tag:blogger.com,1999:blog-91055363360335602242024-03-24T16:32:07.255-07:00Consumer Debt Litigation (mostly Texas)This blog covers debt collection litigation and practices, and related legal, procedural, and public policy issues, from the perspective of consumers. MOTPhttp://www.blogger.com/profile/15883011307129083993noreply@blogger.comBlogger242125tag:blogger.com,1999:blog-9105536336033560224.post-1044106157267816012020-03-12T18:01:00.002-07:002020-03-12T18:02:48.339-07:00Moss Law Firm sued non-debtor: Not entitled to have wrongful debt collection action dismissed by summary judgment; non-debtor had standing under FDCPA, TDCA to fight back, District Judge rules<br />
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CHRISTOPHER SMITH, Plaintiff,<br />v.<br />MOSS LAW FIRM, P.C., Defendant.</h3>
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<a href="https://scholar.google.co.uk/scholar?scidkt=2010297738103214516&as_sdt=2&hl=en" style="color: #660099;">Civil Action No. 3:18-CV-2449-D.</a></center>
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<b>United States District Court, N.D. Texas, Dallas Division.</b></div>
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February 6, 2020. </center>
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Christopher Smith, Plaintiff, represented by Ramona Veronica Ladwig, Kazerouni Law Group, Anthony Patrick Chester, Hyde & Swigart & Seyed Abbas Kazerounian, Kazerouni Law Group APC.</div>
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Moss Law Firm PC, Defendant, represented by Rebecca Anne Moss, Moss Law Firm PC & Michael Allen Moss, Moss Law Firm PC.</div>
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MEMORANDUM OPINION AND ORDER</h2>
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SIDNEY A. FITZWATER, Senior District Judge.</div>
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In this action by plaintiff Christopher Smith ("Smith") asserting claims for violations of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 <i>et seq.</i> ("FDCPA"), and the Texas Debt Collection Practices Act, Tex. Fin. Code Ann. §§ 392.001-.404 (West 2016) ("TDCPA"), defendant Moss Law Firm, P.C. ("Moss") moves for summary judgment. For the following reasons, the court denies the motion.</div>
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I</h2>
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Moss is a law firm that exclusively represents creditors in suits to collect consumer debts.<sup><a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#[1]" name="r[1]" style="color: #660099;">[1]</a></sup> Before Moss files a collection suit, its employees are required to confirm the debtor's information, including his name and address for service, on at least two current, independent sources, to ensure that Moss attempts to collect the debt from the correct person at the most recent address. In cases where the debtor may have used an alias or alternative name, Moss employees are required to adhere to Moss's Procedure for Skipping Accounts for Suit ("Skiptracing Policy"), which states, in pertinent part:</div>
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If sources show an alternate or more complete name for the consumer other than what downloaded from the client, the account should be reviewed for possibly adding an "aka" to the field containing the consumer's name on the Debtor Tab, using these guidelines: . . . Only add when all sources show a different name other than that in CM[.]</blockquote>
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D. App. 176.</div>
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In October 2017 Moss filed suit in Dallas County Justice Court on behalf of its client, Barclays Delaware Bank ("Barclays"), to collect a delinquent debt owed by Christopher O. Smith II ("Debtor"). Debtor is the son of plaintiff Smith. At all relevant times, Debtor resided with his parents on Sun Valley Drive<sup><a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#[2]" name="r[2]" style="color: #660099;">[2]</a></sup> in Dallas, Texas. Although the name "Christopher O Smith II" is reflected on the credit card account statement attached to the justice-court petition, the petition itself refers only to "Christopher O Smith." D. App. 91, 95.</div>
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On October 14 or October 15, 2017<sup><a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#[3]" name="r[3]" style="color: #660099;">[3]</a></sup> a private process server served Smith with the justice-court petition at his residence on Sun Valley Drive. Although Smith knew that he did not owe the debt at issue and "immediately recognized the lawsuit was for his son, who bore his exact name, but with the suffix `II' attached," P. Br. 5, Smith accepted service.</div>
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On Monday, October 16, 2017 Smith's wife Demetrice contacted Moss to inform it that the collection suit had been improperly filed against her husband. She provided Smith's date of birth to the receptionist who answered her call, and gave his social security number to David Wright, Esquire ("Wright"), the Moss attorney with whom she spoke. Wright "verbally advised that [Moss] was not seeking to collect a debt from [Smith]," P. Br. 9, and informed Demetrice that she could either mail the petition and summons back to Moss or that Moss would have them picked up. Smith maintains that he did not return the documents to Moss because doing so would have "deprived him of the only proof of the suit and service on him." P. Br. 9.</div>
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Despite the alleged assurances from Moss that it was not seeking to collect a debt from Smith, Smith feared that a default judgment would nevertheless be entered against him. Consequently, Smith searched for and retained defense counsel. On October 30, 2017 a return of service was filed in the collection suit.<sup><a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#[4]" name="r[4]" style="color: #660099;">[4]</a></sup> Moss contends that during the process of determining whether the petition should be served on Debtor at an address other than the Sun Valley address, it discovered, for the first time, an out-of-state address for Debtor. Because Moss does not file suit against debtors who live outside of Texas, it internally closed the account and filed a motion to nonsuit<sup><a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#[5]" name="r[5]" style="color: #660099;">[5]</a></sup> the collection action on November 7, 2017.</div>
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Smith then filed the instant lawsuit alleging claims against Moss for violations of the FDCPA and TDCPA. Moss moves for summary judgment. Smith opposes the motion.</div>
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II</h2>
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When a party moves for summary judgment on claims on which the opposing party will bear the burden of proof at trial, the moving party can meet its summary judgment obligation by pointing the court to the absence of admissible evidence to support the nonmovant's claims. <i>See </i><a href="https://scholar.google.co.uk/scholar_case?case=774572446857633137&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Celotex Corp. v. Catrett,</i> 477 U.S. 317, 325 (1986)</a>. Once the moving party does so, the nonmovant must go beyond his pleadings and designate specific facts showing there is a genuine issue for trial. <i>See id.</i> at 324; <a href="https://scholar.google.co.uk/scholar_case?case=5057265714808836310&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Little v. Liquid Air Corp.,</i> 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc)</a> (per curiam). An issue is genuine if the evidence is such that a reasonable jury could return a verdict in the nonmovant's favor. <a href="https://scholar.google.co.uk/scholar_case?case=9272001251064530131&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Anderson v. Liberty Lobby, Inc.,</i> 477 U.S. 242, 248 (1986)</a>. The nonmovant's failure to produce proof as to any essential element of a claim renders all other facts immaterial. <i>See </i><a href="https://scholar.google.co.uk/scholar_case?case=5296952813041803835&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>TruGreen Landcare, L.L.C. v. Scott,</i> 512 F.Supp.2d 613, 623 (N.D. Tex. 2007) (Fitzwater, J.)</a>. Summary judgment is mandatory if the nonmovant fails to meet this burden. <a href="https://scholar.google.co.uk/scholar_case?case=5057265714808836310&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Little,</i> 37 F.3d at 1076</a>.</div>
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For claims or defenses on which the moving party will bear the burden of proof at trial, to be entitled to summary judgment the movant "must establish `beyond peradventure all of the essential elements of the claim or defense.'" <a href="https://scholar.google.co.uk/scholar_case?case=10649543796283292032&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Bank One, Tex., N.A. v. Prudential Ins. Co. of Am.,</i> 878 F. Supp. 943, 962 (N.D. Tex. 1995) (Fitzwater, J.)</a> (quoting <a href="https://scholar.google.co.uk/scholar_case?case=7966911039960929496&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Fontenot v. Upjohn Co.,</i> 780 F.2d 1190, 1194 (5th Cir. 1986)</a>). This means that the movant must demonstrate that there are no genuine and material fact disputes and that it is entitled to summary judgment as a matter of law. <i>See </i><a href="https://scholar.google.co.uk/scholar_case?case=8551277003127400820&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Martin v. Alamo Cmty. Coll. Dist.,</i> 353 F. 3d 409, 412 (5th Cir. 2003)</a>. "The court has noted that the `beyond peradventure' standard is `heavy.'" <a href="https://scholar.google.co.uk/scholar_case?case=7490648943808040354&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Carolina Cas. Ins. Co. v. Sowell,</i> 603 F.Supp.2d 914, 923-24 (N.D. Tex. 2009) (Fitzwater, C.J</a>.) (quoting <a class="gsl_co_link" href="https://scholar.google.co.uk/scholar_case?about=1980929511730476714&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Cont'l Cas. Co. v. St. Paul Fire & Marine Ins. Co.,</i> 2007 WL 2403656, at *10 (N.D. Tex. Aug. 23, 2007) (Fitzwater, J.)</a>).</div>
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III</h2>
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The court begins with Moss's argument that it is entitled to summary judgment because Smith lacks Article III standing.</div>
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A</h2>
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The standing doctrine addresses the question of who may properly bring suit in federal court, and "is an essential and unchanging part of the case-or-controversy requirement of Article III." <a href="https://scholar.google.co.uk/scholar_case?case=10150124802357408838&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Lujan v. Defenders of Wildlife,</i> 504 U.S. 555, 560 (1992)</a>. It "involves both constitutional limitations on federal-court jurisdiction and prudential limitations on its exercise." <a href="https://scholar.google.co.uk/scholar_case?case=1789581117125093979&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Warth v. Seldin,</i> 422 U.S. 490, 498 (1975)</a>. To establish standing, a plaintiff must meet both constitutional and prudential requirements. <i>See, e.g., </i><a href="https://scholar.google.co.uk/scholar_case?case=16180149793751214979&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Procter & Gamble Co. v. Amway Corp.,</i> 242 F.3d 539, 560 (5th Cir. 2001)</a>. Moss contends that Smith lacks constitutional standing,<sup><a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#[6]" name="r[6]" style="color: #660099;">[6]</a></sup> which requires that he establish that he "(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision." <a href="https://scholar.google.co.uk/scholar_case?case=11810453531811593153&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Spokeo, Inc. v. Robins,</i> ___ U.S. ___, 136 S.Ct. 1540, 1547 (2016)</a> (citing <a href="https://scholar.google.co.uk/scholar_case?case=10150124802357408838&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Defenders of Wildlife,</i> 504 U.S. at 560</a>). "The plaintiff, as the party invoking federal jurisdiction, bears the burden of establishing these elements." <i>Id.</i> (citing <a href="https://scholar.google.co.uk/scholar_case?case=14051829728005364054&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>FW/PBS, Inc. v. Dallas,</i> 493 U.S. 215, 231 (1990)</a>).</div>
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B</h2>
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Moss contends that it is entitled to summary judgment because "there is no issue of genuine fact as to whether Plaintiff can prove a causal link between Defendant's alleged violations and any alleged injury in fact or actual damages." D. Br. 14. Regarding Smith's FDCPA claim, Moss posits that Smith lacks standing because he cannot show an injury in fact that created a "real risk of harm" that is fairly traceable to an attempt by Moss to collect a debt from Smith, <i>id.</i> at 16; that Smith's acceptance of service of Barclay's justice court suit against Smith's debtor-son is not tantamount to a debt collection activity in violation of the FDCPA, and did not cause any damage or even a risk of harm to Smith; that any alleged risk of harm or injury to Smith resulted from his own irrational belief that Moss sought to collect a debt from him despite Moss's assurance that it was not seeking payment from Smith, and Moss's clear attempts to ensure collection efforts were not directed at Smith; and that "because Plaintiff was actually aware Defendant was not seeking to collect a debt from him, he cannot show a risk of real harm that is fairly traceable to Defendant's conduct by simply alleging Defendant attempted to collect a debt from him," <i>id.</i> at 17-18.</div>
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With respect to Smith's TDCPA claim, Moss maintains that only those who have sustained actual damages from a TDCPA violation have standing to sue; that Smith does not have evidence of any identifiable economic damages, mental anguish that meets the Texas standard, or attorney's fees and costs associated with the instant case; and that even if Smith could quantify his alleged damages, he cannot show a causal connection between Moss's alleged TDCPA violation and such damages.</div>
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Smith responds that the mere showing of a violation of the FDCPA sufficiently confers standing because it demonstrates that the consumer suffered a type of harm that Congress intended to protect against; that he has alleged numerous forms of actual damages, including loss of money and emotional damages; that the risk of harm created by Moss's FDCPA violation was material, because it could have resulted in a default judgment, which was stressful to Smith; that Smith incurred expenses in the amount of $1,000 in defending against the wrongful debt collection lawsuit; that Smith experienced emotional stress from managing the litigation; that "[t]he record shows that Plaintiff suffered actual damages in expending costs to hire an attorney, taking time away from work to find an attorney, including the severe distress from being wrongly sued and having his address and phone number publicly listed," P. Br. 20; and that, in sum, Smith's concrete injury and actual damages were due to Moss's wrongful persistent prosecution of an unlawful lawsuit.</div>
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Moss contends in reply that, even if Smith were able to show a statutory violation, this violation would alone be insufficient to confer Article III standing; that Smith has failed to show the required causal connection between his alleged damages and Moss's conduct, because Smith had actual knowledge that Moss was not seeking a judgment against him and cannot claim damages allegedly caused by his belief to the contrary; that because there is no evidence that Moss either intended to take a judgment against Smith or represented to Smith that it was seeking a judgment against him, the pending justice court lawsuit posed no real risk of harm to Smith; that the $1,000 retainer Smith paid to his counsel was for the federal case against Moss, so Smith cannot claim these fees as actual damages incurred in defending the underlying justice court suit; that Moss has failed to point to any evidence that would support mental anguish to the degree required by the TDCPA; and that Smith has provided no support in the record for his claimed economic damages or that these alleged damages were caused by Moss's alleged violation of the TDCPA.</div>
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The court first addresses whether Smith has standing to bring his FDCPA claim, focusing primarily on whether he has created a genuine issue of material fact regarding the injury element of Article III standing.</div>
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1</h2>
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"To establish injury in fact, a plaintiff must show that he or she suffered `an invasion of a legally protected interest' that is `concrete and particularized' and `actual or imminent, not conjectural or hypothetical." <a href="https://scholar.google.co.uk/scholar_case?case=11810453531811593153&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Spokeo,</i> 136 S.Ct. at 1548</a> (quoting <a href="https://scholar.google.co.uk/scholar_case?case=10150124802357408838&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Defenders of Wildlife,</i> 504 U.S. at 560</a>). "A `concrete' injury must be `<i>de facto</i>'; that is, it must actually exist." <i>Id.</i> (citation omitted). Thus while an injury need not be tangible, it cannot be merely abstract or hypothetical. <i>Id.</i> at 1548-49. "[T]he violation of a procedural right granted by statute can be sufficient in <i>some</i> circumstances to constitute injury in fact." <i>Id.</i> at 1549 (emphasis added). "But deprivation of a procedural right without some concrete interest that is affected by the deprivation . . . is insufficient to create Article III standing." <a href="https://scholar.google.co.uk/scholar_case?case=16579785065789479909&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Summers v. Earth Island Inst.,</i> 555 U.S. 488, 496 (2009)</a>; <i>see also </i><a href="https://scholar.google.co.uk/scholar_case?case=11810453531811593153&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Spokeo,</i> 136 S.Ct. at 1549</a> ("[Plaintiff] could not, for example, allege a bare procedural violation, divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III."); <a href="https://scholar.google.co.uk/scholar_case?case=5535683786861392591&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Sayles v. Advanced Recovery Sys., Inc.,</i> 865 F.3d 246, 250 (2017)</a> (affirming district court's holding that plaintiff had standing to bring FDCPA claim because defendant's violation of 15 U.S.C. § 1692e(8) "exposed [plaintiff] to a real risk of financial harm caused by an inaccurate credit rating.").</div>
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Courts across the country, including in the Fifth Circuit, "have considered whether a violation of the FDCPA itself confers standing on a plaintiff, and they have answered that question in the affirmative." <a class="gsl_co_link" href="https://scholar.google.co.uk/scholar_case?about=14152071187185149944&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Linehan v. Allianceone Receivables Mgmt., Inc.,</i> 2016 WL 4765839, at *7 (W.D. Wash. Sept. 13, 2016)</a> (collecting cases); <i>see also, e.g., </i><a class="gsl_co_link" href="https://scholar.google.co.uk/scholar_case?about=5673222550479673025&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Church v. Accretive Health, Inc.,</i> 654 Fed. Appx. 990, 995 (11th Cir. 2016)</a> ("[the plaintiff] has sufficiently alleged that she has sustained a concrete—<i>i.e.,</i> `real'—injury because she did not receive the allegedly required [FDCPA] disclosures."); <a href="https://scholar.google.co.uk/scholar_case?case=11374323724155411586&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Tourgeman v. Collins Fin. Servs.,</i> <i>Inc.,</i> 755 F.3d 1109, 1116 (9th Cir. 2014)</a> (holding that "the violation of [the] right not to be the target of misleading debt collection communications . . . constitutes a[n] injury under Article III"); <a class="gsl_co_link" href="https://scholar.google.co.uk/scholar_case?about=7998454894713154947&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>McLain v. Head Mercantile Co.,</i> 2017 WL 3710073, at *15 (M.D. La. Aug. 28, 2017)</a> (holding that plaintiff's allegations that she received debt collection letter that did not identify sender and that charged a fee were sufficient for standing because those are the types of harms the FDCPA is meant to address); <a href="https://scholar.google.co.uk/scholar_case?case=3734378897889646790&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Bautz v. ARS Nat'l Servs., Inc.,</i> 226 F.Supp.3d 131, 141, 143 (E.D.N.Y. 2016)</a> (noting that "[i]n cases where a plaintiff sues to enforce a substantive legal right conferred by statute, she has standing to pursue that claim without need to allege a `material risk of harm' because the infringement of that right constitutes, in and of itself, a concrete injury," and holding, in context of FDCPA claim, that "adequately alleging a `false, deceptive, or misleading representation' that is materially misleading to the least sophisticated consumer thus satisfies the concrete injury component of Article III"); <a class="gsl_co_link" href="https://scholar.google.co.uk/scholar_case?about=15562681056301018281&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Prindle v. Carrington Mortg. Servs., LLC,</i> 2016 WL 4369424, at *11 (M.D. Fla. Aug. 16, 2016)</a> ("[B]ecause [plaintiff] had a personal statutory right to be free from abusive debt-collection practices, and because she has alleged facts plausibly showing that [defendant] violated that right, she `need not allege any additional harm.'" (citation omitted)); <a href="https://scholar.google.co.uk/scholar_case?case=16801723581510859902&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Irvine v. I.C. Sys., Inc.,</i> 198 F.Supp.3d 1232, 1237 (D. Colo. 2016)</a> ("Through the FDCPA, Congress created statutory legal rights to be free from certain abusive debt collection practices and a debt collector's violation of those rights may constitute a concrete and particularized injury. . . . Plaintiff's lawsuit does not seek to merely vindicate an interest in defendant's procedural compliance with the FDCPA; rather, plaintiff's suit is based on her claim that defendant violated her substantive rights under the FDCPA by its conduct and communications regarding plaintiff's debt.").</div>
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In this lawsuit, Smith asserts that Moss violated the FDCPA by, <i>inter alia,</i> naming him in the collection petition, serving him with process, and failing to immediately dismiss the collection action upon being notified that it had sued the incorrect party. Because Smith has alleged harm of the type the FDCPA was meant to address, <i>i.e.,</i> abusive debt-collection practices, a reasonable jury<sup><a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#[7]" name="r[7]" style="color: #660099;">[7]</a></sup> could find that he suffered an injury for purposes of satisfying Article III standing.</div>
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Alternatively, even if Moss is correct that, under <i>Sayles,</i> Smith is required to show, <i>in addition</i> to the FDCPA violation itself, that he suffered a "risk of real harm," D. Br. 15 (citing <a href="https://scholar.google.co.uk/scholar_case?case=5535683786861392591&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Sayles,</i> 865 F.3d at 250</a>), Smith has met that burden. Smith has at least produced evidence that would enable a reasonable jury to find that he had to deal with a lawsuit that improperly named him as a party, "with its attendant legal costs, anxiety, and worry." <a href="https://scholar.google.co.uk/scholar_case?case=8712458617837331083&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Boerner v. LVNV Funding LLC,</i> 326 F.Supp.3d 665, 675 (E.D. Wis. 2018)</a>; <i>see also, e.g., </i><a class="gsl_co_link" href="https://scholar.google.co.uk/scholar_case?about=744125846073164414&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Ben-Davies v. Blibaum & Assocs., P.A.,</i> 695 Fed. Appx. 674, 676 (4th Cir. 2017)</a> (holding, in the context of FDCPA claim, that emotional distress is a concrete injury sufficient to support Article III standing); <i>Camaj v. Makower Abbate Guerra Weggner Vollmer PLLC,</i> 2019 WL 6037597, at *4 (E.D. Mich. Nov. 14, 2019) (holding that plaintiff's assertion that, as a result of defendant's FDCPA violations, "he suffered both `emotional distress' (including `anxiety') and `physical symptoms including weakened nails and hair loss," sufficiently alleged concrete and particularized injuries for purposes of FDCPA claim); <a href="https://scholar.google.co.uk/scholar_case?case=1190748938149127240&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Edeh v. Midland Credit Mgmt., Inc.,</i> 748 F.Supp.2d 1030, 1041 (D. Minn. 2010)</a> ("A consumer who has suffered emotional distress has suffered [actionable damage under the FDCPA] even if the emotional distress was not severe."). Even if Moss is correct that there is no evidence that Moss intended to take a judgment against Smith or that it represented to Smith that it sought a judgment against him, a reasonable jury could find that Smith experienced stress or anxiety due to the fact that he was named in the justice-court petition, he was served with the lawsuit, and, after contacting Moss to report the mistake, the justice court suit was not promptly dismissed. "Thus, unlike <i>Spokeo,</i> here the purported procedural violations are only the premise, not the sum total, of the harm to [Smith]." <a href="https://scholar.google.co.uk/scholar_case?case=8712458617837331083&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Boerner,</i> 326 F.Supp.3d at 675</a> (citing <a href="https://scholar.google.co.uk/scholar_case?case=16486288267723668427&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Evans v. Portfolio Recovery Assocs., LLC,</i> 889 F.3d 337, 344 (7th Cir. 2018)</a>).</div>
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Moss also challenges the causation element<sup><a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#[8]" name="r[8]" style="color: #660099;">[8]</a></sup> of standing with respect to Smith's FDCPA claim. Moss maintains, <i>inter alia,</i> that Smith was actually aware that Moss was not seeking to collect a debt from him, and that any risk of harm or injury resulted from Smith's "own irrational belief that Defendant sought to collect a debt from him despite Defendant's assurance that it was not seeking payment from Plaintiff and Defendant's clear attempts to ensure collection efforts were not directed at Plaintiff." D. Br. 17.</div>
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To satisfy the causation element of standing, Smith must establish that his putative injury is fairly traceable to Moss's allegedly unlawful actions. The injury must not be the result of the independent action of some third party not before the court. <a href="https://scholar.google.co.uk/scholar_case?case=10150124802357408838&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Defenders of Wildlife,</i> 504 U.S. at 560</a>. At this stage of the analysis, although the causal connection "cannot be too speculative, or rely on conjecture about the behavior of other parties, [it] need not be so airtight . . . as to demonstrate that [Smith] would succeed on the merits." <a class="gsl_co_link" href="https://scholar.google.co.uk/scholar_case?about=5892393421292521289&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Coal. for a Sustainable Delta v. Carlson,</i> 2008 WL 2899725, at *5 (E.D. Cal. July 24, 2008)</a> (quoting <a href="https://scholar.google.co.uk/scholar_case?case=3906464721630413284&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Ocean Advocates v. U.S. Army Corps of Eng'rs,</i> 402 F.3d 846, 860 (9th Cir. 2005)</a>). "It is inappropriate for the court to focus on the merits of the case when considering the issue of standing. In examining the causation element of standing, the question to be asked is whether the line of causation between [the plaintiff's] injury and [the defendant's conduct] is too attenuated." <a href="https://scholar.google.co.uk/scholar_case?case=13249073762525866864&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Hanson v. Veterans Admin.,</i> 800 F.2d 1381, 1385 (5th Cir. 1986)</a> (internal quotation marks and citation omitted)).</div>
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Smith has proffered sufficient evidence to create a genuine issue of material fact regarding whether his emotional and other injuries are fairly traceable to Moss's alleged FDCPA violation without requiring speculation regarding the independent actions of third parties not before the court. Accordingly, because Smith has met his summary judgment burden with respect to the injury and causation elements of Article III standing, the court concludes that Moss is not entitled to summary judgment on Smith's FDCPA claim on the ground that Smith lacks constitutional standing.</div>
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The court next considers whether Smith has standing to bring his TDCPA claim.<sup><a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#[9]" name="r[9]" style="color: #660099;">[9]</a></sup></div>
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Moss contends that because the TDCPA requires that a plaintiff show actual damages as an element of his claim, and because Smith has failed to provide evidence of any identifiable economic damages, mental anguish that meets the Texas standard, or attorney's fees and costs associated with the instant case, he does not have standing to assert his TDCPA claim. The court disagrees.</div>
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The court has already held that Smith has created a genuine issue of material fact on the question whether he suffered an injury in fact that is fairly traceable to Moss's conduct. <i>See supra</i> § III (C). Whether Smith can ultimately prove actual damages as a result of Moss's alleged violations of the TDCPA is a question that goes to the <i>merits</i> of Smith's claims, and "[i]t is inappropriate for the court to focus on the merits of the case when considering the issue of standing." <a class="gsl_co_link" href="https://scholar.google.co.uk/scholar_case?about=10377563642752717286&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Montfort Square Shopping Ctr., Ltd. v. Goodyear Tire & Rubber Co.,</i> 2012 WL 2358163, at *5 (N.D. Tex. June 21, 2012) (Fitzwater, C.J</a>.) (quoting <a href="https://scholar.google.co.uk/scholar_case?case=13249073762525866864&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Hanson,</i> 800 F.2d at 1385</a>); <i>see also </i><a href="https://scholar.google.co.uk/scholar_case?case=9417482228356030283&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Duarte ex rel. Duarte v. City of Lewisville, Tex.,</i> 759 F.3d 514, 520 (5th Cir. 2014)</a> (holding that "[t]he district court erroneously granted summary judgment for lack of standing because it conflated the actual-injury inquiry for standing purposes with the underlying merits of the Duartes' constitutional claims."); <a href="https://scholar.google.co.uk/scholar_case?case=14099538308472226132&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Cole v. Gen. Motors Corp.,</i> 484 F.3d 717, 723 (5th Cir. 2007)</a> ("Whether recovery for [the plaintiffs' breach of contract] claim is permitted under governing law is a separate question; it is sufficient for standing purposes that the plaintiffs seek recovery for an economic harm that they allege they have suffered."); <a href="https://scholar.google.co.uk/scholar_case?case=13365340470883923328&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>BCC Merch. Sols., Inc. v. Jet Pay, LLC,</i> 129 F.Supp.3d 440, 464 (N.D. Tex. 2015) (Boyle, J.)</a> ("In fact, the issue Defendants raise here—whether BCC can recover certain damages stemming from Defendants' alleged violations of BCC's contractual, common law, and statutory rights—ultimately goes to the merits of BCC's claims, and therefore, does not even implicate Article III standing."). Moreover, even if, as Moss argues, Smith cannot prove that he suffered "any identifiable economic damages, mental anguish that meets the Texas standard, or attorney's fees and costs associated with the instant case," D. Br. 19, this would not necessarily mean that Smith did not suffer an injury in fact. As explained, Smith has at least produced evidence that he experienced stress and anxiety as a result of Moss's alleged TDCPA violation. Accordingly, Smith has standing to pursue his TDCPA claims, and the court denies Moss's motion for summary judgment on the ground that Smith lacks Article III standing.</div>
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IV</h2>
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Having determined that Smith has met his summary judgment burden on the question of Article III standing, the court now turns to the merits of Smith's claims, beginning with Moss's contention that because its collection activities were not directed at Smith, he lacks statutory standing<sup><a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#[10]" name="r[10]" style="color: #660099;">[10]</a></sup> to pursue his FDCPA claim.</div>
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A</h2>
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Although a primary purpose of the FDCPA is "to promote consistent State action to protect consumers against debt collection abuses," the FDCPA does not limit recovery to debtors. <i>See</i> 15 U.S.C. § 1692(e).<sup><a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#[11]" name="r[11]" style="color: #660099;">[11]</a></sup> Indeed, 15 U.S.C. § 1692k, which defines civil liability for FDCPA violations, provides that "any debt collector who fails to comply with any provision of [the FDCPA] with respect to any person is liable to such person[.]" <i>Id.</i> § 1692k(a). District courts in this circuit and others have recognized that "under certain circumstances, third-party, non-debtors have standing to bring claims under the FDCPA." <a class="gsl_co_link" href="https://scholar.google.co.uk/scholar_case?about=6187112514733391731&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Prophet v. Myers,</i> 2009 WL 1437799, at *3 (S.D. Tex. May 21, 2009)</a> (collecting cases).</div>
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In <i>Smith v. Moss Law Firm, P.C.</i> (<i>Smith I</i>), 2019 WL 201839, at *3 (N.D. Tex. Jan. 15, 2019) (Fitzwater, J.), in the context of Moss's Rule 12(b)(6) motion to dismiss, the court held that Smith had adequately pleaded statutory standing to pursue his FDCPA claim.<sup><a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#[12]" name="r[12]" style="color: #660099;">[12]</a></sup> The court explained,</div>
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[t]o state a claim under the FDCPA, Smith must plausibly plead that a debt collector has failed to comply with a provision of the FDCPA <i>with respect to</i> him. <i>See</i> 15 U.S.C. § 1692k(a). Smith alleges that Moss sought to collect a debt that Smith did not owe to Barclays; that Moss initiated a lawsuit against Smith to collect this alleged debt; that Smith informed Moss of the error; and that Moss nevertheless continued to pursue the lawsuit against Smith. Moss is correct that the account statement attached to the justice-court petition bears the name "Christopher O[.] Smith II." But that fact does not undermine Smith's allegations of collection activity directed at him—especially considering that the caption and party description within the justice-court petition bear the name "CHRISTOPHER O SMITH," without the "II" addition. Reading Smith's complaint and the justice-court petition under the proper standard, Smith has adequately pleaded that Moss's actions were directed toward him.</blockquote>
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<i>Id.</i> at *4 (alterations in original)</div>
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B</h2>
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In its motion for summary judgment, Moss reurges its standing argument from <i>Smith I,</i> contending that its business records, along with Smith's own admissions, show that there is no genuine issue of material fact as to whether Moss aimed its collection efforts at Smith. Moss maintains that when it received the case from its client (Barclays), the file bore the name "Christopher O. Smith" in conjunction with the debtor's date of birth and social security number; that its own research also indicated that the debtor could be identified as "Christopher O. Smith," and the justice-court petition was therefore correctly captioned; that the fact that another individual with the same name resided at the same address and accepted service of the original suit to collect the debt does not mean that Moss sued the wrong individual or directed its collection efforts toward Smith; that although Moss did not include the suffix "II" on the caption, Smith admits that he read the petition and attachments in their entirety, including the attached account statement with the name "Christopher O. Smith, II,"; that Smith and his wife knew that Smith did not have a Barclay's account; that as soon as Moss became aware that the process server had served Smith and not Smith's son, Moss immediately assured Smith that it was not seeking to collect a debt from him and had not filed the lawsuit against him; and that Smith had no reasonable belief that Moss was attempting to collect a debt from him and cannot maintain an FDCPA claim based only on the omission of a suffix in the caption of the justice-court petition. In sum, Moss argues that</div>
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the fact that [Smith] improperly accepted service of a suit not filed against him does not amount to [Moss] aiming a debt collection activity at [Smith]. Rather, [Moss] had no intent to collect a debt from [Smith] and, in fact, made no attempts to collect a debt from [Smith]; accordingly, [Smith] does not have standing to pursue FDCPA claims against [Moss].</blockquote>
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D. Br. 13. Regarding Smith's argument that Moss violated the FDCPA by refusing to confirm that the lawsuit would be dismissed, Moss contends that the fact that Smith chose to believe that a lawsuit was pending against him does not amount to a debt collection activity by Moss directed at Smith or somehow require Moss to dismiss the suit.</div>
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Smith responds that because the "debt agreement" and social security number provided by Barclays bore the correct name with a "II" suffix, Moss cannot credibly claim that its own research indicated that the debtor could be named "Christopher O. Smith," without the suffix, and that genuine issues of fact are raised as to whether the misnomer was intentional; that Moss reviewed the agreement with Debtor's name and his social security number in skiptracing the account name, and that "[g]iven that Moss reviewed the correct debtor's name and social security number in skiptracing the account, genuine issues of fact are raised as to whether it intentionally disregarded the information before it so it could target Smith," P. Br. 15; that Moss's claim that it nonsuited the justice court suit in November 2017 because it discovered an out-of-state address for the Debtor is disingenuous and suggests that Moss "intentionally pick[s] and choos[es]" which name to run in its system, <i>id.;</i> that Moss persisted in the lawsuit after verifying the wrong party was sued and served; that Moss attempted to mislead or deceive Smith into believing that the mailing of the process papers back to Moss would resolve the issue; that given the numerous irregularities, the record raises genuine issues of material fact on the issue whether Moss directed debt collection activities against Smith; and that because Moss did not dismiss the case even after full knowledge that Smith was served and that the suit was pending against him and not the intended debtor, Smith was treated as an alleged debtor with standing to bring an FDCPA claim.</div>
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Moss replies that the "debt agreement" to which Smith refers is actually a single monthly account statement that proves nothing about what Moss found when skiptracing the account; that the client (Barclays) provided the name "Christopher O. Smith," <i>without the suffix,</i> when it placed the account, so that Smith's contention that Moss's social security information bore the correct debtor's name with a "II" suffix is incorrect; that Moss's Skiptracing Policy requires an employee skiptracing the account to add an alias or a/k/a different from the name given by Barclays only when <i>all</i> sources show an alternative name for a debtor; that Smith has "failed to direct the Court to any evidence that proves Defendant could not have legitimately identified Plaintiff's debtor-son as `Christopher O. Smith' and, thus, cannot create an issue of fact as to whether the `misnomer was intentional,'" D. Reply 6; that there is no evidence that Moss knew prior to serving Smith that two individuals with the same or similar names resided at the Sun Valley address or that Moss employed a scheme to target Smith and his assets by intentionally mis-captioning the justice court petition; that the undisputed evidence shows that Moss uses the consumer's <i>social security number</i> and <i>address</i> to confirm a debtor's information, it is undisputed that the social security number and address provided by Barclays was that of Debtor, and nothing indicates that Moss searched skiptracing sources by inputting Smith's or Debtor's <i>names</i> to confirm account information; that the skiptrace that revealed an out-of-state address for Debtor was completed <i>after</i> Smith made Moss aware that two individuals with the same or similar name resided at the Sun Valley address, and the fact that the skiptracing process performed by different employees at different dates produced one different result does not, by itself, create a genuine issue of fact as to Moss's intent; that after Smith's wife called Moss, nothing in the record indicates that Moss intended to proceed with a suit <i>against Smith;</i> that Moss requested that Smith return the papers he was served with because they included sensitive data; and that Smith's only "proof" that Moss intentionally filed suit against <i>him</i> and not Debtor is that the caption on the justice court petition stated "Christopher O. Smith," but the record indicates that Moss reasonably believed Debtor went by the name "Christopher O. Smith," as provided by Barclays, and Smith has not shown that Debtor does not, in fact, use this name.</div>
