Hernandez v. Michael J. Scott, P.C.
REPORT AND RECOMMENDATIONS re 9 Motion for Summary Judgment filed by Michael J. Scott, P.C. be granted. Signed by Judge Nancy Stein Nowak. (mailed on 9/30/2011 by certified mail, or sent via electronic transmittal)(rg)
UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
Michael J. Scott, P.C.,
CIVIL ACTION NO.
SA-10-CV-1051 OG (NN)
REPORT AND RECOMMENDATION
Honorable Orlando Garcia
United States District Judge
This report and recommendation addresses defendant Michael J. Scott, P.C.’s
(Scott’s), motion for summary judgment.1 I have jurisdiction to enter this report under
the district judge’s order of referral2 and my authority under 28 U.S.C. § 636(b)(1)(B)
and Rule 1(d) of the Local Rules for the Assignment of Duties to United States
Magistrate Judges. After considering the motion, I recommend summary judgment in
favor of Scott.
Background of the case. Attorney Michael Agruss filed this lawsuit on behalf of
plaintiff Rosa Hernandez. Agruss works for Krohn & Moss Consumer Law Center.
Docket entry # 9.
Docket entry # 15.
Krohn & Moss advertises to “offer consumer protection involving defective vehicles
(Lemon Law), Products (Warranty Law), Consumer Fraud, Violations of Renters Rights,
Credit Report discrepancies and lenders and creditors discrepancies.”3 As an active
part of that practice, Agruss has filed hundreds of lawsuits against collection agencies
for violating the Fair Debt Collection Practices Act (the Act). Most of the lawsuits are
settled within months of the filing date, followed by an award of attorney fees. This
lawsuit is one of over 600 lawsuits filed by Agruss and one of at least 12 lawsuits
Agruss filed against defendant Scott in federal courts in Texas.4
Nature of the claims. Like the plaintiffs in other lawsuits filed by Agruss against
Scott, Hernandez alleged Scott violated the Act by communicating with her knowing
that she was represented by an attorney and after receiving a cease-and-desist letter. As
relief, Hernandez sought $1,000 in statutory damages and attorney fees. The complaint
is virtually identical to the complaint filed in the Southern District of Texas in Cause
No. 7:10-CV-467. Judge Hinojosa dismissed that case because, as in this case, no
evidence raised a fact question about whether the plaintiff was represented by an
The firm’s home page at http://www.krohnandmoss.com/Home.aspx (last visited Sept. 28,
The other cases are: 6:11-CV-002-WSS (W.D. Tex.), 6:11-CV-008-LED (E.D. Tex.), 1:10-CV-297-C
(N.D. Tex.), 1:10-CV-299-CV (N.D. Tex.), 3:10-CV-2005-F (N.D. Tex.), 3:10-CV-2172-D (N.D. Tex.),
3:10-CV-2536-M (N.D. Tex.), 4:11-CV-202-A (N.D. Tex.), 7:10-CV-467 (S.D. Tex.), 3:11-CV-00083-N
(N.D. Tex.) & 3:11-CV-00653-B (N.D. Tex.).
attorney.5 Scott has moved for summary judgment.
Scott is entitled to summary judgment because Hernandez was not represented
by an attorney when Scott communicated with her. Congress enacted the Act, in part,
“to eliminate abusive debt collection practices by debt collectors….”6 The Act prevents
a debt collector from communicating with a consumer “in connection with the collection
of any debt  if the debt collector knows the consumer is represented by an attorney
with respect to such debt….”7 The inclusion of the italicized language indicates the
prohibition applies to representation as to the debt, not as to other legal representation.
The Act also prevents a debt collector from communicating with a consumer after the
consumer notifies the debt collector “that the consumer wishes the debt collector to
cease further communication with the consumer….”8
Hernandez’s allegation that Scott violated the Act’s provisions is based on a
letter attorney Jerome S. Lamet sent to Scott about a debt Hernandez owed to Capitol
One Bank. Lamet signed the letter on October 27, 2009, as the supervising attorney for
Debt Counsel for Seniors and the Disabled. In the letter, Lamet stated, “my law firm
See docket entry # 48, Cause No. 7:10-CV-467 (S.D. Tex. Aug. 15, 2011). Judge Hinojosa
articulated his reasoning on the record. A transcript of the record is included in this case. See
docket entry # 24.
