Segovia v. The Phoenix Recovery Group

Filing 31

ORDER GRANTING MOTION FOR SUMMARY JUDGMENT.. Signed by Judge Xavier Rodriguez. (mgr)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
APRIL SEGOVIA,
Plaintiff,
v.
THE PHOENIX RECOVERY GROUP,
Defendant.

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Civil Action No. SA-18-CV-340-XR

ORDER
On this date, the Court considered the Motion for Partial Summary Judgment filed by
Defendant the Phoenix Recovery Group (“PRG”) (docket no. 12). PRG attempted to collect a
debt owed by Plaintiff after she skipped out on her lease. Plaintiff does not dispute that she
breached the lease and owes the underlying debt of approximately $5,000, which she has
never paid. And she did not dispute the debt, which included a $91 charge for attorney’s fees,
or the $50 collection fee charged by PRG, under § 1692g of the Federal Debt Collection
Practices Act (“FDCPA”) when PRG first contacted her about the debt in 2012. Instead,
Plaintiff waited until 2018 to file this lawsuit alleging FDCPA violations based on the $91
attorney fee charge and the $50 collection fee, because Plaintiff suspected that the fees failed
to comply with the specific requirements of the Lease. Because Plaintiff fails to proffer any
summary judgment evidence that the fees are unlawful or that the collection letter contained
misrepresentations, summary judgment is granted in favor of Defendant.

Procedural Background
April Segovia filed this lawsuit against Defendant PRG on April 17, 2018, alleging
violations of the FDCPA insofar as Defendant PRG allegedly made false and deceptive
representations to Plaintiff and attempted to collect unauthorized fees. On June 13, 2018, PRG
answered, asserting the affirmative defense of limitations, and filed a counterclaim to recover
its attorney’s fees and costs on the ground that Plaintiff’s lawsuit is frivolous and filed in bad
faith. On August 11, 2018, PRG moved for summary judgment on Plaintiff’s FDCPA claims
on the basis that the claims are barred by limitations and that the fees were lawfully charged.
Defendant’s motion raises two grounds for summary judgment: (1) limitations and (2) the
attorney’s fee and collection fee are permitted in the lease and therefore do not violate the
FDCPA. On September 23, Plaintiff objected to the motion as premature, noting that she had
not had the opportunity to obtain certain discovery, including as to how and when the
“Collection Fee” notation was added, by whom it was added, and by whose authority it was
added. Docket no. 14 at 8. Plaintiff further argued that she needed discovery as to whether the
$91 attorney’s fee actually arose from “some work instituted by an attorney.” Id. at 9.
This Court held a status conference and hearing on all pending motions on September
26. The Court noted proportionality concerns about discovery and directed the parties to
confer and attempt to work out a settlement. On October 2, PRG filed its Reply, repeating its
assertion of limitations and that the fees were lawful, and specifically addressing for the first
time Plaintiff’s claim that language concerning re-building credit was confusing in violation of
the FDCPA. On October 25, Plaintiff filed a motion for leave to file a Sur-Reply, which the
Court granted. On October 29, PRG filed a motion requesting a hearing on its motion for
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summary judgment, which the Court granted by setting a hearing. On November 20, the Court
granted Plaintiff’s unopposed motion to extend the discovery deadline until March 8, 2019.
The Court held a hearing on Defendant’s motion for summary judgment on December
20, 2018. At the hearing, the parties made arguments but neither side presented any evidence.
The Court denied Plaintiff’s request to continue consideration of the motion or deny the
motion pursuant to Rule 56(d) because Plaintiff failed to comply with the rule and because any
additional discovery from Sage Crossing appeared to be futile. The motion for summary
judgment is thus ripe for disposition.
Factual Background
Plaintiff leased an apartment with Sage Crossing Apartments in San Antonio for a term
from April 1, 2011 to May 31, 2012. Docket no. 12-2. Plaintiff breached the lease in
December 2011 by failing to fulfill the full term of the lease, and was charged for the unpaid
accelerated rent, cleaning charges, an insufficient notice penalty, attorney fees or legal charges
($91), and owed rent, totaling $5,028.15. Paragraph 32 of the Lease Agreement provides that
if the tenant breaches the lease, all monthly rent for the rest of the lease contract would be
accelerated and would be immediately due, and provides as “other remedies” that Sage
Crossing “may recover attorney’s fees in connection with enforcing our rights under this Lease
Contract” and that the tenant “must pay all collection-agency fees if you fail to pay all sums
due within 10 days after we mail you a letter demanding payment and stating that collection
agency fees will be added if you don’t pay all sums by that deadline.” Docket no. 12-2.