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The FDCPA provides that "[a] debt collector may not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt." 15 U.S.C. § 1692d (emphasis added). The FDCPA also provides that "any debt collector who fails to comply with any provision of this subchapter with respect to <i>any person</i> is liable to such person." 15 U.S.C. § 1692k(a) (emphasis added). "Persons subjected to abusive debt collection by a debt collector who was attempting to collect a debt from another person may bring an action against the debt collector under sections of the FDCPA not specifically limited to consumers." <i>Amelina v. Mfrs. & Traders Tr. Co.,</i> 2016 WL 3982483, at *8 (S.D. Cal. July 21, 2016) (citing cases); <i>see also </i><a href="https://scholar.google.co.uk/scholar_case?case=5257717757143743899&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Wright v. Fin. Serv. of Norwalk, Inc.,</i> 22 F.3d 647, 649-50 (6th Cir. 1994)</a> ("[A]bsent a limitation in the substantive provisions, the ordinary and common understanding of § 1692k is that any aggrieved party may bring an action under § 1692e. . . . [T]he purpose of the FDCPA and the legislative history of the act also support this conclusion."); <a href="https://scholar.google.co.uk/scholar_case?case=5834022770760465788&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Eley v. Evans,</i> 476 F.Supp.2d 531, 532-33 (E.D. Va. 2007)</a> (holding that "<i>any</i> aggrieved party may bring an action under the FDCPA" and therefore the plaintiff who was not the consumer-debtor had standing to sue under 15 U.S.C. §§ 1692d, 1692e, and 1692f).<sup><a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#[13]" name="r[13]" style="color: #660099;">[13]</a></sup> Many courts have concluded that "any person who comes in contact with the proscribed debt collection practices may bring a claim under certain sections of the FDCPA." <a class="gsl_co_link" href="https://scholar.google.co.uk/scholar_case?about=17530444136160940968&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Siberesky v. Borah, Goldstein, Altschuler & Schwartz, P.C.,</i> 2000 WL 1448635, at *4 (S.D.N.Y. Sept. 28, 2000)</a> (citation omitted). In order for a non-consumer to have standing under the FDCPA, however, the alleged debt collection activities must have been directed at the plaintiff. <i>See Mathis v. Omnium Worldwide,</i> 2005 WL 3159663, at *3 (D. Or. Nov. 27, 2005) (holding that the FDCPA "does not limit causes of actions to those brought by a `consumer,' so long as the alleged conduct was directed at the plaintiff"); <a href="https://scholar.google.co.uk/scholar_case?case=13105329417379622995&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Dewey v. Assoc. Collectors, Inc.,</i> 927 F. Supp. 1172, 1174 (W.D. Wis. 1996)</a> (holding that Congress "did not intend to provide damages to those who did not experience any abusive behavior").</div>
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A reasonable jury could find that Moss directed its collection activities at Smith. Although Moss contends that it intended to sue the Debtor, not Smith, the summary judgment record contains evidence, for example, that the caption and party description in the justice-court petition refer to "CHRISTOPHER O SMITH," not "Christopher O. Smith II"; that Smith was served with process; and that the lawsuit against Smith was not dismissed until several weeks after the misidentification was brought to Moss's attention. The evidence in the summary judgment record is sufficient to support the reasonable finding that Smith was subjected to the challenged debt collection practices<sup><a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#[14]" name="r[14]" style="color: #660099;">[14]</a></sup> and thus has standing to sue under 15 U.S.C. § 1692k. Accordingly, the court denies Moss's motion for summary judgment on this ground.</div>
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Finally, the court considers Moss's contention that it is entitled to summary judgment on Smith's FDCPA and TDCPA claims based on the bona fide error affirmative defense.</div>
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Generally speaking, the FDCPA is a strict liability statute, which does not require the plaintiff to show that the violation was either knowing or intentional. <i>See, e.g., </i><a href="https://scholar.google.co.uk/scholar_case?case=915637975706692088&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Vangorden v. Second Round, Ltd. P'ship,</i> 897 F.3d 433, 437-38 (2d Cir. 2018)</a> ("The FDCPA is `a strict liability statute' and, thus, there is no need for a plaintiff to plead or prove that a debt collector's misrepresentation of a debt obligation was intentional." (citation omitted)); <a href="https://scholar.google.co.uk/scholar_case?case=13029886927522735446&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Stratton v. Portfolio Recovery Assocs., LLC,</i> 770 F.3d 443, 448-49 (6th Cir. 2014)</a> ("The FDCPA is a strict-liability statute: A plaintiff does not need to prove knowledge or intent[.]"). The FDCPA provides a "narrow exception to strict liability," however, for bona fide errors. <a href="https://scholar.google.co.uk/scholar_case?case=3928774407677620154&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Clark v. Cap. Credit & Collection Servs., Inc.,</i> 460 F.3d 1162, 1177 (9th Cir. 2006)</a>. Section 1692k(c) provides,</div>
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[a] debt collector may not be held liable in any action brought under this subchapter if the debt collector shows by a preponderance of 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.</blockquote>
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15 U.S.C. § 1692k(c). Using nearly identical language, the TDCPA also provides a defense for debt collectors accused of statutory violations upon proof that the "the action complained of resulted from a bona fide error that occurred notwithstanding the use of reasonable procedures adopted to avoid the error." Tex. Fin. Code Ann. § 392.401 (West 2016).</div>
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The bona fide error defense is an affirmative defense for which the defendant has the burden of proof. <a href="https://scholar.google.co.uk/scholar_case?case=5373470113725580436&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Reichert v. Nat'l Credit Sys., Inc.,</i> 531 F.3d 1002, 1006 (9th Cir. 2008)</a>; <a class="gsl_co_link" href="https://scholar.google.co.uk/scholar_case?about=13729716833941364137&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Wallace Roofing, Inc. v. Benson,</i> 2013 WL 6459757, at *7 (Tex. App. Nov. 27, 2013, pet. denied)</a> (holding that under the TDCPA, defendant "had the burden of pleading and proving bona fide error as a defense"). To be entitled to the defense, the defendant must first establish that the violation was "not intentional." <i>See</i> 15 U.S.C. § 1692k(c); <a href="https://scholar.google.co.uk/scholar_case?case=7149216388878614970&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Johnson v. Riddle,</i> 443 F.3d 723, 727-28 (10th Cir. 2006)</a>. This inquiry is inherently subjective and "becomes principally a credibility question" as to whether the defendant intended to violate the FDCPA. <a href="https://scholar.google.co.uk/scholar_case?case=7149216388878614970&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Johnson,</i> 443 F.3d at 728</a>. Once the subjective intent is established, the defendant must also demonstrate that the error was "bona fide" and that it occurred "notwithstanding the maintenance of procedures reasonably adapted to avoid any such error." <i>See</i> 15 U.S.C. § 1692k(c); <a href="https://scholar.google.co.uk/scholar_case?case=7149216388878614970&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Johnson,</i> 443 F.3d at 729</a>. "Whereas the intent prong of the bona fide error defense is a subjective test, the bona fide and the procedures prongs are necessarily objective tests." <a href="https://scholar.google.co.uk/scholar_case?case=7149216388878614970&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Johnson,</i> 443 F.3d at 729</a> (citations omitted). This is a "fact-intensive inquiry." <a href="https://scholar.google.co.uk/scholar_case?case=10444904797941111904&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Owen v. I.C. Sys., Inc.,</i> 629 F.3d 1263, 1274 (11th Cir. 2011)</a>; <i>see also, e.g., </i><a class="gsl_co_link" href="https://scholar.google.co.uk/scholar_case?about=1600112302930201315&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Allen v. Scott,</i> 2011 WL 13079866, at *5 (N.D. Tex. May 18, 2011) (Furgeson, J.)</a> (denying summary judgment based on bone fide error defense, and noting that "[a]n inquiry such as this one, which involves questions of intent, reasonableness, and [defendant]'s credibility, is more appropriately left for the jury to decide."); <a class="gsl_co_link" href="https://scholar.google.co.uk/scholar_case?about=16158705096512037974&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Soren v. Equable Ascent Fin., LLC,</i> 2012 WL 2317362, at *4 (D. Utah June 18, 2012)</a> ("prevailing on the [bona fide error] defense has proven elusive . . . as it requires a fact-intensive examination . . . combined with an evaluation of the reasonableness of the procedures." (alterations in original) (citation omitted)).</div>
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Moss contends that the court should grant summary judgment on all claims because even if Smith could show a statutory violation, it resulted from a bona fide error despite Moss's procedures reasonably adopted to avoid such error. Moss points to its Skiptracing Policy and argues that requiring employees to confirm account information using multiple sources and adding an alias only when indicated by all sources is a procedure reasonably crafted to avoid using the wrong name on a debt collection communication, including the caption of a petition; that Moss's omission of the suffix from Smith's name is the type of human error that the bona fide error defense was designed to address; that its records indicate that Debtor's account was skiptraced following Moss's procedures on numerous occasions and that Moss's skiptracing efforts indicate that the name and address for service provided by Barclays were correct and do not indicate the circumstances were satisfied to add an "a/k/a" to the account; that even if Moss's skiptracing efforts would have revealed the name "Christopher O. Smith, II" on all sources and an a/k/a should have been added, any failure to do so by a Moss employee is the result of an unintentional, bona fide error; and that there is no indication that the omission of the suffix "II" was an intentional decision by Moss to collect a debt from an improper party.</div>
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Smith responds that Moss's wrongful collection was intentional: Moss intentionally chose to put the name "Christopher O. Smith" in its skiptracing system despite the fact that the contract and social security number reflected that the Debtor's correct name was "Christopher O. Smith, II"; Moss's system does not have a mechanism for ensuring that the name on the pleadings corresponds to the name on the debt agreement or for ensuring that the name on the debt agreement is the name skiptraced on the account; the skiptracing system can be manipulated and "works only as good as the information intentionally inputted into the system," P. Br. 22; the process server served Smith on a Sunday, in violation of Rule 6 of the Texas Rules of Civil Procedure; Moss instructed Smith to mail back the papers after he was served, which was deceptive because mailing back the process would not have dismissed the lawsuit and could have led to a default judgment; Moss made the choice not to take any action, aside from making statements, to truly assure Smith that no action would be taken against him; and Moss chose not to amend, correct, or dismiss the lawsuit at any point after learning about the misnomer in the justice-court petition. Regarding the maintenance of reasonable procedures, Smith contends that Moss's system lacked relevant procedures to avoid the numerous types of errors involved in this matter (i.e., the use of a misnomer on the pleadings, the service of pleadings on the wrong party due to the misnomer, and false statements of law in communications with Smith), including procedures to help avoid human or clerical factual mistakes in the handling of the file.</div>
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In its reply, Moss contends that Smith misstates the law and the evidence. Regarding the latter, Moss explains that it does not skiptrace accounts by searching a consumer's name; that Smith's contention that Moss does not use human oversight of its system is defied by the record; that internal account notes verify that an employee skiptraced the Debtor's account on several occasions to confirm the information in Moss's internal system, and that when Smith's wife called stating that the petition was mis-captioned, Moss took steps to ensure the return of service was not filed and began an investigation as to why an "a/k/a" was not added to the petition; that Moss never gave legal advice to Smith, informed Smith that he was not the intended party of the lawsuit, offered to have the papers served on him picked up, and indicated that it intended to go back to the justice court to amend or reissue citation to resolve the issue. Regarding its procedures, Moss maintains that it relied on Barclays' representation that the consumer's name was "Christopher O. Smith" when drafting the petition, and that it implemented a skiptracing policy reasonably developed to avoid errors in the name on the petition, and Smith has produced no evidence "that any misnomer on the petition was anything more than a factual or clerical error and has failed to show that the Skiptracing Policy that denotes how to confirm a consumer name and when to add an a/k/a is not reasonably adapted to avoid such a misnomer." D. Reply 24.</div>
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Because Moss will have the burden of proof on the bona fide error affirmative defense at trial, to obtain summary judgment, it must satisfy the "heavy" beyond peradventure standard. Although a reasonable jury could certainly find that Moss is entitled to the protection of the bona fide error defense, the court cannot say that this is the <i>only</i> reasonable finding that the jury could make from the evidence.</div>
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Regarding the first and second elements of the defense, a reasonable jury could find that, to the extent Moss's conduct after the October 16, 2017 telephone call violated the FDCPA or TDCPA,<sup><a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#[15]" name="r[15]" style="color: #660099;">[15]</a></sup> the conduct was intentional and not the result of a bona fide error. Regarding the third element, whether Moss's process for verifying account information, including its Skiptracing Policy, was "reasonably adapted to avoid" errors such as occurred here due to the account holder's use of an alias or alternate name is a question of fact for the jury to decide.<sup><a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#[16]" name="r[16]" style="color: #660099;">[16]</a></sup> Because Moss has not carried its heavy burden of establishing the bona fide error affirmative defense beyond peradventure, the court denies Moss's motion for summary judgment insofar as based on this defense.<sup><a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#[17]" name="r[17]" style="color: #660099;">[17]</a></sup></div>
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Accordingly, for the reasons explained, the court denies Moss's motion for summary judgment.</div>
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SO ORDERED.</div>
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<a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#r[1]" name="[1]" style="color: #660099;">[1]</a> In deciding Moss's motion for summary judgment, the court views the evidence in the light most favorable to Smith as the summary judgment nonmovant and draws all reasonable inferences in his favor. <i>See, e.g., </i><a href="https://scholar.google.co.uk/scholar_case?case=11572409675325253977&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Owens v. Mercedes-Benz USA, LLC,</i> 541 F.Supp.2d 869, 870 n.1 (N.D. Tex. 2008) (Fitzwater, C.J</a>.) (citing <a href="https://scholar.google.co.uk/scholar_case?case=4409588918178873688&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>U.S. Bank Nat'l Ass'n v. Safeguard Ins. Co.,</i> 422 F.Supp.2d 698, 701 n.2 (N.D. Tex. 2006) (Fitzwater, J.)</a>).</div>
<div style="position: relative;">
<a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#r[2]" name="[2]" style="color: #660099;">[2]</a> Although the specific residence address is disclosed in the summary judgment record, the court will refer to the address by street name for privacy protection purposes. <i>See</i> Fed. R. Civ. P. 5.2 (addressing privacy protection in civil cases); Fed. R. Crim. P. 49.1(a)(5) (providing in a criminal case that an individual's home address be limited to "the city and state of the home address.").</div>
<div style="position: relative;">
<a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#r[3]" name="[3]" style="color: #660099;">[3]</a> Smith contends that the record shows that he was served with process on Sunday, October 15, 2017. Although Smith does not cite any evidence in support of this assertion, he refers in response to Moss's statement of facts to the "Transcript of the October 16, 2017 phone call the Monday after the Sunday Smith was served," P. Br. 9, in which Smith's wife stated, "[h]e just got this here yesterday." D. App. 142. The return of service affidavit states that Smith was served at 2:00 p.m. on October 14, 2017. <i>Id.</i> at 145.</div>
<div style="position: relative;">
<a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#r[4]" name="[4]" style="color: #660099;">[4]</a> Moss maintains that, after the October 16, 2017 telephone call, it immediately instructed the private process server to refrain from filing a return of service or making any further service attempts at the address provided in the petition.</div>
<div style="position: relative;">
<a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#r[5]" name="[5]" style="color: #660099;">[5]</a> A "nonsuit" is a procedural device recognized by Texas law that is roughly equivalent to a voluntary dismissal under Rule 41(a). <i>See </i><a class="gsl_co_link" href="https://scholar.google.co.uk/scholar_case?about=15747654402528881&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Edgar v. Gen. Elec. Co.,</i> 2002 WL 34722191, at *1 (N.D. Tex. Mar. 5, 2002) (Fitzwater, J.)</a>.</div>
<div style="position: relative;">
<a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#r[6]" name="[6]" style="color: #660099;">[6]</a> Although Moss refers to "jurisdictional" standing, it is clear that it is referring to constitutional standing. D. Br. 14</div>
<div style="position: relative;">
<a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#r[7]" name="[7]" style="color: #660099;">[7]</a> "[W]hen [standing is] challenged by a motion for summary judgment, . . . evidence is required, including affidavits and other facts. If such evidence is presented, whether controverted or not, it is accepted as true and survives summary judgment; if the evidence is controverted, standing must be supported adequately by the evidence adduced at trial." <a href="https://scholar.google.co.uk/scholar_case?case=1767609756201969203&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Cadle Co. v. Neubauer,</i> 562 F.3d 369, 371 (5th Cir. 2009)</a> (internal quotation marks omitted) (quoting <a href="https://scholar.google.co.uk/scholar_case?case=10150124802357408838&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Defenders of Wildlife,</i> 504 U.S. at 561</a>)).</div>
<div style="position: relative;">
<a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#r[8]" name="[8]" style="color: #660099;">[8]</a> Moss does not appear to contest the redressability element of standing, which requires that Smith prove that it is likely, not merely speculative, that his injury will be redressed by a favorable decision. <i>See </i><a href="https://scholar.google.co.uk/scholar_case?case=10150124802357408838&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Defenders of Wildlife,</i> 504 U.S. at 561</a>.</div>
<div style="position: relative;">
<a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#r[9]" name="[9]" style="color: #660099;">[9]</a> "[A] plaintiff must demonstrate standing for each claim he seeks to press." <a href="https://scholar.google.co.uk/scholar_case?case=7207880735879333720&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Davis v. Fed. Election Comm'n,</i> 554 U.S. 724, 734 (2008)</a>.</div>
<div style="position: relative;">
<a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#r[10]" name="[10]" style="color: #660099;">[10]</a> As the court noted in <i>Smith v. Moss Law Firm, P.C.,</i> 2019 WL 201839, at *1 n.1 (N.D. Tex. Jan. 15, 2019) (Fitzwater, J.), "`statutory standing' is an imperfect label that can be misused because it is not truly a `standing' doctrine." Nonetheless, because the parties use this term throughout their briefing, the court will do so as well.</div>
<div style="position: relative;">
<a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#r[11]" name="[11]" style="color: #660099;">[11]</a> Similarly, the TDCPA is intended to protect consumers, but does not limit recovery to consumers. Tex. Fin. Code Ann. § 392.403 creates a private right of action for TDCPA violations and provides: "A person may sue for: . . . actual damages sustained as a result of a violation of this chapter." Tex. Fin. Code Ann. § 392.403(a)(2). "[P]ersons who have sustained actual damages from a [TDCPA] violation have standing to sue." <a href="https://scholar.google.co.uk/scholar_case?case=8963346135090500734&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>McCaig v. Wells Fargo Bank (Tex.), N.A.,</i> 788 F.3d 463, 473 (5th Cir. 2015)</a> (citing Tex. Fin. Code Ann. § 392.403(a)(2)).</div>
<div style="position: relative;">
<a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#r[12]" name="[12]" style="color: #660099;">[12]</a> In reaching this holding, the court expressly declined to suggest a view on how it would decide a motion for summary judgment or how a jury would evaluate the merits of Smith's claims. <i>Smith I,</i> 2019 WL 201839, at *3.</div>
<div style="position: relative;">
<a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#r[13]" name="[13]" style="color: #660099;">[13]</a> In its motion, Moss relies on <a href="https://scholar.google.co.uk/scholar_case?case=17357245412945140407&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Christy v. EOS CCA,</i> 905 F.Supp.2d 648 (E.D. Penn. 2012),</a> maintaining that the court in that case was considering a "near identical issue." D. Br. 12. In <i>Christy,</i> however, the plaintiff alleged violations of 15 U.S.C. § 1692c(b). The court explained: "Courts in this district and elsewhere have required a plaintiff bringing claims under certain FDCPA subsections, including § 1692c(b), to be a `consumer' as defined in § 1692c(d)." <a href="https://scholar.google.co.uk/scholar_case?case=17357245412945140407&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Christy,</i> 905 F.Supp.2d at 652</a>. Because Smith does not seek to recover under § 1692c(b), <i>Christy</i> is distinguishable and its reasoning inapposite.</div>
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<a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#r[14]" name="[14]" style="color: #660099;">[14]</a> "When this court denies rather than grants summary judgment, it typically does not set out in detail the evidence that creates a genuine issue of material fact." <a href="https://scholar.google.co.uk/scholar_case?case=4556823019614626198&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="color: #660099;"><i>Valcho v. Dall. Cnty. Hosp. Dist.,</i> 658 F.Supp.2d 802, 812 n.8 (N.D. Tex. 2009) (Fitzwater, C.J</a>.) (citing <a class="gsl_co_link" href="https://scholar.google.co.uk/scholar_case?about=14137657103574057306&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Swicegood v. Med. Protective Co.,</i> 2003 WL 22234928, at *17 n.25 (N.D. Tex. Sept. 19, 2003) (Fitzwater, J.)</a>).</div>
<div style="position: relative;">
<a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#r[15]" name="[15]" style="color: #660099;">[15]</a> The court expresses no view on whether this conduct violated either statute.</div>
<div style="position: relative;">
<a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#r[16]" name="[16]" style="color: #660099;">[16]</a> For example, under the Skiptracing Policy, an alternate name will not be entered into the system unless "<i>all</i> sources" show a different name other than the name provided by the client. D. App. 176. A reasonable jury could find that this requirement was not reasonably adapted to avoid errors such as occurred in this case.</div>
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<a class="gsl_hash" href="https://scholar.google.co.uk/scholar_case?case=2420874571414581382&q=Smith+v.+Moss+Law+Firm.+3:18-CV-2449-D&hl=en&as_sdt=6,44#r[17]" name="[17]" style="color: #660099; text-decoration: underline;">[17]</a> In denying Moss's motion for summary judgment, the court does not suggest that Moss cannot prevail on this defense at trial.</div>
MOTPhttp://www.blogger.com/profile/15883011307129083993noreply@blogger.com0tag:blogger.com,1999:blog-9105536336033560224.post-17774516915140320202019-10-18T17:19:00.000-07:002019-10-19T20:23:54.250-07:00Status of CFPB v. National Collegiate Student Loan Trust in Delaware USDC (filed in 2017)<br />
<span style="color: #0b5394;">The relevant item in the Bureau's most recent semi-annual report has this to say (not much): </span><br />
<br />
<b>Consumer Financial Protection Bureau v. The National Collegiate Master Student Loan Trust, et al. </b><b>(D. Del. No. 17-cv-1323). </b><br />
<blockquote class="tr_bq" style="text-align: justify;">
On September 18, 2017, the Bureau filed a complaint and proposed consent judgment against several National Collegiate Student Loan Trusts (collectively, “NCSLT”). The Bureau alleges that NCSLT brought debt collection lawsuits for private student loan debt that the companies could not prove was owed or was too old to sue over; that they filed false and misleading affidavits or provided false and misleading testimony; and that they falsely claimed that affidavits were sworn before a notary. The proposed consent judgment against the NCSLT would require an independent audit of all 800,000 student loans in the NCSLT portfolio. It would also prohibit the NCSLT, and any company it hires, from attempting to collect, reporting negative credit information, or filing lawsuits on any loan the audit shows is unverified or invalid. In addition, it would require the NCSLT to pay at least $19.1 million, which would include redress to consumers, disgorgement, and a civil money penalty. Soon after the Bureau’s filing, several entities moved to intervene to object to the proposed consent judgment. The judge granted the intervention motions, and <span style="background-color: yellow;">the parties are currently engaged in discovery. The case remains pending. </span></blockquote>
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<a href="https://files.consumerfinance.gov/f/documents/cfpb_semi-annual-report-to-congress_spring-2019.pdf" target="_blank">SEMI-ANNUAL REPORT OF THE CFPB</a>, SPRING 2019, p. 35 of 61<br />
https://files.consumerfinance.gov/f/documents/cfpb_semi-annual-report-to-congress_spring-2019.pdf<br />
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Also see prior posts on the CFPB v. Nat’l Collegiate Student Loan Trust and related litigation:<o:p></o:p></div>
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<span style="color: #222222; font-family: arial, tahoma, helvetica, freesans, sans-serif;"><span style="font-size: 13.2px;"><a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/11/us-district-court-in-delaware-okays.html" target="_blank">Federal District Court in Delaware okays Odyssey's appointment as additional servicer of NCSLT private student loans</a> (Nov. 2, 2018) </span></span></div>
<span style="color: #222222; font-family: "arial" , "tahoma" , "helvetica" , "freesans" , sans-serif;"><span style="font-size: 13.2px;"><a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/10/cfpb-v-national-collegiate-student-loan.html" target="_blank">Consumer Financial Protection Bureau vs. National Collegiate Student Loan Trusts: Numerous Interventions finally approved</a> (Oct 31, 2018) </span></span></div>
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<a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/09/gss-data-services-inc-and-wilmington.html" style="color: #888888; text-decoration-line: none;" target="_blank">GSS Data Services, Inc. and Wilmington Trust Company win dismissal of law firm's suit brought against them in New York over NCSLT-related legal work</a> (Sep. 21, 2018)<o:p></o:p></div>
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Update on Wrangle over NC Trust Asset Control: <a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/05/delaware-usdc-magistrate-okays-odysseys.html" style="color: #33aaff;" target="_blank">Delaware Magistrate okays Odyssey's designation as servicer of 6 Trusts in row between Indenture Trustee U.S. Bank and NCSLT trust certificate owners</a>; overrules all of US Bank's objections (May 7, 2018)</div>
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<a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/04/cfpb-status-report-on-enforcement.html" style="color: #888888; text-decoration-line: none;" target="_blank">CFPB Status Report on Enforcement Actions against NCSLT and TSI</a> (April 3, 2018)<o:p></o:p></div>
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<a href="https://debt-suit-litigation-in-texas.blogspot.com/2017/11/wall-street-group-files-amicus-brief.html" style="color: #888888; text-decoration-line: none;" target="_blank">Securitization industry group files amicus brief, joins chorus of objectors to proposed CFPB-NCSLT Deal in Delaware federal court</a> (Nov. 30, 2017)<o:p></o:p></div>
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<a href="https://debt-suit-litigation-in-texas.blogspot.com/2017/11/the-latest-consumer-advocate-georgia.html" style="color: #888888; text-decoration-line: none;" target="_blank">The latest consumer advocate: Georgia Lawsuit Mill Operator Transworld Systems Inc</a>. (Nov. 16, 2017)<o:p></o:p></div>
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<a href="https://debt-suit-litigation-in-texas.blogspot.com/2017/11/trust-spat-in-delaware-usdc-cfpbs.html" style="color: #888888; text-decoration-line: none;" target="_blank">Trust spat in Delaware Verbatim: CFPB's Opposition to Intervention of Interested Non-parties who want to block Consent Judgment between the Bureau and the National Collegiate Student Loan Trusts</a> (Nov. 16, 2017)<o:p></o:p></div>
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<a href="https://debt-suit-litigation-in-texas.blogspot.com/2017/10/cfpb-toxic-vegetable-in-beltway.html" style="color: #888888; text-decoration-line: none;" target="_blank">CFPB: The Toxic Vegetable in the Beltway Alphabet Soup</a> (Oct 5, 2017) </div>
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<a href="https://debt-suit-litigation-in-texas.blogspot.com/2017/09/transworld-systems-incs-shady.html" style="color: #888888; text-decoration-line: none;" target="_blank">Transworld Systems Inc.’s shady litigation-mill practices finally exposed for all the World to see</a> (Sep. 19, 2017) </div>
MOTPhttp://www.blogger.com/profile/15883011307129083993noreply@blogger.com0tag:blogger.com,1999:blog-9105536336033560224.post-6196630665342358892019-10-15T12:35:00.002-07:002019-10-15T12:44:58.913-07:00Student Loan Servicing Complaints: AR 2019 by CFPB Ombudsman Released <div style="text-align: center;">
<b><span style="color: red;">CFPB PRIVATE EDUCATION LOAN OMBUDSMAN ISSUES </span></b></div>
<div style="text-align: center;">
<b><span style="color: red;">2019 ANNUAL REPORT</span></b></div>
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On October 15, 2019 the Consumer Financial Protection Bureau Private Education Loan Ombudsman issued the <a href="https://files.consumerfinance.gov/f/documents/cfpb_annual-report_private-education-loan-ombudsman_2019.pdf" target="_blank">2019 Annual Report</a> reflecting that from September 1, 2017 through August 31, 2019 the Bureau handled approximately 20,600 complaints related to private or federal student loans. Of these, there were approximately 6,700 private student loan complaints and 13,900 federal student loan complaints. The report also provides policymakers with a series of recommendations.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEghLqfx6-Vo3-n19VY5G6mXJclGTbsVrHyAHChHP0o_a7NT5dNi1wjqIesCcFkZCHLla5p1nyBQfrI5p9L4Q-xf4mx9tENTTda0AqSd-waj6wSCQ6Pauf7ZX3UrNkWK66-pSkk3EMM1N43w/s1600/cfpb_annual-report_private-education-loan-ombudsman_2019+%2528title%2529.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="413" data-original-width="1004" height="163" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEghLqfx6-Vo3-n19VY5G6mXJclGTbsVrHyAHChHP0o_a7NT5dNi1wjqIesCcFkZCHLla5p1nyBQfrI5p9L4Q-xf4mx9tENTTda0AqSd-waj6wSCQ6Pauf7ZX3UrNkWK66-pSkk3EMM1N43w/s400/cfpb_annual-report_private-education-loan-ombudsman_2019+%2528title%2529.JPG" width="400" /></a></div>
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<span style="background-color: white; color: #323232; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14px;">The 52-page Annual Report of the CFPB Ombudsman is posted at the following URL:</span><br />
<a data-saferedirecturl="https://www.google.com/url?q=https://lnks.gd/l/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMDAsInVyaSI6ImJwMjpjbGljayIsImJ1bGxldGluX2lkIjoiMjAxOTEwMTUuMTE1Mzc1MDEiLCJ1cmwiOiJodHRwczovL2ZpbGVzLmNvbnN1bWVyZmluYW5jZS5nb3YvZi9kb2N1bWVudHMvY2ZwYl9hbm51YWwtcmVwb3J0X3ByaXZhdGUtZWR1Y2F0aW9uLWxvYW4tb21idWRzbWFuXzIwMTkucGRmIn0.DTJs59iNdu-fs2LJ1nItijgm5tXe7ualwW0uPi5JQiI/br/70190804236-l&source=gmail&ust=1571250842555000&usg=AFQjCNHdIPlz6C_MJFjZWvN9eKhBgWDzXg" href="https://lnks.gd/l/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMDAsInVyaSI6ImJwMjpjbGljayIsImJ1bGxldGluX2lkIjoiMjAxOTEwMTUuMTE1Mzc1MDEiLCJ1cmwiOiJodHRwczovL2ZpbGVzLmNvbnN1bWVyZmluYW5jZS5nb3YvZi9kb2N1bWVudHMvY2ZwYl9hbm51YWwtcmVwb3J0X3ByaXZhdGUtZWR1Y2F0aW9uLWxvYW4tb21idWRzbWFuXzIwMTkucGRmIn0.DTJs59iNdu-fs2LJ1nItijgm5tXe7ualwW0uPi5JQiI/br/70190804236-l" style="background-color: white; color: #1d5782; font-family: "Helvetica Neue", Arial, Helvetica, sans-serif; font-size: 14px;" target="_blank">https://files.consumerfinance.<wbr></wbr>gov/f/documents/cfpb_annual-<wbr></wbr>report_private-education-loan-<wbr></wbr>ombudsman_2019.pdf</a><span style="background-color: white; color: #323232; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14px;">. </span><br />
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<span style="color: #6aa84f; font-family: helvetica neue, arial, helvetica, sans-serif;"><b>Executive summary</b></span><br />
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<span style="color: #323232; font-family: helvetica neue, arial, helvetica, sans-serif;"><span style="font-size: 14px;">Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, this report analyzes complaints submitted by consumers from September 1, 2017, through August 31, 2019. (A report was not submitted in 2018.) During this time period the Bureau handled approximately 20,600 complaints related to private or federal student loans – approximately 6,700 private student loan complaints and 13,900 federal student loan complaints. The Bureau handled an additional 4,600 debt collection complaints with a student loan related subproduct.</span></span><br />
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<span style="color: #323232; font-family: helvetica neue, arial, helvetica, sans-serif;"><span style="font-size: 14px;">1. Regarding private student loans, for the year ending August 31, 2018, the Bureau handled approximately 3,800 private student loan complaints, a decrease of approximately 50 percent compared to that of the previous year (2017). For the year ending August 31, 2019, the Bureau handled approximately 2,900 private student loan complaints, a decrease of approximately 25 percent compared to that of the previous year (2018).</span></span><br />
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<span style="color: #323232; font-family: helvetica neue, arial, helvetica, sans-serif;"><span style="font-size: 14px;">2. Regarding federal student loans, for the year ending August 31, 2018, the Bureau handled approximately 7,200 federal student loan complaints, a decrease of approximately 44 percent compared to that of the previous year (2017). For the year ending August 31, 2019, the Bureau handled approximately 6,600 federal student loan complaints, a decrease of approximately 8 percent compared to that of the previous year (2018).</span></span><br />
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<span style="color: #323232; font-family: helvetica neue, arial, helvetica, sans-serif;"><span style="font-size: 14px;">Over the past 24 months the Bureau handled approximately 4,600 debt collection complaints related to private or federal student loans, approximately 18% of student loan complaints and debt collection complaints about student loans. Over the past 24 months federal and state law enforcement agencies, including the Bureau, FTC, Department of Education and state Attorneys General Offices have successfully brought numerous enforcement actions against student loan debt relief companies with judgments totaling hundreds of millions of dollars. A single unscrupulous student loan debt relief company may negatively impact thousands, if not tens of thousands, of borrowers.</span></span><br />
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<span style="color: #323232; font-family: helvetica neue, arial, helvetica, sans-serif;"><span style="font-size: 14px;">Policymakers, federal and state law enforcement agencies, and market participants may wish to consider reinforcing the success of the enforcement actions <span style="background-color: yellow;">against student loan debt relief companies</span> by formalizing the collaborative and cooperative enforcement efforts against unscrupulous actors in the market place and expanding beyond civil enforcement actions to criminal enforcement actions at all levels. In assessing and considering formalization of these efforts, actions to consider include the sharing of information, sharing data analytic tools, </span></span><span style="color: #323232; font-family: "helvetica neue", arial, helvetica, sans-serif; font-size: 14px;">creating task forces, deciding how to best task organize, and determining how to best synchronize and deconflict resources and expertise to achieve the maximum benefit for the consumer.</span><br />
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<span style="background-color: white; color: #323232; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14px;"><br /></span>MOTPhttp://www.blogger.com/profile/15883011307129083993noreply@blogger.com0tag:blogger.com,1999:blog-9105536336033560224.post-32087917860282257182019-10-04T09:21:00.002-07:002019-10-05T04:29:22.999-07:00Student Loan Plaintiff EduCap Inc. loses appeal from Take-Nothing Judgment in Texas <div style="text-align: justify;">
EduCap, Inc. v. Mendoza, No. <a href="http://search.txcourts.gov/Case.aspx?cn=03-18-00686-CV&coa=coa03" target="_blank">03-18-00686-CV</a> (Tex.App.- Austin, Sep. 27, 2019, no pet. h.) (take-nothing judgment in favor of student-loan defendant affirmed where EduCap failed to provide admissible evidence at trial that it owned the loan made by bank as program lender and was entitled to recover). </div>
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Counsel for EduCap made the mistake of appealing the trial court's denial of EduCap's motion for summary judgment after entry of a judgment on the merits following a bench trial. Under such circumstances, the prior denial is not reviewable on appeal. </div>
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As for appellate review of the adverse bench-trial judgement, EduCap offered the same affidavit it had used to support its unsuccessful motion for summary judgment and did not offer any live witness testimony or other evidence. The affidavit contained averments beyond those required to establish a predicate for admission of business records, which the student loan defendant’s counsel objected to as hearsay. The trial court sustained the objection and the higher court found no error in this ruling because <i>ex parte</i> affidavits are not admissible in contested cases. </div>
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Nor did the business records attached to the affidavit themselves support the proposition that EduCap had created them. The loan agreement identified 5StarBank as the lender and no evidence established that the records of 5StarBank had become the business records of EduCap. Finding no error in the exclusion of EduCap's evidence, the court of appeals affirmed the trial court’s take-nothing judgment in the defendant's favor. </div>
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EduCap, Inc., Appellant,<br />v.<br />Stephanie L. Mendoza, Appellee.</h3>
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<a href="https://scholar.google.com/scholar?scidkt=7622936687140746537&as_sdt=2&hl=en" style="color: #660099;">No. 03-18-00686-CV.</a></center>
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<b>Court of Appeals of Texas, Third District, Austin.</b></div>
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Filed: September 27, 2019.</center>
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Jody D. Jenkins, Jillian A. Beatty, for Educap, Inc., Appellant.</div>
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Tom M. Thomas, II, for Stephanie L. Mendoza, Appellee.</div>
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Appeal from the 21st District Court of Bastrop County, No. 174-21, the Honorable Carson Talmadge Campbell, Judge Presiding.</div>
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Affirmed.</div>
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Before Chief Justice Rose, Justices Kelly and Smith.</div>
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MEMORANDUM OPINION</h2>
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CHARI L. KELLY, Justice.</div>
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This appeal arises from a suit filed by Educap, Inc. against Stephanie L. Mendoza for breach of a student loan agreement. Following a bench trial, the trial court signed a take-nothing judgment in favor of Mendoza. In three issues, Educap asserts that the trial court erred in denying its motion for summary judgment, in refusing to admit certain evidence at trial, and in denying its motion for new trial. For the reasons that follow, we will affirm the trial court's judgment.</div>
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BACKGROUND</h2>
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In November 2015, Educap filed suit against Mendoza seeking to collect what it alleges are unpaid amounts due under a student loan made to Mendoza in 2005. Educap later filed a combined traditional and no-evidence motion for summary judgment. In support of its motion for summary judgment, Educap attached the affidavit of Susan Martin, a "Legal Collections Coordinator" for Educap. In paragraph one of her affidavit, Martin states:</div>
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My name is Susan Martin, I am employed as Legal Collections Coordinator for Plaintiff. I have personal knowledge of the following facts which are true and correct. In my capacity as Legal Collections Coordinator, I have been designated as records custodian for Educap, Inc. I have personal knowledge of the record keeping methods that relate to the account of Stephanie L. Mendoza. Educap, Inc. is authorized to collect the account of Stephanie L. Mendoza. Attached hereto are pages of records kept on this account by Educap, Inc. These pages of said records are kept by Educap, Inc. in the regular course of business and it is the regular course of business of Educap, Inc. for an employee or representative of Educap, Inc with knowledge of the act, event, condition, opinion, or diagnosis recorded to make the record or to transmit information thereof to be included in such record and the records were made at or near the time or reasonably soon thereafter. The pages of records attached hereto are the originals or exact duplicate of the originals.</blockquote>
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Educap attached eleven pages of documents to Martin's affidavit, including a document entitled "combined private education loan application and promissory note," signed by Mendoza and identifying "5StarBank" as the lender, as well as a check issued by "5StarBank."</div>
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In seven additional paragraphs in her affidavit, Martin testifies to matters unrelated to Educap's recordkeeping methods. Instead, in these paragraphs, Martin makes factual statements related to Educap's underlying breach-of-promissory-note claim against Mendoza. In general, Martin states that Mendoza was required to make monthly payments on the promissory note, that she defaulted on her payments and currently owes $29,406.91, and that Educap is the owner and holder of the note.</div>
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Mendoza responded to Educap's combined motion for summary judgment by, in part, objecting to the trial court's consideration of Martin's affidavit. Mendoza argued that the documents attached to Martin's affidavit were unauthenticated and inadmissible hearsay and that the affidavit failed to establish the business records exception to the hearsay rule. <i>See</i> Tex. R. Evid. 801(d) (hearsay rule), R. 803(6) (business records exception). Mendoza also objected to Martin's affidavit on the ground that it included "unsupported conclusions and factual claims" for which Martin had not demonstrated personal knowledge. In a written order, the trial court denied Mendoza's objections and denied Educap's motion for summary judgment.</div>