15 U.S.C. § 1692c(e).
15 U.S.C. § 1692c(a)(2) (emphasis added).
15 U.S.C. § 1692c(c).
represents the above-referenced client(s) for the purpose of enforcing their rights
pursuant to applicable federal statutes.”9 Lamet then stated, “you must cease
contacting my client(s) pursuant to [the Act].…If and when you violate these statutes, I
will not hesitate to pursue all legal remedies for my client….”10 Because Scott later sent
Hernandez a letter offering to settle the debt owed to Capital One Bank,11 Agruss
argued that Scott violated the Act.
Both letters are attached to Hernandez’s complaint. The face of the documents
suggests Scott violated the Act’s provisions because Lamet’s letter notified Scott that
Hernandez was represented by an attorney and Scott’s settlement letter shows he
communicated with Hernandez after receiving Lamet’s letter. However, the summaryjudgment evidence shows Scott did not violate the Act because Lamet sent Scott a
second letter between the time Lamet sent the notice-of-representation letter and the
time Scott sent the settlement letter.
On April 9, 2010, Lament sent a letter stating the following:
We do not represent the client with regard to this state lawsuit nor shall
we file an appearance on their behalf. We will represent them in federal
court with local counsel should any violations of the [Act] occur.12
Docket entry # 1, ex. A.
Docket entry # 1, ex. A.
Docket entry # 1, ex. B.
Docket entry # 21, p. MSJ 0016.
The summary-judgment record bears out that promise. The record includes a default
judgment against Hernandez, evidencing that neither Lament nor Debt Counsel for
Seniors and the Disabled appeared on Hernandez’s behalf in Scott’s lawsuit seeking a
judgment based on Hernandez’s debt. Lament’s second letter shows that neither he nor
his law firm represented Hernandez with respect to the debt.
Lamet’s second letter shows no fact question exists about Hernandez’s first
claim—that Scott violated the Act by communicating with her knowing she had an
attorney—because the letter shows Hernandez was not represented “by an attorney
with respect to [the] debt.” To the extent Agruss disagrees, Hernandez admitted that
neither Lamet nor Debt Counsel for Seniors and the Disabled represented her with
respect to the debt.13
The summary-judgment evidence also shows no fact question exists about
Hernandez’s second claim—that Scott violated the Act by communicating with
Hernandez after Lament sent his first letter—the letter notifying Scott that Hernandez
was represented and demanding that Scott cease further communications with
Hernandez—because Hernandez was unrepresented. Even if Hernandez had been
represented, the second letter falls within the Act’s exceptions. The Act permits a debt
collector to communicate with a consumer after receiving a cease-and-desist letter “to
Docket entry # 9, Def. App. 0010.
notify the consumer that the debt collector or creditor may invoke specified remedies
which are ordinarily invoked by such debt collector or creditor….”14 Scott’s letter fell
within this exception because the letter advised Hernandez about remedies Capital One
Bank could invoke under Texas law and offered to settle the default judgment.15
Advising Hernandez about Capital One Bank’s remedies notified the
consumer—Hernandez—that the creditor—Capitol One Bank—may invoke remedies
which are ordinarily invoked by a creditor and specified those remedies. No fact
question exists about whether Scott violated the Act by communicating with Hernandez
after receiving Lamet’s first letter.
Agruss’s response to the motion for summary judgment relied in substantial part
on Judge Furgeson’s order denying Scott’s motion for summary judgment in a case filed
in the Northern District of Texas. In that case, Judge Furgeson denied Scott’s motion, in
part, because the Court could not conclude from the summary judgment record
whether Scott knew the plaintiff was represented by counsel and determined that issue
was best left to a jury to decide.16 This case is different. Scott provided specific evidence
showing that he knew Hernandez was not represented by counsel. Scott provided
15 U.S.C. § 1692c(c).
Docket entry # 1, ex. B.
