Ozmun v. Portfolio Recovery Associates LLC et al

Filing 177

ORDER DISMISSING AS MOOT Plaintiff's 173 Motion for Leave to File Supplemental Briefing. ORDER DENYING Plaintiff's 152 Motion for Attorneys' Fees. ORDER GRANTING Defendants' 151 Motion for Attorneys' Fees. ORDER DENYING Defendants' 164 Motion for Contempt. Signed by Judge Sam Sparks. (lt)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF
LUI9 nd?
AUSTIN DIVISION

9

JOSPEH OZMUN,
Plaintiff,
-vs-

CAUSE NO.:
AU-16-CV-OO94-SS

PORTFOLIO RECOVERY ASSOCIATES,
LLC; RAUSCH, STURM, ISRAEL,
ENERSON & HORNIK, LLC; WESTERN
SURETY COMPANY; and TRAVELERS
CASUALTY AND SURETY COMPANY
OF AMERICA,
Defendants.

iS1aflI
BE IT REMEMBERED on this day the Court considered Plaintiff Joseph Ozmun

("Ozmun")'s Motion for Attorneys' Fees [#152] and Defendants Portfolio Recovery Associates,
LLC ("PRA") and Rausch, Sturm, Israel, Enerson & Hornik LLC ("RSIEH") (collectively

"Defendants")'s Response [#156]; Defendants' Motion for Attorneys' Fees [#151], Ozmun's
Responses [#154 and #156], and Defendants' Replies [#155 and #162]; Defendants' Motion for

Contempt [#164], Ozmun's Response [#167], and Defendants' Reply [#168]; and Ozmun's
Motion for Leave to File Supplemental Briefing [#173] and Defendants' Response [#174]. Having
considered these pleadings, the relevant law, and the file as a whole, the Court now enters the
following opinion and orders.

Background
This lawsuit involves Defendants' attempts to collect on a $2,065.21 credit-card debt owed
by Ozmun.

See

Am. Comp!. [#53] ¶ 22. After Defendants filed suit in Travis County Court to

collect the outstanding debt, Ozmun made a payment of $57.00 toward the debt, bringing the total
balance owed to $2,008.21. Id.

¶IJ

23-24. Ozmun contends Defendants then violated the Fair Debt
1

Collection Practices Act (FDCPA) and the Texas Debt Collections Act (TDCA) when they
(1) sought a default judgment against him for the full $2,065.21' and (2) communicated the debt

to a credit reporting agency without noting Ozmun disputed the amount of the debt. Id.
It is therefore fair to say that this

lawsuitwhich includes

¶IJ

65-67.

174 docket entries and which has

required the attention of a United States District Court for more than two

yearsis rooted in a

dispute over fifty-seven dollars.
The incongruity between the amount at issue and the effort expended in litigation is not the
only problematic aspect of this case. More concerning are the actions of Ozmun's attorneys,

particularly Celetha Chatman and Michael Wood, who have repeatedly violated scheduling orders2
and the Texas Disciplinary Rules of Professional

Conduct.3

Perhaps most concerning of all, this

entire suit appears to have been manufactured by Chatman and Wood to collect the attorneys' fees
they contend must be given to any plaintiff who brings a "successful action" under the FDCPA.
See

Pl.'s

Mot. Att'ys' Fees [#152] at 5. Indeed, Plaintiff Ozmun's involvement in his own lawsuit

is strikingly limited: he has consistently been unable to describe the nature of his injuries, and the

complaint in this case was filed by Chatman and Wood before Ozmun was even aware they

'Notably, the state-court default judgment about which Plaintiff complains was never entered. See RSIEH's
Mot. Summ. J. [#36-2] Ex. B (Ozmun Dep.) at 62:8-10 ("Q. And a judgment was not entered against you [in state
court], correct? A. Correct.").
In particular, Chatman and Wood requested leave to amend their complaint more than two months after the
imposed deadline, Mot. Am. Compl. [#46]; filed a cross-motion for summary judgment two weeks after the deadline
for dispositive motions, Order of July 24, 2017 [#79] at 4, 6; and served designations on Defendants nearly two months
after they were due, Order of Feb. 15, 2018 [#91] at 2, 7.
2

These violations include failing to consult with their client regarding a potential settlement agreement as
required by Texas Disciplinary Rule of Professional Conduct 1 .02(a)(2), directly communicating with an opposing
party despite knowing the party was represented by counsel in violation of Rule 4.02(a), and assisting with the
unauthorized practice of law in violation of Rule 5.05(b). These actions also violated Local Rule AT-7(a), which
requires attorneys admitted to practice in the Western District to "comply with the standards of professional conduct
set out in the Texas Disciplinary Rules of Professional Conduct."

2

represented him. See RSIEH's Mot. Summ. J. [#36-2] Ex. B (Ozmun Dep.) at 69:14-72:1; see also
Id.

at 8:23-25, 150:6-10.
Less than a month after this case was filed, details of a proposed settlement were exchanged

between Defendants and Chatman and Wood. Although the proposed settlement is not in the
record, it appears Plaintiff offered to settle this case in exchange for $6,500. Def. PRA's Resp.

Mot. Enforce Settlement Agreement [#22] at 2. But after Defendants requested the settlement

agreement include language releasing them from liability on all of Plaintiff's claims, Plaintiff's

counselwithout consulting with their clientrefused to agree.