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At the bench trial that followed, Educap did not offer any live witnesses. Instead, Educap offered into evidence Martin's affidavit and the attached documents. Mendoza again objected to the affidavit and documents as inadmissible hearsay. In response, Educap argued that Martin's entire affidavit and the documents attached to it were admissible under the business records exception to the hearsay rule. The trial court sustained Mendoza's objection, and Educap offered no other evidence. The trial court signed a take-nothing judgment in favor of Mendoza.</div>
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Educap now raises three issues on appeal.</div>
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ANALYSIS</h2>
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<i>Motion for Summary Judgment</i></h2>
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In its first issue, Educap asserts that the trial court erred in denying its motion for summary judgment. Where a motion for summary judgment is denied by the trial court and later tried on its merits, the order denying the motion for summary judgment is not reviewable on appeal. <i>Barnes v. University Fed. Credit Union,</i> No. 03-10-00147-CV, 2013 Tex. App. LEXIS 4871, at *11 n.3 (Tex. App.-Austin Apr. 18, 2013, no pet.) (mem. op.) (citing <a href="https://scholar.google.com/scholar_case?case=5186276962049199541&q=educap&hl=en&as_sdt=6,44" style="color: #660099;"><i>Ackermann v. Vordenbaum,</i> 403 S.W.2d 362, 365 (Tex. 1966)</a>). As a result, we do not address this issue. <i>See Cairus v. Gomez,</i> No. 03-06-00225-CV, 2006 Tex. App. LEXIS 10479, at *29 (Tex. App.-Austin Dec. 6, 2006, pet. denied) (mem. op.) ("We do not reach any of the issues relating to the summary judgment motion because the denial of a summary judgment motion is not appealable.").</div>
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<i>Exclusion of Evidence</i></h2>
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In its second issue, Educap asserts that the trial court erred in refusing to admit Martin's affidavit and attached documents at trial under the business records exception to the hearsay rule. In its third issue, Educap argues that the trial court erred in denying its motion for new trial on this same basis. According to Educap, if the affidavit and documents had been admitted, Educap would have proven each element of its claim against Mendoza.</div>
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We review a trial court's ruling on the admission or exclusion of evidence for an abuse of discretion. <i>See </i><a href="https://scholar.google.com/scholar_case?case=5121602460112861208&q=educap&hl=en&as_sdt=6,44" style="color: #660099;"><i>In re J.P.B.,</i> 180 S.W.3d 570, 575 (Tex. 2005)</a>. A trial court abuses its discretion when it acts without regard for any guiding rules or principles. <a href="https://scholar.google.com/scholar_case?case=10717445315645060399&q=educap&hl=en&as_sdt=6,44" style="color: #660099;"><i>U-Haul Int'l, Inc. v. Waldrip,</i> 380 S.W.3d 118, 132 (Tex. 2012)</a>. We must uphold a trial court's evidentiary ruling if there is any legitimate basis in the record for the ruling. <a href="https://scholar.google.com/scholar_case?case=9456963118000736416&q=educap&hl=en&as_sdt=6,44" style="color: #660099;"><i>Owens-Corning Fiberlgass Corp. v. Malone,</i> 972 S.W.2d 35, 43 (Tex. 1998)</a>. In addition, we will not reverse a trial court for an erroneous evidentiary ruling unless the error was harmful, that is, it probably resulted in an improper judgment. <i>See</i> Tex. R. App. P. 44.1 (reversible error in civil cases).</div>
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Hearsay is an out-of-court statement offered in evidence to prove the truth of the matter asserted and is inadmissible unless a statute or rule of exception applies. Tex. R. Evid. 801(d). The proponent of hearsay has the burden of showing that the testimony fits within an exception to the general rule prohibiting the admission of hearsay evidence. <a href="https://scholar.google.com/scholar_case?case=17235607577377111113&q=educap&hl=en&as_sdt=6,44" style="color: #660099;"><i>Simien v. Unifund CCR Partners,</i> 321 S.W.3d 235, 240 (Tex. App.-Houston [1st Dist.] 2010, no pet.)</a> (citing <a href="https://scholar.google.com/scholar_case?case=8143037979834154623&q=educap&hl=en&as_sdt=6,44" style="color: #660099;"><i>Volkswagen of Am., Inc. v. Ramirez,</i> 159 S.W.3d 897, 908 n.5 (Tex. 2004)</a>).</div>
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The business records exception to the hearsay rule, found in Rule 803(6) of the Texas Rules of Evidence, provides for the admission of "[r]ecords of a [r]egularly [c]onducted [a]ctivity" when certain criteria are satisfied. <i>See</i> Tex. R. Evid. 803(6). Under this exception, a record that is otherwise inadmissible as hearsay may be admissible if the proponent demonstrates that (1) the records were kept in the course of a regularly conducted business activity; (2) it was the regular practice of that business activity to make the records; (3) the records were made at or near the time of the events recorded; and (4) the records were made by, or from information transmitted by, a person with knowledge. <i>Id.</i> R. 803(6)(A)-(C); <a href="https://scholar.google.com/scholar_case?case=11492767679654280087&q=educap&hl=en&as_sdt=6,44" style="color: #660099;"><i>In re E.A.K.,</i> 192 S.W.3d 133, 142 (Tex. App.-Houston [14th Dist.] 2006, pet. denied)</a>. This predicate for the admissibility of records under the business records exception may be established by the testimony "of the custodian or other qualified witness" or by an affidavit or unsworn declaration that complies with Rule 902(10). Tex. R. Evid. 803(6)(D); <i>see id.</i> R. 902(10)(B) (providing form affidavit for business records exception).</div>
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The Rules of Evidence do not require the witness who lays the predicate for admissibility of business records to be the creator of the records or even be an employee of the same company as the creator. <a href="https://scholar.google.com/scholar_case?case=6243314068914427340&q=educap&hl=en&as_sdt=6,44" style="color: #660099;"><i>Granbury Marina Hotel, L.P. v. Berkel & Co. Contractors, Inc.,</i> 473 S.W.3d 834, 842 (Tex. App.-El Paso 2015, no pet.)</a> (citing <a href="https://scholar.google.com/scholar_case?case=11492767679654280087&q=educap&hl=en&as_sdt=6,44" style="color: #660099;"><i>E.A.K.,</i> 192 S.W.3d at 142</a>); <a href="https://scholar.google.com/scholar_case?case=11656465634822652257&q=educap&hl=en&as_sdt=6,44" style="color: #660099;"><i>Ortega v. CACH, LLC,</i> 396 S.W.3d 622, 629 (Tex. App.-Houston [14th Dist.] 2013, no pet.)</a> (same). The predicate witness does not have to have personal knowledge of the information recorded but need only have knowledge of the manner in which the records were prepared. <a href="https://scholar.google.com/scholar_case?case=11492767679654280087&q=educap&hl=en&as_sdt=6,44" style="color: #660099;"><i>E.A.K.</i> 192 S.W.3d at 142</a>. In addition, documents authored or created by a third party can become the business records of an organization and, consequently, admissible under Rule 803(6) if the documents are (1) incorporated and kept in the course of the testifying witness's business, (2) the business typically relies upon the accuracy of the contents of the documents, and (3) the circumstances otherwise indicate the trustworthiness of the documents. <a href="https://scholar.google.com/scholar_case?case=17235607577377111113&q=educap&hl=en&as_sdt=6,44" style="color: #660099;"><i>Simien,</i> 321 S.W.3d at 240</a>; <i>see </i><a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=351338619889235048&q=educap&hl=en&as_sdt=6,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Roper v. CitiMortgage, Inc.,</i> No. 03-11-00887-CV, 2013 Tex. App. LEXIS 14518,</a> *35 (Tex. App.-Austin Nov. 27, 2013, pet. denied) (mem. op.) (citing same).</div>
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Here, Mendoza argued at trial that Martin's affidavit was defective as a business records affidavit and therefore inadmissible for two reasons. First, Mendoza argued that the attempt by Martin to establish the predicate for business records exception failed to comply with the form affidavit provided by Rule 902(10)(B). Second, Mendoza argued that the affidavit was inadmissible hearsay because it contains additional factual statements beyond those required for establishing the business records exception. We first consider whether the trial court abused its discretion in excluding Martin's affidavit to the extent it contains statements of fact unrelated to the business records exception.</div>
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In paragraph one—the paragraph that Educap contends sufficiently establishes the predicate for the admission of business records under Rule 902(10)—Martin states, "Educap, Inc. is authorized to collect the account of Stephanie L. Mendoza." Similarly, as previously discussed, Martin's affidavit contains seven additional paragraphs that are irrelevant to the issue of whether the attached documents are business records and that instead set out facts that tend to support Educap's underlying claim. In general, Martin states in these paragraphs that:</div>
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(2) under the terms of the promissory note, Mendoza was required to make payments;</blockquote>
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(3) Mendoza defaulted in paying the total of principal and interest due on the note;</blockquote>
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(4) "after all just and lawful offsets, payments, and credits" under the note have been allowed, the balance due on the account is $29,406.91;</blockquote>
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(5) interest continues to accrue at a contract rate of 7.3500% per year;</blockquote>
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(6) Educap is the owner and holder of the note until the date of judgment;</blockquote>
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(7) Educap has made demand for payment which has not been tendered; and</blockquote>
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(8) Educap has incurred reasonable and necessary attorney's fees as a result of this litigation.</blockquote>
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Unless specifically permitted by statute or rule, affidavits do not constitute evidence in contested cases. <a href="https://scholar.google.com/scholar_case?case=11656465634822652257&q=educap&hl=en&as_sdt=6,44" style="color: #660099;"><i>Ortega,</i> 396 S.W.3d at 630</a>; <i>Lawson v. Collins,</i> No. 03-17-00003-CV, 2017 Tex. App. LEXIS 8843, at *11-12 (Tex. App.-Austin Sept. 20, 2017, no pet.) (mem. op.). "Accordingly, when an ex parte affidavit presents evidence beyond the simple authentication requirements of Rule 902, the extraneous portions of the affidavit constitute inadmissible hearsay." <a href="https://scholar.google.com/scholar_case?case=11656465634822652257&q=educap&hl=en&as_sdt=6,44" style="color: #660099;"><i>Ortega,</i> 396 S.W.3d at 630</a>. Martin's statement in paragraph one of her affidavit regarding Educap's authority to collect on the promissory note, along with her statements in paragraphs two through eight, are extraneous to the requirements under Rule 902(10). Consequently, the statements constitute inadmissible hearsay. We conclude that the trial court did not abuse its discretion in excluding Martin's affidavit to the extent the affidavit includes these statements. <i>See id.</i></div>
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Next, we examine whether the trial court abused its discretion in excluding the remainder of Martin's affidavit, which purports to establish the business records predicate, along with the documents attached to it. At trial, Mendoza argued that Martin's affidavit was fatally defective as a business records affidavit because it did not specify the number of attached pages that she was attesting to as business records and because, although Martin states that the promissory note is attached as "Exhibit 1," none of the documents attached were designated as exhibits. <i>See</i> Tex. R. Evid. 803(6) (records otherwise meeting requirements for admissibility as business record under Rule 803(6) are inadmissible if "the source of information or the method or circumstances of preparation indicate lack of trustworthiness"). Upon review of the requirements of Rule 902(10)(B), we disagree with Mendoza's contention that these discrepancies prevented Martin's affidavit from qualifying as a business-records affidavit.</div>
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Although Rule 902(10)(B) provides a form affidavit for establishing the predicate for the admission of business records, the form is not exclusive. <a href="https://scholar.google.com/scholar_case?case=17235607577377111113&q=educap&hl=en&as_sdt=6,44" style="color: #660099;"><i>Simien,</i> 321 S.W.3d at 240</a>. An affidavit that substantially complies with Rule 902(10)(B) is sufficient. Tex. R. Evid. 902(10)(B) ("[A]n affidavit that substantially complies with the provisions of this rule shall suffice. . . ."); <a href="https://scholar.google.com/scholar_case?case=17777424385749559339&q=educap&hl=en&as_sdt=6,44" style="color: #660099;"><i>Fullick v. City of Baytown,</i> 820 S.W.2d 943, 944 (Tex. App.-Houston [1st Dist.] 1991, no writ)</a>. Under this standard, we cannot conclude that the failure to include the number of pages or the failure to label a document as an exhibit necessarily prevents a party from satisfying the business records predicate, especially when, as in this case, it is clear what records are offered as business records.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=18396962925948449269&q=educap&hl=en&scisbd=2&as_sdt=6,44#[1]" name="r[1]" style="color: #660099;">[1]</a></sup> Comparing Martin's affidavit to the form set forth in Rule 902(10)(B), we conclude that Martin's affidavit provided the predicate necessary to show that any attached records authored or created by Educap comply with requirements of Rule 803(6).</div>
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It is not clear, however, from Martin's affidavit or from the face of the documents themselves that the documents were in fact created or authored by Educap. Attached to Martin's affidavit and offered into evidence were eleven pages of documents, comprised of (1) a document entitled "combined private education loan application and promissory note," signed by Mendoza and identifying 5StarBank as the lender; (2) a loan application checklist for "the LendingTree Student Loan Program, powered by Educap," signed by Mendoza; (3) a copy of a "disbursement notice" and check made out to Mendoza in the amount of $22,748.73 from 5StarBank, dated August 9, 2005; (4) a copy of a "truth in lending disclosure statement," identifying 5StarBank as the lender and stating that 229 monthly payments would be due on the loan, beginning on September 5, 2005; (5) a printout of a "balance sheet" without any identifying information as to its creator. Martin's affidavit—the only evidence presented by Educap—does not explain what relationship, if any, Educap has to 5StarBank, and the trial court could have reasonably concluded that the documents were business records of 5StarBank, a third party, and not of Educap. <i>See </i><a href="https://scholar.google.com/scholar_case?case=14087130996237781231&q=educap&hl=en&as_sdt=6,44" style="color: #660099;"><i>Barnhart v. Morales,</i> 459 S.W.3d 733, 742 (Tex. App.-Houston [14th Dist.] 2015, no pet.)</a> (explaining that when reviewing evidentiary ruling by trial court, appellate court "examine[s] all bases for the trial court's decision that are suggested by the record or urged by the parties").</div>
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Further, Educap did not present any evidence showing that the records of 5StarBank had become the business records of Educap. That is, Educap did not present evidence that the records were incorporated and kept in the course of Educap's business and that Educap typically relies on the accuracy of the records. <i>See </i><a href="https://scholar.google.com/scholar_case?case=17235607577377111113&q=educap&hl=en&as_sdt=6,44" style="color: #660099;"><i>Simien,</i> 321 S.W.3d at 240-41</a> (three-part predicate for third-party business records). Educap also did not present any evidence of circumstances suggesting that the records are trustworthy. <i>See id.</i> Because Educap failed to establish that the records were its own business records, or had been incorporated as such, we conclude that the trial court did not abuse its discretion in excluding the documents as inadmissible hearsay. <i>See </i><a href="https://scholar.google.com/scholar_case?case=6002885628857614821&q=educap&hl=en&as_sdt=6,44" style="color: #660099;"><i>Savoy v. National Collegiate Student Loan Tr. 2005-3,</i> 557 S.W.3d 825, 832 (Tex. App.-Houston [1st Dist.] 2018, no pet.)</a> (noting that proponent's business records affidavit included three-part predicate for admission of third-party documents and concluding that it was sufficient under rule 803(6)); <i>cf. Carmouche v. State,</i> No. 14-03-00768-CR, 2004 Tex. App. LEXIS 11164, * 7 (Tex. App.-Houston [14th Dist.] Dec. 14, 2014, no pet.) (mem. op., not designated for publication) (concluding that trial court abused its discretion in admitting third-party records where proponent only provided basic predicate under rule 803(6)).</div>
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Because the trial court did not abuse its discretion in excluding Martin's affidavit in its entirety or the documents attached to it, we overrule Educap's first and second issues on appeal.</div>
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CONCLUSION</h2>
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Having overruled Educap's issues on appeal, we affirm the trial court's judgment.</div>
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<a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=18396962925948449269&q=educap&hl=en&scisbd=2&as_sdt=6,44#r[1]" name="[1]" style="color: #660099; text-decoration: underline;">[1]</a> Martin's affidavit and attached records were served on Mendoza at least fourteen days prior to trial, as required by Rule 902(10). <i>See</i> Tex. R. Evid. 902(10)(A). The same affidavit and records were then offered at trial.</div>
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<br />MOTPhttp://www.blogger.com/profile/15883011307129083993noreply@blogger.com0tag:blogger.com,1999:blog-9105536336033560224.post-83497500612914678032019-09-06T10:41:00.002-07:002019-09-10T12:09:36.897-07:00How Wells Fargo uses Texas courts to empty its own customers' bank accounts: By Suing Itself <br />
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<b><span style="color: #0b5394;">WELLS FARGO BANK, NA VS. WELLS FARGO BANK, NA </span></b></div>
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Wells Fargo regularly sues itself, styling itself both as Garnishor (Plaintiff and Judgment Creditor) and as Garnishee Bank (Defendant holding deposits of a customer/Judgment Debtor). It then agrees with itself to award all of the money from its customer's account to itself, and also agrees with itself to apportion attorney's fees to its second law firm (appearing for Wells Fargo as Garnishee) for its role in the operation.<br />
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjXGJEUeKI-5YCP-2SQZLjxjyYRcHdlyoVO0oQvoEGQOJr-MILIP6vUke0SCfjh3RUpkjE34oI0VcFUovQ-m1ePrjGy-JLqAzgJ3qIlCFv-2ey0wxJWqVkqGKaU2j1F7DG1qVTJBVBS3lqe/s1600/Wells-Fargo-Bank-vs-Wells-Fargo-Bank-garnishment-cases.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="837" data-original-width="1245" height="268" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjXGJEUeKI-5YCP-2SQZLjxjyYRcHdlyoVO0oQvoEGQOJr-MILIP6vUke0SCfjh3RUpkjE34oI0VcFUovQ-m1ePrjGy-JLqAzgJ3qIlCFv-2ey0wxJWqVkqGKaU2j1F7DG1qVTJBVBS3lqe/s400/Wells-Fargo-Bank-vs-Wells-Fargo-Bank-garnishment-cases.JPG" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Wells Fargo Bank N.A. vs. Wells Fargo Bank, N.A. </td></tr>
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All this is done through an "AGREED" JUDGMENT OF GARNISHMENT that the attorneys for both of its law firms sign off on after the account has previously been frozen through a writ of garnishment so that the customer cannot withdraw any money.<br />
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Because the judgment submitted by Wells Fargo is agreed, trial court judges routinely sign it.<br />
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In one such <b>Wells Fargo vs. Wells Fargo</b> case, the customer/judgment debtor obtained the help of a good consumer defense attorney and challenged the "agreed" judgment that took away his and his son's money. Wells Fargo then argued that the debtor did not have "standing" because he was not a party to the <b>Wells Fargo vs. Wells Fargo</b> garnishment action. The trial court ruled for the Bank.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfmNYEMuFXSpweoSzNFrdgFYsNDF8NGxTbg2VinW5v6lLOqFYRN434YqABNNMqZ8okiOYc0bcLDU4N__skZ-gVqXypnwfcrBvAtnBsH1q5loLjsJ1q1evfQHLD0pkcer9rqpCdXtcjOwMj/s1600/Wells+Fargo+vs+Wells+Fargo+Garnishment+%2528case+style%2529.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="514" data-original-width="875" height="233" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfmNYEMuFXSpweoSzNFrdgFYsNDF8NGxTbg2VinW5v6lLOqFYRN434YqABNNMqZ8okiOYc0bcLDU4N__skZ-gVqXypnwfcrBvAtnBsH1q5loLjsJ1q1evfQHLD0pkcer9rqpCdXtcjOwMj/s400/Wells+Fargo+vs+Wells+Fargo+Garnishment+%2528case+style%2529.JPG" width="400" /></a></div>
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<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgtJhMn3W8KbWSYVUbseA5uyJH2x675HB416jDGDJ2b_4goFRGyYjRVVSMdQkg1RLxbQqwNLzZXEYnxOIhhyphenhypheng866yE3dT5F2Ub8hNPLwOwhERTERCCHUi3wX0jr46-UNF7wMEXCOpKFal-H/s1600/Wells+Fargo+Garnishment+-+2+law+firms+on+Agreed+Judgment.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="938" data-original-width="908" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgtJhMn3W8KbWSYVUbseA5uyJH2x675HB416jDGDJ2b_4goFRGyYjRVVSMdQkg1RLxbQqwNLzZXEYnxOIhhyphenhypheng866yE3dT5F2Ub8hNPLwOwhERTERCCHUi3wX0jr46-UNF7wMEXCOpKFal-H/s400/Wells+Fargo+Garnishment+-+2+law+firms+on+Agreed+Judgment.JPG" width="386" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Wells Fargo's two law firms see eye to eye on emptying out the customer's<br />
Wells Fargo bank account. </td></tr>
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The Fort Worth Court of Appeal, however, disagreed on the standing issue, and sent the case back to the trial court, so the judgment debtor would receive a hearing. <a href="http://search.txcourts.gov/SearchMedia.aspx?MediaVersionID=cff03929-979a-48ed-9e85-96eda4b9a5b9&coa=coa02&DT=Opinion&MediaID=ec7c5416-9e4b-4dc7-af46-b5f1006a8bed" target="_blank">Barrow v Wells Fargo Bank, N.A.</a>, No. <a href="http://search.txcourts.gov/Case.aspx?cn=02-19-00026-CV&coa=coa02" target="_blank">02-19-00026-CV</a> (Tex.App.-Fort Worth, Sep. 5, 2019, no pet. h.) </div>
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In the</div>
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Court of Appeals</div>
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Second Appellate District of Texas</div>
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at Fort Worth</div>
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___________________________</div>
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No. <a href="http://search.txcourts.gov/Case.aspx?cn=02-19-00026-CV&coa=coa02" style="text-align: left;" target="_blank">02-19-00026-CV</a> </div>
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___________________________</div>
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On Appeal from the 431st District Court</div>
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Denton County, Texas</div>
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Trial Court No. 18-8946-431</div>
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Before Sudderth, C.J.; Kerr and Birdwell, JJ.</div>
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Opinion by Chief Justice Sudderth</div>
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ADAM I. BARROW, Appellant</div>
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V.</div>
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WELLS FARGO BANK, N.A., Appellee</div>
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OPINION</div>
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Appellee Wells Fargo Bank, N.A., garnishor, filed an application for writ of<br />
garnishment against itself as garnishee, on September 25, 2018, to collect on its<br />
judgment against Appellant Adam I. Barrow, the judgment debtor. The writ of<br />
garnishment issued the following day, and on October 17, Wells Fargo as garnishee<br />
filed an answer. On November 16, Wells Fargo entered into an agreed final judgment<br />
with itself, awarding $6,751.44 from Barrow’s Wells Fargo account to Wells Fargo,<br />
awarding $650.00 in attorney’s fees against Barrow’s account in favor of Wells Fargo,<br />
and assessing filing fees and court costs in the action against Barrow. On December<br />
14, Barrow filed a motion for new trial, challenging the sufficiency of the affidavit<br />
supporting the application and agreed judgment and asserting that some of the seized<br />
money belonged to his 11-year-old son.<br />
<br />
At the time the judgment was signed, no proof of service on Barrow was on<br />
file. See Tex. R. Civ. P. 663a (providing that the judgment debtor—the “defendant”—<br />
in a garnishment action “shall be served in any manner . . . provided in Rule 21a”); see<br />
also Tex. R. Civ. P. 21a(a)(2) (providing that “[e]very notice required by these rules . . .<br />
may be served by delivering a copy to the party to be served . . . in person, mail, by<br />
commercial delivery service, by fax, by email, or by such other manner as the court in<br />
its discretion may direct”). But in an affidavit attached to its response to Barrow’s<br />
motion for new trial, Thomas Sellers, attorney for Wells Fargo, as garnishor, averred<br />
that in compliance with rule 663a,1 Wells Fargo had sent Barrow the required notices<br />
and documents by first class mail and certified mail, return receipt requested on<br />
October 12, 2018. In its response to Barrow’s motion, Wells Fargo argued that<br />
because Barrow was not a party to the case, he lacked standing to bring a motion for<br />
new trial.<br />
<br />
On January 25, 2019, after hearing argument on Barrow’s motion for new trial,<br />
the trial court found that Barrow did not have standing. In its written order denying<br />
the motion, which was signed on the same day, the trial court ruled, “After reviewing<br />
the evidence, [2] the court concludes that the Motion should be denied, as Adam<br />
Barrow does not have standing.”<br />
<br />
In two issues, Barrow complains that he had standing to file the motion for<br />
new trial and that the evidence was legally and factually insufficient to grant a<br />
judgment of garnishment to Wells Fargo.<br />
<br />
<blockquote class="tr_bq">
<span style="font-size: x-small;">[1] On January 24, 2019, Wells Fargo filed a supplemental affidavit by Sellers,</span><span style="font-size: x-small;">again attesting to Rule 663a service.</span> </blockquote>
<blockquote class="tr_bq">
<span style="font-size: x-small;">[2] Notwithstanding this recitation in the written order, the trial court did not </span><span style="font-size: x-small;">consider evidence at the hearing. After hearing only argument, the court made its oral </span><span style="font-size: x-small;">ruling as follows,</span></blockquote>
<br />
After considering the authorities you both cited in your oral arguments<br />
as well as your responsive brief, the Court finds that, based upon the<br />
procedural posture of this case and the capacity in which the motion for<br />
new trial was brought in Mr. Barrow’s name, that he does not have<br />
standing and the motion for new trial is denied.<br />
<br />
Garnishment is a statutory proceeding governed by civil practice and remedies<br />
code chapter 63 and rules of civil procedure 657–679. See Tex. Civ. Prac. & Rem.<br />
Code Ann. §§ 63.001–.008; Tex. R. Civ. P. 657–679. A post-judgment garnishment<br />
proceeding is a quasi in rem action brought by a judgment creditor (the garnishor)<br />
against another party (the garnishee) who holds property or funds belonging to the<br />
judgment debtor. Bank One, Tex., N.A. v. Sunbelt Sav., F.S.B., 824 S.W.2d 557, 558<br />
(Tex. 1992); Zeecon Wireless Internet, LLC v. Am. Bank of Tex., N.A., 305 S.W.3d 813,<br />
816 (Tex. App.—Austin 2010, no pet.). In the garnishment action, the garnishor<br />
seeks to have the property or funds held by the garnishee applied toward payment of<br />
the underlying judgment against the debtor. Zeecon, 305 S.W.3d at 816.<br />
<br />
Because garnishment was unknown at common law and is “purely a creature of<br />
statute,” id., the Texas Supreme Court has held that garnishment proceedings “cannot<br />
be sustained unless they are in strict conformity with statutory requirements.” Beggs v.<br />
Fite, 106 S.W.2d 1039, 1042 (Tex. 1937); see also Zeecon, 305 S.W.3d at 816 (observing<br />
that the supreme court has held that garnishment proceedings cannot be sustained<br />
without strictly conforming to the statutory requirements and related rules governing<br />
such proceedings). This is because the remedy of garnishment is “summary and<br />
harsh.” Beggs, 106 S.W.2d at 1042.<br />
<br />
To ensure a debtor’s due process right to not be deprived of his property<br />
without notice and opportunity to be heard, rule 663a requires a garnishor to serve the<br />
debtor with notice of the garnishment and of his rights to regain his property. Tex. R.<br />
Civ. P. 663a; see also Hering v. Norbanco Austin I, Ltd., 735 S.W.2d 638, 639–41 (Tex.<br />
App.—Austin 1987, writ denied) (noting that in 1978, the Texas Rules of Civil<br />
Procedure relating to garnishment actions were amended in response to prejudgment<br />
garnishment procedures that were declared unconstitutional based on U.S. Supreme<br />
Court holdings in Sniadach v. Family Fin. Corp., 394 U.S. 337, 89 S. Ct. 1820 (1969), and<br />
Fuentes v. Shevin, 407 U.S. 67, 92 S. Ct. 1983 (1972)). Thus, a garnishor’s failure to<br />
strictly conform with rule 663a’s notice requirement will result in a void judgment. See<br />
Zeecon, 305 S.W.3d at 818–20 (holding that “failure to properly serve the debtor<br />
deprived the trial court of jurisdiction over the debtor’s property—the res,” but<br />
pointing out that a “mere irregularity” is waivable and will not render the garnishment<br />
judgment void).<br />
<br />
The supreme court has identified “three parties” to a garnishment action: (1) a<br />
creditor (the garnishor), (2) a debtor (also referred to as “the defendant”), and (3) a<br />
third person who possesses the debtor’s funds or owes money to the debtor (the<br />
garnishee). 3 Orange Cty. v. Ware, 819 S.W.2d 472, 474 (Tex. 1991) (op. on reh’g).<br />
Thus, while the judgment debtor (the defendant) is not a “necessary party”<br />
4 to the<br />
<blockquote class="tr_bq">
<span style="font-size: x-small;">[3] Although the rules of civil procedure provide that the garnishment action is </span><span style="font-size: x-small;">docketed with the garnishor as plaintiff and the garnishee as defendant, see Tex. R. Civ.</span><span style="font-size: x-small;">P. 659, in the rules, the term “the defendant” refers to the debtor, and the garnishee is </span><span style="font-size: x-small;">referred to as “the garnishee.” See Tex. R. Civ. P. 658–679. </span> </blockquote>
<blockquote class="tr_bq">
<span style="font-size: x-small;">[4] Rule of civil procedure 39, the “necessary party” rule, describes the necessary </span><span style="font-size: x-small;">party and the circumstances for joinder of a necessary party as follows:</span></blockquote>
proceeding, he is nevertheless a party to the proceeding who has rights in the process.<br />
Hering, 735 S.W.2d at 642; see also Tex. R. Civ. P. 663a (providing the right to notice),<br />
664 (providing the right to replevy), 664a (providing the right to have the writ of<br />
garnishment vacated, dissolved, or modified).5<br />
<blockquote class="tr_bq">
<span style="font-size: x-small;">[5] Wells Fargo cites to Missouri Pacific Railway Co. v. Whipker, 13 S.W. 639, 639</span><span style="font-size: x-small;">(Tex. 1890), as “well-established” authority for the proposition that a judgment debtor </span><span style="font-size: x-small;">is not a party to a garnishment proceeding. We note that Whipker predates the </span><span style="font-size: x-small;">enactment of the rules of civil procedure and the civil practice and remedies code,</span><span style="font-size: x-small;">which govern modern-day garnishment actions, and it predates Orange County by </span><span style="font-size: x-small;">almost a hundred years. Because the law has changed in the intervening century, we </span><span style="font-size: x-small;">decline to follow Whipker. We also decline to follow our sister court’s holding in </span><span style="font-size: x-small;">Mullins v. Main Bank & Trust, 592 S.W.2d 24, 26 (Tex. App.—Beaumont 1979, no </span><span style="font-size: x-small;">writ)—also cited by Wells Fargo in support of its position that Barrow was not a party </span><span style="font-size: x-small;">to the garnishment proceeding—because it, too, predates Orange County.</span></blockquote>
<span style="font-size: x-small;"><br /></span>
As the judgment debtor, or “defendant” in the garnishment action, Barrow had<br />
standing to participate in the proceeding. He had standing to replevy or to file a<br />
motion seeking to have the garnishment vacated, dissolved, or modified. See Tex. R.<br />
Civ. P. 664–664a. But first and foremost, he had the right to notice of the<br />
<br />
A person who is subject to service of process shall be joined as a party in<br />
the action if (1) in his absence complete relief cannot be accorded<br />
among those already parties, or (2) he claims an interest relating to the<br />
subject of the action and is so situated that the disposition of the action<br />
in his absence may (i) as a practical matter impair or impede his ability to<br />
protect that interest, or (ii) leave any of the persons already parties<br />
subject to a substantial risk of incurring double, multiple, or otherwise<br />
inconsistent obligations by reason of his claimed interest. If he has not<br />
been so joined, the court shall order that he be made a party. If he<br />
should join as a plaintiff but refuses to do so, he may be made a<br />
defendant, or, in a proper case, an involuntary plaintiff.<br />
Tex. R. Civ. P. 39(a).<br />
<br />
garnishment action. See Tex. R. Civ. P. 663a; see also Hering, 735 S.W.2d at 641 & n.3<br />
(considering, without deciding, whether a defendant in a post-judgment garnishment<br />
action has a due process right or merely a rule-created right to notice). On appeal,<br />
Barrow complains of defects in service of the garnishment action.<br />
<br />
Wells Fargo makes an interesting argument: that Barrow was required to<br />
intervene in the garnishment proceeding to acquire standing but that it was too late<br />
for Barrow to intervene once the agreed judgment had been signed. Whether Wells<br />
Fargo’s approach is correct appears to be a matter of first impression. But as we see<br />
it, Wells Fargo’s position, were we to adopt it, would create a quintessential catch-22<br />
for defendants in garnishment actions.<br />
<br />
In considering Wells Fargo’s argument, we note as a practical matter that<br />
complaints regarding defective service normally occur postjudgment because that is<br />
when a judgment debtor who has not been properly served would become aware of<br />
the consequences of the garnishment action. To require a garnishment defendant to<br />
intervene in a garnishment action at a time prior to acquiring proper notice of the<br />
proceeding would render meaningless the right to notice of the proceedings in the<br />
first place because most garnishment-action defendants would learn of improper<br />
service only after it was too late to complain. Such a paradox in the law should be<br />
avoided. See Whittlesey v. Miller, 572 S.W.2d 665, 668 (Tex. 1978) (explaining that its<br />
holding “corrects a paradox in the law of this state”).<br />
<br />
We are not inclined to create such a catch-22 for garnishment defendants, and<br />
Wells Fargo cites no authority directing us to do so.6<br />
<blockquote class="tr_bq">
<span style="font-size: x-small;">[6] Wells Fargo cites to Bechem v. Reliant Energy Retail Services, LLC, 441 S.W.3d</span><span style="font-size: x-small;">839, 844 (Tex. App.—Houston [14th Dist.] 2014, no pet.), as authority for the </span><span style="font-size: x-small;">proposition that as a nonparty, Barrow was required to intervene in the garnishment </span><span style="font-size: x-small;">action to acquire standing. Wells Fargo’s position appears to be based upon a </span><span style="font-size: x-small;">misreading of one sentence in the case. In Bechem, our sister court states, “A debtor</span><span style="font-size: x-small;">may controvert the garnishee’s answer, however, or a third party may intervene </span><span style="font-size: x-small;">claiming an interest in the garnished property.” Id. Couched in the disjunctive, Bechem </span><span style="font-size: x-small;">does not support the proposition that a debtor must intervene in a garnishment action </span><span style="font-size: x-small;">to acquire standing. Furthermore, as explained above, the supreme court has </span><span style="font-size: x-small;">identified the judgment debtor as a party to a garnishment action. See Orange Cty., 819</span><span style="font-size: x-small;">S.W.2d at 474.</span></blockquote>
Consequently, we hold that<br />
<br />
Barrow had standing to file a motion for new trial, to be heard on the matter, and to<br />
offer evidence in support thereof.<br />
<br />
The trial court erred by holding otherwise.<br />
<br />
Having sustained Barrow’s first issue, we need not reach Barrow’s second issue<br />
challenging the sufficiency of the evidence to support the judgment. Accordingly, we<br />
reverse the trial court’s judgment and remand the case to the trial court to hear and<br />
consider Barrow’s motion for new trial.<br />
<br />
/s/ Bonnie Sudderth<br />
<br />
Bonnie Sudderth<br />
Chief Justice<br />
<br />
Delivered: September 5, 2019<br />
<br />
<br />
<br />
<br />MOTPhttp://www.blogger.com/profile/15883011307129083993noreply@blogger.com0tag:blogger.com,1999:blog-9105536336033560224.post-1671310406061826272019-08-15T23:24:00.002-07:002019-08-20T13:52:23.641-07:00Bankrupt(cy) Logic: TERI got paid for providing a private student loan guaranty, ergo TERI "funded" the loan program <div style="text-align: center;">
<b>Question Raised:<span style="color: blue;"> Which Way Did the Money Flow?</span></b><br />
<br />
IN RE GREER-ALLEN, Bankr. Court, D. Massachusetts July 29, 2019</div>
<div style="text-align: center;">
<br /></div>
<span style="color: #073763;">The Education Resources Institute, Inc. (TERI) took fees for providing guaranties for private student loans originated by The First Marblehead Corporation (not First Marblehead Bank) under a "rent-a-charter" scheme involving numerous national banks. Late in the game, the FMC even bought a financial institution outright (UNION FEDERAL SAVINGS BANK, now defunct) </span><span style="color: #073763;">to have even greater control over the make-money-quick scheme, and to get to mix its own harvest of high-interest subprime lemons into the securitization pool in 2007. That was just before the financial crash that brought on TERI's bankruptcy because the venerable nonprofit did not have sufficient reserves to cover the mounting defaults. It also ended Wall Street's appetite for Marblehead SLABS (<a href="http://allaboutslabs.blogspot.com/2017/" target="_blank">Student Loan Asset Backed Securities</a>). </span><br />
<span style="color: #073763;"><br /></span>
<span style="color: #073763;">More than a decade down the road, a bankruptcy court in Massachusetts has now ruled that TERI "funded" the program under which the loans were originated. -- Duh! </span><br />
<span style="color: #073763;"><br /></span>
<span style="color: #073763;">That (mis)characterization of TERI's role in the First Marblehead's National Collegiate Student Loan Scheme does serve a solid purpose, though: It makes the private non-federal student loans nondischargeable for former students in bankruptcy except under the "undue hardship" test. </span><br />
<span style="color: #073763;"><br /></span>
<span style="color: #073763;">As for TERI's guaranty obligation to purchase defaulted loans for full on-the-books value, and thus hold bond investors harmless, TERI itself restructured in bankruptcy court, and shed its obligations under the guaranty agreements. </span><br />
<span style="color: #073763;"><br /></span>
<span style="color: #073763;">The student loan debtors whose loans were guaranteed by TERI are not so lucky. </span><br />
<span style="color: #073763;"><br /></span>
<span style="color: #073763;">At least TERI was good for Wall Street. </span><br />
<span style="color: #073763;"><br /></span>
<br />
<blockquote class="tr_bq">
<span style="color: #073763;">Also see earlier post: <a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/11/did-teri-guaranty-bring-ncslt.html" target="_blank">Did TERI guaranty make NCSLT-securitized student loans nondischargeable under the Bankruptcy Code</a>? </span></blockquote>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhlzycTfTywEOkmNnCO36e2aKv7-H4Iu0KWa1Dzgu3tpMxQsAEf7J6CzVSuZd5utYBPsgXk80g1KNOyeNt25E3XMA2k05a-RQW8WCK_2vHHeX6hGr_XyTrZ8OA82himLyQAjryIFBJ1NY63/s1600/TERI+funded+loan+program+not+reasonable+-+8thCir+holding+in+In+re+Page+%25282018%2529.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img alt=" In re Page, 592 B.R. 334 (8th Cir. BAP 2018) (dischargeability of TERI-guarnateed loan)" border="0" data-original-height="782" data-original-width="1029" height="303" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhlzycTfTywEOkmNnCO36e2aKv7-H4Iu0KWa1Dzgu3tpMxQsAEf7J6CzVSuZd5utYBPsgXk80g1KNOyeNt25E3XMA2k05a-RQW8WCK_2vHHeX6hGr_XyTrZ8OA82himLyQAjryIFBJ1NY63/s400/TERI+funded+loan+program+not+reasonable+-+8thCir+holding+in+In+re+Page+%25282018%2529.JPG" title=" In re Page, 592 B.R. 334 (8th Cir. BAP 2018) (role of TERI) https://scholar.google.com/scholar_case?case=4316323255884169018&q=%22Richelle+A.+PAGE%22&hl=en&as_sdt=6,44" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"> <a href="https://scholar.google.com/scholar_case?case=13275686271641006432&hl=en&as_sdt=6,44" target="_blank">In re Page</a>, 592 B.R. 334 (8th Cir. BAP 2018).</td></tr>
</tbody></table>
<blockquote class="tr_bq" style="text-align: center;">
<div style="text-align: justify;">
<div style="text-align: center;">
<span style="color: #073763;">A MORE TRADITIONAL VIEW OF "FUNDED" </span></div>
</div>
<span style="color: #073763;"></span><br />
<div style="text-align: justify;">
<span style="color: #073763;">Comment on <a href="https://scholar.google.com/scholar_case?case=13275686271641006432&hl=en&as_sdt=6,44" target="_blank">In re Page v. NCSLT 2006-1</a>, No. 18-6011 (8th Cir. Nov. 20, 2018) (reversing summary judgment for Trust and remanding for fact determination regarding TERI's guaranty of private student loans securitized through National Collegiate Student Loan Trusts and its significance to the loan's dischargeability). </span></div>
<span style="color: #073763;">
</span></blockquote>
<span style="color: #0b5394;"><br /></span>
<span style="background-color: white; color: #222222; font-family: "arial" , sans-serif;"><b><span style="font-size: large;">C. TERI is a Nonprofit Institution, and it Funded the Education One Program by Guaranteeing All Loans Issued Under the Program</span></b></span><br />
<div>
<div style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 14px; position: relative;">
</div>
<div style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 14px; position: relative;">
<br /></div>
<div style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 14px; position: relative;">