Sage Crossing issued a final account statement on December 27, 2011. The account
statement included $91 in “attorney or legal charges” and totaled $5,028.15. Docket no. 12-3.
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Plaintiff did not pay, and Sage Crossing then sent the account to PRG for collection in June
2012. Docket no. 12-1, 12-5. It is undisputed that PRG is a debt collector under the FDCPA.
15 U.S.C. § 1692a(6).
PRG sent a first notice letter to Plaintiff on June 28, 2012, a second notice letter on
July 24, 2012, and a third notice letter on August 30, 2012. Docket no. 12-4. These letters
notified Plaintiff that she owed the account balance of $5,028.15 to Sage Crossing, and
assessed an additional $50 collection fee assessed by Defendant, for a total amount due of
$5,078.15. Plaintiff did not dispute the debt within thirty days of the first notice letter. See 15
U.S.C. § 1692g(3) (requiring the first notice of debt to inform the consumer 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”). PRG continued
attempts to collect the debt for the next several years. Docket no. 12-5.
Plaintiff alleges that Defendant sent a letter “on or about April 2017” and she disputed
the debt. Plaintiff alleges that Defendant then “validated” the debt in a letter dated April 20,
2017. In that letter, PRG offered a “settlement off of the original balance due,” showing an
amount of $5,028.15 due to Creditor Sage Crossing, and a $50 collection fee, for a total due of
$5,078.15. Docket no. 1-1. The $50 collection fee was handwritten onto a copy of the
December 27, 2011 final account statement sent to Plaintiff by Sage Crossing Apartments (and
that final account statement included a $91 charge for attorney’s fees). The letter also stated,
“Don’t wait, call today and begin to re-establish your credit.” Id.
Plaintiff filed this lawsuit on April 17, 2018, less than one year after the April 20, 2017
letter was mailed. She alleges that the FDCPA prohibits “seeking to collect a collection fee in
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connection with the collection of a debt where underlying state law does not specifically
provide for such a fee, or where the underlying contract does not permit such fees,” that the
underlying contract does not expressly authorize a $50 collection fee, and a $50 collection fee
is exorbitant and abusive. Compl. ¶¶ 15-17. Plaintiff further alleges that “seeking to collect an
attorney fee in connection with the collection of debt where underlying state law does not
provide for such a fee, or where no legal proceedings occurred and as such the underlying
contract does not permit such fees, is a violation of the FDCPA,” and that no legal proceedings
occurred warranting a $91 attorney fee. Id. ¶¶ 19-20. Last, Plaintiff alleges that the statement
“Don’t wait, call today and begin to re-establish your credit” is “false, deceptive and
misleading in violation of the FDCPA as the least sophisticated consumer would be confused
as to whether the payment of this debt alone would ‘re-establish’ his or her credit.” Id. ¶ 21.
Plaintiff thus asserts violations of § 1692e, prohibiting certain false or misleading
representations, and § 1692f, prohibiting certain unfair practices, including 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.”
Analysis
A. Limitations
Section 1692k of the FDCPA authorizes civil actions to enforce the FDCPA, and
provides that such an action may be brought “within one year from the date on which the
violation occurs.” 15 U.S.C. § 1692k(d). The alleged violations in this case are “the collection
of any amount (including any interest, fee, charge, or expense)” not permitted by law under §
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1692f(1) and false or misleading representations under § 1692e. Defendant asserts that
“Plaintiff’s lawsuit is barred by the one year FDCPA Statute of Limitations” because its first
notice letter dated June 18, 2012 started the limitations clock of one year. Docket no. 12 at 2-3.