See

Ozmun Dep. at 150:25-

151:8, 170:16-171:1 (neither Chatman nor Wood communicated Defendants' offer of settlement

to Ozmun);

see also

PRA's Resp. Mot. Enforce Settlement Agreement [#22-1] Ex. A at 2

("Plaintiff's counsel refused the agreement because they would not sign a 'global release."). Then,
despite this refusal, Plaintiff's counsel moved to enforce the settlement agreement they had

previously refused.

See

Mot. Enforce Settlement Agreement [#13]. The Court denied this motion

after finding that no agreement had been reached and noting that Plaintiff's claim to the contrary

relied on a

"he said/she said' pleading"

and an email that simply showed Plaintiff had

memorialized its best and final offer of settlement. Order of Sept. 27, 2016 [#25] at

1.

The Court

concluded by stating it would "ultimately determine costs and perhaps attorney's fees and has a
long memory." Id.

As the case dragged on, evidence indicating it had been brought for questionable reasons

accumulated. At his deposition on November 21, 2016, Ozmun acknowledged that, although
Chatman and Wood had filed a complaint on his behalf nearly four months before, he had never

met either Chatman or Wood. See Ozmun Dep. at 8:23-25 ("Q. And how about Ms. Chatman and
Mr. Wood, how did they become your lawyers? A. I don't know that. I've not met them."). In fact,

ci

Ozmun acknowledged he had not even seen the complaint filed on his behalf until "a couple days"

before his deposition.

See

id.

at 55:23-56:4

[the complaint] before? A. I don't think so.

("Q.

Q.

Before the past couple days, had you ever seen

So you didn't review it before it was filed?

A. No, sir."). Ozmun also admitted that although his complaint alleged he had suffered a

reputational injury due to his lowered credit score, he had not actually seen his credit report and
therefore had no way of knowing whether PRA's actions had lowered his credit score.
Dep. at 119:6-18

("Q.

complaining about?.
("Q.

Q.

. .

See

Ozmun

Do you know when it was you obtained the credit report that you are
A. This is the first time I've seen [the report]."); see

also

id.

at 70:25-71:5

[W]hat was your credit score at the time of the erroneous report? A. I don't remember.

What should it have been? A. I don't know."). He further explained that although his complaint

alleged he sent a letter to PRA disputing his debt, he could not remember who drafted or sent the
letter, and he conceded that it had been his attorney's idea to send the letter in the first place. See
id.

at 120:10-19.

31 letter? A. My
Q.

("Q.

So do we now know whose idea it was to send the [dispute] letter, the May

attorney's.

Q.

OK. And did your lawyer draft that letter? A. Not necessarily.

Did your lawyer help you draft it? A. Or gave me guidelines.

directly? A.

I

Q.

And had you send it to PRA

just don't remember."). Finally, Ozmun stated that he believed the extent of

Defendants' liability was $157.00. See

Id.

at 139:21-24

("Q.

[Y]ou said $57 would be about right

for [RSIEHJ? A. To the extent I understand my suit, yes, sir.");

see also

id.

at 141:8-18

("Q.

And

what you want from {PRA] is $100 for this alleged violation, right? A. For each violation, yes, sir.
Q.

Are you aware of them committing more than one?.

. .

A. No, not myself, no sir.").

Furthermore, in May of 2017, PRA provided the Court with evidence that it had received
several misleading but identically worded dispute letters from other clients of Chatman and Wood.
In these letters, Chatman and Wood's clients noted that they "refuse to pay" the debt owed to PRA

ru

because "[their] monthly expenses exceed [their] monthly income" before noting, almost as an

afterthought, that "the amount [PRA is] reporting is not accurate, either." See PRA' s Mot. Summ.
J. [#62-1] App. at

2-3. These concerning facts did not go unremarked upon. On April 12, 2017,

the Court stated it expected the parties to reach a settlement agreement soon and expressed concern

that the only basis for Ozmun's lawsuit appeared to be "a technical violation involving $57.00 (if
any violation at all)." Order of April 12, 2017 [#56] at 2.

Further admonitions followed. On July 24, 2017, the Court entered a take-nothing

judgment on Plaintiffs state-law claims because Plaintiff lacked standing. Order of July 24, 2017
[#79] at 12. Although the Court determined genuine issues of fact precluded summary judgment

on Plaintiffs FDCPA claims, it also observed there was "{e]vidence that Plaintiffs attorneys are

involved in a scheme to force settlements from debt collectors by abusing the FDCPA" and that
this case appeared to "misus[e] the statutes involved." Id. at 16, 18. The Court warned that future
decisions on costs and attorneys' fees would "be guided by the apparent lack of good faith in this

case." Id. at 18. On January 23, 2018, the Court held a hearing on Defendants' motion to hold
Ozmun, Chatman, and Wood in contempt for failing to meet a court-imposed deadline. See Order

of Feb. 15, 2018 [#91] at

1, 3.

Although Defendants' counsel came from out of town to attend the

hearing, neither Chatman nor Wood attended; instead, they sent a local attorney they had retained
the day before who was unable to answer any of the Court's questions. See

id.

at 3. On January 26,

2018, the undersigned sent a letter to the Chairman of the Disciplinary Committee of the Western

District of Texas in which he highlighted the evidence suggesting "Ms. Chatman and her associates

"PRA also provided the Court with evidence that Ozmun's dispute letter had been faxed directly from
Chatman and Wood's office. Defs.' Joint Mot. Summ. J. [#101-7] Ex. F. This factcombined with Ozmun's inability
to remember who drafted the dispute letter and the fact that Ozmun's dispute letter was identical to those of Chatman
and Wood's other clientsindicates that Chatman and Wood, rather than Ozmun, drafted the dispute letter at issue in
this case.