Docket entry # 20, app’x, order denying defendant’s motion for summary judgment in Cause
No. 3:10-CV-2005-RF, p. 7.
Lamet’s second letter, stating “We do not represent the client with regard to this state
lawsuit nor shall we file an appearance on their behalf.” As Judge Hinojosa articulated
on the record in another case against Scott, Lamet’s letter “clearly state[d] we don’t
represent her on this debt.”17 Judge Hinojosa reasoned that Lamet’s second
letter—stating Lamet did not represent the plaintiff—superceded the first letter—the
cease-and-desist letter.18 The second letter shows Hernandez was not represented by
counsel with respect to the debt Scott sought to collect.19 Because Hernandez was not
represented as to the debt, Scott is entitled to summary judgment on Hernandez’s
Whether Agruss should be sanctioned for filing a case without a legal basis.
Under Rule 11, an attorney certifies that he presents claims warranted by existing law or
by a nonfrivolous argument for extending, modifying, or reversing existing law or for
establishing new law.20 Agruss violated Rule 11 by filing this case knowing Hernandez
Docket entry # 24, p. 8 .
Docket entry # 24, p. 12.
Accord docket entry # 24, p. 18 (Judge Hinojosa: “There is no way that this Defendant could
possibl[y] have known that they were on notice based on the letter that has just been sent saying
we don’t represent her on the state court action. We’re not accepting any kind of service or
anything else with regards to this.…[T]here is no way based on this record that Mr. Scott could
have known that [the plaintiff] was being represented by an attorney with regards to the
underlying debt here.”).
Fed. R. Civ. P. 11(b)(2).
was not represented with respect to her debt to Capitol One Bank.
Agruss’s practice of filing meritless lawsuits under the Act is described in
documents of record in Cause No. 6:11-CV-002-WSS filed in the Waco Division of the
Western District of Texas. Agruss filed a very similar complaint in that case. However,
instead of attaching Lamet’s notice-of-representation letter to the complaint, Agruss
attached Lamet’s second letter in which he stated that he did not represent the plaintiff
in the state court lawsuit to collect the plaintiff’s debt.21 Scott moved for summary
judgment based on the letter attached to the complaint. Instead of responding to the
motion, Agruss moved to dismiss the case and to quash his client’s deposition.22 Judge
Smith granted the motion, but retained jurisdiction to consider whether Agruss should
be sanctioned and whether Scott should be awarded attorney fees.23 In his motion for
sanctions, Scott described what occurs in Agruss’s cases:
Mr. Agruss has filed at least ten (10) other similar lawsuits against Scott
based on Mr. Lamet’s “notice of representation” letters. However, the
difference in most of these cases and the one before the Court is that Mr.
Agruss normally attaches Mr. Lamet’s initial letter from one of his law
firms, Debt Counsel for Seniors and the Disabled, stating that he
represents the debtor and that Scott should stop contacting them. It is
only after conducting some discovery that it is revealed that Mr. Lamet
and his firm do not actually represent the debtor on the debt, returning
See Cause No. 6:11-CV-002-WSS, docket entry # 21, app’x Def. App. 006.
See Cause No. 6:11-CV-002-WSS, docket entry # 13.
Cause No. 6:11-CV-002-WSS, docket entry # 19, p. 4 n. 2.
the lawsuit papers to Scott with the same letter attached to Plaintiff’s
complaint.…Mr. Agruss hopes the cases settle before reaching this
discovery. In the present case, it appears Mr. Agruss got careless with
which letter he was attaching to the complaint and inadvertently revealed
his hand at the outset.24
Judge Smith has not ruled on Scott’s motion for sanctions.
In Cause No. 10-CV-467 filed in the Southern District of Texas, Judge Hinojosa
characterized Lamet’s letters and Agruss’s response as entrapment.25 Judge Hinojosa
opined that Congress did not envision an attorney representing a debtor to enforce the
Act and collecting $1,000 in statutory damages and attorney fees, without protecting the
client from a default judgment on the underlying debt.26 Considering the Act was
enacted to protect debtors from abusive debt collection practices by debt collectors,27
Judge Hinojosa lamented, “there is no protection for this poor Plaintiff
here—none.…And so, really nobody’s watching out for her at this point other than I
guess me and trying to really read the [A]ct the way it’s suppose[d] to be read.”28 Judge
Cause No. 6:11-CV-002-WSS, docket entry # 21, p. 7 (citations omitted).