Defendant relies primarily on a factually similar case, Roe v. Tolteca Enterprises, Inc.
d/b/a The Phoenix Recovery Group, No. 6:17cv242, 2018 WL 1900532 (E.D. Tex. Apr. 20,
2018), in which it argued that the plaintiff was placed on notice that she was being charged a
$50 collection fee in the move-out reconciliation from the lessor in 2010 and from the first
collection letter that it mailed to her, and thus her claim filed in 2017 was time-barred. The
plaintiff argued that each attempt to collect the $50 fee was a discrete violation, such that she
would have a new claim each time a letter was sent including the fee, regardless of when it
was initially assessed, and thus her claim (which was based on a 2016 letter including the fee)
was timely.
The Roe court did not locate any Fifth Circuit cases that asserted a violation of §
1692f(1) on the same facts, and thus discussed a Fifth Circuit case involving § 1692i(a)(2)
(“legal actions by debt collectors”), finding that a debtor’s injury occurs when he learns that he
has been sued and that is when a violation of “bringing suit” occurs for limitations purposes.
Of course, a holding as to when a cause of action accrues based on “bringing suit” does not
determine when a cause of action accrues for “collecting a fee” or making false
representations under other FDCPA provisions. Recognizing this, the Roe court further
discussed different court cases finding either that each communication from a debt collector
may create a new, actionable violation or that limitations begins running from the first letter
when multiple letters are sent for the same debt. The court concluded that it would be
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inappropriate to “keep the claim alive indefinitely” by finding that each new communication
could start a fresh statute of limitations, and thus found that the alleged violation of the
FDCPA for seeking to collect a $50 collection fee occurred in December 2010, when the
defendant first assessed and sought to collect the fee, and that the plaintiff’s claim was barred
by limitations.
Some courts, like Roe, hold that the first alleged FDCPA violation puts the plaintiff on
notice and starts the limitations period, and that “new communications . . . concerning an older
claim . . . [do] not start a new period of limitations.” E.g., Nutter v. Messerli & Kramer, P.S.,
500 F. Supp. 2d 1219, 1223 (D. Minn. 2007); Reese v. JPMorgan Chase & Co., 686 F. Supp.
2d 1291, 1307 (S.D. Fla. 2009). However, more courts have concluded that when a series of
violations is alleged, even if they relate to the same debt, each discrete violation should be
analyzed on an individual basis. Solomon v. HSBC Mortgage Corp., 395 F. App’x 494, 497
(10th Cir. 2010). This is because “[a]ny other rule would immunize debt collectors for later
wrongdoing.” Id. “It does not matter that the debt collector’s violation restates earlier
assertions – if the plaintiff sues within one year of the violation, it is not barred by § 1692k(d)”
and “[e]ach alleged violation of the FDCPA is ‘evaluate[d] . . . individually to determine
whether any portion of’ the ‘claim is not barred by the state of limitations.’” Demarais v.
Gurstel Chargo P.A., 869 F.3d 685, 694 (8th Cir. 2017). Along those lines, courts have held
that when numerous letters are sent, each letter may constitute a separate violation of the
FDCPA. See, e.g., Michalak v. LVNV Funding, LLC, 604 F. App’x 492 (6th Cir. 2015);
Kaplan v. Asssetcare, Inc., 88 F. Supp. 2d 1355, 1360 (S.D. Fla. 2000) (plaintiff sued on
dunning letters sent January 1998 to June 1998 as violations of §§ 1692e and § 1692f(1) and
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court found only those sent more than one year before suit was filed were time barred);
Murphy v. MRC Receivables Corp., No. 06-0299-CV-W-NKL, 2007 WL 148823 (W.D. Mo.
Jan. 12, 2007).
Courts recognizing this rule, however, generally reject any “continuing violation”
theory, where parties argue that later acts (within the limitations period) revive the limitations
period for older acts outside the limitations period. See Gajewski v. Ocwen Loan Serv., 650 F.