5

'I

are involved in a scheme to force settlements from debt collectors by abusing the FDCPA." Mot.

Recuse [#107-1] Ex.

1

at 1-2. And on May 16, 2018, the Honorable David

Ezrain considering

a Motion to Recuse that Plaintiffs counsel had filed mere hours before a scheduled hearing
commented that "[t]he basis of the FDCPA suit leaves much to be desired." Order of May 16, 2018
[#113] at2.

Eventually, the Court set this case for trial for July 16, 2018. Order of June 27, 2018 [#124].
Two days later, Ozmun moved to stay the case pending mandamus review of Judge Ezra's decision

on the Motion to Recuse. Mot. Stay [#130] at 1, 3. The Court denied the motion, noting that trial
had been set for more than eighteen months and was required "to resolve key factual questions."
Order of July 3, 2018 [#138] at 4. On July 11, the parties filed a Joint Notice of Settlement wherein

Plaintiff agreed to dismiss his remaining claims against the Defendants with prejudice in exchange
for $1,250.00. Joint Notice Settlement [#141]. Both parties also announced their intention to seek

attorneys' fees following dismissal. Plaintiff, however, refused to dismiss his claims, contending
that because each side intended to file motions for fees and costs, dismissing the case would
deprive the Court of jurisdiction over these motions. Resp. Mot. Dismiss [#145] at 2. On July 19,
2018, Defendants were then compelled to file a motion to

dismissin effect, a motion to enforce

the settlement agreement. The Court granted the motion so the settlement agreement could be
effectuated. Order of Aug. 9, 2018 [#144].

Consistent with the notice of settlement, both parties filed motions for attorneys' fees and
costs. Ozmun seeks fees and costs under 15 U.S.C.

§

1

692k(a)(3), which mandates an award of

fees and costs to an individual plaintiff who maintains a successful action to enforce a defendant's

liability under the FDCPA. Pl.'s Mot. Att'ys' Fees [#152] at 2-3. Defendants similarly seek an
award of fees under 15 U.S.C.

§

1692k(a)(3), as well as under Texas Finance Code

§

392.403(c),

I

Rule

11

of the Federal Rules of Civil Procedure, and 28 U.S.C.

§

1927. Defs.' Mot. Att'ys' Fees

[#15 1] at 2. Defendants also move to hold Chatman, Wood, Amy Clark, and Ozmun in contempt

for perpetrating a fraud upon the court by failing to dismiss this case with prejudice as agreed to
in the Notice of Settlement. Mot. Contempt [#164] at 2-3. These pending motions have been

briefed and are ripe for decision.

Analysis
The Court first considers Defendants' motion for attorneys' fees before considering

Plaintifrs motion for attorneys' fees. It concludes with a consideration of Defendants' motion for
contempt.
I.

Defendants' Motion for Attorneys' Fees
Defendants claim they are entitled to reasonable attorneys' fees under § 1 692k(a)(3) of the

FDCPA and

§ 3 92.403

of the TDCA because Ozmun brought these claims in bad faith and for the

purpose of harassment. Defs.' Mot. Att'ys' Fees [#1511 at 13-14. Defendants further claim that
they are entitled to attorneys' fees as sanctions under Federal Rule of Civil Procedure 11 and under
28 U.S.C.

§

1927 because Ozmun made allegations with no basis in law or fact, filed his suit for

an improper purpose, and needlessly continued this case. Id. at 22, 24. The Court first considers

whether Defendants should be awarded attorneys' fees as sanctions under Rule

11

and

§

1927

before considering whether Defendants are eligible for attorneys' fees under the federal and state

debt collection statutes.

Sanctions Under Federal Rule of Civil Procedure 11

A.

Rule

11

permits courts to impose an appropriate sanction if a pleading, motion, or other

paper is presented for any improper purpose or if the claims or arguments asserted therein are
frivolous.

See FED.

R. CIV.

P.

11(b). "[T]he central purpose of Rule 11 is to deter baseless filings

7

in district court and thus.
& Gell

v.

. .

streamline the administration and procedure of federal court." Cooter

Hartmax Corp., 496 U.S. 384, 393 (1990). Courts 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 Sec. 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

FED.

R.

Civ. P. 11(c)(2); Merriman v. Sec. Ins. Co. of Hartford, 100 F.3d 1187, 1191 (5th Cir. 1996).

Courts also possess inherent power to "protect the efficient and orderly administration of

justice.

. .

[and] to command respect for the court's orders, judgments, 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 v. Lynaugh, 989 F.2d 191,

195-97 (5th Cir. 1993).
Defendants identify fourteen separate actions or statements by Plaintiff's counsel as
grounds for sanctions under Rule 11, including falsely claiming Defendants misrepresented

Plaintiff's debt to the Travis County Court, falsely claiming Plaintiff sent a dispute letter to PRA
when the letter was in fact sent by Plaintiff's counsel, suing Defendants under the TDCA without

asserting damages as the statute requires, and "using this litigation for the improper purpose of
extorting money from Defendants by forcing them to choose between paying Plaintiff's

unreasonable demands or else incur the substantial expense of defending the case." Defs.' Mot.

Att'ys' Fees [#15 1] at 19-21.
The Court declines to award attorneys' fees as sanctions under Rule 11. A motion for
sanctions brought under Rule

11

"must be made separately from any other motion."