The third requirement is satisfied because the Education One Undergraduate Loan Program was funded in part by TERI, a nonprofit institution. This determination requires the Court to answer two questions affirmatively. First, was TERI a nonprofit institution? And second, did TERI fund, at least in part, the Education One Undergraduate Loan Program? The defendants have satisfied their burden of production on both questions; and Greer-Allen has not submitted evidence, beyond mere speculation, refuting TERI's nonprofit status or TERI's funding of the program.</div>
<div style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 14px; position: relative;">
</div>
<h2 style="background-color: white; border: 0px; color: #222222; font-family: Arial, sans-serif; margin: 1em 0px; padding: 0px; position: relative;">
1. TERI was a Nonprofit Institution</h2>
<div style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 14px; position: relative;">
</div>
<div style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 14px; position: relative;">
Ample evidence in the record shows that TERI was a nonprofit entity. All three loan agreements reference TERI's status as a nonprofit institution. All three trust agreements submitted by the defendants define TERI as "a private non-profit corporation organized under Chapter 180 of the Massachusetts General Laws." Def.'s Mot Summ. J. Ex. F, G, H. Further, the Guaranty Agreement, submitted under seal, between TERI and Bank One, N.A. also describes TERI as "a private non-profit corporation organized under Chapter 180 of the Massachusetts General Laws."<br />
<br /></div>
<div style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 14px; position: relative;">
At oral argument, Greer-Allen's counsel insinuated that TERI may not have been operating as a nonprofit institution when these loans originated. However, Greer-Allen has not produced any evidence in furtherance of that claim. Summary judgment is appropriate where there is no genuine issue of material fact. Here, Greer-Allen has not put forth sufficient evidence to generate a genuine issue of material fact regarding TERI's nonprofit status.<br />
<br /></div>
<div style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 14px; position: relative;">
Greer-Allen's counsel also argues that Congress understood "nonprofit institution," as the phrase is used in § 523(a)(8)(A)(i), to mean only nonprofit educational institutions. In other words, Greer-Allen contends that only educational loans made under a program funded by a nonprofit college should be excepted from discharge. Whether or not Congress intended such a meaning, this Court must give effect to the plain language Congress used. Section 523(a)(8)(A)(i) excepts loans made under programs funded by "nonprofit institutions" from discharge. The plain text is unambiguous and offers no reason to suggest that only certain nonprofit institutions satisfy the exception. Accordingly, the Court declines to adopt Greer-Allen's reading of § 523(a)(8)(A)(i).</div>
<div style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 14px; position: relative;">
</div>
<h2 style="background-color: white; border: 0px; color: #222222; font-family: Arial, sans-serif; margin: 1em 0px; padding: 0px; position: relative;">
2. TERI Funded the Education One Program by Guaranteeing All Education One Loans</h2>
<div style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 14px; position: relative;">
</div>
<div style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 14px; position: relative;">
The final issue the Court must decide is whether TERI funded the Education One Undergraduate Loan Program. The defendants put forth evidence suggesting that TERI did fund the program. Greer-Allen argues that the evidence the defendants produced cannot satisfy their burden of production. The Court finds that the defendants have satisfied their initial burden of production. On the other hand, Greer-Allen has provided no evidentiary basis for her assertion that TERI did not fund the program. Greer-Allen has not shown a genuine issue of material fact relating to the issue.<br />
<br /></div>
<div style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 14px; position: relative;">
The defendants produced the loan documents for each of the three loans. The first loan states:</div>
<blockquote style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 14px; margin: 1em 0px; padding: 0px 40px; position: relative;">
I acknowledge that the requested loan is subject to the limitations on dischargeability in bankruptcy contained in Section 523(a)(8) of the United States Bankruptcy Code. Specifically, I understand that [Bank One, N.A.] purchased a guaranty of this loan, and that this loan is guaranteed by The Education Resources Institute, Inc., a nonprofit institution.</blockquote>
<div style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 14px; position: relative;">
The second loan contains identical language, and the third loan contains substantially similar language. The language in the loan documents provide some evidence that the program was funded by TERI because they indicate that Bank One and JPMorgan Chase purchased guarantees from TERI. A guaranty helps fund a program because it encourages a lender to extend credit that may not otherwise be available. However, the language in the loan documents is not, standing alone, sufficient to prove the existence of the guarantees. Another court in this circuit has denied summary judgment when a creditor sought to prove the existence of a guaranty based only upon similar language in a promissory note. <i>See </i><a href="https://scholar.google.com/scholar_case?case=2667722072512261674&q=%22national+collegiate+student+loan%22&hl=en&as_sdt=6,44" style="color: #660099;"><i>In re Wiley,</i> 579 B.R. at 7</a>. Here, the defendants have produced substantially more evidence, including the relevant guaranty and the defendants' trust agreements.<br />
<br /></div>
<div style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 14px; position: relative;">
The summary judgment record also contains the trust agreement of each defendant. These agreements provide further evidence of the existence of the TERI guaranty agreement and TERI's funding of the Education One Program. The agreements define "TERI Guaranty Agreements" as the "Guaranty Agreements entered into between each of the Loan Originators and TERI as set forth on Schedule D attached hereto." The trust agreements define "TERI Guaranteed Loans" as "Student Loans originated under the Student Loan Programs owned by the Trust and guaranteed by TERI pursuant to the Guaranty Agreements." Schedule D of each trust agreement lists a Guaranty Agreement between TERI and Bank One, N.A. "for loans that were originated under Bank One's . . . Education One Loan Program." (ECF #29 Ex. F, G, H).<br />
<br /></div>
<div style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 14px; position: relative;">
The trust agreements and their attached schedules indicate that the Education One Loan Program was funded by TERI. Each agreement lists the Program as one guaranteed by TERI. Each defines loans made under the Program as TERI Guaranteed Loans. The trust agreements bolster the notion that TERI played a part in funding the Program by guaranteeing loans issued under the Program.<br />
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Most notably, the defendants produced a guaranty agreement, executed on April 18, 2002, between Bank One and TERI. Under the agreement, TERI promised to guaranty all loans made under the Education One Undergraduate Loan Program. Section 2.1 of the guaranty states that "TERI hereby guarantees to Bank One, unconditionally. . . the payment of 100% of the principal of and accrued interest on every Loan as to which a Guaranty Event has occurred." Loans are defined as disbursements of funds made by Bank One under the Program. Guaranty Events are triggered by the failure of a borrower to make timely monthly payments. Thus, the agreement makes clear that TERI guaranteed all loans made under the Program, and that TERI was obligated to pay Bank One in the event of any default by a student loan borrower. The sweeping breadth of the guaranty makes clear that TERI helped fund the Program. Bank One and JPMorgan Chase Bank, its successor in interest, knew that all loans issued under the Program would be guaranteed by TERI in the event of default.<br />
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Considering the guaranty between Bank One and TERI, along with the aforementioned evidence, the defendants have met their initial burden of production. While the record lacks direct evidence of payments from TERI to the program, TERI's guaranty of all loans made under the Program conclusively establishes that the Program was funded in part by TERI. The blanket guaranty allowed Bank One, and its successor JPMorgan Chase, to offer student loans to borrowers like Greer-Allen.</div>
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VI. CONCLUSION</h2>
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The evidence presented shows that there are no genuine issues of material fact in this adversary proceeding. The defendants demonstrated that Greer-Allen's loans are educational loans made under the Education One Loan Program. Further, they showed that the Education One Loan Program was funded by TERI, and that TERI was a nonprofit institution. Greer-Allen has failed to produce evidence that would create a genuine issue as to any one of these facts. At the summary judgment stage, the Court must make reasonable inferences in the nonmoving party's favor. Here, however, Greer-Allen has not produced evidence that would allow a reasonable factfinder to return a verdict in her favor. Accordingly, the three student loans at issue are non-dischargeable under 11 U.S.C. § 523(a)(8)(A)(i). For the aforementioned reasons, the defendants' motion for summary judgment is GRANTED and Greer-Allen's motion for summary judgment is DENIED. Judgment shall enter accordingly.</div>
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<small style="background-color: white;"><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=13534570739083584739&q=%22national+collegiate+student+loan%22&hl=en&scisbd=2&as_sdt=6,44#r[1]" name="[1]" style="color: #660099;">[1]</a> Greer-Allen does not contend that her debts fall within the undue hardship exception. </small><br />
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<small style="background-color: white;"><b><span style="color: #0b5394; font-size: small;">DEFINED TERMS FROM THE INDENTURE (NCSLT 2006-3)</span></b></small></div>
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<small style="background-color: white;"><span style="display: inline; font-size: 10pt;">“</span><span style="display: inline; font-size: 10pt;"><u>TERI</u></span><span style="display: inline; font-size: 10pt;">” means The Education Resources Institute, Inc., a Massachusetts non-profit corporation, or its successors and assigns.</span></small></div>
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<small style="background-color: white;"><span style="display: inline; font-size: 10pt;">“</span><span style="display: inline; font-size: 10pt;"><u>TERI Deposit and Security Agreement</u></span><span style="display: inline; font-size: 10pt;">” means the Deposit and Security Agreement dated as of September 28, 2006, by and among the Issuer, TERI and the Administrator with respect to the issuance of the Notes hereunder.</span></small></div>
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<small style="background-color: white;"><span style="display: inline; font-size: 10pt;">“</span><span style="display: inline; font-size: 10pt;"><u>TERI Guaranty Agreement</u></span><span style="display: inline; font-size: 10pt;">” means, with a respect to a Student Loan Program, a guaranty agreement between a Seller and TERI, together with the acknowledgment by TERI relating thereto. On the Issue Date, the TERI Guarantee Agreements shall be as listed on Schedule B to the Indenture.</span></small></div>
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<small style="background-color: white;"><span style="display: inline; font-size: 10pt;">“</span><span style="display: inline; font-size: 10pt;"><u>TERI Guaranty Amount</u></span><span style="display: inline; font-size: 10pt;">” means, pursuant to the TERI Guaranty Agreements, Financed Student Loans are guaranteed 100% as to payment of principal and interest.</span></small></div>
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<small style="background-color: white;"><span style="display: inline; font-size: 10pt;">“</span><span style="display: inline; font-size: 10pt;"><u>TERI Guaranty Event</u></span><span style="display: inline; font-size: 10pt;">” means a claim for payment on a Financed Student Loan made under any of the TERI Guaranty Agreements if: (i)(a) the Obligor has failed to make monthly principal and/or interest payments on such loan when due, provided such failure continues for a period of 150 consecutive days, (b) the Obligor has filed a Chapter 13 petition in a bankruptcy or, in a Chapter 7 proceeding has filed an adversary proceeding pursuant to 11 U.S.C. § 523(a)(8), or (c) the Obligor has died and (ii) the conditions set forth in such TERI Guaranty Agreement giving rise to an obligation on the part of TERI to make payment on such claim have otherwise been satisfied.</span></small></div>
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<span style="display: inline; font-size: 10pt;">“</span><span style="display: inline; font-size: 10pt;"><u>TERI Pledge Fund</u></span><span style="display: inline; font-size: 10pt;">” means the fund by the name created in the TERI Deposit and Security Agreement whereby TERI will pledge a portion of its guaranty fees to the Trust, by deposit into a special trust account with the Indenture Trustee. </span><br />
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<b><span style="color: #0b5394;">BACK IN 2006 WHEN SLABS WERE THE RAGE </span></b><br />
<b><span style="color: #0b5394;"><a href="https://www.sec.gov/Archives/edgar/data/1223029/000112528206005747/0001125282-06-005747-index.htm" target="_blank">NCSLT 2006-3 SECURITIZATION</a> </span></b></div>
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<span style="font-size: small;">[FIRST MARBLEHEAD(TM) LOGO]</span></div>
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<span style="font-size: small; text-indent: 0pt;">[CREATING SOLUTIONS FOR EDUCATION FINANCE.]</span></div>
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<span style="font-size: small;">FOR IMMEDIATE RELEASE</span></div>
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<span style="font-size: small;"> FIRST MARBLEHEAD ANNOUNCES PLANNED $1.56 BILLION</span></div>
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<span style="font-size: small;"> SECURITIZATION OF PRIVATE STUDENT LOANS</span></div>
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<span style="font-size: small;">BOSTON, MA, SEPTEMBER 8, 2006 - The First Marblehead Corporation (NYSE: FMD)</span></div>
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<span style="font-size: small;">today announced the scheduled closing of a securitization enabling the purchase</span></div>
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<span style="font-size: small;">of private student loans by The National Collegiate Student Loan Trust 2006-3</span></div>
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<span style="font-size: small;">(the Trust) and the related issuance of Student Loan Asset Backed Notes by the</span></div>
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<span style="font-size: small;">Trust. The National Collegiate Funding LLC, as sponsor and depositor of the</span></div>
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<span style="font-size: small;">securitization, has filed with the Securities and Exchange Commission a Free</span></div>
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<span style="font-size: small;">Writing Prospectus regarding this transaction. The Company expects the</span></div>
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<span style="font-size: small;">transaction to close on or about September 28, 2006.</span></div>
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<span style="font-size: small;">The loans were originated by several different banks under various loan programs</span></div>
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<span style="font-size: small;">that were structured with the assistance of First Marblehead. The Trust expects</span></div>
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<span style="font-size: small;">to raise approximately $1.56 billion from the sale of asset-backed securities,</span></div>
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<span style="font-size: small;">and plans to acquire private student loans with a principal and accrued interest</span></div>
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<span style="font-size: small;">balance of approximately $1.18 billion in the transaction. The Trust expects</span></div>
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<span style="font-size: small;">that approximately 70% of the loans to be purchased at closing will be "Direct</span></div>
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<span style="font-size: small;">to Consumer" loans, and that the remaining 30% of the loans to be purchased at</span></div>
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<span style="font-size: small;">closing will be "School Channel" loans.</span></div>
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<span style="font-size: small;">The loans are guaranteed by The Education Resources Institute, Inc. (TERI), the</span></div>
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<span style="font-size: small;">nation's oldest and largest guarantor of private student loans.</span></div>
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<span style="font-size: small;">ABOUT FIRST MARBLEHEAD</span></div>
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<span style="font-size: small;">First Marblehead, a leader in creating solutions for education finance, provides</span></div>
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<span style="font-size: small;">outsourcing services for private, non-governmental, education lending in the</span></div>
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<span style="font-size: small;">United States. The Company helps meet the growing demand for private education</span></div>
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<span style="font-size: small;">loans by providing national and regional financial institutions and educational</span></div>
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<span style="font-size: small;">institutions, as well as businesses and other enterprises, with an integrated</span></div>
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<span style="font-size: small;">suite of design, implementation and securitization services for student loan</span></div>
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<span style="font-size: small;">programs tailored to meet the needs of their respective customers, students,</span></div>
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<span style="font-size: small;">employees and members.</span></div>
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<b><span style="color: red;">THE AFTERMATH IN 2019 </span></b></div>
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In re SHARLENE GREER-ALLEN, Chapter 7, Debtor.<br />SHARLENE GREER-ALLEN, Plaintiff,<br />v.<br />NATIONAL COLLEGIATE STUDENT LOAN TRUST 2005-1, NATIONAL COLLEGIATE STUDENT LOAN TRUST 2005-3, and NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-3, Defendants.</h3>
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<a href="https://scholar.google.com/scholar?scidkt=2288903152862865876+9148719630291265682&as_sdt=2&hl=en" style="color: #660099;">Case No. 17-12935-FJB, Adversary Proceeding No. 17-1129.</a></center>
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<b>United States Bankruptcy Court, D. Massachusetts, Eastern Division.</b><br />
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July 29, 2019.</center>
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Sharlene Greer-Allen, Plaintiff, represented by Richard N. Gottlieb, Law Offices of Richard N. Gottlieb.</div>
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National Collegiate Student Loan Trust 2005-1, National Collegiate Student Loan Trust 2005-3, National Collegiate Student Loan Trust 2006-1 & National Collegiate Student Loan Trust 2006-3, Defendants, represented by Morgan Ian Marcus, Sessions, Fishman, Nathan & Israel, LLC, Jennifer L. Markowski & Catherine Scott, Peabody & Arnold LLP.</div>
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MEMORANDUM OF DECISION</h2>
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FRANK J. BAILEY, Bankruptcy Judge.</div>
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I. INTRODUCTION</h2>
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Sharlene Greer-Allen ("Greer-Allen") entered into three loan agreements, subsequently assigned to the defendants, to help finance her education at Northeastern University. After receiving a discharge under Chapter 7 of the Bankruptcy Code ("the Code"), Greer-Allen commenced the present adversary proceeding, in which she seeks a determination that her discharge extinguished the aforementioned obligations. The defendants contend that 11 U.S.C. § 523(a)(8) excepts these loans from discharge. The parties have now filed competing motions for summary judgment. Because these student loans originated under a program funded by a nonprofit institution, § 523(a)(8)(A)(i) excepts these loans from a Chapter 7 discharge. Accordingly, the defendants are entitled to summary judgment, and the Court will allow their motion and enter judgment accordingly.</div>
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II. JURISDICTION</h2>
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This proceeding is one to determine the dischargeability, under § 523(a)(8) of the Bankruptcy Code, of Greer-Allen's student loan obligations. It arises under the Bankruptcy Code and in a bankruptcy case and therefore falls within the jurisdiction given the district court in 28 U.S.C. § 1334(b). By standing order of reference, the District Court has referred the matter to the bankruptcy court pursuant to 28 U.S.C. § 157(a). It is a core proceeding within the meaning of 28 U.S.C. § 157(b)(1) and (b)(2)(I) (core proceedings include determinations of the dischargeability of particular debts). The bankruptcy court accordingly has authority to enter final judgment on the complaint. 28 U.S.C. § 157(b)(1) (authorizing bankruptcy judge to enter appropriate orders and judgment as to core proceedings).</div>
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III. LEGAL STANDARDS</h2>
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Summary judgment is warranted when "there is no genuine dispute as to any material fact" and "the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "Creating a genuine issue of material fact requires hard proof rather than spongy rhetoric." <a href="https://scholar.google.com/scholar_case?case=6572411456940408153&q=%22national+collegiate+student+loan%22&hl=en&as_sdt=6,44" style="color: #660099;"><i>Cowell v. Hale (In re Hale),</i> 289 B.R. 788, 791 (1st Cir. BAP 2003)</a> (citing <a href="https://scholar.google.com/scholar_case?case=514627687149523331&q=%22national+collegiate+student+loan%22&hl=en&as_sdt=6,44" style="color: #660099;"><i>Mesnick v. Gen. Elec. Co.,</i> 950 F.2d 816, 822 (1st Cir. 1991)</a>). A court "must view the record in the light most favorable to the party opposing the motion, and must indulge all inferences favorable to that party." <a href="https://scholar.google.com/scholar_case?case=14445411328313247990&q=%22national+collegiate+student+loan%22&hl=en&as_sdt=6,44" style="color: #660099;"><i>Daury v. Smith,</i> 842 F.2d 9, 11 (1st Cir. 1988)</a>. To defeat a motion for summary judgment, the evidence presented must be sufficient to allow a reasonable factfinder to resolve an issue in favor of the nonmoving party. <i>See </i><a href="https://scholar.google.com/scholar_case?case=6572411456940408153&q=%22national+collegiate+student+loan%22&hl=en&as_sdt=6,44" style="color: #660099;"><i>Hale,</i> 289 B.R. at 792</a>.<br />
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In an action to determine the dischargeability of student loans, the lender bears the initial burden of showing "that the debt is of the type excepted from discharge under section 523(a)(8)." <a href="https://scholar.google.com/scholar_case?case=14715509405075894100&q=%22national+collegiate+student+loan%22&hl=en&as_sdt=6,44" style="color: #660099;"><i>Bronsdon v. Educ. Credit Mgmt. Corp. (In re Bronsdon),</i> 435 B.R. 791, 796 (1st Cir. BAP 2010)</a>. Upon such a showing, the burden of production shifts to the debtor. The lender bears the ultimate burden of proof by a preponderance of the evidence. <i>See </i><a href="https://scholar.google.com/scholar_case?case=6233710418300821527&q=%22national+collegiate+student+loan%22&hl=en&as_sdt=6,44" style="color: #660099;"><i>Grogan v. Garner,</i> 498 U.S. 279, 286 (1991)</a>. Although Congress plainly intended to except certain debts from discharge, the § 523(a) exceptions should be construed narrowly. <i>See </i><a href="https://scholar.google.com/scholar_case?case=15657171750867080399&q=%22national+collegiate+student+loan%22&hl=en&as_sdt=6,44" style="color: #660099;"><i>In re Hyman,</i> 502 F.3d 61, 66 (2d Cir. 2007)</a>.</div>
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IV. FACTUAL AND PROCEDURAL HISTORY</h2>
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Beginning in 2004, Greer-Allen attended Northeastern University. Although she received financial aid in the form of both loans and grants, Greer-Allen sought out private loans in order to fully finance her education. Using a web portal maintained by First Marblehead Bank, Greer-Allen applied for and received three separate student loans. The first loan originated with Bank One, N.A. Bank One then merged with JPMorgan Chase Bank, N.A. Thus, the second and third loans originated with JP Morgan Chase, despite Greer-Allen applying for all three loans in the same manner. Each loan stated that it was made as part of the Education One Undergraduate Loan Program. Further, each loan agreement stated that "this loan is guaranteed by The Education Resources Institute, Inc. ("TERI"), a nonprofit institution."<br />
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The first loan agreement originated in 2004. Bank One loaned Greer-Allen $30,000 to help finance her attendance at Northeastern during the 2004-2005 school year. In 2004, the cost of attendance at Northeastern was $16,113. The first loan supplemented $8,034 in other forms of aid that Greer-Allen received for that academic year. Assuming that the $8,034 loan went towards educational expenses, the proceeds of the Bank One loan exceeded the cost of attendance by $21,921. Bank One subsequently assigned the first loan to defendant National Collegiate Student Loan Trust 2005-1.<br />
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Before the 2005-2006 academic year, Greer-Allen entered into a second loan agreement, this time with JPMorgan Chase Bank. While the second loan originated with JPMorgan Chase Bank, not with Bank One, the loan agreement contained identical terms. Greer-Allen received $30,000 in proceeds from the second loan, on the same terms as the first loan. That year, Greer-Allen again received $8,034 in other forms of aid, however, the cost of attendance at Northeastern had risen to $20,744. As a result, she received $17,290 in excess of the cost of attendance from the second loan proceeds. JPMorgan Chase Bank subsequently assigned the second loan to defendant National Collegiate Student Loan Trust 2005-3.<br />
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Greer-Allen received $33,792 for the 2006-2007 academic year as proceeds from the third loan. Once again, Greer-Allen received $8,034 in other aid. Although Greer-Allen increased the principal of her third loan, the cost of attendance for 2006-2007 fell to $15,259. Thus, her loan proceeds exceeded the cost of attendance by $26,567. JPMorgan Chase Bank subsequently assigned the third loan to defendant National Collegiate Student Loan Trust 2006-3.<br />
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In 2017, Greer-Allen filed her petition for relief under Chapter 7 of the Bankruptcy Code. She scheduled the amounts owed under the loan agreements as follows: $62,022.66 owed to NCSLT 2005-1 for the first loan, $55,730.50 owed to NCSLT 2005-3 for the second, and $71,803.75 owed to NCSLT 2006-3 for the third. On November 7, 2017, this Court entered an order discharging all of Greer-Allen's properly scheduled debts, excluding those excepted from discharge under 11 U.S.C. § 523(a).</div>
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V. DISCUSSION</h2>
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The issue before the Court is whether the November 7, 2017 discharge order extinguished Greer-Allen's obligation to repay the debts owed to NCSLTs 2005-1, 2005-3, and 2006-3. The answer depends on whether the three loans at issue fall within the categories of student debt that, in 11 U.S.C. § 523(a)(8), Congress excepted from discharge. Because the loans were made under a program funded in part by a nonprofit institution, § 523(a)(8)(A)(i) excepts the loans from discharge. Accordingly, the defendants are entitled to summary judgment.<br />
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A Chapter 7 discharge removes a debtor's obligation to repay a wide array of prepetition debts. 11 U.S.C. § 727(b). Despite the general breadth of a Chapter 7 discharge, Congress set out certain categories of non-dischargeable debts. <i>See generally</i> 11 U.S.C. § 523(a). Among the debts excepted from Chapter 7 discharge are four categories of student loan obligations. 11 U.S.C. § 523(a)(8). Subject to an undue hardship exception not applicable here, the obligation to repay a debt falling within § 523(a)(8) survives the entry of a Chapter 7 discharge.<br />
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Section 523(a)(8) excepts four types of debt from discharge: first, educational loans (or benefit overpayments) made, insured, or guaranteed by a governmental unit, § 523(a)(8)(A)(i); second, educational loans (or benefit overpayments) "made under any program funded in whole or in part by a governmental unit or nonprofit institution," <i>id</i>; third, obligations "to repay funds received as an educational benefit, scholarship, or stipend," § 523(a)(8)(A)(ii); and fourth, qualified educational loans incurred by an individual, § 523(a)(8)(B). A loan falling within any of the four categories is non-dischargeable unless excepting it from discharge would impose an undue hardship on the debtor and the debtor's dependents.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=13534570739083584739&q=%22national+collegiate+student+loan%22&hl=en&scisbd=2&as_sdt=6,44#[1]" name="r[1]" style="color: #660099;">[1]</a></sup><br />
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Greer-Allen contends that her student loans fall outside the scope of all four categories. Conversely, the defendants argue that the loans are excepted from discharge under the second, third, and fourth categories. The defendants acknowledge that the loans were not made, insured, or guaranteed by a governmental unit and therefore do not fall within the first category.<br />
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Section 523(a)(8) is written disjunctively, meaning that a loan must fall within just one of the four categories in order to be non-dischargeable. If, taking all reasonable inferences in Greer-Allen's favor, the defendants show that each loan falls within one of the non-dischargeable categories, then the defendants are entitled to summary judgment. On the other hand, Greer-Allen is entitled to summary judgment only if each loan falls outside the scope of all categories, despite taking all reasonable inferences in the defendants' favor. While the parties put forth numerous theories regarding the applicability of each of the three contested categories, the record and this Court's own docket show that all three loans fall within the second category. Each of the three educational loans was made under a program funded in part by a nonprofit institution. For that reason, the defendants are entitled to summary judgment. Because the determination that these loans are non-dischargeable under § 523(a)(8)(A)(i) is dispositive, the Court declines to reach the parties' arguments relating to the third and fourth categories (subsections 523(a)(8)(A)(ii) and 523(a)(8)(B), respectively).<br />
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In order for a debt to fall within the second category, three requirements must be satisfied. 11 U.S.C. § 523(a)(8)(A)(i); <a href="https://scholar.google.com/scholar_case?case=2667722072512261674&q=%22national+collegiate+student+loan%22&hl=en&as_sdt=6,44" style="color: #660099;"><i>Wiley v. Wells Fargo Bank, N.A. (In re Wiley),</i> 579 B.R. 1, 6 (Bankr. D. Me. 2017)</a>. First, the debt must be for either an educational loan or an educational benefit overpayment. 11 U.S.C. § 523(a)(8)(A)(i). Courts look to the purpose of the loan in order to determine whether it is an educational loan. <a href="https://scholar.google.com/scholar_case?case=13275686271641006432&q=%22national+collegiate+student+loan%22&hl=en&as_sdt=6,44" style="color: #660099;"><i>In re Page,</i>592 B.R. 334, 336 (8th Cir. BAP 2018)</a> (citing <a href="https://scholar.google.com/scholar_case?case=4915954796367648379&q=%22national+collegiate+student+loan%22&hl=en&as_sdt=6,44" style="color: #660099;"><i>In re Murphy,</i> 282 F.3d 868 (5th Cir. 2002)</a>). Second, the loans must have been made under a program.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=13534570739083584739&q=%22national+collegiate+student+loan%22&hl=en&scisbd=2&as_sdt=6,44#[2]" name="r[2]" style="color: #660099;">[2]</a></sup> <a href="https://scholar.google.com/scholar_case?case=2667722072512261674&q=%22national+collegiate+student+loan%22&hl=en&as_sdt=6,44" style="color: #660099;"><i>Wiley,</i> 579 B.R. at 6</a>. Third, the program must have been funded, at least in part, by a governmental unit or a nonprofit institution. <i>Id.</i><br />
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Importantly, it is the program, not the individual loan, that must have been funded by a governmental unit or nonprofit institution. <a href="https://scholar.google.com/scholar_case?case=16630120181778447090&q=%22national+collegiate+student+loan%22&hl=en&as_sdt=6,44" style="color: #660099;"><i>In re O'Brien,</i> 419 F.3d 104, 106 (2d Cir. 2005)</a>("While it may be true that TERI merely guaranteed, without funding, [debtor's] particular loan, it is an entirely different question whether TERI funded the loan program under which [debtor's] loan was made."); <a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=2215210982067534698&q=%22national+collegiate+student+loan%22&hl=en&as_sdt=6,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Educ. Res. Inst., Inc. v. Taratuska (In re Taratuska),</i>No. 07-11938-RCL, 2008 WL 4826279, at *3 (D. Mass. Aug. 25, 2008)</a>. "Congress intended to include within [section] 523(a)(8) all loans made under a program in which a nonprofit institution plays any meaningful part in providing funds." <a href="https://scholar.google.com/scholar_case?case=13309098527739043381&q=%22national+collegiate+student+loan%22&hl=en&as_sdt=6,44" style="color: #660099;"><i>Educ. Res. Inst., Inc. v. Hammarstrom (In re Hammarstrom),</i> 95 B.R. 160, 165 (Bankr. N.D. Cal. 1989)</a>. A nonprofit institution's guarantee of a loan made under a program serves as evidence that the program was funded by that nonprofit institution. <i>See </i><a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=2215210982067534698&q=%22national+collegiate+student+loan%22&hl=en&as_sdt=6,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Taratuska,</i> 2008 WL 4826279, at *6</a>. This is because the existence of a guarantee plays a meaningful part in a program's ability to extend credit to student borrowers. <i>See id.</i></div>
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A. These are Educational Loans Because Greer-Allen Entered Them to Fund Her Studies at Northeastern University</h2>
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Greer-Allen's loans satisfy all three requirements of the second prong of § 523(a)(8)(A)(i). The three loans are educational loans because Greer-Allen entered into them to finance her studies at Northeastern University. Greer-Allen admits that she sought out the loans for this educational purpose.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=13534570739083584739&q=%22national+collegiate+student+loan%22&hl=en&scisbd=2&as_sdt=6,44#[3]" name="r[3]" style="color: #660099;">[3]</a></sup> The loan agreements and Greer-Allen's admissions show that she entered these loans to help fund her education. For this reason, these loans qualify as educational loans under § 523(a)(8)(A)(i), notwithstanding that Greer-Allen spent some of their proceeds for non-educational purposes.</div>
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B. Bank One and JPMorgan Chase Bank Issued the Loans as Part of the Education One Undergraduate Loan Program.</h2>
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All three loans were made under the Education One Undergraduate Loan Program. Greer-Allen applied for each loan through a website maintained by First Marblehead Bank. While Bank One originated the first loan and JPMorgan Chase Bank originated both subsequent loans, all three loan agreements conspicuously state that they were made under the Education One Undergraduate Loan Program. Further, the defendants submitted the affidavit of Bradley Luke, an employee of Transworld Systems, Inc. ("TSI"). Def.'s Mot. Summ. J. Ex. C. TSI is responsible for subservicing student loans held by the defendants. Luke testified that all three loans were made under a loan program. Luke Aff. ¶ 16, 23, 31. Greer-Allen has submitted no evidence calling into question the existence of the loan program. Thus, even taking all reasonable inferences in Greer-Allen's favor, the defendants have shown that these loans were made under a program.</div>
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C. TERI is a Nonprofit Institution, and it Funded the Education One Program by Guaranteeing All Loans Issued Under the Program</h2>
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The third requirement is satisfied because the Education One Undergraduate Loan Program was funded in part by TERI, a nonprofit institution. This determination requires the Court to answer two questions affirmatively. First, was TERI a nonprofit institution? And second, did TERI fund, at least in part, the Education One Undergraduate Loan Program? The defendants have satisfied their burden of production on both questions; and Greer-Allen has not submitted evidence, beyond mere speculation, refuting TERI's nonprofit status or TERI's funding of the program.</div>
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1. TERI was a Nonprofit Institution</h2>
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Ample evidence in the record shows that TERI was a nonprofit entity. All three loan agreements reference TERI's status as a nonprofit institution. All three trust agreements submitted by the defendants define TERI as "a private non-profit corporation organized under Chapter 180 of the Massachusetts General Laws." Def.'s Mot Summ. J. Ex. F, G, H. Further, the Guaranty Agreement, submitted under seal, between TERI and Bank One, N.A. also describes TERI as "a private non-profit corporation organized under Chapter 180 of the Massachusetts General Laws."<br />
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At oral argument, Greer-Allen's counsel insinuated that TERI may not have been operating as a nonprofit institution when these loans originated. However, Greer-Allen has not produced any evidence in furtherance of that claim. Summary judgment is appropriate where there is no genuine issue of material fact. Here, Greer-Allen has not put forth sufficient evidence to generate a genuine issue of material fact regarding TERI's nonprofit status.<br />
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Greer-Allen's counsel also argues that Congress understood "nonprofit institution," as the phrase is used in § 523(a)(8)(A)(i), to mean only nonprofit educational institutions. In other words, Greer-Allen contends that only educational loans made under a program funded by a nonprofit college should be excepted from discharge. Whether or not Congress intended such a meaning, this Court must give effect to the plain language Congress used. Section 523(a)(8)(A)(i) excepts loans made under programs funded by "nonprofit institutions" from discharge. The plain text is unambiguous and offers no reason to suggest that only certain nonprofit institutions satisfy the exception. Accordingly, the Court declines to adopt Greer-Allen's reading of § 523(a)(8)(A)(i).</div>
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2. TERI Funded the Education One Program by Guaranteeing All Education One Loans</h2>
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The final issue the Court must decide is whether TERI funded the Education One Undergraduate Loan Program. The defendants put forth evidence suggesting that TERI did fund the program. Greer-Allen argues that the evidence the defendants produced cannot satisfy their burden of production. The Court finds that the defendants have satisfied their initial burden of production. On the other hand, Greer-Allen has provided no evidentiary basis for her assertion that TERI did not fund the program. Greer-Allen has not shown a genuine issue of material fact relating to the issue.<br />
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The defendants produced the loan documents for each of the three loans. The first loan states:</div>
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I acknowledge that the requested loan is subject to the limitations on dischargeability in bankruptcy contained in Section 523(a)(8) of the United States Bankruptcy Code. Specifically, I understand that [Bank One, N.A.] purchased a guaranty of this loan, and that this loan is guaranteed by The Education Resources Institute, Inc., a nonprofit institution.</blockquote>
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The second loan contains identical language, and the third loan contains substantially similar language. The language in the loan documents provide some evidence that the program was funded by TERI because they indicate that Bank One and JPMorgan Chase purchased guarantees from TERI. A guaranty helps fund a program because it encourages a lender to extend credit that may not otherwise be available. However, the language in the loan documents is not, standing alone, sufficient to prove the existence of the guarantees. Another court in this circuit has denied summary judgment when a creditor sought to prove the existence of a guaranty based only upon similar language in a promissory note. <i>See </i><a href="https://scholar.google.com/scholar_case?case=2667722072512261674&q=%22national+collegiate+student+loan%22&hl=en&as_sdt=6,44" style="color: #660099;"><i>In re Wiley,</i> 579 B.R. at 7</a>. Here, the defendants have produced substantially more evidence, including the relevant guaranty and the defendants' trust agreements.<br />
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The summary judgment record also contains the trust agreement of each defendant. These agreements provide further evidence of the existence of the TERI guaranty agreement and TERI's funding of the Education One Program. The agreements define "TERI Guaranty Agreements" as the "Guaranty Agreements entered into between each of the Loan Originators and TERI as set forth on Schedule D attached hereto." The trust agreements define "TERI Guaranteed Loans" as "Student Loans originated under the Student Loan Programs owned by the Trust and guaranteed by TERI pursuant to the Guaranty Agreements." Schedule D of each trust agreement lists a Guaranty Agreement between TERI and Bank One, N.A. "for loans that were originated under Bank One's . . . Education One Loan Program." (ECF #29 Ex. F, G, H).<br />
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The trust agreements and their attached schedules indicate that the Education One Loan Program was funded by TERI. Each agreement lists the Program as one guaranteed by TERI. Each defines loans made under the Program as TERI Guaranteed Loans. The trust agreements bolster the notion that TERI played a part in funding the Program by guaranteeing loans issued under the Program.<br />