App’x 283, 286 (7th Cir. 2016) (“The ‘continuing violation’ doctrine, which actually concerns
‘cumulative’ violations, ‘does not apply to ‘a series of discrete acts, each of which is
independently actionable, even if those acts form an overall pattern of wrongdoing.’”);
Solomon v. HSBC Mortgage Corp., 395 F. App’x 494, 487 n.3 (10th Cir. 2010); Schaffhauser
v. Citibank (S.D.), N.A., 340 F. App’x 128, 131 (3d Cir. 2009) (declining to extend the
continuous violation doctrine to an FDCPA claim); Boles v. Moss Codilis, LLP, No. SA-10CV-1003-XR, 2012 WL 12861080, at *4 n.10 (W.D. Tex. Jan. 17, 2012) (“Another argument
that is commonly proffered in FDCPA cases, albeit unsuccessfully, is the continuous violation
doctrine, which would bring otherwise time-barred claims within the statute of limitations.”).
Plaintiff relies on the line of cases holding that when a plaintiff alleges a series of
violations, activity outside the one-year period is barred by limitations, while activity within
the one-year period is not. Although Defendant asserts that Plaintiff is pursuing a continuing
violation theory, a careful analysis of the briefing shows that Plaintiff is at most arguing that
acts outside the one-year limitations period are relevant, not that they are actionable. Plaintiff
does not espouse, and the Court does not adopt, any continuing violation theory.

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Plaintiff contends that Roe represents the minority view, and that in fact this Court has
already recognized and applied the majority view in Boles v. Moss Codilis, LLP, No. SA-10CV-1003-XR, 2012 U.S. Dist. LEXIS 196826, 2012 WL 12861080 (W.D. Tex. Jan. 17, 2012).
In Boles, the debt collector sent the plaintiff a series of letters attempting to collect on the
same alleged debt, and all of which contained the same allegedly misleading statement. The
defendant argued that limitations began when the first letter was sent, because otherwise a
cause of action could be “kept alive indefinitely.” Although this Court did not adopt a
“continuing violation” theory, the Court agreed with what it found to be the majority view that
discrete violations should be analyzed on an individual basis and that the letter sent within the
limitations period was actionable.
The Court follows its prior opinion in Boles and the majority view of cases treating
each alleged violation as a discrete violation for purposes of limitations. The FDCPA’s
limitations period runs “from the date on which the violation occurs” and thus its applicability
“turns on when the alleged ‘violation’ occurred.” Demarais v. Gurstel Chargo, P.A., 869 F.3d
685, 691 (8th Cir. 2017). The language of § 1692f(1) is: “A debt collector may not use unfair
or unconscionable means to collect or attempt to collect any debt. Without limiting the general
application of the foregoing, the following conduct is a violation of this section: (1) 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.” Thus, limitations turns on when Defendant “collected” the fee
within the meaning of the FDCPA – when it sent the first letter including the Sage Crossing
bill assessing the fee, when it sent each letter attempting to collect on the debt that included
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the fee, not until it actually collects the fee,1 when it sues to collect such a fee, all of the
above?
Without expressly addressing this issue, Defendant’s motion presumes that
“collection” occurred in the first letter that included the fee in 2012, and no other time.
However, courts have construed § 1692f(1) as including attempts to collect. As discussed in
McLain v. Head Mercantile Co., Inc., No. 16-780-JWD-RLB, 2017 WL 3710073, at *21
(M.D. La. Aug. 28, 2017):
Although the catchall provision of 1692f specifically notes that both
actual collection and collection attempts are proscribed by statute, subsection
1692f(1) refers only to the collection of any amounts not authorized by contract
or by law. See 15 U.S.C. §§ 1692f and f(1). However, the Court finds that the
catchall provision is intended to encompass the nonexclusive list of enumerated
offenses in its subsections, and that the “attempt” language of 1692f also
applies to 1692f(1). . . . . This conclusion is consistent with jurisprudence
addressing this exact issue. See, e.g., Diaz v. Kubler Corp., 785 F.3d 1326,
1328 (9th Cir. 2015) (“[T]he [FDCPA] prohibits debt collectors from trying to
collect any amount that is not ‘expressly authorized by the agreement creating
the debt or permitted by law.’ 15 U.S.C. § 1692f(1).”); McCollough v. Johnson,
Rodenburg & Lauinger, LLC, 637 F.3d 939, 949 (9th Cir. 2011) (“Section
1692f(1) prohibits the use of ‘unfair or unconscionable means to collect or
attempt to collect any debt[.]’”); Miller v. Wilpoff & Abramson, L.L.P., 321
F.3d 292, 308 (2d Cir. 2003) (“plaintiff's cause of action under § 1692f(1)
requires a showing that defendants attempted to collect an amount not expressly
permitted either by the agreement creating the debt or by law.”); Thomas, 232
F.Supp.3d at 676–77 (“Section 1692f(1) is one of a number of nonexclusive
examples of conduct that violates the more general proscription of 1692f,
which outlaws attempts.”); Shami, 914 F.Supp.2d at 357 (“The fact that
subsection (1) of § 1692f does not specify that it includes both collections of
and attempts to collect unauthorized incidental fees does not limit the general
provision of the statute that includes attempts to collect. Courts in this circuit
and others have continued to resolve cases involving § 1692f(1) where no
actual collection appears to have taken place, instead focusing on the
communication seeking payment itself.”); B-Real, LLC v. Rogers, 405 B.R.