FED.

R.

Civ.

P. 11 (c)(2). Defendants, however, included their Rule 11 motion within their motion for fees and

8

sanctions under

§

1927. Thus, awarding Defendant attorneys' fees as sanctions would be contrary

to the clear directives of Rule 11.

B.

Attorneys' Fees Under 28 U.S.C.

28 U.S.C.

§

§ 1927

1927 provides that a court may require an attorney who "so multiplies the

proceedings in any case unreasonably or vexatiously" to personally satisfy the costs reasonably
incurred by such conduct. A party may be found to have multiplied proceedings unreasonably or

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

v.

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

Section 1927 permits the court to shift the entire costs of defense if the party requesting sanctions

proves by "clear and convincing evidence" that "every facet of the litigation was patently
meritless" and that counsel "lacked a reason to file suit" and wrongfully persisted in its prosecution

"through discovery, pre-trial motions, and trial." Id. at 526 (emphasis in original).
Defendants contend sanctions are appropriate under

§

1927 because the evidence

demonstrates "Plaintiff's attorneys failed to conduct this case in a manner that would reflect any
actual intent to proceed to trial." Id. at 26. But Defendants have not met the high bar of proving by
clear and convincing evidence that every facet of this litigation was patently meritless. See Procter
& Gamble, 280 F.3d at 526. Although the Court condemns Plaintiff's counsel's conduct in this

case, Plaintiff has plausibly alleged a technical violation of the FDCPA. Furthermore, the Fifth

Circuit has held that imposing sanctions under

§

1927 is inappropriate in cases where, as here, the

court previously encouraged the parties to settle their claims. See Nat 'lAss 'n of Gov 't Emps., Inc.
v.

Nat'l Fed'n of Fed. Emps., 844 F.2d 216, 222 (5th Cir. 1988) (concluding there is a "patent

anomaly" in imposing sanctions for "filing a suit that [the court] considered worthy of

;sj

compromise"). Thus, the Court declines to award attorneys' fees to Defendants as sanctions under
§

1927.

C.

Attorneys' Fees Under the FDCPA and TDCA

Congress passed the FDCPA "to eliminate abusive debt collection practices by debt

collectors, to insure that those debt collectors who refrain from using abusive debt collection
practices are not competitively disadvantaged, and to promote consistent State action to protect

consumers against debt collection abuses." 15 U.S.C.

§

1692(e). To encourage consumers to bring

suit, the statute awards attorneys' fees and costs to plaintiffs who bring a "successful action to

enforce

.

. .

liability" under the FDCPA. Id.

§

1

692k(a)(3); see also Hester

v.

Graham, Bright &

Smith, P.C., 289 F. App'x 35, 44 (5th Cir. 2008) (per curiam). Section 1692k(a)(3) further states,

however, that if the court determines the claim was brought "in bad faith and for the purpose of

harassment," it may award reasonable attorneys' fees to the defendant. 15 U.S.C.

§

1692k(a)(3).

"Bad faith" and "harassment" implies "the conscious doing of a wrong because of a dishonest

purpose or moral obliquity." Rodriguez

ICS Sys., No. EP-16-CV-00186-DCG, 2017 WL

v.

2105679, at *2 (W.D. Tex. May 12, 2017) (citing Cunningham

v.

Credit Mgmt., L.P., No. 3:09-

CV-1497-G, 2010 WL 3721049, at *2 (N.D. Tex. Sept. 27, 2010); Grant

v.

Barro, No. 07-194-

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

Section 392.403 of the Texas Finance Code is the TDCA's analogue to

§

1692k(a)(3).

Under this section, a person who successfully brings a TDCA action is entitled to reasonable

attorneys' fees and costs.

TEX. FIN.

CODE

§

392.403(b). But unlike the FDCPA, if the court

determines the TDCA action was brought in bad faith or for purposes of harassment, an award of
costs and fees to the defendant is mandatory, not discretionary. Id.

§

392.403(c). Although there

is no guidance from the Fifth Circuit or the Texas courts as to what constitutes bad faith in the

10

'I

§

392.403(c) context, Texas appellate courts have defined bad faith in similar statutes as "the

conscious doing of a wrong for dishonest or malicious purposes." Elbaor
S.W.3d 826, 829 n.1

(Tex.App.Fort Worth

v.

Sanderson, 817

1991, no writ); see also WWW. URBAN.INC.

v.

Drummond, 508 S.W.3d 657, 676 (Tex.App.Houston [1st Dist.] 2016, no pet.); Elkins v. StottsBrown, 103 S.W.3d 664,668 (Tex.App.Dallas 2003, no pet.); Schiager v. Clements, 939 S.W.2d
183, 190

(Tex.App.Houston [14th Dist.] 1996, writ denied). In determining bad faith, "the court

must consider the acts or omissions of counsel, not merely the legal merit of a pleading or motion."
Drummond, 508 S.W.3d at 676.
Here, Chatman and Wood manufactured a case by misusing federal and state debt

collection statutes and then failed to inform their client of a generous settlement offer, all in an
attempt to augment their attorneys' fees. They contend this lawsuit was brought to vindicate

"Joseph Ozmun's Congressionally-granted right to be free from abusive and unconscionable debtcollection practices." Resp. Defs.' Mot. Att'ys' Fees [#157] at
The complaint in this lawsuit was

1.