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Most notably, the defendants produced a guaranty agreement, executed on April 18, 2002, between Bank One and TERI. Under the agreement, TERI promised to guaranty all loans made under the Education One Undergraduate Loan Program. Section 2.1 of the guaranty states that "TERI hereby guarantees to Bank One, unconditionally. . . the payment of 100% of the principal of and accrued interest on every Loan as to which a Guaranty Event has occurred." Loans are defined as disbursements of funds made by Bank One under the Program. Guaranty Events are triggered by the failure of a borrower to make timely monthly payments. Thus, the agreement makes clear that TERI guaranteed all loans made under the Program, and that TERI was obligated to pay Bank One in the event of any default by a student loan borrower. The sweeping breadth of the guaranty makes clear that TERI helped fund the Program. Bank One and JPMorgan Chase Bank, its successor in interest, knew that all loans issued under the Program would be guaranteed by TERI in the event of default.<br />
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Considering the guaranty between Bank One and TERI, along with the aforementioned evidence, the defendants have met their initial burden of production. While the record lacks direct evidence of payments from TERI to the program, TERI's guaranty of all loans made under the Program conclusively establishes that the Program was funded in part by TERI. The blanket guaranty allowed Bank One, and its successor JPMorgan Chase, to offer student loans to borrowers like Greer-Allen.</div>
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The evidence presented shows that there are no genuine issues of material fact in this adversary proceeding. The defendants demonstrated that Greer-Allen's loans are educational loans made under the Education One Loan Program. Further, they showed that the Education One Loan Program was funded by TERI, and that TERI was a nonprofit institution. Greer-Allen has failed to produce evidence that would create a genuine issue as to any one of these facts. At the summary judgment stage, the Court must make reasonable inferences in the nonmoving party's favor. Here, however, Greer-Allen has not produced evidence that would allow a reasonable factfinder to return a verdict in her favor. Accordingly, the three student loans at issue are non-dischargeable under 11 U.S.C. § 523(a)(8)(A)(i). For the aforementioned reasons, the defendants' motion for summary judgment is GRANTED and Greer-Allen's motion for summary judgment is DENIED. Judgment shall enter accordingly.</div>
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<small style="color: #222222; font-family: Arial, sans-serif; font-size: 11px; text-align: start;"><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=13534570739083584739&q=%22national+collegiate+student+loan%22&hl=en&scisbd=2&as_sdt=6,44#r[1]" name="[1]" style="color: #660099;">[1]</a> Greer-Allen does not contend that her debts fall within the undue hardship exception.</small></div>
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<small style="color: #222222; font-family: Arial, sans-serif; font-size: 11px; text-align: start;"><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=13534570739083584739&q=%22national+collegiate+student+loan%22&hl=en&scisbd=2&as_sdt=6,44#r[2]" name="[2]" style="color: #660099;">[2]</a> The term "program" is not defined by the Code. While scores of published opinions discuss 523(a)(8) dischargeability, the Court is unaware of any case defining the parameters of a "program."</small></div>
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<small style="color: #222222; font-family: Arial, sans-serif; font-size: 11px; text-align: start;"><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=13534570739083584739&q=%22national+collegiate+student+loan%22&hl=en&scisbd=2&as_sdt=6,44#r[3]" name="[3]" style="color: #660099;">[3]</a> Despite seeking the loans for an educational purpose, the parties suggest that Greer-Allen used some portion of the loan proceeds to purchase a home. At oral argument, Greer-Allen's counsel suggested that the use of loan proceeds for non-educational purchases forecloses their consideration as educational loans. However, "courts routinely look to the purpose of a loan to determine whether it is `educational.'" <a href="https://scholar.google.com/scholar_case?case=13275686271641006432&q=%22national+collegiate+student+loan%22&hl=en&as_sdt=6,44" style="color: #660099;"><i>In re Page,</i> 592 B.R. at 336</a>. This Court finds the reasoning of <i>In re Page</i> persuasive and looks to the purpose for which the loans were entered in order to determine whether the loans are educational in nature.</small></div>
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MOTPhttp://www.blogger.com/profile/15883011307129083993noreply@blogger.com0tag:blogger.com,1999:blog-9105536336033560224.post-74982057879701147122019-05-25T05:30:00.000-07:002019-06-07T15:46:40.213-07:00Special Interest Jurisprudence: How Intermediate Courts of Appeals Have Lowered Substantive Proof Requirements in Consumer Debt Cases in Texas <b style="font-size: 11pt;"><span style="color: #cc0000; font-family: inherit;">Proof of contract not necessarily required to prove breach-of-contract claim: There is another way </span></b><br />
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<span style="background-color: white; color: #222222; font-size: 11pt;">A high number of consumer debt collection cases result in default judgments. Under Texas pleading rules, the contract does not have to be attached to a creditor’s petition, and when no answer is filed, the allegations in the petition are admitted except for unliquidated damages. The latter are typically “proven up” with an affidavit and at least one account statements attached to the creditor’s motion for default judgment.</span></span><br />
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<span style="font-family: inherit;">That may not be so remarkable. What is more remarkable is that creditors routinely obtain judgments without proving the underlying contract even in contested cases because one intermediate court held in 2008 that proof of the contract is not required if the creditor proceeds on the alternative common-law theory of account stated. <i>See Dulong v. Citibank (South Dakota), N.A.,</i> 261 S.W.3d 890, 893 (Tex. App.-Dallas 2008, no pet.) (Opinion by Justice Richter). </span></div>
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<span style="font-family: inherit;">In <i>Dulong</i>, the Dallas Court of Appeals fundamentally changed the common-law theory of account stated while purporting to rely on existing authority, and blessed its use for credit card debt collection. It cited a case in which the Fourteenth Court of Appeals in Houston held that an invoice for medical services provided to a patient was not enough to prove the reasonableness of charges in the absence of the patient’s agreement to the amount. <i>See Neil v. Agris</i>, 693 S.W.2d 604, 605 (Tex. App.-Houston [14th Dist.] 1985, no writ).</span></div>
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<span style="font-family: inherit; font-size: 10.5pt; line-height: 14.98px;">His sole attempt to prove an account stated was through his bookkeeper, who testified that she mailed appellant a bill which was never paid. There is no evidence in the record to show at the time the services were rendered or even subsequently that appellant agreed to pay $1700 to appellee for the professional services rendered. In the absence of an agreement fixing the price for the services, appellee was required to prove that the price charged for his services was usual, customary and reasonable; this he failed to do. We therefore sustain appellant's second point of error.</span></div>
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<span style="font-family: inherit;">Several Texas courts of appeals have jumped on the bandwagon and have approved credit card debt collection without proof of the contract, blessing grant of judgments based on copies of credit card statements only. They cite <i>Dulong</i>, but don’t reexamine <i>Dulong’</i>s mistaken reliance on <i>Neil v. Agris</i>.</span></div>
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<span style="font-family: inherit;">The only hold-out is the Second Court of Appeals in Fort Worth. <i>See Morrison v. Citibank (South Dakota) N.A.</i>, 02-07-00130-CV, 2008 WL 553284 (Tex.App.-Fort Worth Feb. 28, 2008, no pet.) (mem. op.) (per curiam), an opinion with which the Dallas COA has expressly taken issue. See <i>Compton v. Citibank (S.D.), N.A.</i>, 364 S.W.3d 415, 417-18 (Tex. App.-Dallas 2012, no pet.)(declining to follow the Fort Worth Court of Appeals' opinion in <i>Morrison</i> in favor of its own holding in <i>Dulong</i> and its reliance on that case in subsequent credit card cases).</span></div>
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<span style="font-family: inherit;">Although there is a conflict among the appellate court, the Texas Supreme Court declined the invitation to review a credit card judgment based on account stated when a petition in such a case was filed in 2015. <i>See Core v. Citibank, NA</i>, No. 13-12-00648-CV, 2015 WL 1631680 (Tex. App.-Corpus Christi Apr. 9, 2015, pet. denied) (mem. op.). </span></div>
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<b><span style="color: #cc0000; font-family: inherit;">Proof of contract-formation not required to prove breach-of-contract claim: Exemptions available</span></b></div>
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<span style="font-family: inherit;">Even when a creditor proceeds on a breach-of-contract theory, Texas appeals courts have gone out of their way to relax the substantive proof requirements.</span></div>
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<span style="font-family: inherit;">Credit card agreements are typically not signed. In litigation, the legal theory of contract-formation is acceptance of credit terms by card use (or other form of credit utilization involving the account).</span></div>
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<span style="font-family: inherit;">Although the matter is technically governed by the choice-of-law jurisdiction (Delaware for Discover Bank and FIA/BANA, Utah for American Express, South Dakota for Wells Fargo and Citibank, Virginia for Capital One), Texas common-law is typically applied because a motion for judicial notice of the other state’s law is rarely filed in collection suits.</span><br />
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<span style="font-family: inherit;">Contractual choice of law comes up occasionally in American Express cases because of the distinct nature of the Utah statute of frauds and its statutory exceptions for credit cards, which do not fall under the statute of frauds in Texas even if the loan amount were to exceed $50,000. See TEX. BUS. & COMM. CODE ANN. § 26.02 (West, Westlaw through 2017 1st C.S.) (requiring a loan agreement exceeding $50,000 to be in writing, thus, creating a statute of frauds for certain loan agreements, but excepting (A) a credit card or charge card, and (B) an open-end account, as that term is defined by Section 301.002, Finance Code, intended or used primarily for personal, family, or household use.).</span></span></div>
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<b><span style="color: #cc0000; font-family: inherit;">Proof of a <a href="https://debt-suit-litigation-in-texas.blogspot.com/2019/05/texas-contract-law-was-there-meeting-of.html" target="_blank">Meeting of the Minds</a> on Contract Terms no longer necessary: Here is a consumer contract, you are a consumer, therefore you have agreed to it</span></b></div>
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<span style="font-family: inherit;">Texas courts look to evidence of card use as shown by line items for charges on the credit card statement as proof that a contract was formed, but they do not require creditors to prove that a generic cardmember agreement attached to an affidavit is the one that was offered to and accepted by the cardholder.</span><br />
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<span style="font-family: inherit;">In <i>Wakefield v. Wells Fargo Bank, N.A</i>., for example, the court of appeals found it sufficient that the defendant had the status of cardholder and that the generic agreement stated that it applied to cardholder even though the date on the agreement attached to the bank's summary judgment affidavit did not match the date attested to by the Bank’s affiant as the date of contract-formation, which was years earlier. <i>Wakefield v. Wells Fargo Bank, N.A</i>., No. 14-12-00686-CV, 2013 WL 6047031 (Tex. App.-Houston [14th Dist.] Nov. 14, 2013, no pet.) (mem op. by Justice Tracy Christopher).</span></span></div>
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<b><span style="color: #cc0000; font-family: inherit;">Creditor’s affidavit testimony accepted as competent, Debtor’s dismissed as conclusory or immaterial</span></b></div>
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<span style="font-family: inherit;">The matter of whether contractual rights predicated upon an unsigned contract (or terms-and-conditions document) are enforceable depends not only on the nature and quality of the proof of credit formation/acceptance, but whether the evidence is admissible.</span></div>
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<span style="font-family: inherit;">In credit card cases, Texas courts of appeals find it sufficient when an affiant for a creditor testifies that an attached boilerplate agreement is the agreement governing the account without details regarding contract-formation, but reject or discount affidavit testimony by defendants disputing the creditor’s contentions as conclusory. <i>See, e.g. Hay v. Citibank (S.D.) N.A., </i>No. 14-04-01131-CV, 2006 WL 2620089, at *2 (Tex. App.-Houston [14th Dist.] Sept. 14, 2006, no pet.) (holding affidavit statement that customer "did not agree to the terms of any credit card" did not defeat summary judgment in creditor’s favor);<i> also see Houle v. Capital One Bank (USA), N.A.,</i> No. 08-16-00234-CV, 2018 WL 6629698, at *5 (Tex.App.-El Paso Dec. 19, 2018, pet. filed) (opinion by Chief Justice Ann Crawford McClure) <span style="font-size: 11pt;">(</span><span style="background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-size: 10.5pt; line-height: 14.98px;">concluding that defendant’s counter-affidavit disputing the bank’s claims and evidence did not raise a genuine issue of material fact).</span></span></div>
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<span style="font-family: inherit;">In one recent summary judgment appeal, a Houston Court of Appeals found the creditor’s evidence “free from any contradictions or inconsistencies” even though there were only two credit card statements in the record and they had different account numbers on them. The court went so far as to cite a criminal case from a federal district court in a different state to support the factual proposition that two different account numbers can pertain to the same account to neutralize the discrepancy in the summary judgment record before it. <i>See Germany v. Wells Fargo Bank, N.A.</i>, No. 14-17-00916-CV (Tex.App. – Houston [14<sup>th</sup> Dist.], Feb. 7, 2019, pet. filed)(memorandum opinion by Justice Christopher). </span></div>
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<span style="color: #222222; font-size: 14.6667px;">See -- > <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3394610" target="_blank">Beyond Judicial Notice: A Critique of Sua Sponte Speculation and Factfinding on Appeal</a> </span></div>
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<span style="font-family: inherit;">By contrast, when the issue is whether a valid agreement to arbitrate exists in the employment context (which is also a matter of ordinary state contract law), much closer attention is given to the elements of contract-formation. <i>See, e.g., Kmart Stores of Texas, L.L.C. v. Ramirez</i>, 510 S.W.3d 559, 568-71 (Tex. App.-El Paso 2016, pet. denied)(finding fact issue regarding existence of arbitration agreement where employee testified unequivocally that she did not log in through Kmart's online portal to view an arbitration agreement, did not click on a screen acknowledging receipt of the policy, and had never been presented with an arbitration agreement at any time during her employment.); <i>Red Bluff , LLC v Tarpley</i>, No. 14-17-00505-CV (Tex.App. – Houston [14<sup>th</sup> Dist.] Dec. 21 , 2018, no pet.) (mem. op by Justice Brett Busby) <span style="font-size: 11pt;">(arbitration agreement not formed because proper procedure not followed).</span></span></div>
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<b><span style="color: #cc0000; font-family: inherit;">Imputation of consent upon the consumer by the Court of Appeals in the absence of evidence </span></b></div>
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<span style="font-family: inherit;">Another approach taken by at least one Texas Court of Appeals to dispose of the issue of consumer consent is to simply impute consent on the consumer without the requisite evidence in the record that the consumer consented in the manner specified by the standard terms on the loan origination documents. <i>See Foster v. National Collegiate Student Loan Trust 2007-4</i>, No. 01-17-00253-CV, 2018 WL 1095760 (Tex. App.-Houston [1st Dist.] 2018, no pet.) (mem. op. by Chief Justice Radack)(invoking theory of joint construction of multiple contract documents and concluding that student-applicant consented to loan terms by signing application even though the loan terms were not yet known when she signed the application), <i>contra Mock v. Nat'l Collegiate Student Loan Tr. 2007-4</i>, No. 01-17-00216-CV, 2018 WL 3352913, at *6-7 (Tex. App.-Houston [1st Dist.] July 10, 2018, no pet. h.) (mem. op. by Justice Harvey Brown) (“The cancelled disbursement check is evidence that the Mocks agreed to the terms of the loan as set forth in the Credit Agreement and Disclosure Statement by endorsing and depositing the check that disbursed the loan proceeds.”).</span></div>
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<span style="font-family: inherit;">In <i>Foster</i>, unlike in <i>Mock</i>, the Trust had not produced the disbursement check as proof of acceptance of the loan itself and the terms under which the loan was being offered (which were printed on the disclosure statement that post-dated the application), so the appellate court filled the evidentiary void with an ad-hoc legal theory that flies in the face of a fundamental tenant of contract-formation: the requirement of a meeting of the minds on essential terms. </span></div>
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<span style="font-family: inherit;">Additionally, in <i>Foster</i>, the loan history exhibit did not reflect that any payments were ever made. So it could not have be argued that the evidence of installment payments was a sufficient proxy for proof of acceptance in the absence of the disbursement check as proof that the loan was made in the amount claimed by the trust, and that it was accepted on the terms stated in the TIL Disclosure Statement. <i>See Benser v. Citibank (South Dakota), N.A.</i>, No. 08-99-00242-CV, 2000 WL 1231386, at *5 (Tex. App.-El Paso Aug. 31, 2000, no pet.) (concluding that defendant’s use of credit card and payments to account showed he understood obligation to bank and that contract had been formed). </span></div>
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<span style="font-size: x-small;"><span style="color: #505050; font-family: inherit;">Also see Research Paper on <a href="https://ssrn.com/abstract=3195590%20or%20http://dx.doi.org/10.2139/ssrn.3195590" target="_blank">Retroactive Judicial Imputation of Consent</a> to (Arguably) Predatory Loan Terms into a Student's Loan Application: A Critique of Foster v. NCSLT 2007-4, No. 01-17-00253-CV, 2018 WL 1095760 (Tex. App. – Houston [1st Dist.] March 1, 2018, no. pet. h.). (June 13, 2018). Available at SSRN: </span></span><br />
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<span style="font-family: inherit; font-size: x-small;"><a data-saferedirecturl="https://www.google.com/url?q=https://ssrn.com/abstract%3D3195590&source=gmail&ust=1557691965277000&usg=AFQjCNF_ZynIZMfBYBT_WxjUcA_E9BD9Ww" href="https://ssrn.com/abstract=3195590" style="color: blue;" target="_blank"><span style="background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #505050; font-family: "nexussanswebpro" , serif;">https://ssrn.com/<wbr></wbr>abstract=3195590</span></a><span style="color: #505050; font-family: "nexussanswebpro" , serif;"> or </span><a data-saferedirecturl="https://www.google.com/url?q=https://dx.doi.org/10.2139/ssrn.3195590&source=gmail&ust=1557691965277000&usg=AFQjCNGNoFGaOik1HwiuX9RcM0ZwStULWA" href="https://dx.doi.org/10.2139/ssrn.3195590" style="color: blue;" target="_blank"><span style="background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #505050; font-family: "nexussanswebpro" , serif;">http://dx.<wbr></wbr>doi.org/10.2139/ssrn.3195590</span></a> </span></div>
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MOTPhttp://www.blogger.com/profile/15883011307129083993noreply@blogger.com0tag:blogger.com,1999:blog-9105536336033560224.post-55228089373518408412019-05-22T18:52:00.001-07:002019-06-02T13:39:11.024-07:00Texas Contract Law: Was there a "Meeting of the Minds" on a Fixed Amount? <div class="MsoNormal">
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<span style="font-size: x-small;">McAllen Hospitals, L.P. v. Lopez, No.
<a href="http://www.search.txcourts.gov/Case.aspx?cn=17-0733&coa=cossup" target="_blank">17-0733</a> (Tex. May 17, 2019) (judgment for plaintiffs on jury verdict reversed)</span><o:p></o:p></div>
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It will come as no surprise to Texas attorneys that the
all-Republican Texas Supreme Court ruled for the hospital when the hospital sough supreme court help after its bid to obtain reversal of a jury trial verdict favoring nurses in an
employment/pay dispute failed in the court of appeals. <i>See McAllen Hospitals, L.P. v. Lopez</i>, No. <a href="http://www.search.txcourts.gov/Case.aspx?cn=17-0733&coa=cossup">17-0733</a>
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<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi2C9SPYymd_p65rRXkbnGCT-54993dRSOKwb0jO53Up7INZkk4Tg48OUOhw4I9qx5aFqIzXJedqFArSDMmqpHSgzpIZoTod1WlFh0-auNosI_LBdp1jTI8LtKViudsmnT3UyAFcXF-JAlh/s1600/McAllen+Hospitals%252C+L.P.+v.+Lopez%252C+No.+17-0733+%2528Tex.+May+17%252C+2019%2529%2528snip+of+exhibit%2529.PNG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="857" data-original-width="889" height="308" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi2C9SPYymd_p65rRXkbnGCT-54993dRSOKwb0jO53Up7INZkk4Tg48OUOhw4I9qx5aFqIzXJedqFArSDMmqpHSgzpIZoTod1WlFh0-auNosI_LBdp1jTI8LtKViudsmnT3UyAFcXF-JAlh/s320/McAllen+Hospitals%252C+L.P.+v.+Lopez%252C+No.+17-0733+%2528Tex.+May+17%252C+2019%2529%2528snip+of+exhibit%2529.PNG" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">No contract despite two signatures on a job performance evaluation </td></tr>
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<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgA7tCmNshTxiNG1-Od6PT81Z4tQrEg1x0zvQSV9027-1AE2PUlUknRrlvx5W-70wUO4FdBV8JAb6Fpg5K5C8d6yON-yj2Jlpf0Jn531kN5syvWMYlITcr5HrfOdykhyphenhyphen2_T7gYQYFmgLUaD/s1600/McAllen+Hospitals%252C+L.P.+v.+Lopez%252C+No.+17-0733+%2528Tex.+May+17%252C+2019%2529%2528snip+of+exhibit+-+performance+eval+not+a+contract%2529.PNG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="427" data-original-width="528" height="258" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgA7tCmNshTxiNG1-Od6PT81Z4tQrEg1x0zvQSV9027-1AE2PUlUknRrlvx5W-70wUO4FdBV8JAb6Fpg5K5C8d6yON-yj2Jlpf0Jn531kN5syvWMYlITcr5HrfOdykhyphenhyphen2_T7gYQYFmgLUaD/s320/McAllen+Hospitals%252C+L.P.+v.+Lopez%252C+No.+17-0733+%2528Tex.+May+17%252C+2019%2529%2528snip+of+exhibit+-+performance+eval+not+a+contract%2529.PNG" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Employer's disclaimer: Performance Appraisal not a Contract </td></tr>
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</div>
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In the trial court, the nurses were successful on their claim that they had
been promised a fixed amount of annual salary as opposed to being compensated at
an hourly rate for the number of hours worked. The Thirteenth Court of Appeals <a href="https://scholar.google.com/scholar_case?case=5783072738180152500&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44" target="_blank">affirmed the trial court’s judgment entered on the jury’s verdict</a> for the plaintiffs, but
the Supreme Court reversed, finding that the evidence was not sufficient to support a meeting
of the minds of the parties on the matter of the annual salary, and ordered
that the nurses take nothing.<br />
</div>
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</div>
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The bottom line: <b>The jury got it wrong. The Court of Appeals got it wrong. There was no implied contract for
an annual salary. </b><o:p></o:p></div>
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<br />
<div style="text-align: center;">
<b><span style="color: #0b5394;">NAME THE PLACE WHERE CLAIMS OF EMPLOYEES, CONSUMERS, AND PERSONAL INJURY PLAINTIFFS GO TO DIE </span></b><b><span style="color: #0b5394;">-- OR ARE TAKEN TO BE SNUFFED </span></b><br />
<b><span style="color: #0b5394;"><br /></span></b></div>
</div>
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This is another case of employees coming to grief in the Texas
Supreme Court. Nothing unusual or unexpected. But the dispositive legal issues in the case
may have ramifications that go beyond the employment context because they
involve matters of common-law contract law; specifically, the element of a meeting of the
minds in the absence of a formal written contract executed by both parties. <o:p></o:p></div>
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<br /></div>
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The absence of a signed contract also describes other legal relationships such as that between a bank and a customer with respect to a
credit card account. Most credit card agreements are not signed by the
consumer, and many take the form of a generic boilerplate agreement that does
not have the name of the customer or the number of the account printed on it so
as to link it to a specific customer and account. (American Express is a notable
exception in that regard, as is, to some extent, Bank of America f/k/a FIA Card Services, N.A.). <o:p></o:p></div>
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<br /></div>
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Alas, in credit card collection cases, Texas courts do not consistently
hold creditors to the requirement that they prove a meeting of the minds on the
terms by which credit was extended and indebtedness incurred. The caselaw on this issue is rather checkered as shown by the selection of the groups of cases below: <o:p></o:p></div>
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<br /></div>
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<b><span style="color: #0b5394;">Requirement to prove agreement on credit terms enforced:</span></b></div>
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<ul>
<li><i>Hooper v. Generations Cmty. Fed. Credit Union</i>, No. 04-12-00080-CV, 2013 WL 2645111 (Tex. App.-San Antonio June 12, 2013, no pet.) (bench trial judgment reversed on insufficiency-of-evidence grounds and take-nothing judgment rendered on appeal)</li>
<li><i>Uribe v. Pharia, LLC</i>, No. 13-13-00551-CV, 2014 WL 3555529 (Tex. App.-Corpus Christi July 17, 2014) (mem. op.) (judgment for alleged assignee of credit card debt reversed and take-nothing judgment rendered)</li>
<li><i>Williams v. Unifund CCR Partners Assignee of Citibank</i>, 264 S.W.3d 231 (Tex. App.-Houston [1st Dist.] 2008, no pet.)(summary judgment for debt buyer reversed based on insufficiency of the evidence under the summary judgment standard) </li>
<li><i>Tully v. Citibank (South Dakota), N.A</i>., 173 S.W.3d 212 (Tex.App.-Texarkana 2005, no pet.) (summary judgment for Citibank on multiple
theories of recovery reversed, including breach of contract, where agreement on
interest rate applied on billing statements had not been proven).</li>
</ul>
</div>
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<span style="color: #0b5394; font-weight: bold;">Requirement to prove agreement on credit terms not
enforced:</span> </div>
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<ul>
<li><i>Devine v. Am. Express Centurion Bank</i>, No. 09-10-00166-CV, 2011 WL 2732583 (Tex.App.-Beaumont 2011, no pet.) (mem. op.) (summary judgment affirmed even though
defendant filed controverting affidavit denying receipt of credit card agreement
offered as summary judgment proof and denying agreement on interest rates).</li>
<li><i>Wakefield v. Wells Fargo Bank</i>, N.A., No. 14-12-00686-CV, 2013 WL 6047031, at *4 (Tex. App.-Houston [14th Dist.] Nov. 14, 2013, no pet.) (mem. op.) (summary judgment for bank affirmed even tough year printed on generic cardmember agreement did not match year of contract-formation attested to by the bank's affiant, and despite absence of proof establishing contractual basis
for interest rates).</li>
</ul>
</div>
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<o:p></o:p></div>
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<b style="color: #0b5394;">CONTRACT-PROOF AVOIDANCE BY RESORT TO ALTERNATIVE LEGAL THEORIES</b><br />
<br />
Additionally, several Texas courts of appeal have signed
on to the proposition that a credit card plaintiff need not prove the terms of
the underlying contract if it chooses to pursue its claim under a different theory of recovery, the most popular one (with the Creditors' Bar) being "Account Stated." </div>
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<br /></div>
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See --- > <a href="https://debt-suit-litigation-in-texas.blogspot.com/2019/05/consumer-contracts-at-back-end.html" target="_blank">Avoidance of requirement to prove contract through alternative theories</a>.<br />
--- > <a href="https://debt-suit-litigation-in-texas.blogspot.com/2013/07/texas-account-stated-cases-lower-proof.html" target="_blank">Common-law Account Stated theory revived to lower standards of proof in credit card collection cases and facilitate robo-litigation</a>.<br />
<o:p></o:p></div>
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<br /></div>
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The Texas Supreme Court has not weighed in the matter.<br />
<br />
<div style="text-align: center;">
<b><span style="color: #cc0000;">BELOW: SCOTX AND COURT OF APPEALS OPINIONS IN</span></b><br />
<b><span style="color: #cc0000;"> MCALLEN HOSPITALS LP VS. NURSE YOLANDA LOPEZ ET AL </span></b></div>
</div>
<div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiThEBhS3tslwuXf7-qx5UYLFGeYjS4OuosvN7jEwzWrdVPoej1MfNpkVd_LFac8Y2CBzQdIn3weXNBSZGFeecbhCLrP0ataGe6zToWbBmoda7IvVshqJE1VxJZ5aN6G6zDozqTgtlwa1k8/s1600/McAllen+Hospitals%252C+L.P.+v.+Lopez%252C+No.+17-0733+SCOTX+case+style+from+oral+argument+submission.PNG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img alt="McAllen Hospitals, L.P. v. Lopez, No. 17-0733 (Tex. May 17, 2019)" border="0" data-original-height="485" data-original-width="902" height="215" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiThEBhS3tslwuXf7-qx5UYLFGeYjS4OuosvN7jEwzWrdVPoej1MfNpkVd_LFac8Y2CBzQdIn3weXNBSZGFeecbhCLrP0ataGe6zToWbBmoda7IvVshqJE1VxJZ5aN6G6zDozqTgtlwa1k8/s400/McAllen+Hospitals%252C+L.P.+v.+Lopez%252C+No.+17-0733+SCOTX+case+style+from+oral+argument+submission.PNG" title="McAllen Hospitals, L.P. v. Lopez, No. 17-0733 (Tex. May 17, 2019)" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">McAllen Hospitals, L.P. v. Lopez, No. 17-0733 in SCOTX </td></tr>
</tbody></table>
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<h3 id="gsl_case_name" style="border: 0px; margin: 1em 0px; padding: 0px;">
McALLEN HOSPITALS, L.P. D/B/A McALLEN MEDICAL CENTER AND SOUTH TEXAS HEALTH SYSTEMS, Petitioners,<br />v.<br />YOLANDA LOPEZ, SHERYL HAMER, ELMER DEGUZMAN AND RICHARD WECKER, Respondents.</h3>
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<a href="https://scholar.google.com/scholar?scidkt=680953496979377600&as_sdt=2&hl=en" style="color: #660099;">No. 17-0733.</a></center>
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<b>Supreme Court of Texas.</b></div>
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Argued March 12, 2019.</center>
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Opinion delivered: May 17, 2019.</center>
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Miguel A. `Michael' Pruneda, Jr., Rolando Quintana, for Elmer DeGuzman, Yolanda Lopez, Richard Wecker and Sheryl Hamer, Respondents.</div>
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Alfred John Harper, III, Arrissa K. Meyer, for South Texas Health Systems and McAllen Hospitals, L.P. d/b/a McAllen Medical Center, Petitioners.</div>
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<br /></div>
<div style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 14px; position: relative;">
On Petition for Review from the Court of Appeals for the Thirteenth District of Texas.<br />
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JUSTICE BUSBY delivered the opinion of the Court.</div>
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J. BRETT BUSBY, Justice.</div>
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In this breach-of-contract case, we consider whether there is legally sufficient evidence that an employer impliedly agreed to change the compensation of four employees from payment based on hours worked to fixed annual salaries. We hold there is no evidence that would have allowed reasonable, fair-minded people to find that the employer and its employees had a meeting of the minds on a fixed amount of pay. We therefore reverse and render judgment that the employees take nothing.</div>
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<h2 style="background-color: white; border: 0px; color: #222222; font-family: Arial, sans-serif; margin: 1em 0px; padding: 0px; position: relative;">
I. Background</h2>
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Yolanda Lopez, Sheryl Hamer, Elmer DeGuzman, and Richard Wecker (the Nurses) worked as house supervisor nurses for McAllen Hospitals, L.P. (the Hospital). As house supervisors, the Nurses served as administrative representatives and supervised other nurses at the Hospital. The Nurses were paid based on the hours they worked.</div>
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In 2011, the Nurses sued the Hospital for breach of contract, among other things. They alleged the Hospital had promised to pay them annual salaries from 2007 through 2010 and breached that agreement by failing to pay them the full annual amounts. As evidence of the implied agreement, the Nurses relied on their 2009 and 2010 performance reviews listing an "Annual Rate" of pay, payroll change forms providing the Nurses were to receive a certain amount of "salary," and Hospital policies explaining that "exempt" employees (the classification the Hospital gave the Nurses) are paid to perform a job, while "nonexempt" employees are paid by the hour. The Nurses testified they had expected to be paid the salaries listed in the performance reviews and their supervisor did not inform them they would be compensated at an hourly rate. The Hospital argued it consistently paid the Nurses based on the hours they worked and the Nurses' pay rates were calculated by dividing the annual salaries by 2080 hours (which the Hospital deemed full-time working hours). In the Hospital's view, the Nurses were only entitled to the full sum if they worked full time during a given year, which they did not.</div>
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Question one of the jury charge asked: "Did Plaintiffs and Defendant agree that Plaintiffs would receive a fixed amount of pay?" In connection with this question, the trial court instructed the jury: "In deciding whether the parties reached an agreement, you may consider what they said in light of the surrounding circumstances, including any personnel files and policies, and including course of dealing. You may not consider the parties' unexpressed thoughts or intentions."<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=9702796657512986053&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44#[1]" name="r[1]" style="color: #660099;">[1]</a></sup> The jury found that the parties agreed the Nurses would receive a fixed amount of pay and that the Hospital breached the agreement. The jury awarded total damages of $389,014.68 for the period November 23, 2007 through December 31, 2010. The trial court rendered judgment accordingly.</div>
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The Hospital appealed, arguing the evidence was legally and factually insufficient to support the jury's findings of an implied agreement and breach, and evidence of the Nurses' exempt status was inadmissible. The court of appeals affirmed, concluding the evidence admitted in the trial court "would enable reasonable and fair-minded people to find that the Hospital agreed to pay the Nurses a fixed amount." 567 S.W.3d 748, 751 (Tex. App.-Corpus Christi-Edinburg 2017). The court of appeals also held that even if the evidence challenged by the Hospital was improperly admitted, the error was harmless because other documents admitted without objection contained the same information. <i>Id.</i>at 752.</div>
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The Hospital filed a petition for review with this Court, raising three issues. First, the Hospital asserts the evidence is legally insufficient to support the jury's finding that the Hospital agreed to pay the Nurses fixed salaries. Second, the Hospital argues that because no contract for fixed pay existed, the evidence was legally insufficient to support the jury's finding that the Hospital breached that contract. Third, the Hospital contends the trial court erred in admitting evidence regarding "exempt" and "nonexempt" employee classifications under the Fair Labor Standards Act. We granted the Hospital's petition for review. 62 Tex. Sup. Ct. J. 308 (January 18, 2019).</div>
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II. Analysis</h2>
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Because we conclude the first issue is dispositive, we begin with that issue. As we stated in <i>City of Keller v. Wilson,</i> "[t]he final test for legal sufficiency must always be whether the evidence at trial would enable reasonable and fair-minded people to reach the verdict under review." 168 S.W.3d 802, 827 (Tex. 2005). We "credit favorable evidence if reasonable jurors could, and disregard contrary evidence unless reasonable jurors could not." <i>Id.</i> "It is the province of the jury to resolve conflicts in the evidence," but the jury must do so reasonably. <i>See id.</i> at 820, 827. "Evidence is legally insufficient to support a jury finding when (1) the record discloses a complete absence of evidence of a vital fact; (2) the court is barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact; (3) the evidence offered to prove a vital fact is no more than a mere scintilla; or (4) the evidence establishes conclusively the opposite of a vital fact."<a href="https://scholar.google.com/scholar_case?case=5426405722736665125&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44" style="color: #660099;"><i>Crosstex N. Tex. Pipeline, L.P. v. Gardiner,</i> 505 S.W.3d 580, 613 (Tex. 2016)</a>.</div>
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The Nurses argue that the Hospital's agreement to pay them fixed salaries was an implied contract. The difference between implied and express contracts is the "character and manner of proof required to establish them." <a href="https://scholar.google.com/scholar_case?case=14414285802331453134&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44" style="color: #660099;"><i>Haws & Garrett Gen. Contractors, Inc. v. Gorbett Bros. Welding Co.,</i> 480 S.W.2d 607, 609 (Tex. 1972)</a>. Both express and implied contracts require the element of mutual agreement, "which, in the case of an implied contract, is inferred from the circumstances." <i>Id.</i> "The conception is that of a meeting of the minds of the parties as implied from and evidenced by their conduct and course of dealing, . . . the essence of which is consent to be bound." <i>Id.</i></div>
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<i><br /></i></div>
<div style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 14px; position: relative;">
As the parties alleging breach of contract, the Nurses had the burden of proving the existence of a valid contract. <a href="https://scholar.google.com/scholar_case?case=12619035510653788362&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44" style="color: #660099;"><i>TRO-X, L.P. v. Anadarko Petroleum Corp.,</i> 548 S.W.3d 458, 464-65 (Tex. 2018)</a>. The Nurses argue that the Hospital impliedly agreed to pay them a fixed annual salary starting in 2007 and continuing through 2010. Consistent with this timeline, the damages portion of the jury charge specified that the alleged agreement was to pay the Nurses from November 23, 2007 through December 31, 2010. The charge also instructed the jury that in deciding whether the parties reached an agreement, it could consider the parties' course of dealing and the surrounding circumstances, including personnel files and policies. We therefore focus our analysis of the evidence primarily on the parties' course of dealing and the circumstances surrounding the alleged formation of the fixed-salary contract in 2007.</div>
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As to course of dealing, the evidence not only fails to support the Nurses' position but shows that the Hospital intended to pay the Nurses based on the hours they worked. Before filing suit, each of the Nurses had worked for the Hospital for years. Lopez had been employed by the Hospital since 1975, Hamer and Wecker began working for the Hospital around 1984, and DeGuzman started in 2000. The Nurses agreed that during the time period at issue, they were paid based on the hours they worked. Despite the significant differences between the annual salaries to which they claimed to be entitled and the wages they actually received, none of the Nurses complained of the discrepancy before filing their lawsuit. At the time of trial, Hamer and DeGuzman were still employed by the Hospital and were receiving an hourly wage. Thus, the record shows the Hospital paid the Nurses based on the hours they worked, and there are no indications from the course of dealing between the parties that the Hospital ever intended to do otherwise. Reasonable and fair-minded people could not infer from the Hospital's course of dealing that it agreed to pay the Nurses a fixed annual salary. <i>See City of Keller,</i> 168 S.W.3d at 827.</div>
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The Nurses respond by pointing to certain surrounding circumstances: their annual performance reviews, payroll change forms, provisions of the Hospital's employee handbook, and policies circulated by the Hospital's Accounting and Human Resources Departments. We conclude that this evidence does not show a meeting of the minds between the Hospital and the Nurses on an agreement regarding fixed pay beginning in 2007. Although the Nurses' choice to continue their employment with the Hospital could indicate agreement and acceptance by performance, the Hospital must first have given the Nurses some clear indication of its intent to be bound to pay them a fixed salary. <i>See </i><a href="https://scholar.google.com/scholar_case?case=14414285802331453134&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44" style="color: #660099;"><i>Haws & Garrett Gen. Contractors,</i> 480 S.W.2d at 609</a>. As we explain, none of the circumstances cited by the Nurses indicates that the Hospital had such an intent.</div>
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A. Performance Reviews</h2>
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The record includes the Hospital's annual written performance reviews of the Nurses for the years 2007 through 2010, except that Hamer's 2007 review is missing. The reviews, which were completed in June or July of each year, contain an evaluation of each nurse's performance for the prior twelve months and state what each nurse's pay would be going forward. These reviews cannot serve as evidence of the Hospital's intent to contract with the Nurses for a fixed salary for two reasons.</div>