Along this vein, one court has held that § 1692f(1) is premised on “actual collection” such that the defendant
had to prove that the actual collection or the payoff amount was outside the statute of limitations. Kline v. MERS,
154 F. Supp. 3d 567 (S.D. Ohio 2015). Under this view, the statute of limitations has not yet begun to run in this
case. The Court does not adopt this view.
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428, 433 (M.D. La. 2009) (“Section 1692f(1) prohibits a debt collector from
seeking to collect on any amount ‘unless ... permitted by law.’”); McAdams v.
Citifinancial Mortg. Co., Inc. of New York, 06-27 and 06-636, 2008 WL
577559, at *2 n.6 (M.D. La. Mar. 3, 2008) (reading Section 1692f and 1692f(1)
in tandem to apply the “attempt” language of 1692f to 1692f(1)); Jackson v.
Adcock, 03-3369, 2004 WL 1900484, at *5 n.27 (E.D. La. Aug. 23 2004)
(same).
Thus, “[a] debt collector violates § 1692f(1) when it sends a letter attempting to collect
money not permitted by law.” Demarais, 869 F.3d at 691 (citing Duffy v. Landberg, 215 F.3d
871, 875 (8th Cir. 2000)). In addition, a debt collector violates § 1692e when it makes a false
representation or uses false representations as proscribed in that section. The Eighth Circuit
has held that each alleged violation of the FDCPA is evaluated individually to determine
whether any portion of the claim is barred by limitations, and it does not matter that the debt
collector’s violation restates earlier assertions. Demarais, 869 F.3d at 694. Thus, if the
plaintiff plausibly alleges that the debt collector defendant violated the FDCPA on a certain
date within the one-year limitations period, the plaintiff’s claim is not barred by limitations. Id.
Accordingly, summary judgment on limitations is denied as to Plaintiff’s claims that the April
20, 2017 letter violated §§ 1692e and 1692f(1).
B. Whether the fees are authorized?
The lawfulness of the $91 attorney’s fee charge and the $50 collection fee turns on
whether the charges are “expressly authorized by the agreement creating the debt or permitted
by law.” 15 U.S.C. §1692f(1). Defendant argues that, even if Plaintiff’s claims are not barred
by limitations, the fees charged do not violate the FDCPA because they are authorized by
Plaintiff’s lease agreement, which is the agreement creating the debt. Paragraph 32 of the
Lease provides that if the tenant breaches the lease, all monthly rent for the rest of the lease
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contract would be accelerated and would be immediately due, and provides as “other
remedies” that Sage Crossing “may recover attorney’s fees in connection with enforcing our
rights under this Lease Contract” and that the tenant “must pay all collection-agency fees if
you fail to pay all sums due within 10 days after we mail you a letter demanding payment and
stating that collection agency fees will be added if you don’t pay all sums by that deadline.”
Plaintiff argues that Defendant has not shown that any attorney work was done to
authorize the $91 attorney fee under the lease and that, “[g]iven that the contract between
Plaintiff and the original creditor does not expressly authorize the amount of the collection fee,
nor has Defendant fulfilled the express requirements under the contract in order to collect the
collection fee, it is not beyond dispute that such fees are not authorized by the lease document
signed by Plaintiff.”