The evidence suggests otherwise.

filedwithout any input from Ozmunby two attorneys

on behalf of a client who had never met them, had never been to their offices, and was entirely

unaware they represented him. Ozmun Dep. at 8:23-25, 9:1-17, 55:17-24, 150:6-10. It was filed
on behalf of a client who has never been able to articulate, even in general terms, what injury he

suffered, why these particular defendants were responsible, or which of his "Congressionally-

granted right[s]" were violated. See id. at 57:17-58:7. It relied on a deceptively worded and
intentionally conffising dispute letter the client did not even draft and on a state court judgment

that was never even entered. See Am Compl. [#53-1] Ex. F; see also Ozmun Dep. at 62:8-1 0. And
it was settled on the eve of trial for an amount that was nearly five times less than Plaintiff would
have received two years earlier.

. .

had his attorneys made him aware of an offer of settlement.

11

See Mot. Enforce Settlement Agreement [#13]; see also Joint Notice Settlement [#1411; Ozmun

Dep. at 150:11-24. In noting these facts, the Court does not intend to suggest that a client must be

fluent in the statutory provisions and the legal theories supporting his suit to refute a charge of bad
faith and harassment. But where a client's knowledge of and involvement in his suit is de minimis,
a plausible conclusion is that the suit is being brought not to vindicate the client's rights but for

some other, undeclared reason.

Aside from Ozmun's near-nonexistent involvement in this lawsuit and Chatman and

Wood's unexplained failure to communicate a generous settlement offer to their client, there are
further indications that Chatman and Wood are part of a cottage industry of litigants who seek to

manufacture lawsuits under the FDCPA in order to secure attorneys' fees. See Jacobson

v.

Healthcare Fin. Servs., Inc., 434 F. Supp. 2d 133, 138 (E.D.N.Y. 2006), cited by Fed. Home Loan
Mortg. Corp.

v.

Lamar, 503 F.3d 504, 5 13-14 (2d Cir. 2007). As the Court has previously noted,

this case follows a well-established pattern whereby Chatman and Wood represent a debtorplaintiff, fax a misleadingly worded dispute letter to a debt collector, and then file suit against the
debt collector who was misled by the dispute letter. See Order of April 2, 2018 [#52], Tejero

v.

Portfolio Recovery Assocs. LLC etal., No. AU-16-CV-767-SS; compare First Am. Compl. [#531]

Ex. F and Compi. [#1-1] Ex. B, Tejero, No. AU-16-CV-767-SS, with Compl. [#1-1] Ex. A,

Palomo

v.

Portfolio Recovery Assocs. LLC et al., No. 1:16-CV-628 and Compi. [#1-1] Ex. E,

Jones v. Midland Funding, LLC et al., No. 1:1 6-CV-592. In each of the above instances, Chatman
and Wood begin with a blanket refusal to pay the debt owed, then explain "there is no reason" for
the debt collector to continue to contact the consumer because the consumer's "monthly expenses

exceed [her] monthly income" before noting, almost as an aside, that "the amount [the debt

12

collector is] reporting is not accurate,

either."5

E.g., Am. Compi. [#53-1] Ex. F. While such

language might be understandable if it were composed by an unsophisticated consumer, see

Emerson

v.

Fidelity Capital Holdings, Inc., No.

Aug. 14, 2015), it is unclear why Chatman and

15 c

3416, 2015 WL 5086458, at *2 (N.D. Ill.

Woodtwo

attorneys with substantial FDCPA

experiencewere unable to draft a clearer dispute letter in this case, particularly since, after the
first several lawsuits, it would have become clear to any reasonable and competent attorney that
the dispute letters were consistently being misconstrued by the debt collectors.

As for Plaintiff's TDCA claims, the evidence supporting a finding of bad faith is even more

substantial. Although the TDCA plainly limits suits to those brought for injunctive relief or for
actual damages, TEX.

FIN.

CODE § 392.403(a), Plaintiff's amended complaint neither requested an

injunction nor alleged actual damages. Am. Compi. [#53] at 12; see also Order of July 24, 2017
[#79] at 12. Moreover, Plaintiff requested attorneys' fees under

§

392.403(b) despite that section's

unambiguous command that attorneys' fees may be recovered only where a plaintiff obtains
injunctive relief or actual damages. Thus, unlike Plaintiff's FDCPA claims, Plaintiff has not even
alleged a plausible claim under the TDCA. This clear misuse of the TDCA, when coupled with the

extensive evidence detailed above, supports a finding that Plaintiff's counsel brought their TDCA

claims in bad faith.

Plaintiff's counsel respond to this evidence of bad faith with non sequiturs, excuses, and
ambiguous excerpts from Ozmun's deposition. See, e.g., Resp. Defs.' Mot. Att'ys' Fees [#157] at
12 (contending that the involvement

of an attorney who is not admitted to practice in the Western

The letters conclude with a promise that the consumer "will be in touch" if his "circumstances should
change," e.g., Am. Compi. [#53-1] Ex. F. If the letters were intended to inform the debt collectors that the debtor is
unable to pay the debt because of his present financial circumstances, it makes sense that a debtor might promise to
alert the debt collectors if his financial circumstances improve. But if, as Plaintiff's counsel claims, the letters were
intended to dispute the accuracy of the debt, this promise serves to further mislead the debt collectors about the nature
of the dispute.
13

District was not improper because the attorney is licensed to practice in Texas); id. at

11

(justifying

the filing of a motion to recuse mere hours before a scheduled hearing by noting simply that "[nb
rule holds that such a motion was untimely"); id. at 7 (defending their failure to inform Ozmun of

settlement negotiations by pointing to deposition testimony that the negotiations might have been
communicated to Ozmun by a different attorney). Plaintiff's counsel also offer three arguments as
to why

§

1692k(a)(3) does not apply in this case. The Court addresses each argument in turn.