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First, the reviews are inconsistent with the Nurses' theory of contractual formation. If the Hospital intended to be bound to pay the Nurses a fixed annual salary from 2007 through 2010, as the Nurses contend, then circumstances surrounding the formation of the alleged agreement in 2007 would indicate that intent. To the contrary, the 2007 and 2008 performance reviews state the Nurses' new base rates of pay in dollars "per hour."<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=9702796657512986053&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44#[2]" name="r[2]" style="color: #660099;">[2]</a></sup> Only in 2009 and 2010 do the reviews list an "Annual Rate."<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=9702796657512986053&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44#[3]" name="r[3]" style="color: #660099;">[3]</a></sup></div>
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Second, the Hospital's employee handbook states: "A performance review is not a contract or a commitment to provide a salary increase, a bonus, or continued employment. It is a communication process aimed at facilitating optimum employee performance." The Nurses argue the Hospital's reliance on the disclaimer in the handbook is misplaced because the performance reviews were not offered as express contracts themselves but rather as circumstantial evidence of implied contracts. But the question before us is not whether the handbook disclaimer prevents the performance reviews from being admitted into evidence for any purpose. Instead, the question is whether those reviews can provide evidence of a commitment by the Hospital to pay a fixed salary. The handbook expressly barred the jury from giving weight to the reviews for that purpose. <i>See </i><a href="https://scholar.google.com/scholar_case?case=14967772573928802364&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44" style="color: #660099;"><i>Fed. Express Corp. v. Dutschmann,</i> 846 S.W.2d 282, 283-84 (Tex. 1993) (per curiam)</a> (recognizing use of handbook disclaimer to prevent contract formation).<br />
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The Nurses also testified at trial that they (1) were never told they were going to be paid an hourly rate during the years at issue, and (2) believed the Hospital had promised them an annual salary.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=9702796657512986053&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44#[4]" name="r[4]" style="color: #660099;">[4]</a></sup> The Nurses were consistently paid based on the hours they worked, however, and they attributed their belief in a promised salary to their written performance reviews and to annual discussions they had with their supervisor regarding the reviews. These oral discussions, which the written reviews specifically contemplated, were part of the review "communication process" and thus covered by the handbook disclaimer.</div>
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In other portions of their testimony, the Nurses stated their belief that they were promised annual salaries without identifying a basis for that belief. As to those statements, "[i]t is well settled that the naked and unsupported opinion or conclusion of a witness does not constitute evidence of probative force and will not support a jury finding even when admitted without objection." <a href="https://scholar.google.com/scholar_case?case=16487095387634787783&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44" style="color: #660099;"><i>Dall. Ry. & Terminal Co. v. Gossett,</i> 294 S.W.2d 377, 380 (Tex. 1956)</a>. Consequently, the Nurses' testimony would not enable reasonable and fair-minded people to find the Hospital intended to enter an agreement for fixed pay.</div>
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B. Payroll Change Forms</h2>
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The supervisor who reviewed each nurse also completed a payroll change form for that nurse and submitted it to the Hospital's Payroll Department, which approved the change. The record contains no forms for 2007, but it does include forms for each nurse that were effective in July of 2008, 2009, and 2010. All of the July 2008 payroll change forms include both a printed annual "salary" and what appears to be a handwritten hourly rate.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=9702796657512986053&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44#[5]" name="r[5]" style="color: #660099;">[5]</a></sup> With one exception, the hourly rates on the 2008 payroll change forms correspond with the hourly rates stated in the Nurses' 2008 performance reviews.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=9702796657512986053&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44#[6]" name="r[6]" style="color: #660099;">[6]</a></sup> All of the 2009 and 2010 payroll change forms list a "salary" and no hourly rate.</div>
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As with the Nurses' 2007 and 2008 performance reviews, the payroll change forms do not support the Nurses' theory that the Hospital intended to pay them a fixed annual salary starting in 2007. The 2007 payroll change forms are not in the record, and the July 2008 forms state both an hourly and an annual rate of pay. Although the jury could have inferred from the 2008 forms that the Hospital intended to change the Nurses' pay from an hourly to an annual rate, the evidence is equally consistent with a simple change in the manner in which these forms were filled out by the Hospital's Human Resources Department, unconnected to any change in the form of pay from an hourly wage to an annual salary. When circumstantial evidence "is susceptible to multiple, equally probable inferences, requiring the factfinder to guess in order to reach a conclusion[,]" it is in legal effect no evidence. <a href="https://scholar.google.com/scholar_case?case=14181155215638443589&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44" style="color: #660099;"><i>Suarez v. City of Tex. City,</i> 465 S.W.3d 623, 634 (Tex. 2015)</a>. Because the 2008 payroll change forms are susceptible to equally probable inferences regarding the Hospital's intended form of pay, they are no evidence of its intent to contract with the Nurses for fixed pay beginning in 2007.</div>
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The 2009 and 2010 payroll change forms do state annual salaries, but there is no evidence linking those forms to an intent by the Hospital to pay fixed salaries beginning in 2007. Moreover, unlike the performance reviews, the payroll change forms were not signed by the Nurses and nothing in the record indicates the Nurses ever saw the forms. Thus, the Nurses could not have accepted any promise the Hospital made in those forms by performance. <i>See generally</i> <a href="https://scholar.google.com/scholar_case?case=2801058638339171260&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44" style="color: #660099;"><i>Montgomery Cty. Hosp. Dist. v. Brown,</i> 965 S.W.2d 501, 502 (Tex. 1998)</a> ("A promise, acceptance of which will form a contract, `is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made.'" (quoting RESTATEMENT (SECOND) OF CONTRACTS § 2(1) (AM. LAW INST. 1981)).</div>
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C. Employee Handbook Provisions</h2>
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The Nurses argue that provisions of the Hospital's employee handbook distinguishing between exempt and nonexempt employees show the Hospital treated the Nurses like salaried employees and thus provide some evidence of the Hospital's intent to contract with the Nurses for fixed pay. The Hospital does not dispute that the Nurses were classified as "exempt employees." The handbook states that "[nonexempt] employees are eligible for overtime pay for all hours worked over forty hours in a work-week," while "exempt employees are not eligible for overtime pay" and "may not be eligible for callback pay." According to the handbook, nonexempt employees are required to record their "hours worked each day," while exempt employees are required to record their "presence each day." In addition, "[e]veryone is expected to take at least thirty minutes for lunch each day," and nonexempt employees who are required to work through their lunch break will be paid for that time. The handbook does not address exempt employees who work through their lunch break.</div>
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As with the performance reviews, however, the handbook expressly bars the jury from giving contractual weight to these provisions. The handbook includes its own disclaimer, which states:</div>
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This Employee Handbook is designed to provide you with information concerning [the Hospital] and sets out informational guidelines. <i>It is not a contract of employment.</i> Conditions from time to time may require [the Hospital] to supplement, modify or eliminate benefits, work rules and guidelines described in this Handbook. [The Hospital] reserves the right to exercise its discretion, and unilaterally make changes, including both deletions from and additions to this Handbook. Such changes will be communicated to employees through normal channels and will become effective as indicated. If you have any questions about the content of this book, please consult your supervisor or a representative of the Human Resources Department.</blockquote>
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(Emphasis added). As we have previously held, an employee handbook that contains such a disclaimer of contractual intent "is not a contract." <a href="https://scholar.google.com/scholar_case?case=7759115704673024551&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44" style="color: #660099;"><i>In re 24R, Inc.,</i> 324 S.W.3d 564, 567 (Tex. 2010) (per curiam)</a>; <i>see also </i><a href="https://scholar.google.com/scholar_case?case=14967772573928802364&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44" style="color: #660099;"><i>Fed. Express Corp.,</i> 846 S.W.2d at 283</a>; <a href="https://scholar.google.com/scholar_case?case=11163073590342998444&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44" style="color: #660099;"><i>Brown v. Sabre, Inc.,</i> 173 S.W.3d 581, 589 (Tex. App.-Fort Worth 2005, no pet.)</a>(concluding a disclaimer demonstrated the employer's "clear intent not to create any binding contractual rights through its employee handbook"). Given this disclaimer, no reasonable jury could infer from the Hospital's statements in the handbook an intent to contract with the Nurses for fixed pay.</div>
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D. Hospital Policies</h2>
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Finally, the Nurses point to several written policies issued by the Hospital's Human Resources Department. One policy elaborates on the overtime principles discussed in the handbook, including that exempt employees are not entitled to overtime pay. This policy further notes the Hospital "may . . . elect to pay exempt employees above their regular weekly salary in other situations." Another policy expands a bit on the handbook's provisions regarding benefit eligibility for full-time, part-time, temporary, and per diem employees, as well as for students and interns.</div>
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A third policy goes into more detail than the handbook about nonexempt employees receiving approval for overtime, when time is considered hours worked, and the procedure for dealing with unauthorized work time. The policy reiterates that nonexempt employees "are required to accurately record and report all hours worked," but it does not discuss time-keeping requirements for exempt employees. The policy also provides that "[g]enerally, under the Fair Labor Standards Act (FLSA), exempt employees are paid to perform a job and nonexempt employees are paid for hours worked."</div>
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It is unclear whether these policies were intended to stand alone or were changes or additions to the employee handbook. The policies speak to topics that are at least generally touched upon within the handbook and, for the most part, provide additional procedures or explanations regarding those topics. To the extent the policies are additions to the handbook, which the Hospital reserved the right to make, the handbook's disclaimer prevents them from serving as evidence of the Hospital's intent to contract with the Nurses.</div>
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Even if treated as separate from the handbook, however, these policies do not provide a basis for reasonable and fair-minded people to infer that the Hospital intended to provide the Nurses a fixed amount of pay. The record contains no evidence that any of the policies were in force when the alleged agreement was formed in 2007. Nor do the policies provide that exempt employees will be paid fixed salaries. The policies generally explain that exempt employees are "paid to perform a job" and not entitled to overtime pay. Even if the Nurses are correct that employees classified as "exempt" under the FLSA generally are entitled to payment on a salary or fee basis, this generalization is not evidence that the parties in this particular case agreed the Nurses would receive a fixed amount of pay. Indeed, the FLSA permits deductions from exempt employees' salaries (including for weeks they do not work), <i>see</i> 29 C.F.R. § 541.602, and one of the policies contemplates situations in which exempt employees will be paid more. In addition, the course-of-dealing evidence shows that the parties agreed the Nurses, although categorized as exempt employees, would be paid based on the hours they worked and not receive overtime.</div>
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"When the evidence offered to prove a vital fact is so weak as to do no more than create a mere surmise or suspicion of its existence, the evidence is no more than a scintilla and, in legal effect, is no evidence." <a href="https://scholar.google.com/scholar_case?case=14181155215638443589&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44" style="color: #660099;"><i>Suarez,</i> 465 S.W.3d at 634</a> (quoting <a href="https://scholar.google.com/scholar_case?case=14280088691942409190&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44" style="color: #660099;"><i>Browning-Ferris, Inc. v. Reyna,</i> 865 S.W.2d 925, 927 & n.3 (Tex.1993)</a>). Here, the Hospital's policies create no more than a suspicion of the Hospital's intent to contract for a fixed amount of pay; therefore, they are no evidence of the Hospital's intent to do so. <i>See id.</i></div>
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III. Conclusion</h2>
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In summary, the evidence before the jury was insufficient to establish the Hospital's intent to be bound by an agreement to pay the Nurses fixed annual salaries. <i>See generally </i><a href="https://scholar.google.com/scholar_case?case=14414285802331453134&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44" style="color: #660099;"><i>Haws & Garrett Gen. Contractors,</i> 480 S.W.2d at 609</a>. The course of dealing among the parties demonstrates only that the Nurses were paid based on the hours they worked, the performance reviews and employee handbook are subject to explicit disclaimers of contractual intent that prevent them from serving as evidence of the Hospital's agreement to pay the Nurses fixed salaries, and the Hospital's policies are either subject to the handbook's disclaimer or constitute no more than a scintilla of evidence regarding the Hospital's contractual intent. Even viewed in the light most favorable to the verdict, the evidence is insufficient to allow reasonable, fair-minded people to conclude there was a meeting of the minds between the Hospital and the Nurses as to the issue of fixed pay. Consequently, we hold the evidence was legally insufficient to support the jury's finding that the Hospital agreed to pay the Nurses a fixed salary. Because there was no agreement over fixed pay, the evidence was likewise insufficient to support the jury's verdict that the Hospital breached that agreement.</div>
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Having concluded the Hospital is entitled to judgment in its favor, we do not reach its third issue regarding the admission of evidence of exempt and nonexempt employee status under the FLSA. We reverse the court of appeals' judgment and render judgment that the Nurses take nothing.</div>
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<span style="font-size: x-small;"><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=9702796657512986053&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44#r[1]" name="[1]" style="color: #660099;">[1]</a> The Nurses unsuccessfully objected to the inclusion of "course of dealing" in the instruction. They do not challenge the instruction on appeal.</span></div>
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<span style="font-size: x-small;"><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=9702796657512986053&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44#r[2]" name="[2]" style="color: #660099;">[2]</a> One page of Hamer's 2008 review does list what appears to be an annual pay rate, but elsewhere in the form it states an hourly rate.</span></div>
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<span style="font-size: x-small;"><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=9702796657512986053&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44#r[3]" name="[3]" style="color: #660099;">[3]</a> Hand-written notations were added to most of the 2010 reviews, marking out "Hourly" and writing in "Annual." "Hourly" is scratched out on Wecker's 2010 review and what appears to be an annual amount of pay is written in; however, "Annual" is not handwritten on the form as it is for the other Nurses.</span></div>
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<span style="font-size: x-small;"><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=9702796657512986053&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44#r[4]" name="[4]" style="color: #660099;">[4]</a> Not all of the Nurses consistently testified that the annual salary they were promised was a "fixed amount of pay," as the jury charge required. At certain points, DeGuzman and Wecker testified that they had to work full-time hours to be entitled to the annual salary, which they did not do.</span></div>
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<span style="font-size: x-small;"><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=9702796657512986053&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44#r[5]" name="[5]" style="color: #660099;">[5]</a> The handwritten hourly rates for Lopez and DeGuzman, when multiplied by 2080, match the printed salaries on the payroll change forms. The handwritten hourly rate listed for Wecker does not correspond with the printed salary on the form; however, the handwritten rate also does not correspond with the hourly rate listed on Wecker's 2008 performance review. The correct hourly rate from his 2008 performance review, when multiplied by 2080, does match the printed salary on his 2008 payroll change form. The handwritten hourly rate on Hamer's 2008 payroll change form does not correspond with the printed salary when multiplied by 2080, and there does not appear to be any way to make those numbers match.</span></div>
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<span style="font-size: x-small;"><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=9702796657512986053&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44#r[6]" name="[6]" style="color: #660099; text-decoration: underline;">[6]</a> The handwritten hourly rate on Wecker's 2008 payroll change form does not correspond with the rate provided in his 2008 performance review.</span></div>
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McALLEN HOSPITALS, L.P. D/B/A McALLEN MEDICAL CENTER AND SOUTH TEXAS HEALTH SYSTEMS, Appellants,<br />v.<br />YOLANDA LOPEZ, SHERYL HAMER, ELMER DE GUZMAN AND RICHARD WECKER, Appellees.</h3>
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<a href="https://scholar.google.com/scholar?scidkt=14198242171318935642&as_sdt=2&hl=en" style="color: #660099;">No. 13-16-00138-CV.</a></center>
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<b>Court of Appeals of Texas, Thirteenth District, Corpus Christi, Edinburg.</b></div>
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Delivered and filed April 27, 2017.</center>
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Steven M. Gonzalez, Gerald E. Castillo, for McAllen Hospitals, L.P. d/b/a McAllen Medical Center and South Texas Health Systems, Appellant.</div>
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On appeal from the County Court at Law No. 8, of Hidalgo County, Texas.</div>
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Before Chief Justice Valdez and Justices Rodriguez and Benavides.</div>
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MEMORANDUM OPINION</h2>
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Memorandum Opinion by Chief Justice ROGELIO VALDEZ.</div>
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Appellants, McAllen Hospitals, L.P. d/b/a McAllen Medical Center and South Texas Health Systems (the "Hospital"), appeals from a verdict in favor of appellees, Yolanda Lopez, Sheryl Hamer, Elmer De Guzman, and Richard Wecker (the "Nurses"). By four issues, the Hospital contends that employee evaluations were not contracts, the evidence is legally and factually insufficient to support the jury's answers to questions one and two, and evidence of the Nurses' status as exempt employees was inadmissible. We affirm.</div>
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I. BACKGROUND</h2>
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The Nurses are former and current employees of the Hospital and were classified as "exempt" employees. The Hospital's various policies explained the rights of exempt and nonexempt employees. The Nurses assert that each year they met with their supervisors to discuss a written evaluation, which also provided the amount of their yearly salaries for the previous year and for the upcoming year. It is undisputed that the Nurses were paid hourly. The Nurses argued "that in light of all the surrounding circumstances (the representations made to them orally and through the evaluation forms, their statuses as exempt employees, the handbook, the Hospital's policies, and the course of dealing between the parties) an implied contract existed, whereby the Hospital agreed to pay [the Nurses] a fixed amount of pay per year." The jury agreed with the Nurses and awarded them the difference between the amounts paid and the amounts quoted in the evaluations. This appeal followed.</div>
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II. EXPRESS CONTRACT</h2>
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By its first issue, the Hospital contends that the Nurses sued for breach of an express agreement relying on the evaluations and/or the handbook and neither constitutes a contract as a matter of fact or law.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=5783072738180152500&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44#[1]" name="r[1]" style="color: #660099;">[1]</a></sup> We disagree with the Hospital's interpretation of the Nurses' allegations. The Nurses argued at trial that there was an implicit agreement for the Hospital to pay them a fixed amount as opposed to an hourly amount of pay and relied on the evaluations and handbook to support that theory. Question one of the charge asked: "Did the [Nurses] and the [Hospital] <i>agree</i> that the [Nurses] would receive a fixed amount of pay?"<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=5783072738180152500&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44#[2]" name="r[2]" style="color: #660099;">[2]</a></sup> (Emphasis added). The jury answered "Yes" for each of the Nurses. The charge, however, did not mention the evaluations or the handbook. We conclude that the jury found that there was an implied promise based on the evidence presented. Therefore, because the jury did not find that the evaluations or handbook constituted a contract, we overrule the Hospital's first issue.</div>
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III. SUFFICIENCY OF THE EVIDENCE</h2>
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By its second issue, the Hospital contends that the evidence is legally and factually insufficient to support the jury's finding that the Hospital agreed to pay the Nurses a fixed amount. The Hospital claims that whether an implied contract exists is a question of law reviewed de novo. However, the Hospital cites no authority, and we find none, supporting such a claim. Instead, whether an implied contract exists is a question of fact, which requires making inferences from circumstantial evidence regarding mutual assent. <i>See </i><a href="https://scholar.google.com/scholar_case?case=12002641188628524731&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44" style="color: #660099;"><i>Double Diamond, Inc. v. Hilco Elec. Coop., Inc.,</i> 127 S.W.3d 260, 267 (Tex. App.-Waco 2003, no pet.)</a>; <i>see also </i><a href="https://scholar.google.com/scholar_case?case=4984998111205143200&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44" style="color: #660099;"><i>Domingo v. Mitchell,</i> 257 S.W.3d 34, 40 (Tex. App.-Amarillo 2008, pet. denied)</a>. Accordingly, we will not perform a de novo review.</div>
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A. Standard of Review</h2>
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In a legal sufficiency review, we review the evidence in the light most favorable to the verdict, crediting any favorable evidence if a reasonable fact-finder could and disregarding any contrary evidence unless a reasonable fact-finder could not. <a href="https://scholar.google.com/scholar_case?case=18303564960181757665&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44" style="color: #660099;"><i>City of</i><i>Keller v. Wilson,</i> 168 S.W.3d 802, 821-22 (Tex. 2005)</a>. The test for legal sufficiency is "whether the evidence at trial would enable reasonable and fair-minded people to reach the verdict under review." <i>Id.</i> at 827. In a factual sufficiency review, we examine all of the evidence in the record and if the finding is so against the great weight of the evidence as to be clearly wrong and unjust, we will reverse. <a href="https://scholar.google.com/scholar_case?case=1319588470071174146&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44" style="color: #660099;"><i>Ortiz v. Jones,</i> 917 S.W.2d 770, 772 (Tex. 1996) (per curiam)</a>.</div>
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B. Discussion</h2>
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First, it appears that the Hospital challenges the sufficiency of the evidence supporting mutual intent to contract. <i>See </i><a href="https://scholar.google.com/scholar_case?case=4843412254057693396&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44" style="color: #660099;"><i>Houston Med. Testing Servs., Inc. v. Mintzer,</i> 417 S.W.3d 691, 698 (Tex. App.-Houston [14th Dist.] 2013, no pet.)</a> ("[A]n implied-in-fact contract `arises from the acts and conduct of the parties, it being implied from the facts and circumstances that there was a mutual intention to contract.'"). The jury heard the following relevant evidence: (1) the evaluations identified the salaries as annual salaries; (2) the evaluations did not state that the Nurses needed to work a minimum number of hours to earn the stated salaries; (3) the evaluations showed that the Nurses were exempt employees; (4) the evaluations were executed by the Nurses' supervisors and the salaries were approved by the Human Resources Department; (5) the employee handbook stated that exempt employees only clocked in to "record [their] presence each day," while nonexempt (hourly) employees had to clock in and out to demonstrate the hours worked; (6) the employee handbook provided that nonexempt employees were paid extra if they worked through their meal breaks while exempt employees, were not; (7) the employee handbook provided that nonexempt employees were entitled to overtime pay while exempt employees were not; (8) the employee handbook provided that nonexempt employees were entitled to "callback pay" while exempt employees were not; (9) the Hospital's document entitled HR.1022C stated that exempt employees were paid for performance of a job, and were not paid for the hours worked while nonexempt employees were paid for the hours actually worked; (10) the Hospital's document entitled HR.2001c stated that exempt employees would receive a "regular weekly salary"; (11) each of the Nurses testified that the Hospital agreed to pay them an annual salary and they had not been informed that they would be paid hourly; and (12) none of the Nurses testified that to receive the quoted yearly salary, they were required to work forty hours.</div>
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Viewing this evidence in the light most favorable to the verdict, crediting favorable evidence if a reasonable fact-finder could and disregarding contrary evidence unless a reasonable fact-finder could not, we conclude that the evidence as set out above would enable reasonable and fair-minded people to find that the Hospital agreed to pay the Nurses a fixed amount. <a href="https://scholar.google.com/scholar_case?case=18303564960181757665&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44" style="color: #660099;"><i>City of Keller,</i> 168 S.W.3d at 821-22</a>. The jury's finding of mutual assent may have been inferred from the circumstantial evidence, including evidence that the Nurses were classified as exempt employees that would be paid for the job performed and not paid on an hourly basis. <i>See id.; </i><a href="https://scholar.google.com/scholar_case?case=4984998111205143200&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44" style="color: #660099;"><i>Domingo,</i> 257 S.W.3d at 40</a>. And, after examining all of the evidence in the record, we cannot conclude that the jury's finding is so against the great weight of the evidence as to be clearly wrong and unjust. <a href="https://scholar.google.com/scholar_case?case=1319588470071174146&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44" style="color: #660099;"><i>Ortiz,</i> 917 S.W.2d at 772</a>.</div>
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The Hospital also argues that it is undisputed that the Nurses were paid for the hours worked. However, the jury found that the Hospital agreed to pay each of the Nurses a fixed yearly amount regardless of the hours worked; thus, by paying the Nurses an hourly wage, the Hospital breached its agreement to pay them a fixed amount. Next, the Hospital argues that the salaries quoted in the evaluations only applied if an employee worked forty hours per week, and none of the Nurses worked forty hours per week. </div>
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However, the jury heard this evidence and was free to disbelieve it. <a href="https://scholar.google.com/scholar_case?case=15586796735074450095&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44" style="color: #660099;"><i>Golden Eagle Archery, Inc. v. Jackson,</i> 116 S.W.3d 757, 761 (Tex. 2003)</a> (explaining that a fact finder is the sole judge of the witnesses' credibility and may choose to believe one witness over another); <a href="https://scholar.google.com/scholar_case?case=14759506139688711623&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44" style="color: #660099;"><i>Maritime Overseas Corp. v. Ellis,</i> 971 S.W.2d 402, 411 (Tex. 1998)</a> (providing that we may not substitute our own judgment for that of the jury, even if we would reach a different answer based on the evidence). We are not persuaded by these arguments. We overrule the Hospital's second issue.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=5783072738180152500&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44#[3]" name="r[3]" style="color: #660099;">[3]</a></sup></div>
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IV. ADMISSION OF EVIDENCE</h2>
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By its fourth issue, the Hospital argues that the trial court erroneously admitted evidence of the Nurses' "status as `exempt' or `non-exempt' employees" "because it was misleading, not relevant, and improperly suggested to the jury that federal law supported [the Nurses'] theory that the [H]ospital promised to pay them a salary." The Hospital cites the record wherein (1) a witness read from the Hospital's forms, (2) the terms exempt and nonexempt were mentioned in passing, (3) the Nurses' trial counsel quoted from HR.1022c and asked if the witness disagreed with the form's statement that exempt employees are paid to perform a job and nonexempt employees are paid for the hours worked, and (4) the Nurses' trial counsel argued to the jury that the Hospital's documents explained the requirements of exempt and nonexempt employees.</div>
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The Hospital's HR.2001c, HR.1022 and HR.1024 forms were admitted without objection. Each form, cites federal law, and provides information that: (1) nonexempt employees must receive overtime pay; (2) exempt employees "are paid to perform a job," while nonexempt employees are paid for hours worked; (3) nonexempt employees are required to accurately record and report the hours worked; and (4) nonexempt employees who work beyond forty hours a week must receive overtime. The complained-of evidence either states the same information included on the forms or quotes those forms. Thus, even assuming error, we conclude that admission of the same or similar evidence, without objection, rendered any alleged error harmless. <i>See </i><a href="https://scholar.google.com/scholar_case?case=7241072811154827092&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44" style="color: #660099;"><i>Richardson v. Green,</i> 677 S.W.2d 497, 501 (Tex. 1984)</a> ("The general rule is that error in the admission of testimony is deemed harmless if the objecting party subsequently permits the same or similar evidence to be introduced without objection."). We overrule the Hospital's fourth issue.</div>
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V. CONCLUSION</h2>
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We affirm the trial court's judgment.</div>
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<span style="font-size: x-small;"><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=5783072738180152500&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44#r[1]" name="[1]" style="color: #660099;">[1]</a> The Nurses agree that neither evaluations nor handbooks constitute an employment contract. Therefore, we agree with the Nurses that whether the employment contracts constituted an express contract is not an issue in this case.</span></div>
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<span style="font-size: x-small;"><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=5783072738180152500&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44#r[2]" name="[2]" style="color: #660099;">[2]</a> The charge instructed, in relevant part, that "[i]n deciding whether the parties reached an agreement, you may consider what they said in light of the surrounding circumstances, including any personnel files and policies, and including course of dealing."</span></div>
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<span style="font-size: x-small;"><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=5783072738180152500&q=McAllen+Hospitals,+L.P.+v.+Lopez&hl=en&as_sdt=4,44#r[3]" name="[3]" style="color: #660099; text-decoration: underline;">[3]</a> By its third issue, the Hospital contends that if we sustain either its first or second issues, the evidence is legally and factually insufficient to support the jury's finding that it failed to pay the Nurses a fixed amount. The Hospital states that it "understands that if the jury could consider the evaluation form as a contract of employment, and if there is legally and factually sufficient evidence that the hospital agreed to pay" a fixed amount or salary as "noted on the evaluation sheet," there is also legally and factually sufficient evidence that the hospital breached the agreement. We have overruled the Hospital's first and second issues; thus, we need not address its third issue as it is not dispositive. <i>See</i> TEX. R. APP. P. 41.7.</span><br />
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<span style="font-size: x-small;">CASE CITE: McAllen Hospitals, L.P. et al. v. Yolanda Lopez et al., No. 17-0733, 2019 WL 2147252 (Tex. May 17, 2019) </span><br />
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MOTPhttp://www.blogger.com/profile/15883011307129083993noreply@blogger.com0tag:blogger.com,1999:blog-9105536336033560224.post-27952658982460918022019-05-20T09:11:00.002-07:002019-06-09T10:58:46.385-07:00ALI's Bean Counting for Consumer Law Restatement Purposes Not as Simple as 1, 2, 3 ...<div style="text-align: center;">
<b>The Great Consumer-Be-Bound Common-Law Do-over:</b><br />
<b>American Law Institute's Case Counting Scheme in Need of Further</b><b> Reflection </b><br />
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgnNhlGFLyB7ginEjUE4ASgc4xCzDimxyec_uazeA5WV9sFv5hwmdaGw53fXRi_OL1TXDQz1jbiwNhNCBI1dsW2so_8dZft3tf-eRTJWQCPQU9DGDfeiqtuFj6-ieucjy9wDxXFxnFIKSVX/s1600/ALI+Restatement+of+the+Law+Consumer+Contracts+2019-04-18+version+of+Draft.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="644" data-original-width="1138" height="226" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgnNhlGFLyB7ginEjUE4ASgc4xCzDimxyec_uazeA5WV9sFv5hwmdaGw53fXRi_OL1TXDQz1jbiwNhNCBI1dsW2so_8dZft3tf-eRTJWQCPQU9DGDfeiqtuFj6-ieucjy9wDxXFxnFIKSVX/s400/ALI+Restatement+of+the+Law+Consumer+Contracts+2019-04-18+version+of+Draft.JPG" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="font-size: 12.8px;">Link to -- > <a href="https://www.ali.org/media/filer_public/05/30/053007a1-2b37-4142-b9c3-7a881e847d50/consumer_contracts_-_td_-_online.pdf" target="_blank">Tentative Draft dated April 18, 2019 </a><br />
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<b><span style="color: #cc0000;">Take Payday Lenders and Arbitration as a Textbook Case: What is the Majority Position on Litigation Waiver and Who Would You Say Got It Wrong? </span></b></div>
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The latest iteration of the <b>Restatement of the Law of Consumer Contracts</b> (<a href="https://www.ali.org/media/filer_public/05/30/053007a1-2b37-4142-b9c3-7a881e847d50/consumer_contracts_-_td_-_online.pdf" target="_blank">draft</a>) aspires to summarize majority common-law rules and trends based on “all” relevant cases in a particular area of (consumer) law.<br />
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But what is a relevant case? Which ones should be included? Which ones omitted? And should they be weighted equally, or some given more weight than others?<br />
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<span style="font-size: x-small;">Also see --- > <a href="https://debt-suit-litigation-in-texas.blogspot.com/2019/05/consumer-contracts-at-back-end.html" target="_blank">Consumer contracts at the back end (when consumers are sued on debt)</a> </span><br />
<span style="font-size: x-small;">-- > <a href="https://debt-suit-litigation-in-texas.blogspot.com/2019/05/ucc-vs-common-law-in-texas-cadence-bank.html" target="_blank">UCC vs. Common Law in Texas: Appellate Justices split in Cadence Bank v. Elizondo</a> </span><br />
<span style="font-size: x-small;">-- > </span><a href="https://debt-suit-litigation-in-texas.blogspot.com/2019/05/ucc-vs-common-law-in-texas-cadence-bank.html" target="_blank"><span style="font-size: x-small;">Divergence in Texas case law on contract-formation between arbitration and credit card accounts </span></a><br />
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The utilization of the <b>quantitative approach</b> in surveying the current legal landscape dotted with common-law courts has been subject of some criticism, but the notion of a “majority” view is necessarily a quantitative concept that necessarily presumes countability of discrete units (or instances of a phenomenon) and so is the concept of “trends.” The latter adds the dimension of time as a directional variable to improve upon blunt measures of frequency of occurrences within a given span of time, such as the time that has elapsed since issuance of the last Restatement.<br />
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If the purpose of the Restatement Project is to paint an accurate picture of where the law currently is, and where it is going, quantification--and plotting of data on relative frequencies of discrete legal positions (common-law rules) on the time line--is at least implicit. Even a traditional doctrinal analysis cannot seriously eschew it.<br />
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<b><span style="color: #0b5394;">Rudimentary Empiricism in Describing the Prevailing Law: Case Counting</span></b><br />
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Before a meaningful <b>case count</b> can be conducted for a particular legal question, not to mention a histogram generated to show an evolutionary pattern over time, there must be a clear definition of what qualifies to be counted.<br />
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What is the unit of analysis? Merely stating the seemingly obvious--that the unit of analysis is “the case”--does not solve all problems. For what qualifies as an eligible case? And what courts do qualify to contribute eligible cases?<br />
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The largest number of cases are processed by trial courts; only a small percentage of them reach the intermediate courts of appeals, and only very few are decided on the merit by the court of last resort. Federal district courts issue opinion orders, but their stateside counterparts rarely do so, at least not in Texas. So the populations of case opinions that can be found in repositories such as Westlaw, Lexis, Casemaker, Justia, or Google Scholar, are not a representative sample of the universe of cases. On some legal issues, an opinion is not needed because the order resolving a motion involving the issue--such as enforceability of an arbitration or forum selection--is enough to ascertain the reason for the decision.<br />
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And as for the precedent-setting cases in the state supreme court, they were and continue to be hand-picked because courts of last resort exercise discretionary review and their active docket (granted petitions are denominated "causes" in the SCOTX lingo) is anything but a random sample. The cases that reach the highest level of the judicial hierarchy and the fraction of them slated for merits briefing are atypical. No two of them are alike even on the legal issue(s), not to mention the facts, except for occasional companion cases accepted for review and disposed of contemporaneously, whether upon consolidation or otherwise.<br />
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<b><span style="color: #0b5394;">Who articulates the law: The highest courts only, any and all courts, or any and all individual judges? </span></b><br />
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It has been suggested that the focus of inquiry in the Restatement project should be on decisions of state courts of last resort (and that overruled cases should be disregarded because they are no longer “good law” which makes eminent sense from the viewpoint of legal practice and appellate advocacy but less so from a more comprehensive view of the evolution of the substance of the law in historical context, which should also pay heed to dissents).<br />
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The courts of last resort decide a much smaller number of cases than all appellate courts taken together, and therefore do not necessarily establish binding precedent for an entire state even on important legal issues, especially those arising in connection with the adaption of new technology, or instances where existing precedent ill fits new fact patterns that could not arise in the past. The issues of first impression invariable first arise in the trial courts the move up to the next-higher level.<br />