Docket entry # 24, pp. 5-6 & 14-16.
Docket entry 24, pp. 14-15.
See 15 U.S.C. § 1692(e) (“It is the purpose of this subchapter 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.”).
Docket entry # 24, pp. 16-17.
Hinojosa’s characterization applies with equal force to this case.
No reasonable basis in law or fact supported this case from the beginning. If not
for Agruss’s mistake, Scott would have likely settled this lawsuit to minimize litigation
costs, despite having not violated the Act. In Cause No. 1:10-CV-299-C filed in the
Northern District of Texas, Scott settled the issue of statutory damages, but not Agruss’s
attorney fees. In considering Agruss’s motion for attorney fees, Judge Cummings found
Agruss sought excessive attorney fees, as well as charges unrelated to work done on the
plaintiff’s behalf. Judge Cummings awarded 48% of the amount Agruss sought.29
Notably, Agruss resisted the discovery on his attorney fees in the case before this Court,
as he has in other similar cases.30
The foregoing discussion indicates Agruss filed this case knowing no legal basis
existed for a claim. Agruss should be directed to show cause why he should not be
sanctioned for filing a case that is not warranted by existing law or by a nonfrivolous
argument for extending, modifying, or reversing existing law or for establishing new
Recommendation. I recommend the following:
See Cause No. 1:10-CV-299-C, docket entry # 14 (N.D. Tex. July 1, 2011). In Cause No. 6:11CV-008-LED, U.S. Magistrate Judge Guthrie awarded 50% of what Agruss sought. In Cause No.
3:10-CV-2536-M, Judge Lynn awarded 46% of what Agruss sought.
Docket entry # 10. See also Cause No. 6:11-CV-002-WSS (W.D. Tex.), docket entry # 10 &
Cause No. 3:10-CV-2005-F (N.D. Tex.), docket entry # 21.
(1) grant Scott’s motion for summary judgment (docket entry # 9),
(2) enter summary judgment in favor of Scott, and
(3) direct Agruss to show cause why he should not be sanctioned for violating
If the these recommendations are accepted, I recommend directing the Clerk to send a
copy of this report and the Order accepting same to the district judges assigned to the
other pending cases alleging violations of the Act filed by Agruss.31
Instructions for Service and Notice of Right to Object/Appeal. The United
States District Clerk shall serve a copy of this report and recommendation on all parties
by either (1) electronic transmittal to all parties represented by attorneys registered as a
“filing user” with the clerk of court, or (2) by mailing a copy to those not registered by
certified mail, return receipt requested. Written objections to this report and
recommendation must be filed within 14 days after being served with a copy of same,
unless this time period is modified by the district court.32 Such party shall file the
objections with the clerk of the court, and serve the objections on all other parties. A
party filing objections must specifically identify those findings, conclusions or
The other pending cases are Cause Nos. 06:11-CV-002-WSS (W.D. Tex.), 3:11-CV-083-N (N.D.
Tex.), and 1:10-CV-297-C (N.D. Tex.).
28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b).
recommendations to which objections are being made and the basis for such objections;
the district court need not consider frivolous, conclusive or general objections. A
party’s failure to file written objections to the proposed findings, conclusions and
recommendations contained in this report shall bar the party from a de novo
determination by the district court.33 Additionally, failure to file timely written
objections to the proposed findings, conclusions and recommendations contained in this
report and recommendation shall bar the aggrieved party, except upon grounds of
plain error, from attacking on appeal the unobjected-to proposed factual findings and
legal conclusions accepted by the district court.
SIGNED on September 30, 2011.
NANCY STEIN NOWAK
UNITED STATES MAGISTRATE JUDGE
Thomas v. Arn, 474 U.S. 140, 149-52 (1985); Acuña v. Brown & Root, 200 F.3d 335, 340 (5th Cir.
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