First, Plaintiff's counsel contend that the Fifth Circuit's opinion in Perry v. Stewart Title

Company, 756 F.2d 1197 (5th Cir. 1985) requires a defendant to "prevail" in order to recover fees

under the FDCPA; because Defendants did not prevail in this case, they may not recover attorneys'
fees. Resp. Defs.' Mot. Att'ys' Fees [#157] at 15-16. In Perry, the Fifth Circuit affirmed the

district court's denial of fees to a defendant who prevailed on an FDCPA claim because the
defendant had failed to affirmatively show that the plaintiff had brought the FDCPA claim in bad

faith and for the purpose of harassment. Perry, 756 F.2d at 1211. Perry therefore does not require
a defendant to prevail in order to be eligible for fees under the FDCPA; it simply reiterates that

even prevailing defendants must show bad faith and harassment to recover attorneys' fees under
the FDCPA. Indeed, the Supreme Court indicated as much in Marx

Corporation, 568 U.S. 371 (2013) when it explained that

§

v.

General Revenue

1692k(a)(3) "provides that plaintiffs

who bring an action in bad faith and for purpose or harassment may be liable for the defendant's
fees and costs" without any requirement that defendants "prevail." Id. at 383.

Second, Plaintiff's counsel contends Perry permits defendants to recover attorneys' fees
under

§

1692k(a)(3) only where the defendant shows the plaintiff himself brought the FDCPA

action in bad faith and with the purpose to harass. Resp. Defs.' Mot. Att'ys' Fees [#157] at 17. As
an initial matter, there is nothing in Perry to indicate the Fifth Circuit understood § 1 692k(a)(3) as

14

permitting an award of fees only where a bad-faith action is brought by the plaintiff himself. More
significantly, there is nothing in the text of § 1 692k(a)(3) to support this requirement. That section

permits an award of attorneys' fees to defendants "[o]n a finding by the court that an action under
this section was brought for bad faith for the purpose of harassment." 15 U.S.C.
(emphasis added). contrary to Plaintiff's assertion,

§

§

1692k(a)(3)

1692k(a)(3) does not contemplate a

distinction between bad faith on the part of a plaintiff and bad faith on the part of plaintiff's
counsel. And adopting Plaintiff's interpretation of

§

1

692k(a)(3) would encourage plaintiffs'

attorneys to bring nuisance suits by effectively insulating the attorneys from liability for their bad-

faith conduct. Not only is such a result undesirable on policy grounds, but it also runs counter to

congress's intent behind the FDCPA. See

S. Rep. No. 95-382, at 5 (1977),

reprinted in 1977

U.S.C.C.A.N. 1695, 1700 (explaining that "the court may award [a] debt collector reasonable

attorney's fees and costs" "[un order to protect [the debt collector] from nuisance lawsuits")
Finally, Plaintiff's counsel contend that the Court cannot find bad faith "because Plaintiff
obtained a favorable result through settlement." Id. at 18. But, as this case proves, statutes like the
FDCPA sometimes engender lawsuits that are brought not to protect consumers from abusive
collection practices but to generate attorneys' fees an order of magnitude larger than the amounts

recovered by the consumers. Such is the case here: Chatman and Wood brought suit not to obtain
a favorable judgment but rather "as a transparent attempt to bully the administration of justice."

Glickv. Koenig, 766 F.2d 265, 270 (7th Cir. 1985). In light of their conduct, the Court concludes

Defendants are entitled to attorneys' fees on the FDCPA and TDCA claims because they were
brought in bad faith and for the purpose of harassment.
A final note on liability for these fees is in order. The record in this case demonstrates it

was litigated by Chatman and Wood with practically no input from, consultation with, or influence

15

by Ozmun himself. The actions that give rise to a finding of bad

faithfrom the

failure to meet

court-imposed deadlines to the drafting of the deceptive dispute letter to the refusal to
communicate an offer of settlementwere Chatman and Wood's alone. Ozmun possessed no
meaningful knowledge of the facts in this case, made no meaningful decisions in how the case

should proceed, exercised no meaningful control over the litigation,

andexcept

for being

deposedhad no meaningful participation in this lawsuit. As Chatman and Wood have conceded,
there is no evidence Ozmun was responsible for the bad-faith conduct that has plagued this case
for more than two years. See Resp. Defs.' Mot. Att'ys' Fees [#157] at 17. Because of Ozmun's
minute involvement in this lawsuit, the Court determines that fees and costs are to be assessed

solely against Celetha Chatman, Michael Wood, and Community Lawyers Group, Ltd.
D.

Calculation of Reasonable Attorneys' Fees

Because the Court has determined Plaintiff's FDCPA and TDCA claims were brought in
bad faith and for the purpose of harassment, it must determine the reasonable attorneys' fees
Defendants incurred. Defendant PRA requests $82,425.50 in fees and $2,307.33 in costs, including
$1,199.71 in travel expenses. Defendant RSIEH requests $113,107.04 in fees and $1,665.99 in
costs. Plaintiff does not object to the amount of either Defendants' requested fees or costs.