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The intermediate appeals courts (14 in Texas) may or may not endeavor to fill the void with their published opinions (or opinions that are "unpublished" by official designation only), but their precedents only apply to their own appellate districts, and they may take contradictory positions on the same legal issues. For the same reason, federal courts have to make educated <i>Erie</i> guesses when applying state law. And sometimes the intermediate appellate courts are not even consistent in following their own jurisprudence on the very same legal issue in consecutive cases.<br />
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If the State’s highest court steps in and resolves a COA split, there will no longer be majority and minority positions. There will, in most cases, only be one position for the entire state because state supreme court holdings are binding on lower courts. So there is only one case then available for bean-counting purposes, whereas there were previously several (if cases that have been overruled are excluded from the count). More fundamentally, it does not necessarily mean that the all-Republican Texas Supreme Court got it “right” when it resolved a conflict, or when it uses its power to overrule what was previously the majority position among the intermediate courts.<br />
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And what if the state supreme court creates a conflict with federal courts other than the United States Supreme Court? Should that be counted as a draw? Should the Texas Supreme Court's receive greater weight because it is a court of last resort?<br />
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<span style="color: #0b5394;"><b>Variation on a Circuit Split: A State vs. Federal Split </b></span><br />
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There is at least one example that illustrates an inter-jurisdictional incongruity of the latter variety.<br />
In <i>Henry v. Cash Biz, LP</i>, 551 S.W.3d 111 (Tex. 2018), the Texas Supreme Court ruled that a payday lender had not waived the right to arbitration by seeking the assistance of the public criminal justice system in aid of collection of a civil debt, and disapproved the trial court’s denial of arbitration in a subsequent malicious prosecution and wrongful debt collection action brought by the targeted customers. In <i>Vine v. PLS Financial Services, Inc.</i>, however, a federal district court and the Fifth Circuit reached the opposite conclusion in a proposed class action presenting the very same litigation waiver question under almost identical factual circumstances, 689 Fed.Appx. 800 (5th Cir. 2017) (per curiam).<br />
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<b><span style="color: #0b5394;">How should these cases be counted? Is there a majority view or is there a draw? </span></b><br />
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If we look at courts, we have three courts as decisionmakers in <i>Henry</i>, and three in <i>Vine</i>, albeit for different reasons. In <i>Henry</i>, the trial court denied arbitration, the intermediate court reversed and ordered arbitration, and the Texas Supreme Court affirmed the intermediate court. In <i>Vine</i>, a federal district court judge denied arbitration and the Fifth Circuit affirmed the denial in an unpublished opinion. There was no further appeal, and a different federal district judge subsequently denied a motion for reconsideration (which had urged that the Texas Supreme Court’s holding in <i>Henry</i> be followed) after remand and transfer from the original district court.<br />
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In <i>Vine</i>, all of the involved federal judges except 1 dissenting judge on appeal ruled in favor of waiver and therefore against arbitration. In <i>Henry</i>, the trial court found waiver, and 1 dissenting justice on the San Antonio court of appeal agreed. Two justices on that court voted to reverse, however, and eight members of the Texas Supreme Court sided with the majority in the court of appeals.<br />
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So what should we conclude is the majority position? Should it be based on how the highest court ruled on the matter, which would then—on the particular waiver issue in this example-- result in a tie between the State of Texas (based state common law) and the Fifth Circuit (based on federal common law).<br />
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Or should the counting and coding be based on how different courts ruled regardless of whether they were ultimately reversed? That would then result in the two appellate courts in Henry trumping one trial court (2:1) while in the federal court the win ratio would be 3:0 because the district court initially ruled for the customers, the appellate court affirmed the order denying arbitration, and a different U.S. district court judge refused to follow the Texas Supreme Court precedent and instead followed the Fifth Circuit under the law-of-the-case doctrine when the defendants filed a motion for reconsideration. On the federal side, then, we see unanimity against arbitration based on waiver while on the state side two appellate courts overruled one trial court and established the opposite position as the “correct” decision on the question presented.<br />
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But if the decision-making unit is redefined as the participating judicial decisionmaker (as opposed to the court as an institution), there is no longer unanimity on either side. As for <i>Vine</i>, there was one dissent in the Fifth Circuit, while on the state side the trial court in the first instance denied the motion to compel, and one of three justices on the court of appeal agreed with that disposition.<br />
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Taking the individual judicial decisionmaker as the relevant unit of analysis, the tally is 8+2 = 10 judges in favor of arbitration vs. 2 judges against on the state side, while on the federal side the tally is 1+2+1 = 4 judges against arbitration vs. one lone dissenter who would have sent the dispute to arbitration. And if the state and federal data is combined, a larger number of jurists supported arbitration in Texas because the Fifth Circuit opinion was a panel opinion while on the Texas Supreme Court a total of eight justices participated and decided the case without a dissent or concurrence. It should also be noted that a dissent on a three-member panel means that a single member could have changed the outcome. That applies both to the San Antonio Court of Appeals and the Fifth Circuit panel in this example.<br />
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Overall, the ratio would be 11 for arbitration and 6 against based on waiver. But if the analysis is restricted to members of the high courts, the ratio shifts further in favor of the Texas Supreme Court’s resolution of the waiver issue.<br />
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<b><span style="color: #0b5394;">So what then is the majority position on this particular sub-type of an arb. waiver, and how strong is the majority position? </span></b><br />
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The answer depends on (1) whether the scope of the inquiry is limited to highest court (in which case there is a tie between Texas and the Fifth Circuit, i.e. a state-federal split) or whether alternatively (2) all courts, or (3) all involved judicial decisionmakers, are counted in the determination of majority and minority positions in the judicial treatment of the specific common-law waiver issue.<br />
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Additionally, it should not go unmentioned that a petition for certiorari was filed in <i>Henry</i>, which the U.S. Supreme Court denied. Should that count for something even though there was no further review on the merits, and if so, how much weight should the cert denial be given?<br />
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The bottom line here is that the question of determining the majority position is not as simple as it might appear at first glance. All courts are obviously not equal, nor are all judges. Some have their rulings challenged and are reversed. Others have them challenged and are not reversed. If there is no appeal, or no further appeal, the trial court ruling or panel opinion will stand even if it would or might have been reversible. The vast majority of cases processed by trial courts are not appealed. Period. And yet, they affect many more people directly than the appealed cases.<br />
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But even if judges do not prevail and are overruled, this might very well be an indication that the losing position also had merit, or at least potentially so, and that the losing position might have prevailed under different circumstances.<br />
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In our particular example here, the fact that all members of the Texas Supreme Court are Republicans and are generally reputed as favoring business interest over individuals in the cases they chose to hear, may carry explanatory power. But a majority (of 2:1) also favored the payday lender in the intermediate appellate court, while the trial court judge did not. The hypothesis that political party plays a role is plausible in a state with an elective judiciary, but it would obviously have to be tested on a much larger number of cases and issues. But the partisan-jurisprudence hypothesis may not make sense in a state with an appointed judiciary. Should precedents from both types of jurisdictions nevertheless be combined to arrive at statements about majority positions nationwide?<br />
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In the meantime, <i>Henry</i> and <i>Vine</i> offer a valuable opportunity to examine how the very same legal issue in a pair of cases with almost identical facts was treated by two different court systems, with opinions on both sides actually making reference to each other and acknowledging the disagreements.<br />
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LUCINDA VINE, KRISTY POND, on behalf of themselves and all others similarly situated,<br />v.<br />PLS FINANCIAL SERVICES, INC. and PLS LOAN STORE OF TEXAS, INC.</h3>
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Lucinda Vine & Kristy Pond, Plaintiffs, represented by Daniel Raymond Dutko, Rusty Hardin & Associates, LLP, H. Mark Burck, Hanszen Laporte LLP, Daniel R. Dutko, Hanszen Laporte LLP & M. Mitchell Moss, Moss Legal Group, PLLC.</div>
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PLS Financial Services, Inc. & PLS Loan Store of Texas, Inc., Defendants, represented by J. Austen Irrobali, Tillotson Law, Jeffrey Mark Tillotson, Tillotson Law & Jonathan R. Patton, Lynn Pinker Cox & Hurst LLP.</div>
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MEMORANDUM OPINION AND ORDER</h2>
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AMOS L. MAZZANT, District Judge.<br />
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This matter is before the Court on Defendants PLS Financial Services, Inc. and PLS Loan Store of Texas, Inc.'s (collectively, "PLS") Motion to Reconsider Denial of Motion to Compel Arbitration and Stay [Dkt. #110], which, after careful consideration, will be denied.</div>
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BACKGROUND</h2>
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PLS is a short-term loan provider. To qualify for a PLS loan, borrowers must present a post-dated or blank personal check for the amount borrowed in addition to a finance charge. PLS tells borrowers it will not deposit the check or pursue criminal charges to recover the loan. But when a borrower misses a payment, PLS will deposit the check, threaten her with criminal prosecution if the check bounces, and misrepresent to the local district attorney that her check was meant to be cashed. The borrower will then receive letters from the district attorney advising her to pay PLS or face criminal charges. Plaintiffs Lucinda Vine and Kristy Pond have filed a class action lawsuit in the Western District of Texas against PLS on behalf of borrowers who received such letters.<br />
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PLS responded by moving to compel arbitration (Dkt. #18; Dkt. #19). PLS notes that, when a borrower enters a loan contract, she agrees to arbitrate any claims against PLS. These agreements are governed by the Federal Arbitration Act. The Western District Court denied the motion, finding that PLS is not permitted to compel arbitration because PLS substantially invoked the judicial process first. It reasoned that, by informing the district attorney of Plaintiffs' bounced checks, PLS "initiated a process that invites Texas district attorneys' offices to address issues that are at stake in the instant litigation." <i>See </i><a href="https://scholar.google.com/scholar_case?case=11522397606063696848&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Vine v. PLS Financial Srvs., Inc.,</i> 226 F.Supp.3d 719, 727-29 (W.D. Tex. 2016),</a> <i>aff'd,</i> <a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=8862013157631263108&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;">689 F. App'x 800, 807 (5th Cir. 2017)</a>. PLS moved to reconsider the Order (Dkt. #44), unsuccessfully, <i>see </i><a href="https://scholar.google.com/scholar_case?case=11522397606063696848&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Vine v. PLS Financial Srvs., Inc.,</i> 226 F.Supp.3d 708, 719 (W.D. Tex. 2016),</a><sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=17414974518336721809&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#[1]" name="r[1]" style="color: #660099;">[1]</a></sup> and appealed the decision to the Fifth Circuit. PLS argued that "the district court erred by: (1) deciding whether PLS waived its right to compel arbitration by participating in litigation conduct; (2) ignoring the parties' express agreement to arbitrate all disputes, including any litigation-conduct waiver claims; and (3) concluding that PLS waived its right to arbitrate by submitting worthless check affidavits." <i>See </i><a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=8862013157631263108&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Vine v. PLS Financial Srvs., Inc.,</i> 689 F. App'x 800, 802 (5th Cir. 2017)</a>. But the Fifth Circuit was unpersuaded, and affirmed the decision. <i>See id.</i> at 801-07.<br />
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The Texas Supreme Court has since found that a short-term loan provider does not waive its right to arbitration by submitting unpaid checks and affidavits to local district attorneys, the Fifth Circuit's decision notwithstanding. <a href="https://scholar.google.com/scholar_case?case=5513412576169180013&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Henry v. Cash Biz, LP,</i> 551 S.W.3d 111, 118 (Tex. 2018),</a> <i>cert denied.,</i> <a href="https://scholar.google.com/scholar_case?case=10155522288995730945&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;">139 S.Ct. 184 (2018)</a>. The Western District Court indicated that the Texas Supreme Court's decision was not binding (Dkt. #117, Exhibit 2 at pp. 5-6) but invited the parties to submit briefs on whether the motion to compel arbitration should be reconsidered. PLS has since filed a second motion to reconsider in light of the Texas Supreme Court's decision in <i>Cash Biz.</i> Because the case was transferred to this District before the motion was resolved, it is now before this Court.</div>
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LEGAL STANDARDS</h2>
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A motion seeking reconsideration may be construed under Federal Rule of Civil Procedure 54(b), 59(e), or 60(b) depending on the circumstances. "The Fifth Circuit recently explained that `Rule 59(e) governs motions to alter or amend a final judgment,' while `Rule 54(b) allows parties to seek reconsideration of interlocutory orders and authorizes the district court to revise at any time any order or other decision that does not end the action.'" <a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=14439259811957099234&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Dolores Lozano v. Baylor Univ.,</i> No. 6:16-CV-403-RP, 2018 WL 3552351, at *1 (W.D. Tex. July 24, 2018)</a> (quoting <a href="https://scholar.google.com/scholar_case?case=5572209052833110399&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Austin v. Kroger Tex., L.P.,</i> 864 F.3d 326, 336 (5th Cir. 2017)</a>). Further, "`[i]nterlocutory orders,' such as grants of partial summary judgment, `are not within the provisions of 60(b), but are left within the plenary power of the court that rendered them to afford such relief from them as justice requires [pursuant to Rule 54(b)]." <a href="https://scholar.google.com/scholar_case?case=4598912038960697575&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>McKay v. Novartis Pharm. Corp.,</i> 751 F.3d 694, 701 (5th Cir. 2014)</a> (quoting <a href="https://scholar.google.com/scholar_case?case=2131389865852879806&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Zimzores v. Veterans Admin.,</i> 778 F.2d 264, 266 (5th Cir. 1985)</a>) (citing <a href="https://scholar.google.com/scholar_case?case=11554762410974894868&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Bon Air Hotel, Inc. v. Time, Inc.,</i> 426 F.2d 585, 862 (5th Cir. 1970)</a>).<br />
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Because this is a motion seeking reconsideration of an interlocutory order, the Court uses Federal Rule of Civil Procedure 54(b). "Federal Rule of Civil Procedure 54(b) provides that, in a case involving multiple claims or parties, `any order or other decision, however designated, that adjudicates fewer than all the claims or the rights and liabilities or fewer than all the parties . . . may be revised at any time before the entry of a judgment adjudicating all the claims and all the parties' rights and liabilities.'" <a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=7522224502684380213&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Blundell v. Home Quality Care Home Health Care, Inc.,</i> No. 3:17cv-1990-L-BN, 2018 WL 276154, at *4 (N.D. Tex. Jan. 3, 2018)</a> (quoting FED. R. CIV. P. 54(b)). "Under Rule 54(b), `the trial court is free to reconsider and reverse its decision for any reason it deems sufficient, even in the absence of new evidence or an intervening change in or clarification of the substantive law.'" <a href="https://scholar.google.com/scholar_case?case=5572209052833110399&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Austin,</i> 864 F.3d at 336</a> (quoting <a href="https://scholar.google.com/scholar_case?case=16676818585797138277&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Lavespere v. Niagara Mach. & Tool</i><i>Works, Inc.,</i> 910 F.2d 167, 185 (5th Cir. 1990),</a> abrogated on other grounds, <a href="https://scholar.google.com/scholar_case?case=5057265714808836310&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Little v. Liquid Air Corp.,</i> 37 F.3d 1069, 1075 n.14 (5th Cir. 1994)</a>).</div>
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ANALYSIS</h2>
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PLS asks the Court to reconsider two Orders finding that PLS waived its right to compel arbitration by sending false affidavits against Plaintiffs to local district attorneys (the "Prior Orders"). It reasons that, although the Fifth Circuit affirmed these district court orders, <i>see </i><a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=8862013157631263108&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Vine,</i> 689 F. App'x at 802,</a> they warrant reconsideration in light <i>Cash Biz,</i> a Texas Supreme Court case that expressly disagrees with the Fifth Circuit prior decision to affirm. <i>See </i><a href="https://scholar.google.com/scholar_case?case=5513412576169180013&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Cash Biz,</i> 551 S.W.3d at 118-19</a> ("We recognize that our opinion does not accord with the decision in <i>Vine.</i>").<br />
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The Court declines to reconsider the Prior Orders pursuant to the law-of-the-case doctrine. Under this doctrine, district courts are "[to] abstain[] from reexamining an issue of fact or law that has already been decided on appeal." <a href="https://scholar.google.com/scholar_case?case=15040501573685481285&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>United States v. Teel,</i> 691 F.3d 578, 582-83 (5th Cir. 2012)</a> (citing <a href="https://scholar.google.com/scholar_case?case=13297899734989487998&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>United States v. Carales-Villata,</i> 617 F.3d 342, 344 (5th Cir. 2010)</a>). This means that, after an appellate court has ruled on an issue in the case, the district court may not reconsider any "`issues [the appellate court] decided both expressly and by necessary implication'" or any "`other issues arising out of [the appellate court] ruling [that were] not raised" but could have been. <i>See id.</i> (quoting <a href="https://scholar.google.com/scholar_case?case=9978342867583604626&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>United States v. Pineiro,</i> 470 F.3d 200, 205 (5th Cir. 2006) (per curiam)</a>).<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=17414974518336721809&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#[2]" name="r[2]" style="color: #660099;">[2]</a></sup><br />
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The law-of-the-case doctrine is "subject to an exception [PLS] urge[s] here: that `there has been an intervening change of law by a controlling authority.'" <i>See id.</i> at 583 (quoting <a href="https://scholar.google.com/scholar_case?case=8650254999833897492&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>United States v. Matthews,</i> 312 F.3d 652, 657 (2002)</a>). But, as the Western District Court previously indicated (<i>see</i> Dkt. #117, Exhibit 2 at pp. 5-6), the Texas Supreme Court's decision in <i>Cash Biz</i> does not amount to an intervening change of law. The United States Supreme Court has long held that, when deciding issues unique to arbitration contracts, courts are to apply the principles established by federal common law. <i>See </i><a href="https://scholar.google.com/scholar_case?case=16036439799989063938&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Perry v. Thomas,</i> 482 U.S. 483, 492 n.9 (1987)</a>. The Supreme Court reasons that:</div>
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The text of § 2 provides the touchstone for choosing between state-law principles and the principles of federal common law envisioned by the passage of that statute:</blockquote>
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An agreement to arbitrate is valid, irrevocable, and enforceable, <i>as a matter of federal law,</i> see <a href="https://scholar.google.com/scholar_case?case=4974455257504383275&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Moses H. Cone Memorial Hospital v. Mercury Construction Corp.,</i> 460 U.S. 1, 24, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983),</a> "save upon such grounds as exist at law or in equity for the revocation of <i>any</i> contract." 9 U.S.C. §</blockquote>
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2 (emphasis added). Thus state law, whether of legislative or judicial origin, is applicable <i>if</i> that law arose to govern issues concerning the validity, revocability, and enforceability of contracts generally. A state-law principle that takes its meaning precisely from the fact that a contract to arbitrate is at issue does not comport with this requirement of § 2.</blockquote>
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<i>See id</i> (citing <a href="https://scholar.google.com/scholar_case?case=6832110396972740690&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Prima Paint Corp. v. Flood & Conklin Mfg. Co.,</i> 388 U.S. 395, 404 (1967)</a>; <a href="https://scholar.google.com/scholar_case?case=213584465363694300&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Southland Corp. v. Keating,</i> 465 U.S. 1, 16-17 & n. 11 (1984)</a>) (emphasis in original). Because substantial invocation doctrine applies only to agreements to arbitrate, federal substantive law applies. <i>See </i><a href="https://scholar.google.com/scholar_case?case=6931878422019040640&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Miller Brewing Co. v. Fort Worth Distributing Co., Inc.,</i> 781 F.2d 494, 497 & n.4 (5th Cir. 1986)</a> (citing <a href="https://scholar.google.com/scholar_case?case=6832110396972740690&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Prima Paint,</i> 388 U.S. at 402-08</a>; <a href="https://scholar.google.com/scholar_case?case=9879137067913409908&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>In re Mercury Const. Corp.,</i> 658 F.2d 933, 938-41 (4th Cir. 1981),</a> <i>aff'd, </i><a href="https://scholar.google.com/scholar_case?case=4974455257504383275&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp.,</i> 460 U.S. 1, 23 (1983)</a>; <a href="https://scholar.google.com/scholar_case?case=5155217025631759083&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>E.C. Ernst, Inc. v. Manhattan Const. Co. of Texas,</i> 551 F.2d 1026, 1040 (5th Cir. 1977)</a>) (finding that the substantial invocation doctrine is a "matter of federal substantive law").<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=17414974518336721809&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#[3]" name="r[3]" style="color: #660099;">[3]</a></sup> The Texas Supreme Court's decision in <i>Cash Biz</i> is thus not an "intervening change in law" excepted from the law-of-the-case doctrine.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=17414974518336721809&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#[4]" name="r[4]" style="color: #660099;">[4]</a></sup> <i>See </i><a href="https://scholar.google.com/scholar_case?case=15040501573685481285&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Teel,</i> 691 F.3d at 583</a> (noting that the change in law must be decided by a "controlling authority").<br />
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PLS maintains that reconsideration is warranted since <i>Cash Biz</i> concerns substantially similar facts and Texas Supreme Court cases remain highly persuasive authority. While that may be true, nothing suggests that the Fifth Circuit would now find that PLS did not substantially invoke the judicial process. The Fifth Circuit, in fact, expressly rejected the Texas appellate court decision affirmed in <i>Cash Biz</i> "despite [its] obvious factual similarities." <i>See </i><a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=8862013157631263108&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Vine,</i> 689 F. App'x at 806</a>. This is because:</div>
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As the dissent in <i>Cash Biz</i> aptly noted, here, "we are presented with the unique situation of a civil lawsuit and a criminal proceeding, both of which arise out of the same civil debt." <i>Cash Biz,</i> 2016 WL 4013794, at *10 (Martinez, J., dissenting). Moreover, it is alleged that the criminal proceedings were an integral component of PLS's litigation strategy to collect on outstanding debt. If PLS attempted to "game the system" by initiating theft by check proceedings in place of submitting collection actions to an arbitrator, PLS should not be allowed "a second bite at the apple through arbitration" to resolve related issues. <i>See </i><a href="https://scholar.google.com/scholar_case?case=5920656780209451381&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Cargill Ferrous Int'l v. SEA PHX. MV,</i> 325 F.3d 695, 701 (5th Cir. 2003)</a> ("Under the facts of this case, it is clear Serene is not gaming the system by seeking a win at trial, and in the case of loss, anticipating a second bite at the apple through arbitration.").</blockquote>
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In addition, we also agree with the <i>Cash Biz</i> dissent that the majority in that case did not sufficiently consider the critical role that the Defendant played in the criminal proceedings as the complainant. <i>See Cash Biz,</i> 2016 WL 4013794, at *10 (Martinez, J., dissenting) ("[W]hile the formal parties in a criminal proceeding are the defendant and the State of Texas, the victim or complaintant [sic] has a personal interest in the prosecution and thus plays a unique role in criminal proceedings.").</blockquote>
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Here, Vine and Pond allege that PLS had a great "personal interest in the prosecution" as it constituted a means to achieve repayment of its loans while avoiding arbitration. Furthermore, documents incorporated by reference into Vine and Pond's complaint arguably show that PLS drove all theft by check criminal proceedings when it submitted the worthless check affidavits to local district attorneys' offices. In other words, had PLS not submitted the worthless check affidavits, "no criminal prosecution would have occurred." <i>See id.</i> at *9 (Martinez, J., dissenting).</blockquote>
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Therefore, by allegedly submitting false worthless check affidavits, PLS "invoke[d] the judicial process to the extent it litigate[d] a specific claim it subsequently [sought] to arbitrate." <i>See Subway Equip. Leasing Corp.,</i> 169 F.3d at 328. As the district court made clear, "Defendants have initiated a process that invites Texas district attorneys' offices to address issues that are at stake in the instant action." Most obviously, all claims involve whether PLS misled or threatened Vine, Pond, and the class of PLS customers they purport to represent in order to obtain outstanding debt owed to PLS.</blockquote>
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<i>See id.</i> at 806-07.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=17414974518336721809&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#[5]" name="r[5]" style="color: #660099;">[5]</a></sup><br />
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For these reasons, the Court will not disturb the Prior Orders or the Fifth Circuit's decision to affirm them.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=17414974518336721809&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#[6]" name="r[6]" style="color: #660099;">[6]</a></sup></div>
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CONCLUSION</h2>
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Accordingly, Defendants' Motion to Reconsider Denial of Motion to Compel Arbitration and Stay [Dkt. #110] is DENIED.</div>
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<span style="font-size: x-small;"><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=17414974518336721809&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#r[1]" name="[1]" style="color: #660099;">[1]</a> The Orders on the Motion to Compel Arbitration and the First Motion to Reconsider were entered before the case was transferred to this District.</span></div>
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<span style="font-size: x-small;"><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=17414974518336721809&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#r[2]" name="[2]" style="color: #660099;">[2]</a> The Court acknowledges that the law-of-the-case doctrine is technically "`a discretionary practice'" that "`expresses the practice of courts generally to refuse to reopen what has been decided.'" <i>See </i><a href="https://scholar.google.com/scholar_case?case=8650254999833897492&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>United States v. Matthews,</i> 312 F.3d 652, 657 (5th Cir. 2002)</a> (quoting <a href="https://scholar.google.com/scholar_case?case=15113906046550526619&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Tollett v. City of Kernah,</i> 285 F.3d 357, 363 (5th Cir. 2002)</a>). But the Court sees no reason not to apply this best practice here.</span></div>
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<span style="font-size: x-small;"><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=17414974518336721809&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#r[3]" name="[3]" style="color: #660099;">[3]</a> <i>See also </i><a href="https://scholar.google.com/scholar_case?case=17607263466039468221&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Wellogix, Inc. v. SAP America, Inc.,</i> 58 F.Supp.3d 766, 776 n.45 (S.D. Tex. 2014)</a> (describing the Fifth Circuit's articulation of the substantial invocation rule as "<i>federal law</i> in the arbitration context") (emphasis added).</span></div>
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<span style="font-size: x-small;"><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=17414974518336721809&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#r[4]" name="[4]" style="color: #660099;">[4]</a> Defendants note that Plaintiff did not previously argue that federal law governs this issue. This point is not welltaken on a (second) motion to reconsider.</span></div>
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<span style="font-size: x-small;"><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=17414974518336721809&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#r[5]" name="[5]" style="color: #660099;">[5]</a> PLS argues that the Prior Orders were "based, in part, on the incorrect notion that Defendants had <i>initiated</i>criminal proceedings against Plaintiffs" (Dkt. #110 at p.17). But, even assuming this is the case, the Court fails to see how this allegation would compel a different result. The Fifth Circuit plainly acknowledged that PLS only "initiated" the criminal proceedings by "initiat[ing] a process that invites Texas district attorneys' offices to address issues that are stake in the instant litigation." <i>See </i><a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=8862013157631263108&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Vine,</i> 689 F. App'x at 806</a>.</span></div>
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<span style="font-size: x-small;"><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=17414974518336721809&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#r[6]" name="[6]" style="color: #660099; text-decoration: underline;">[6]</a> The Court therefore does not address Plaintiffs' arguments that this case is distinguishable from <i>Cash Biz.</i></span></div>
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<b>551 S.W.3d 111 (2018)</b></center>
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Hiawatha HENRY, Addie Harris, Montray Norris, and Roosevelt Coleman, Jr., on behalf of themselves and for all other similarly situated, Petitioners,<br />v.<br />CASH BIZ, LP, Cash Zone, LLC d/b/a Cash Biz, and Redwood Financials, LLC, Respondents.</h3>
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<a href="https://scholar.google.com/scholar?scidkt=377901669107109878&as_sdt=2&hl=en" style="color: #660099;">No. 16-0854.</a></center>
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<b>Supreme Court of Texas.</b></div>
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Argued September 15, 2017.</center>
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OPINION DELIVERED: February 23, 2018. </center>
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On Petition for Review from the Court of Appeals for the Fourth District of Texas.<br />
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Ricardo G. Cedillo, Davis Cedillo & Mendoza, Inc., San Antonio TX, for Amicus Curiae.</div>
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Daniel R. Dutko, H. Mark Burck, Laporte, L.L.P., Houston TX, for Petitioners.</div>
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Edward S. Hubbard, Patrick E. Gaas, Coats, Rose, PC, Houston TX, for Respondents.</div>
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<a class="gsl_pagenum" href="https://scholar.google.com/scholar_case?case=5513412576169180013&q=henry+v+cash+biz&hl=en&as_sdt=4,44#p113" style="color: #aaaaaa; font-size: 13px; left: -55px; position: absolute; text-decoration-line: none;">113</a><br />
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Justice Johnson delivered the opinion of the Court, in which Chief Justice Hecht, Justice Green, Justice Guzman, Justice Lehrmann, Justice Boyd, Justice Devine, and Justice Brown joined.</div>
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<a class="gsl_pagenum" href="https://scholar.google.com/scholar_case?case=5513412576169180013&q=henry+v+cash+biz&hl=en&as_sdt=4,44#p112" style="color: #aaaaaa; font-size: 13px; left: -55px; position: absolute; text-decoration-line: none;">112</a><br />
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Phil Johnson, Justice.<br />
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This case involves an arbitration provision in short-term loan contracts. The questions presented are whether the borrowers' claims against the lender come within the arbitration provision and, if so, whether the lender waived its right to arbitrate by providing information to the district attorney that checks written to the lender by the borrowers had been returned for insufficient funds. The court of appeals answered the first question "yes," and the second, "no." We affirm.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=5513412576169180013&q=henry+v+cash+biz&hl=en&as_sdt=4,44#[1]" name="r[1]" style="color: #660099;">[1]</a></sup></div>
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I. Background</h2>
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Cash Biz, LP is a registered Texas credit services organization that assists customers in obtaining short-term loans. <i>See</i> TEX. FIN. CODE ch. 393. Hiawatha Henry, Addie Harris, Montray Norris, and Roosevelt Coleman, Jr. (collectively, the Borrowers) contracted with Cash Biz for such loans. Each of the loan contracts contains an identical Waiver of Jury Trial and Arbitration Provision. It provides that "all disputes ... shall be resolved by binding arbitration only on an individual basis with you." The contracts further provide that</div>
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the words "dispute" and "disputes" are given the broadest possible meaning and include, without limitation (a) all claims, disputes, or controversies arising from or relating directly or indirectly to the signing of this Arbitration Provision, the validity and scope of this Arbitration Provision and any claim or attempt to set aside this Arbitration Provision; (b) all federal or state law claims, disputes or controversies, arising from or relating directly or indirectly to this Disclosure Statement (including the Arbitration Provision), ... (c) all counterclaims, cross-claims and third party claims; (d) all common law claims, based on contract, tort, fraud, or intentional torts; (e) all claims based on a violation of any state or federal constitution, statute or regulation; ... (f) ... claims for money damages to collect any sum we claim you owe us and/or the Lender; (g) all claims asserted by you individually against us ... including claims for money damages and/or equitable or injunctive relief; (h) all claims asserted on your behalf by another person; (I) all claims asserted by you as a private attorney general, as a representative and member of a class of persons, or in any other representative capacity, against us ...; and/or (j) all claims arising from or relating directly or indirectly to the disclosure by us ... of any non-public personal information about you.</blockquote>
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As security for the loans, the Borrowers provided postdated personal checks made out to Cash Biz for the amount of the loan plus a finance charge. After the Borrowers defaulted on the loans, Cash Biz deposited their checks. The checks, predictably, were returned for insufficient funds. The parties do not disagree that the Borrowers were charged with issuance of bad checks, <i>see</i> TEX. PENAL CODE § 32.41, and that the charges were eventually dismissed. But they disagree about what the record shows as to whether Cash Biz simply forwarded information about the Borrowers and their returned checks to the district attorney as Cash Biz maintains it did, or somehow <a class="gsl_pagenum" href="https://scholar.google.com/scholar_case?case=5513412576169180013&q=henry+v+cash+biz&hl=en&as_sdt=4,44#p114" style="color: #aaaaaa; font-size: 13px; left: -55px; position: absolute; text-decoration-line: none;">114</a>actually filed criminal charges, as the Borrowers argue Cash Biz did.<br />
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In any event, the Borrowers sued Cash Biz, Redwood Financials, LLC, and Cash Zone LLC, d/b/a Cash Biz (collectively, Cash Biz) on behalf of themselves and a proposed class of similarly situated borrowers. They claimed that Cash Biz wrongfully used the criminal justice system to collect unpaid loans by filing false charges against them. The Borrowers asserted causes of action for malicious prosecution, fraud, and violations of the Deceptive Trade Practices Act, Consumer Protection Act, and the Finance Code. Cash Biz responded by filing a motion to compel arbitration. It argued that the loan documents — including the contracts — comprised the basis of the Borrowers' claims because the claims arose out of Cash Biz's attempts to collect the loans. Further, according to Cash Biz, the broad arbitration provision waived the Borrowers' right to file a class action lawsuit. The Borrowers countered that the arbitration clause was inapplicable because they were not suing on the contract. Rather, their allegations related solely to Cash Biz's illegal use of the criminal justice system to enforce civil debts. The Borrowers also contended that even if the arbitration and class action waiver provisions applied, Cash Biz's "filing of criminal charges," participating in criminal trials, and obtaining "criminal judgments" substantially invoked the judicial process and therefore waived its right to enforce the provisions.<br />
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The trial court denied Cash Biz's motion. The court agreed with the Borrowers that (1) their allegations related solely to Cash Biz's use of the criminal justice system so the arbitration clause was inapplicable, and (2) Cash Biz waived its right to arbitration by substantially invoking the judicial process.</div>
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Cash Biz filed an interlocutory appeal. The court of appeals reversed. 539 S.W.3d 342, ___, 2016 WL 4013794 (Tex. App.-San Antonio 2016). The appeals court first determined that the Borrowers' claims fell within the scope of the arbitration provision because the Borrowers' allegations were factually intertwined with the loan contracts. Thus, the broad definition of "dispute" in the arbitration provision encompassed the claims. <i>Id.</i> at ___. The court next concluded that Cash Biz did not waive its right to enforce the arbitration provision because "Cash Biz's filing of a criminal complaint [did] not rise to the extent of active engagement in litigation that Texas courts have consistently held to be specific and deliberate actions inconsistent with a right to arbitrate or that display an intent to resolve a dispute through litigation." <i>Id.</i> Justice Martinez disagreed, maintaining that Cash Biz substantially invoked the judicial process by deliberately and repeatedly invoking the criminal justice system. <i>Id.</i> at 354-59 (Martinez, J., dissenting).<br />
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In this Court, the Borrowers assert the same substantive arguments that they did in the court of appeals. That is, they first argue that Cash Biz failed to meet its burden to prove their claims are within the scope of the arbitration agreement. In the alternative, they maintain that if the claims fall within the scope of the agreement, Cash Biz waived its right to arbitration by substantially invoking the judicial process to their prejudice by filing criminal charges against them.<br />
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<span style="color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: 14px;">Cash Biz responds, as it did in the courts below, that it met its burden to prove the arbitration agreement encompasses the claims and that the Borrowers failed to meet their burden to prove it waived its right to arbitrate. Further, it contends that the Borrowers produced no evidence to prove they were actually prejudiced 115 by any of its actions. Finally, Cash Biz asserts that the trial court erred by not enforcing the contractual waiver-of-class-action provision.</span></span></div>