1. $50 collection fee charged by Defendant
Defendant asserts that the $50 collection fee is lawful because it was authorized in ¶ 32
of the lease. It would be Plaintiff’s burden at trial to establish that the collection fee was not
authorized by the Lease agreement. Plaintiff argues that Defendant has not shown that the
collection-agency fee is specifically authorized on these facts because the lease states, “You
must pay all collection-agency fees if you fail to pay all sums due within 10 days after we mail
you a letter demanding payment and stating that collection agency fees will be added if you
don’t pay all sums by that deadline.” Plaintiff argues that “the creditor is required to send a
letter to Plaintiff” and “Defendant does not attach the letter to its motion, nor has it provided
this letter in discovery” such that fact issues remain about whether the demand letter was sent
and thus whether the fee is permissible.
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However, even though Defendant is the summary judgment movant, it is not required
to negate an element of Plaintiff’s case. Austin v. Kroger Tex., L.P., 864 F.3d 326, 335 (5th
Cir. 2017) (“[I]t has long been the rule that when the nonmovant has the burden of proof at
trial, the moving party may make a proper summary judgment motion, thereby shifting the
summary judgment burden to the nonmovant, with an allegation that the nonmovant has failed
to establish an element essential to that party’s case.”); In re Louisiana Crawfish Producers,
852 F.3d 456, 463 (5th Cir. 2017) (rejecting plaintiffs’ argument that the district court erred by
shifting the summary judgment burden to them because the defendant did not submit any
evidence in support of its motion for summary judgment because plaintiffs bore the burden of
proof at trial and therefore the burden of demonstrating facts necessary to their claim).
Defendant’s assertion that the fee is lawful is a direct challenge to Plaintiff’s assertion
that it is not lawful. Defendant argued that the fee is permitted by the lease, and asserted that
there was likely no direct evidence concerning whether Sage Crossing sent the letter, given the
passage of time. Docket no. 16 at 5. Defendant’s motion notes that it need not negate the
elements of Plaintiff’s claim but can “point out the absence of evidence supporting the nonmovant’s case.” Docket no. 12 at 4.
Defendant’s motion sufficiently shifted the burden to Plaintiff to show why the fee was
not lawful by coming forward with summary-judgment evidence that the letter was not sent
and that the fee is thus not authorized by the Lease or that the fee was otherwise exorbitant or
unlawful. Defendant need not use the magic words “no evidence” to successfully assert the
absence of facts supporting an element of the plaintiff’s claim. Plaintiff has provided no
evidence to support her assertion that the letter was never sent and thus the collection fee is
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unauthorized. She could have provided an affidavit stating that she never received such a
letter, which would have been some circumstantial evidence that the letter was never sent and
would have required no discovery. But she did not do so, despite this motion being on file for
over four months. She could also have appeared and testified at the summary-judgment
hearing, but she did not.
Because Defendant’s motion put this fact in issue, Plaintiff cannot point to the
existence of “no evidence” to establish a fact issue. Little v. Liquid Air Corp., 37 F.3d 1069,
1075 (5th Cir. 1994) (“We do not, . . ., in the absence of any proof, assume that the nonmoving
party could or would prove the necessary facts.”). Rather, Plaintiff had the burden to produce
summary-judgment evidence upon which a jury could reasonably find that the letter was not in
fact sent. Id. (where critical evidence is so weak or tenuous on an essential fact that it could
not support a judgment in favor of the nonmovant, summary judgment is appropriate). On this
summary judgment record, there is no evidence from which a jury could reasonably find either
that the letter was or was not sent. That is not a fact question, but an absence of evidence,
which is an appropriate basis for summary judgment.
Defendant further provided some evidence to justify the amount of the fee, and
Plaintiff provided no evidence to raise a fact issue on whether the fee is exorbitant. The lease
permits assessment of all collection fees, without limitation. The Court finds as a matter of law
that the $50 fee is not exorbitant and is lawful, as it is 1% of the debt and is reasonably related
to collection costs.2

2

One court has held that an 18% collection fee was not usurious and thus not violative of the FDCPA. Bibbins v.
McCarthy, Burgess & Wolff, Inc., No. 16-cv-02829, 2018 WL 1534969, at *3 (N.D. Ill. Marc. 29, 2018).