The Fifth Circuit uses a two-step process to calculate attorneys' fees. Heidtman

v.

Cnty. of

El Paso, 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

iri

v1

unproductive, excessive, or redundant hours." Walker

v.

US. Dep 't

of Hous.

& Urban Dev., 99

F.3d 761, 769 (5th Cir. 1996).

After calculating the lodestar, the court may increase or decrease the figure 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 the

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)).
Finally, a court may tax as costs the expenses of obtaining a deposition transcript and
photocopies necessary for use in this case. See 28 U.S.C.

§

1920(2), (4) (authorizing a court to tax

as costs fees for printed transcripts and for making copies of materials where such transcripts and

copies "are necessarily obtained for use in the case"). Similarly, a court may tax as costs travel and
related expenses where they are "necessarily obtained for use in the case." Studiengesellschaft
Kohle mbHv. Eastman Kodak Co., 713 F.2d 128, 133 (5th Cir. 1983).

Defendant PRA provided the time sheets of their attorneys, demonstrating they expended
481.7 hours defending this case. See Defs.' Mot. Att'ys' Fees [#151-2] Ex. B at 6-98. The Court
finds this number reasonable, as PRA completed written discovery, filed two answers, a response

to a motion to enforce the settlement agreement, two motions for summary judgment, and two
motions to dismiss, defended against a cross-motion for summary judgment, two requests to extend

17

time, and a motion to amend, and attended five hearings. Furthermore, PRA has shown 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. Defs.' Mot. Att'ys' Fees [#151-2] Ex. B at 3. 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. See Order of Feb. 15, 2018 [#91] at 5_6.6 The Court therefore finds PRA's request of
$82,425.50 in attorneys' fees reasonable.

The Court also finds PRA is entitled to the cost of obtaining the transcript of Ozmun's
deposition, the photocopies necessary for use in this case, the postage fees, and the travel expenses
to Plaintiff's deposition and hearings before this Court because such expenses were necessarily

incurred in the use of this case. See 28 U.S.C.

§

1920(2), (4); see also Studiengesellschafl, 713

F.2d at 133. The Court thus awards PRA $2,307.33 in costs.

Defendant RSIEH also provided time sheets of their attorneys, demonstrating they
expended 284.53 hours defending this case. Defs.' Mot. Att'ys' Fees [#151-11 Ex. M (Time
Sheets). However, 27 of these hours are attributed to "AH," "KC," and "BJS" without any

explanation regarding to whom these initials refer or their roles, qualifications, or experience.
Accordingly, the Court subtracts these 27 hours from RSIEH's total, resulting in 257.43 hours.
The Court finds this revised number reasonable, as RSIEH took Plaintiff's deposition and

completed written discovery, filed two answers, two motions for summary judgment, two motions
to dismiss, and a motion to strike, defended against a cross-motion for summary judgment and a

motion to enforce a settlement agreement, and attended five hearings. However, the Court finds

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&
6

Template/CM/ContentDisplay.cfm&ContentlD=34 182.
18

Manuel Newburger's customary hourly rate of $450 is in excess of the State Bar of Texas's Hourly

Rate Report for attorneys of similar experience in the Austin 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=/CMlContentDisplay.cfm&ContentlD=34 182 (showing a median hourly rate for attorneys
in the Austin-Round Rock Metropolitan Statistical Area with over 25 years' experience of $306).

Accordingly, the Court determines the reasonable hour rate for RSIEH's legal work is $300. The
Court therefore awards RSIEH $77,229.00 in fees.
The Court also finds RSIEH is entitled to the costs of obtaining the transcript of Plaintiff's

deposition and the travel expenses incurred to attend a hearing before this Court on January 23,
2018 as "necessarily incurred in the use of this case." See 28 U.S.C. § 1920(2), (4);

Studiengesellschaft, 713 F.2d at 133. The Court thus awards RSIEH $1,665.99 in costs.

II.

Plaintiffs Motion for Attorneys' Fees
Plaintiff argues he should be awarded attorneys' fees under

§

1

692k(a)(3) because by

obtaining greater relief from a settlement than he would have obtained from a favorable judgment,
he was a "successful party" under the FDCPA. Pl.'s Mot. Att'ys' Fees [#152] at 5. Defendants

respond that a party that enters into a private settlement agreement without a consent decree is not
a "prevailing party." Resp. P1.'s Mot. Att'ys' Fees [#156] at 6. According to Defendants, because

Ozmun was not a "prevailing party," his was not a "successful action" under

§

1

692k(a)(3), and

Ozmun therefore cannot recover attorneys' fees.

Even if Plaintiff's private settlement constitutes a "successful action to enforce. . . liability
under the FDCPA,"7 15 U.S.C.

§

1

692k(a)(3), the bad faith in this case makes awarding attorneys'

Because the Court concludes Plaintiff's counsels' conduct renders awarding attorneys' fees unjust, it does
not decide whether a private settlement constitutes a successful action to enforce liability under the FDCPA.

19

1

fees to Plaintiff inappropriate. As the Fifth Circuit recently explained, district courts may refuse to

award attorneys' fees requested under

§

1692k(a)(3) to prevailing plaintiffs where "special

circumstances would render such an award unjust." Davis v. Credit Bureau of the South, 908 F.3d
972, 975 (5th Cir. 2018) (per curiam) (quoting Romain v. Walters, 856 F.3d 402, 407 (5th Cir.
2017)). Awarding fees to Plaintiff in this case would be unjust because Plaintiff obtained limited
success, Chatman and Wood "essentially created" the FDCPA claim, and no actual damages were
awarded. Cf id. at 978, 980. Moreover, the evidence in this case amply demonstrates that Chatman

and Wood utilized a "technical violation[J of the FDCPA solely as a means for generating

attorneys['] fees." Id. at 981. As the Fifth Circuit "disapprov[es]" of awarding fees in such
circumstances, id., the Court refuses to do so. Accordingly, it denies Plaintiffs' motion for

attorneys' fees.

