGNED this the

c

day of

a4
Mh

2018.

SAM SPARKS
SENIOR UNITED STATES DISTRICT JUDGE

11