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Defendant’s motion for summary judgment is granted as to Plaintiff’s claims related to
the $50 collection fee.
2. $91 attorney fee charged by Sage Crossing
With regard to the attorney’s fee charge, Defendant asserts that the $91 attorney’s fee
was assessed by Sage Crossing and included in Plaintiff’s debt account balance under the
lease, and the fee did not originate with Defendant. Defendant argues that it was not the
producing cause of Plaintiff’s complaint about the $91 attorney’s fee and her claim should be
directed at Sage Crossing, not Defendant, who was entitled to rely on the account as stated by
the creditor when the debtor does not dispute the debt within thirty days of receiving the letter.
Plaintiff contends that the fact that Sage Crossing may have imposed the $91 attorney fee is
irrelevant because the FDCPA is a strict liability statute, and Defendant has not established a
bone fide error defense.3
Paragraph 32 of the lease states that “[Sage Crossing] may recover attorney’s fees in
connection with enforcing our rights under this Lease Contract.” Plaintiff argues that
attorney’s fees are allowable only if actual attorney work was done to enforce the lease, and
that Defendant has not shown as a matter of law that the $91 fee was allowable on the facts
even though the lease generally permits recovery of attorneys’ fees. Again, it is Plaintiff’s
burden to prove that PRG is attempting to collect an amount that is not expressly authorized
by the agreement creating the debt. PRG asserts in its motion that it is not violating the
FDCPA because the fee is part of the debt assessed by the creditor, Sage Crossing, pursuant to

Debt collectors are entitled to a defense for conduct that otherwise violates the FDCPA “if the debt collector
shows by a preponderance of the evidence that the violation was not intentional and resulted from a bona fide
error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.” 15 U.S.C. §
1692k(c).
15
3

¶ 32 of the Lease and is lawful. Docket no. 12 at 2 (“It was lawful for Defendant to seek the
collection of the $91.00.”); id. at 5 (“The $50 and $91 fees were lawful.”).
For Plaintiff to succeed on her claim, and before Defendant would be required to prove
a bona fide error defense, Plaintiff must prove that PRG was attempting to collect an
unauthorized fee. Plaintiff asserts that the fee must be considered unlawful because there is no
evidence that Sage Crossing utilized attorney services that would warrant imposition of
attorney’s fees. But again, Plaintiff cannot rely on an assertion of “no evidence” to create a
fact issue on an element on which she bears the ultimate burden of proof. Plaintiff provides no
evidence to raise a material issue of fact as to whether attorney’s services were utilized,4 and
this lack of evidence from which a jury could find for Plaintiff requires summary judgment.
Defendant’s motion for summary judgment is granted as to the $91 attorneys’ fee
charge.
C. Whether the statement “Don’t wait, call today and begin to re-establish your credit”
is misleading in violation of the FDCPA?
PRG asserts that it is entitled to summary judgment on this claim because the language
is not deceptive or misleading. We must evaluate any potential deception in the letter under an
unsophisticated or least sophisticated consumer standard. That is, in determining whether the
defendant’s actions are deceptive, we must assume that the plaintiff-debtor is neither shrewd
nor experienced in dealing with creditors. At the same time, we do not consider the debtor as

4

To the extent Plaintiff sought a continuance to obtain discovery from Sage Crossing, she failed to comply with
Rule 56(d) or explain why she had not yet obtained this discovery during the past four months. In addition, as
noted at the hearing, it appears that discovery from Sage Crossing on this issue would be futile as Defendant has
submitted evidence that Sage Crossing has changed management and no longer has the relevant records
concerning Segovia’s debt. This problem is largely a result of the fact that Plaintiff, rather than disputing the
charge after the initial dunning letter in 2012, waited until 2018 to challenge the fee.
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tied to the “very last rung on the [intelligence or] sophistication ladder.” Goswami v. Am.
Collections Enter., Inc., 377 F.3d 488, 495 (5th Cir. 2004). In the Fifth Circuit, whether an
unsophisticated consumer would perceive a letter as misleading, deceptive, or unfair is usually
a question of fact, though the decision may be made as a matter of law when reasonable minds
cannot differ. Gomez v. Niemann & Heyer, LLP, No. 1:16-CV-119-RP, 2016 WL 3562148
(W.D. Tex. June 24, 4016).