III.

Defendants' Motion for Contempt
Finally, Defendants have moved the Court to order Chatman, Wood, Amy Clark, and

Ozmun to appear and show cause why they should not be held in contempt "for their apparent

misrepresentations to, and fraud upon the Court." Mot. Contempt [#164] at 3. The alleged
misrepresentation involves Chatman, Wood, Clark, and Ozmun's failure to dismiss Ozmun's

FDCPA claims against Defendants despite entering into a settlement agreement that contemplated
a voluntary dismissal of all claims against Defendants in exchange for $1,250. Id. at 2-3; see Joint

Notice Settlement [#141]. Chatman, Wood, Clark, and Ozmun respond that Defendants' counsel
"deliberately misconstrued" the terms of Plaintiff's offer of settlement. Resp. Mot. Contempt
[#167] at 2. They further contend that the settlement agreement explicitly contemplated both

parties moving for attorneys' fees and costs and that they never agreed to dismiss Plaintiff's claims

20

because doing so would deprive this Court of jurisdiction to hear these motions. See Id.; see also
Resp. Mot. Dismiss [#145] at 2.
It is admittedly difficult to understand how Plaintiff's counsel could be unaware that a

district court retains jurisdiction over motions for attorneys' fees even following dismissal of the

underlying suit. This principle is readily apparent from case law, see Procter & Gamble, 280 F.3d
at 524-25, well-known legal treatises, see
PRACTICE AND PROCEDURE §

1

SB CHARLES ALAN WRIGHT ET AL., FEDERAL

3915.6, and this Court's own Local Rules, see L.R. CV-7(j)(1). The

Court concludes, however, that Plaintiff's resistance to dismissal was borne out of a desire to

preserve the motions for attorneys' fees as well as confusion resulting from the fast-paced and
unusual method of consummating the settlement agreement. See Mot. Contempt [#164] at 1-2
(explaining that Defendants considered Plaintiff's acceptance of a $1,250 cashier's check

following a counter-offer presented in an email as constituting an acceptance of the terms in the

joint notice of settlement). Because Plaintiff's reluctance to dismiss this case was rooted in a
misunderstanding of a procedural doctrine, the Court concludes Plaintiff did not intend to
perpetrate a fraud upon the Court by refusing to dismiss the FDCPA claims. And in any event,
these claims have been dismissed with prejudice, and the Court has awarded Defendants the
entirety of their attorneys' fees incurred in this suit. The Court consequently denies Defendants'

motion to hold Chatman, Wood, Clark, and Ozmun in contempt.

Conclusion
Because Plaintiff's FDCPA claims and TDCA claims were brought in bad faith and for the
purposes of harassment, the Court grants Defendants' motion for attorneys' fees, awards
Defendant PRA $82,425.50 in fees and $2,307.33 in costs, and awards Defendant RSIEH

$77,229.00 in fees and $1,665.99 in costs. Similarly, because Plaintiff's counsels' conduct in this

21

case would render awarding his attorneys' fees unjust, the Court denies his motion for attorneys'
fees. Finally, because the Court concludes Ozmun, Chatman, Wood, and Clark did not intend to

mislead or perpetrate a fraud upon the Court, it denies Defendants' motion for contempt.
Accordingly,
IT IS ORDERED that Plaintiff Joseph Ozmun's Motion for Leave to File

Supplemental Briefing [#1731 is DISMISSED AS MOOT;
IT IS FURTHER ORDERED that Plaintiff Joseph Ozmun's Motion for Attorneys'
Fees [#152] is DENIED;
IT IS FURTHER ORDERED that Defendants Portfolio Recovery, Associates, LLC

and Rausch, Sturm, Israel, Enerson & Hornik LLC's Motion for Attorneys' Fees [#151] is
GRANTED;
IT IS FURTHER ORDERED that Celetha Chatman, Michael Wood, and

Community Lawyers Group, Ltd. SHALL PAY EIGHTY-FOUR THOUSAND, SEVEN
HUNDRED THIRTY-TWO AND 83/100 DOLLARS ($84,732.83) to Defendant Portfolio

Recovery Associates, LLC for attorneys' fees and costs incurred as a result of this
litigation;
IT IS FURTHER ORDERED that Celetha Chatman, Michael Wood, and

Community Lawyers Group, Ltd. SHALL PAY SEVENTY-EIGHT THOUSAND EIGHT

HUNDRED N1NETY-FOUR AND 99/100 DOLLARS ($78,894.99) to Defendant Rausch,
Sturm, Israel, Enerson & Hornik, LLC for attorneys' fees and costs incurred as a result of

this litigation; and

22

IT IS FINALLY ORDERED that Defendants Portfolio Recovery Associates LLC
and Rausch, Sturm, Israel, Enerson & Homik LLC's Motion for Contempt [#164] is

DENIED.
SIGNED this the Z 9' day of March 2019.

SAMRK1 DISTRICT JUDGE
SENIOR UNITED STATES

23