Although PRG did not initially move for summary judgment on this claim, in its Reply
it asserts that it is entitled to summary judgment on this claim because “[n]o least sophisticated
customer could possibly believe that a debt payment will cure the debtor’s negative credit
bureau report” but would know that paying debts helps their credit, such that nobody could
really be confused or misled. Docket no. 16 at 6. Plaintiff notes that this issue was raised
initially in the reply and asserts that the Court should thus not grant summary judgment on it.
However, Plaintiff does respond to the motion on the merits, arguing that the letter is clearly
false and misleading to the least sophisticated consumer, and Plaintiff filed a Sur-Reply. Thus,
the Court finds that Plaintiff had notice and an opportunity to respond to Defendant’s motion
on this claim, and that the issue is ripe for disposition.
Defendant asserts that the statement is not misleading because it does not promise to
fix Plaintiff’s credit; it states only that payment would “begin” to re-establish Plaintiff’s credit.
Plaintiff argues that a consumer would believe that by making payment on the debt, she would
re-establish her credit. Plaintiff argues this is false because in many instances paying off a debt
actually hurts a consumer’s credit score because it make the payment of the debt appear as a
recent negative, negatively affecting the FICO score. Second, she argues that the item was set
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to remain on Plaintiff’s credit report for a short period of time, and so might not have reflected
on her credit at all, let alone re-establish her credit. Plaintiff says there is no dispute this
statement was made to incentivize the consumer to make payment, with the belief it would
help her credit, and therefore it is a false representation.
Plaintiff relies on Knight v. Midland Credit Management, Inc., No. 17-3786, __ F.
App’x __, 2018 WL 5876985 (3d Cir. Nov. 8, 2018), in which the court of appeals reversed a
12(b)(6) dismissal. Plaintiff argued that the statement, “We can’t change the past, but we can
help with your future,” was misleading because it creates a false interpretation that paying off
the debt will improve the debtor’s credit score or credit worthiness, when paying off a
delinquent debt would actually harm the debtor’s credit score. Id. at *3.
In this case, PRG’s statement does not promise to improve a consumer’s credit or
credit score. Even if it could be considered false or misleading because it would in fact have a
short-term effect of negatively affecting a consumer’s credit score, Plaintiff has provided no
evidence to that effect. Knight was decided on a motion to dismiss for failure to state a claim.
This case is at summary judgment. Plaintiff has presented no evidence from which a jury
could conclude that the statement is false and therefore misleading or deceptive. Counsel’s
arguments are not evidence. Thus, the Court grants summary judgment on this claim.
D. Defendant’s counterclaims for attorney’s fees and costs
The Court sua sponte considers summary judgment on Defendant’s counterclaim under
15 USC § 1692k(a)(3), which states, “On a finding by the court that an action under this
section 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.” While
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ordinarily notice and an opportunity to be heard would be needed before granting summary
judgment, the statute makes this an issue for the Court rather than a jury, and it can be decided
at this point as a matter of law such that Defendant would not be harmed by the lack of
opportunity to present evidence. The Court finds that the action was not brought in bad faith or
for the purpose of harassment, and grants summary judgment in favor of Plaintiff on
Defendant’s counterclaim.
Conclusion
Although the Court disagrees with Defendant that Plaintiff’s claims are barred by the
statute of limitations, the Court finds that summary judgment is warranted on the merits of
Plaintiff’s claims. Thus, the Motion for Summary Judgment (docket no. 12) is GRANTED.
The Clerk shall enter Judgment that Plaintiff’s claims are dismissed on the merits with
prejudice and that Plaintiff shall take nothing by her claims. After sua sponte consideration of
Defendant’s counterclaim for fees and costs, Plaintiff is awarded summary judgment on
Defendant’s counterclaim, and Defendant shall take nothing by its counterclaim.
This case is now CLOSED.
It is so ORDERED.
SIGNED this 26th day of December, 2018.

XAVIER RODRIGUEZ
UNITED STATES DISTRICT JUDGE

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