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II. Law and Standard of Review</h2>
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The Federal Arbitration Act (FAA) generally governs arbitration provisions in contracts involving interstate commerce. <a href="https://scholar.google.com/scholar_case?case=7799522967503682695&q=henry+v+cash+biz&hl=en&as_sdt=4,44" style="color: #660099;"><i>In re Rubiola,</i> 334 S.W.3d 220, 223 (Tex. 2011)</a> (citing 9 U.S.C. § 2). The loan contracts specifically provide that the arbitration provision at issue here is governed by the FAA, and neither party argues otherwise. Under the FAA, a presumption exists favoring agreements to arbitrate. <a href="https://scholar.google.com/scholar_case?case=4933480583271488482&q=henry+v+cash+biz&hl=en&as_sdt=4,44" style="color: #660099;"><i>In re FirstMerit Bank, N.A.,</i> 52 S.W.3d 749, 753 (Tex. 2001)</a>. A party seeking to compel arbitration must establish the existence of a valid arbitration agreement and that the claims at issue fall within the scope of that agreement. <a href="https://scholar.google.com/scholar_case?case=8463334224818744874&q=henry+v+cash+biz&hl=en&as_sdt=4,44" style="color: #660099;"><i>Venture Cotton Coop. v. Freeman,</i> 435 S.W.3d 222, 227 (Tex. 2014)</a>. If the party seeking to compel arbitration meets this burden, the burden then shifts, and to avoid arbitration, the party opposing it must prove an affirmative defense to the provision's enforcement, such as waiver. <i>Id.</i> "[A]ny doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability." <a href="https://scholar.google.com/scholar_case?case=11077339785740911224&q=henry+v+cash+biz&hl=en&as_sdt=4,44" style="color: #660099;"><i>In re Serv. Corp. Intern.,</i> 85 S.W.3d 171, 174 (Tex. 2002)</a>(citing <a href="https://scholar.google.com/scholar_case?case=4974455257504383275&q=henry+v+cash+biz&hl=en&as_sdt=4,44" style="color: #660099;"><i>Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp.,</i> 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)</a>).</div>
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We review a trial court's order denying a motion to compel arbitration for abuse of discretion. <a href="https://scholar.google.com/scholar_case?case=11064332715902942515&q=henry+v+cash+biz&hl=en&as_sdt=4,44" style="color: #660099;"><i>In re Labatt Food Serv., L.P.,</i> 279 S.W.3d 640, 642-43 (Tex. 2009)</a>. We defer to the trial court's factual determinations if they are supported by evidence but review its legal determinations de novo. <i>Id.</i> Whether the claims in dispute fall within the scope of a valid arbitration agreement and whether a party waived its right to arbitrate are questions of law, which are reviewed de novo. <i>Id.; </i><a href="https://scholar.google.com/scholar_case?case=12607566796162006396&q=henry+v+cash+biz&hl=en&as_sdt=4,44" style="color: #660099;"><i>Perry Homes v. Cull,</i> 258 S.W.3d 580, 598 & n.102 (Tex. 2008)</a>.</div>
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III. Analysis</h2>
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A. Are the Claims Within the Scope of the Arbitration Agreement?</h2>
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The Borrowers assert that their claims are not within the scope of the arbitration provision because the claims relate solely to Cash Biz's illegal use of the criminal justice system. They also contend that all the damages claimed are based solely on criminal fines, jail time, and loss of reputation related to the criminal charges, rather than breach of contract.<br />
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Both Texas policy and federal policy favor arbitration. <a href="https://scholar.google.com/scholar_case?case=4933480583271488482&q=henry+v+cash+biz&hl=en&as_sdt=4,44" style="color: #660099;"><i>In re FirstMerit Bank,</i> 52 S.W.3d at 753</a>. Thus, courts "resolve any doubts about an arbitration agreement's scope in favor of arbitration." <i>Id.</i> Further, in deciding questions like those before us, courts focus on the factual allegations and not on the legal causes of action asserted. <i>Id.</i> at 754. The presumption in favor of arbitration "is so compelling that a court should not deny arbitration `<i>unless it can be said with positive assurance</i> that an arbitration clause is <i>not</i>susceptible of an interpretation which would cover the dispute at issue.'" <a href="https://scholar.google.com/scholar_case?case=475541471625694972&q=henry+v+cash+biz&hl=en&as_sdt=4,44" style="color: #660099;"><i>Prudential Sec. Inc. v. Marshall,</i> 909 S.W.2d 896, 899 (Tex. 1995)</a> (quoting <a href="https://scholar.google.com/scholar_case?case=8504436158483815076&q=henry+v+cash+biz&hl=en&as_sdt=4,44" style="color: #660099;"><i>Neal v. Hardee's Food Sys., Inc.,</i> 918 F.2d 34, 37 (5th Cir. 1990)</a>). Further, the scope of an arbitration clause that includes all "disputes," and not just claims, is very broad and encompasses more than claims "based solely on rights originating exclusively from the contract." <i>See </i><a href="https://scholar.google.com/scholar_case?case=1092166787453586494&q=henry+v+cash+biz&hl=en&as_sdt=4,44" style="color: #660099;"><i>Pinto Tech. Ventures, L.P. v. Sheldon,</i> 526 S.W.3d 428, 439 </a><a class="gsl_pagenum" href="https://scholar.google.com/scholar_case?case=5513412576169180013&q=henry+v+cash+biz&hl=en&as_sdt=4,44#p116" style="color: #aaaaaa; font-size: 13px; left: -55px; position: absolute; text-decoration-line: none;">116</a><a class="gsl_pagenum2" href="https://scholar.google.com/scholar_case?case=5513412576169180013&q=henry+v+cash+biz&hl=en&as_sdt=4,44#p116" id="p116" style="color: #aaaaaa; font-size: 13px; text-decoration-line: none;">*116</a><a href="https://scholar.google.com/scholar_case?case=1092166787453586494&q=henry+v+cash+biz&hl=en&as_sdt=4,44" style="color: #660099;"> (Tex. 2017)</a> (examining a forum-selection clause and noting the analogies between such clauses and arbitration agreements).<br />
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Here, the arbitration agreement applies to "all disputes" and specifies that "`dispute' and `disputes' are given the broadest possible meaning and include, without limitation... all claims, disputes, or controversies arising from or relating directly or indirectly to the signing of this Arbitration Provision." Given the presumption favoring arbitration and the policy of construing arbitration clauses broadly as noted above, it follows that the arbitration clause here applies — just as it says — to all disputes, even those relating only indirectly to the loan agreements.<br />
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The Borrowers asserted that after they missed payments, Cash Biz deposited their postdated checks; the checks were returned for insufficient funds; Cash Biz threatened the Borrowers with criminal prosecution unless the loans were repaid; and when the Borrowers failed to pay, Cash Biz indeed pursued charges for issuance of bad checks. The Borrowers allege that when Cash Biz entered into the loan agreements, it failed to disclose the possibility that if the personal checks were presented to the banks for payment and were not paid, criminal prosecutions would follow.<br />
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The Borrowers' claims are not for breach of any specific obligations under the loan contracts. Nevertheless, their claims are based on the manner in which Cash Biz pursued collection of loans and are at least indirectly related to the contracts the Borrowers signed obligating them to repay the loans. Therefore, we agree with Cash Biz that the Borrowers' claims are within the scope of the arbitration provision.<br />
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In light of the foregoing, the Borrowers must arbitrate their claims unless they prove the affirmative defense on which they rely, that Cash Biz waived its right to arbitrate disputes. <i>See </i><a href="https://scholar.google.com/scholar_case?case=8463334224818744874&q=henry+v+cash+biz&hl=en&as_sdt=4,44" style="color: #660099;"><i>Freeman,</i> 435 S.W.3d at 227</a>.</div>
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B. Waiver</h2>
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The Borrowers assert that Cash Biz impliedly waived its right to arbitration by its conduct, not that it expressly waived the right. To establish the implied waiver that they rely on — substantial invocation of the judicial process — the Borrowers had the burden to prove that (1) Cash Biz substantially invoked the judicial process in a manner inconsistent with its claimed right to compel arbitration, and (2) the Borrowers suffered actual prejudice as a result of the inconsistent conduct. <a href="https://scholar.google.com/scholar_case?case=7525206418111218344&q=henry+v+cash+biz&hl=en&as_sdt=4,44" style="color: #660099;"><i>G.T. Leach Builders, LLC v. Sapphire V.P., LP,</i> 458 S.W.3d 502, 511-12 (Tex. 2015)</a>; <a href="https://scholar.google.com/scholar_case?case=12607566796162006396&q=henry+v+cash+biz&hl=en&as_sdt=4,44" style="color: #660099;"><i>Perry Homes,</i> 258 S.W.3d at 589-90</a>.</div>
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As to whether a party has substantially invoked the judicial process, courts consider a wide variety of factors and look to the specifics of each case. <a href="https://scholar.google.com/scholar_case?case=7525206418111218344&q=henry+v+cash+biz&hl=en&as_sdt=4,44" style="color: #660099;"><i>G.T. Leach Builders, LLC,</i>458 S.W.3d at 512</a>. The necessary conduct must go beyond merely filing suit or seeking initial discovery. <a href="https://scholar.google.com/scholar_case?case=12607566796162006396&q=henry+v+cash+biz&hl=en&as_sdt=4,44" style="color: #660099;"><i>Perry Homes,</i> 258 S.W.3d at 590</a>. We have declined to conclude that the right to arbitrate was waived in all but the most unequivocal of circumstances. <i>Compare id.</i> at 595-96 (holding that the plaintiffs waived the right to arbitrate by participating in extensive discovery including hundreds of requests for production and interrogatories, then requesting arbitration fourteen months after filing suit and only four days prior to the scheduled trial date), <i>with </i><a href="https://scholar.google.com/scholar_case?case=7525206418111218344&q=henry+v+cash+biz&hl=en&as_sdt=4,44" style="color: #660099;"><i>G.T. Leach Builders, LLC,</i> 458 S.W.3d at 512</a>(holding plaintiffs did not waive arbitration by asserting counterclaims; seeking change of venue; filing motions to designate responsible third parties, for continuance, and to quash depositions; designating experts; and waiting <a class="gsl_pagenum" href="https://scholar.google.com/scholar_case?case=5513412576169180013&q=henry+v+cash+biz&hl=en&as_sdt=4,44#p117" style="color: #aaaaaa; font-size: 13px; left: -55px; position: absolute; text-decoration-line: none;">117</a><a class="gsl_pagenum2" href="https://scholar.google.com/scholar_case?case=5513412576169180013&q=henry+v+cash+biz&hl=en&as_sdt=4,44#p117" id="p117" style="color: #aaaaaa; font-size: 13px; text-decoration-line: none;">*117</a> six months to move for arbitration), <a href="https://scholar.google.com/scholar_case?case=13310519155792129194&q=henry+v+cash+biz&hl=en&as_sdt=4,44" style="color: #660099;"><i>In re Fleetwood Homes of Tex., L.P.,</i> 257 S.W.3d 692, 694 (Tex. 2008)</a>(holding party did not waive arbitration by noticing deposition, serving written discovery, and waiting eight months to move for arbitration), <a href="https://scholar.google.com/scholar_case?case=4650003754923679185&q=henry+v+cash+biz&hl=en&as_sdt=4,44" style="color: #660099;"><i>In re Bruce Terminix Co.,</i> 988 S.W.2d 702, 703-04 (Tex. 1998)</a> (holding arbitration was not waived by sending eighteen interrogatories and nineteen requests for production and waiting six months to seek arbitration).<br />
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Here, the factors generally examined to determine waiver — how much discovery has been conducted, who initiated it, and whether it relates to the merits; how much time and expense has been incurred in litigation; and the proximity in time between a trial setting and the filing of the motion seeking arbitration — may serve as guideposts. <i>See </i><a href="https://scholar.google.com/scholar_case?case=12607566796162006396&q=henry+v+cash+biz&hl=en&as_sdt=4,44" style="color: #660099;"><i>Perry Homes,</i> 258 S.W.3d at 590-92</a>. But those factors are not wholly on point because the conduct in question in this case involves the criminal justice system.<br />
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In attempting to meet their burden, the Borrowers introduced a list of cases and case summaries for criminal prosecutions in a Harris County Justice of the Peace Court. Cash Biz was named "complainant" in many of these cases, including those of the named Borrowers. The complaints resulted in criminal charges against the Borrowers for "issuance of a bad check." The Borrowers assert that without the information from Cash Biz, no criminal prosecutions would have occurred. And although the Borrowers argued, and continue to argue, that Cash Biz filed criminal complaints against them, the record does not reflect that it did. Rather, the record contains an affidavit from a Cash Biz representative, David Flanagan, in which he stated in part as follows:</div>
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Cash Biz simply left the information entirely to the discretion of the district attorney, and any action taken by the district attorney thereafter was made completely on his/her own. Cash Biz did not make any formal charges, did not participate in any criminal trial, and did not obtain criminal judgments. Similarly, Cash Biz was neither a witness in any criminal proceeding nor was it asked to appear in any such proceeding.</blockquote>
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The Borrowers do not attack Flanagan's affidavit or reference evidence contradicting the statements in it. The Borrowers argue that the court of appeals did not consider all of the evidence, but the only information they provided to the trial court apart from case summaries consisted of news reports and online magazine articles stemming from a Texas Appleseed investigation. Those documents indicate that Texas Appleseed, an Austin-based organization that advocates for the poor, investigated payday lenders and discussed what it labeled as questionable practices by many of these businesses, including Cash Biz. But the reports — assuming they were properly before the trial court — do not refer to evidence of conduct by Cash Biz beyond providing information to the district attorney as was set out in Flanagan's affidavit. And while the Borrowers argue that the court of appeals failed to defer to the trial court's factual determinations that Cash Biz "participated in criminal trials [and] obtained criminal judgments," we agree with the appellate court that these findings are not supported by legally sufficient evidence. <i>See </i><a href="https://scholar.google.com/scholar_case?case=11064332715902942515&q=henry+v+cash+biz&hl=en&as_sdt=4,44" style="color: #660099;"><i>In re Labatt Food Serv., L.P.,</i> 279 S.W.3d at 643</a> (holding that deference to trial court findings is limited to those supported by the record). The Borrowers simply provided no evidence of any actions by Cash Biz related to the criminal charges other than evidence that Cash Biz was the complainant in them. This evidence alone does not meet the <a class="gsl_pagenum" href="https://scholar.google.com/scholar_case?case=5513412576169180013&q=henry+v+cash+biz&hl=en&as_sdt=4,44#p118" style="color: #aaaaaa; font-size: 13px; left: -55px; position: absolute; text-decoration-line: none;">118</a>Borrowers' burden to prove that Cash Biz substantially invoked the judicial process.<br />
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The Borrowers reference <i>Principal Investments, Inc. v. Harrison</i> in which a lender filed more than 16,000 individual collection actions in justice of the peace courts and obtained default judgments against many of the borrowers. 366 P.3d 688, 690-91 (Nev. 2016). The Supreme Court of Nevada held that the lender waived its right to arbitrate by initiating the collection actions and inviting the borrowers to appear and defend on the merits of the claims. <i>Id.</i> Here, in contrast, the evidence shows only that Cash Biz informed the district attorney of the checks returned for insufficient funds. Thus, the district attorney, not Cash Biz, ultimately made the decision to prosecute or not prosecute in a particular case.<br />
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The Borrowers also point to <i>In re Christus Spohn Health System Corp.</i> to support their position that a lender's actions within the criminal justice system can waive its rights within the civil justice system. 231 S.W.3d 475 (Tex. App.-Corpus Christi 2007, no pet.). In that case, after a murder in a hospital parking lot, the victim's husband filed a civil suit against the hospital, and the hospital moved to compel arbitration. <i>Id.</i> at 481. The trial court denied the motion because the hospital had sought an order of contempt against the husband's counsel during the criminal proceedings. <i>Id.</i> The appeals court explained that while it ordinarily "would not consider actions in a separate cause as indicative of waiver," the hospital's actions were "part of its strategic plan of defense in the underlying matter that would be inconsistent with a right to arbitrate." <i>Id.</i> The Borrowers contend that Cash Biz's actions mirror that of the hospital — the criminal proceedings arising from Cash Biz's contacts with the district attorney were part of a strategic plan to collect on the debts owed.<br />
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Without passing judgment on the decision in <i>In re Christus Spohn Health System Corp.,</i>a no petition case, Cash Biz's conduct in this case consisted solely of providing information to the district attorney and letting the chips fall where they may. We have no doubt that Cash Biz hoped that the falling chips would result in the borrowers paying their loans. But the Borrowers did not present evidence that Cash Biz went beyond providing truthful information to the district attorney. Cash Biz's conduct arguably demonstrates an intent to cause the district attorney to initiate a judicial proceeding. But even so, it is not <i>more</i> than initiating litigation, which we have held does not substantially invoke the judicial process and waive the right to arbitrate. <a href="https://scholar.google.com/scholar_case?case=12607566796162006396&q=henry+v+cash+biz&hl=en&as_sdt=4,44" style="color: #660099;"><i>Perry Homes,</i> 258 S.W.3d at 590</a>.<br />
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We conclude that Cash Biz did not substantially invoke the judicial process. Accordingly, we need not address whether the Borrowers were actually prejudiced by Cash Biz's conduct.<br />
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We recognize that our opinion does not accord with the decision in <a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=4338278762512727325&q=henry+v+cash+biz&hl=en&as_sdt=4,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Vine v. PLS Financial Services, Inc.,</i> 689 Fed.Appx. 800 (5th Cir. 2017) (per curiam)</a>. There, as did Cash Biz here, a short-term lender had borrowers sign postdated checks, which were presented for payment after the borrowers defaulted. <i>Id.</i> at 801. When the checks were not paid, the lender submitted the unpaid checks and affidavits to the local district attorneys. <i>Id.</i>The <i>Vine</i> court declined to follow the decision of the court of appeals in this case. <i>Id.</i> at 806. Rather, it concluded that the lender's actions in submitting affidavits to prosecuting attorneys waived its right to enforce the arbitration agreement. <i>Id.</i><br />
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With due respect, and recognizing that it is important for federal and state law to be as consistent as possible in this area where we have concurrent jurisdiction, we agree <a class="gsl_pagenum" href="https://scholar.google.com/scholar_case?case=5513412576169180013&q=henry+v+cash+biz&hl=en&as_sdt=4,44#p119" style="color: #aaaaaa; font-size: 13px; left: -55px; position: absolute; text-decoration-line: none;">119</a>with the dissenting justice in <i>Vine. Id.</i> at 807 (Higginson, J., dissenting). We conclude, as he did, that although some lenders may be "gaming the system" by taking actions like the lenders took there and as Cash Biz took here, more is required for waiver of a contractual right to arbitrate. <i>Id.</i></div>
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IV. Conclusion</h2>
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The claims brought by the Borrowers fell within the scope of the arbitration agreement and there was no evidence to support the trial court's finding that Cash Biz waived its right to arbitrate. We affirm the judgment of the court of appeals.<br />
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Justice Blacklock did not participate in the decision.</div>
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<a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=5513412576169180013&q=henry+v+cash+biz&hl=en&as_sdt=4,44#r[1]" name="[1]" style="color: #660099; text-decoration: underline;">[1]</a> After this case was argued, we received notice that Cash Biz had filed for bankruptcy; thus, the appeal was stayed. <i>See</i> TEX. R. APP. P. 8.2; <i>see also</i> 11 U.S.C. § 362(a). The bankruptcy court has lifted the stay for purposes of our issuing an opinion.<br />
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LUCINDA VINE; KRISTY POND, Plaintiffs-Appellees,<br />v.<br />PLS FINANCIAL SERVICES, INCORPORATED; PLS LOAN STORE OF TEXAS, INCORPORATED, Defendants-Appellants.</h3>
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<a href="https://scholar.google.com/scholar?scidkt=95746045303739506&as_sdt=2&hl=en" style="color: #660099;">No. 16-50847.</a></center>
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<b>United States Court of Appeals, Fifth Circuit.</b></div>
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Filed May 19, 2017.</center>
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Richard Andrew Bonner, for Defendant-Appellant.</div>
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Mark Norman Osborn, for Defendant-Appellant.</div>
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Howard Mark Burck, for Plaintiff-Appellee.</div>
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Ricardo Gonzalez Cedillo, for Defendant-Appellant.</div>
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Jose Abelardo Howard-Gonzalez, for Defendant-Appellant.</div>
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Daniel Raymond Dutko, for Plaintiff-Appellee.</div>
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Shelly W. Rivas, for Defendant-Appellant.</div>
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Appeals from the United States District Court for the Western District of Texas, USDC No. 3:16-CV-31.</div>
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Before: BARKSDALE, GRAVES, and HIGGINSON, Circuit Judges.</div>
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PER CURIAM.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=497476112712532409&hl=en&as_sdt=6,44#[1]" name="r[1]" style="color: #660099;">[*]</a></sup></div>
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Appellants PLS Financial Services, Inc., and PLS Loan Store of Texas, Inc. (collectively "PLS"), appeal the district court's denial of its motion to dismiss and to compel arbitration. Because PLS substantially invoked the judicial process to the detriment or prejudice of Appellees Lucinda Vine and Kristy Pond when it submitted false worthless check affidavits, we AFFIRM the judgment of the district court.</div>
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BACKGROUND</h2>
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PLS's business is to provide short-term loans to customers. To obtain loans, PLS customers must present blank or post-dated checks for the amount borrowed plus a finance charge and a credit-access-business fee. They must also sign PLS's Loan Disclosure, Promissory Note and Security Agreement and a Credit Services Agreement (the "Agreement"), which requires arbitration of all "disputes." The Agreement states:</div>
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For purposes of this Waiver of Jury Trial and Arbitration Provision . . . the words "dispute" and "disputes" are given the broadest possible meaning and include, without limitation (a) all claims, disputes, or controversies arising from or relating directly or indirectly to signing of this Arbitration Provision, the validity and scope of this Arbitration Provision, the validity and scope of this Arbitration Provision and any claim or attempt to set aside this Arbitration Provision . . . .</blockquote>
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Vine and Pond allege that during the loan application process, PLS asked them for blank or post-dated checks, but assured them that the checks would not be cashed and would only be used to verify checking accounts. However, PLS cashed the checks as soon as Vine and Pond defaulted on their loans, and then submitted worthless check affidavits to local district attorneys' offices when the checks bounced. According to Vine and Pond, PLS's actions were part of a regular strategy whereby PLS submitted false worthless check affidavits to achieve repayment of the loans and to avoid arbitrating any collection actions. In addition, Vine and Pond allege that PLS knew that its submission of false worthless check affidavits violated Texas law. <i>See</i> Tex. Fin. Code §§ 393.201(c) and 292.301.</div>
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Soon after submission of the worthless check affidavits, Vine and Pond received letters from their local district attorneys' offices, notifying them that they would need to pay restitution to PLS and statutory fees or face criminal proceedings on theft by check charges.</div>
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On January 26, 2016, Vine and Pond initiated the present class action against PLS on behalf of themselves and all similarly-situated plaintiffs, alleging: (1) malicious prosecution; (2) Texas Deceptive Trade Practices Act violations; (3) fraud; and (4) Texas Finance Code § 392.301 violations. On March 23, 2016, PLS moved to dismiss the proceedings and compel Vine and Pond to arbitrate their claims pursuant to the Agreement. On June 6, 2016, the district court denied PLS's motion to dismiss, stating that, even if Plaintiffs had agreed to arbitration, PLS had waived its right to compel them to do so by submitting the worthless check affidavits. PLS appeals from the district court's denial of their motion to dismiss and to compel arbitration.</div>
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STANDARD OF REVIEW</h2>
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"We review the issue of whether a party's conduct amounts to a waiver of arbitration <i>de novo.</i>" <a href="https://scholar.google.com/scholar_case?case=6305900805080878085&hl=en&as_sdt=6,44" style="color: #660099;"><i>Subway Equip. Leasing Corp. v. Forte,</i> 169 F.3d 324, 326 (5th Cir. 1999)</a>. A motion to compel arbitration is generally treated as a motion to dismiss. <i>See </i><a href="https://scholar.google.com/scholar_case?case=7265302966203116984&hl=en&as_sdt=6,44" style="color: #660099;"><i>Suburban Leisure Ctr., Inc. v. AMF Bowling Prods., Inc.,</i> 468 F.3d 523, 525 (8th Cir. 2006)</a>. Consequently, we accept Vine and Pond's well-pleaded facts as true and view them in the light most favorable to them. <i>Id.</i></div>
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DISCUSSION</h2>
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PLS makes three arguments on appeal. It contends that the district court erred by: (1) deciding whether PLS waived its right to compel arbitration by participating in litigation conduct; (2) ignoring the parties' express agreement to arbitrate all disputes, including any litigation-conduct waiver claims; and (3) concluding that PLS waived its right to arbitrate by submitting worthless check affidavits. None of these arguments are persuasive.</div>
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I.</h2>
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First, the district court did not err by deciding the litigation-conduct waiver. In <a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=10965761381336091852&hl=en&as_sdt=6,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Tristar Fin. Ins. Agency v. Equicredit Corp. of Am.,</i> 97 F. App'x 465, 464 (5th Cir. 2004),</a> we recognized that when "waiver . . . depends on the conduct of the parties before the district court," "the court, not the arbitrator, is in the best position to decide whether the conduct amounts to a waiver under applicable law." Here, the district court's waiver decision depended on the conduct of PLS—a party to the litigation. Consequently, the district court was "in the best position" to decide the litigation-conduct waiver. <i>Id.</i></div>
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PLS contends that the Supreme Court's decision in <a href="https://scholar.google.com/scholar_case?case=17062889682268523745&hl=en&as_sdt=6,44" style="color: #660099;"><i>BG Group, PLC v. Republic of Argentina,</i> 134 S. Ct. 1198 (2014),</a> abrogates any persuasive effect of our <i>Tristar</i>decision. In <i>BG Group,</i> the Supreme Court stated that courts should decide issues "such as whether the parties are bound by a given arbitration clause, or whether an arbitration clause in a concededly binding contract applies to a particular type of controversy." <a href="https://scholar.google.com/scholar_case?case=17062889682268523745&hl=en&as_sdt=6,44" style="color: #660099;"><i>BG Group,</i> 134 S. Ct. at 1206</a> (quotations omitted). But arbitrators should decide questions "about the meaning and application of particular procedural preconditions for the use of arbitration." <i>Id.</i> at 1207. Because <i>BG Group</i> defines "claims `of waiver, delay, or a like defense to arbitrability'" as procedural, PLS argues that litigation-conduct waiver should be decided by an arbitrator, and not a court. <i>See id.</i> at 1202 (quoting <a href="https://scholar.google.com/scholar_case?case=4974455257504383275&hl=en&as_sdt=6,44" style="color: #660099;"><i>Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp.,</i> 460 U.S. 1, 25 (1983)</a>). PLS notes that in <a href="https://scholar.google.com/scholar_case?case=7982447248869908956&hl=en&as_sdt=6,44" style="color: #660099;"><i>Howsam v. Dean Witter Reynolds, Inc.,</i> 537 U.S. 79, 84 (2002)</a> (quoting <a href="https://scholar.google.com/scholar_case?case=4974455257504383275&hl=en&as_sdt=6,44" style="color: #660099;"><i>Moses H. Cone Memorial Hospital,</i> 460 U.S. at 25</a>), the Supreme Court also stated that "claims `of waiver, delay, or a like defense to arbitrability'" are procedural and thus arbitrator-committed.</div>
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Despite the surface appeal of this argument, a careful reading of <i>BG Group</i> and <i>Howsam</i> demonstrates that it is misguided. When confronted with the identical language in <i>Howsam,</i> the Third Circuit stated:</div>
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Properly considered within the context of the entire opinion . . . we believe it becomes clear that the Court was referring only to waiver, delay, or like defenses arising from non-compliance with contractual conditions precedent to arbitration . . . and not to claims of waiver based on active litigation in court.</blockquote>
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<i>See </i><a href="https://scholar.google.com/scholar_case?case=17889991138777565561&hl=en&as_sdt=6,44" style="color: #660099;"><i>Ehleiter v. Grapetree Shores, Inc.,</i> 482 F.3d 207, 219 (3d Cir. 2007)</a>. Unlike other types of waiver, litigation-conduct waiver "implicates courts' authority to control <i>judicial</i>procedures or to resolve issues . . . arising from <i>judicial conduct.</i>" <i>Id.</i> (emphasis in the original). Consequently, because "parties would expect the court to decide [litigation-conduct waiver] itself," the Third Circuit was unconvinced that the Supreme Court had meant for arbitrators, and not courts, to presumptively decide litigation-conduct waiver. The majority of our sister circuits agree. <i>See </i><a href="https://scholar.google.com/scholar_case?case=195889487384385849&hl=en&as_sdt=6,44" style="color: #660099;"><i>Marie v. Allied Home Mortg. Corp.,</i> 402 F.3d 1, 14 (1st Cir. 2005)</a> ("We hold that the Supreme Court . . . did not intend to disturb the traditional rule that waiver by conduct, at least due to litigation-related activity, is presumptively an issue for the court."); <a href="https://scholar.google.com/scholar_case?case=18168365415120179428&hl=en&as_sdt=6,44" style="color: #660099;"><i>Grigsby & Assocs., Inc. v. M. Sec. Inv.,</i> 664 F.3d 1350, 1353 (11th Cir. 2011)</a> (same); <a href="https://scholar.google.com/scholar_case?case=18030103694836632522&hl=en&as_sdt=6,44" style="color: #660099;"><i>JPD, Inc. v. Chronimed Holdings, Inc.,</i> 539 F.3d 388, 393 (6th Cir. 2008)</a> (same); <a href="https://scholar.google.com/scholar_case?case=5336910849818536488&hl=en&as_sdt=6,44" style="color: #660099;"><i>Martin v. Yasuda,</i> 829 F.3d 1118, 1122-23 (9th Cir. 2016)</a>(same). <i>But see </i><a href="https://scholar.google.com/scholar_case?case=15844288284129948770&hl=en&as_sdt=6,44" style="color: #660099;"><i>Nat'l Am. Ins. Co. v. Transamerica Occidental Life Ins. Co.,</i> 328 F.3d 462, 466 (8th Cir. 2003)</a> (holding that all waiver challenges should be committed to an arbitrator). We note that a majority of the decisions addressing litigation-conduct waiver pre-date <i>BG Group,</i> but the logic of those decisions interpreting <i>Howsam</i> is equally applicable to <i>BG Group.</i> Consequently, the district court did not err.</div>
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II.</h2>
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Second, the parties' express agreement does not address litigation-conduct waiver. As a preliminary matter, PLS waived this issue by raising it for the first time in its motion to reconsider. <i>See </i><a href="https://scholar.google.com/scholar_case?case=11615170837250450066&hl=en&as_sdt=6,44" style="color: #660099;"><i>LeClerc v. Webb,</i> 419 F.3d 405, 412 n.13 (5th Cir. 2005)</a> ("A motion for reconsideration may not be used to . . . introduce new arguments."). However, even if PLS had not waived the issue, we would reach the same conclusion.</div>
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While the language of an arbitration agreement can displace the presumption that a court should decide an issue, "[a]n issue that is presumptively for the court to decide will be referred to the arbitrator for determination only where the parties' arbitration agreement contains `clear and unmistakable evidence' of such an intent." <i>See </i><a href="https://scholar.google.com/scholar_case?case=17889991138777565561&hl=en&as_sdt=6,44" style="color: #660099;"><i>Ehleiter,</i>482 F.3d at 221</a> (quoting <a href="https://scholar.google.com/scholar_case?case=2717778595314053137&hl=en&as_sdt=6,44" style="color: #660099;"><i>First Options of Chicago, Inc. v. Kaplan,</i> 514 U.S. 938, 944 (1995)</a>).</div>
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Here, we do not find "clear and unmistakable evidence" that the parties intended to arbitrate litigation-conduct waiver. <i>Id.</i> Though the parties' agreement requires arbitration of "any claim or attempt to set aside this Arbitration Provision," it does not explicitly mention litigation-conduct waiver. <i>See </i><a href="https://scholar.google.com/scholar_case?case=2390100641788347568&hl=en&as_sdt=6,44" style="color: #660099;"><i>Principal Investments, Inc. v. Cassandra Harrison,</i>366 P.3d 688, 696 (Nev. 2016)</a> ("Had Rapid Cash intended to delegate litigation-conduct waiver to the arbitrator, rather than the court, the agreements could and should have been written to say that explicitly."). Furthermore, we "cannot interpret the Agreement's silence regarding who decides the waiver issue here `as giving the arbitrators that power for doing so . . . [would] force [an] unwilling part[y] to arbitrate a matter he reasonably would have thought a judge, not an arbitrator, would decide.'" <a href="https://scholar.google.com/scholar_case?case=17889991138777565561&hl=en&as_sdt=6,44" style="color: #660099;"><i>Ehleiter,</i> 482 F.3d at 222</a>(quoting <a href="https://scholar.google.com/scholar_case?case=2717778595314053137&hl=en&as_sdt=6,44" style="color: #660099;"><i>First Options,</i> 514 U.S. at 945</a>). Because the Agreement does not contain "clear and unmistakable evidence" of an intent to arbitrate the instant litigation-conduct waiver issue, the district court did not err. <i>Id.</i> at 221.</div>
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III.</h2>
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Third, the district court correctly found that Vine and Pond plausibly alleged that PLS waived arbitration when it submitted false worthless check affidavits. "The question of what constitutes a waiver of the right of arbitration depends on the facts of each case." <a href="https://scholar.google.com/scholar_case?case=3913847501863310323&hl=en&as_sdt=6,44" style="color: #660099;"><i>Tenneco Resins, Inc. v. Davy Int'l AG,</i> 770 F.2d 416, 420 (5th Cir. 1985)</a>. "Waiver will be found when the party seeking arbitration substantially invokes the judicial process to the detriment or prejudice of the other party." <i>Subway Equipment </i><a href="https://scholar.google.com/scholar_case?case=6305900805080878085&hl=en&as_sdt=6,44" style="color: #660099;"><i>Leasing Corp.,</i> 169 F.3d at 326</a> (quoting <a href="https://scholar.google.com/scholar_case?case=6931878422019040640&hl=en&as_sdt=6,44" style="color: #660099;"><i>Miller Brewing Co. v. Fort Worth Distrib. Co.,</i> 781 F.2d 494, 497 (5th Cir. 1986)</a>).</div>
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A.</h2>
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A party substantially invokes the judicial process when it "engage[s] in some overt act in court that evinces a desire to resolve the arbitration dispute through litigation." <i>Id.</i> "We use the term [invoke] to describe the act of implementing or enforcing the judicial process, not the act of calling upon for support or assistance, as say, one would invoke a spirit or the elements." <i>Id.</i></div>
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As the district court noted, whether PLS sufficiently implemented the criminal justice system to its own benefit such that its conduct constitutes a substantial invocation of the judicial process is a matter of first impression before this Court. On this narrow issue, we find no guidance from any of our sister circuits.</div>
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Here, Vine and Pond allege that PLS systematically engaged in a strategy of submitting worthless check affidavits that falsely stated that borrowers had committed theft by check. In addition, Vine and Pond claim that PLS submitted these false affidavits solely to achieve repayment of loans and to avoid arbitrating any collection actions. According to Vine and Pond, PLS also knew that the affidavits violated Texas law. Texas law does not permit a lender to "threaten or pursue criminal charges against a consumer related to a check . . . in the absence of forgery, fraud, theft, or other criminal conduct." <i>See</i> Tex. Fin. Code § 393.201(c); <i>see also</i> Tex. Fin. Code § 392.301.</div>
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Documents incorporated by reference into Vine and Pond's complaint also show the mechanics of PLS's alleged course of conduct.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=497476112712532409&hl=en&as_sdt=6,44#[2]" name="r[2]" style="color: #660099;">[1]</a></sup> One of the affidavits submitted by PLS and a letter received by a borrower from her local district attorney's office show that the district attorney's office sent out the letter the day after it stamped the corresponding PLS affidavit as "received." This comparison plausibly suggests that when the local district attorney's office sent out its letter requesting restitution, it relied solely on PLS's representations that the customer had committed theft by check. These documents also suggest that the district attorney's office may not have exercised robust discretion in reviewing PLS's affidavits before initiating criminal proceedings against PLS customers. As the district court noted,</div>
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If what Plaintiffs allege is true, Defendants conduct is merely a pretext to obtain a favorable ruling, which Defendants can then use in either defending or prosecuting a lawsuit brought by or against Plaintiffs in an arbitration proceeding.</blockquote>
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Moreover, if true, PLS's conduct is inconsistent with a right to arbitrate.</div>
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In determining whether PLS's alleged actions are consistent with a right to arbitrate, three state-court decisions are instructive. In <a href="https://scholar.google.com/scholar_case?case=2390100641788347568&hl=en&as_sdt=6,44" style="color: #660099;"><i>Principal Investments,</i> 366 P.3d at 690-91,</a>the Nevada Supreme Court found that Defendant Rapid Cash waived its right to arbitrate when it secured thousands of default judgments against the named plaintiffs and other borrowers by submitting false affidavits prepared by its process server. The court explained:</div>
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"By initiating a collection action in justice court, Rapid Cash waived its right to arbitrate to the extent of inviting its borrower to appear and defend on the merits of that claim." <i>Id.</i> at 697. It also stated:</blockquote>
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If the judgment Rapid Cash obtained was the project of fraud or criminal misconduct and is unenforceable for that reason, it would be unfairly prejudicial to the judgment debtor to require arbitration of claims seeking to set that judgment aside, to enjoin its enforcement, and otherwise to remediate its improper entry.</blockquote>
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<i>Id.</i> at 697-98.</div>
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The Texas Court of Appeals decision in <a href="https://scholar.google.com/scholar_case?case=16364992834588015315&hl=en&as_sdt=6,44" style="color: #660099;"><i>In re Christus Spohn Heath Sys. Corp.,</i> 231 S.W.3d 475 (Tex. App.-Corpus Christi 2007, no pet.),</a> is also instructive here. <i>Christus Spohn</i> was a premises liability case arising out of a murder in a hospital parking lot. When the murder victim's husband filed a civil lawsuit against the hospital, the hospital moved to compel arbitration. <i>Id.</i> at 481. However, the court denied the hospital's motion because the hospital had sought an order of contempt against the husband's counsel during the criminal proceedings. <i>Id.</i> The court explained that while "ordinarily [it] would not consider actions in a separate cause as indicative of waiver," the hospital's actions were "part of its strategic plan of defense in the underlying matter that would be inconsistent with a right to arbitrate." <i>Id.</i></div>
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As in <i>Christus Spohn,</i> PLS allegedly submitted the false worthless check affidavits as "part of its strategic plan of defense in the underlying matter" to achieve loan repayment. <i>See </i><a href="https://scholar.google.com/scholar_case?case=16364992834588015315&hl=en&as_sdt=6,44" style="color: #660099;"><i>Christus Spohn,</i> 231 S.W.3d at 481</a>. As in <i>Principal Investments,</i> PLS allegedly derived benefit by engaging the criminal justice system through improper conduct. If it is true that PLS's submission of worthless check affidavits was fraudulent, "it would be unfairly prejudicial to [Vine, Pond, and similarly situated borrowers] to require arbitration of claims . . . to remediate [the] improper entry" of the affidavits. <i>See </i><a href="https://scholar.google.com/scholar_case?case=2390100641788347568&hl=en&as_sdt=6,44" style="color: #660099;"><i>Principal Investments,</i> 366 P.3d at 690</a>. Thus, Vine and Pond have plausibly alleged that PLS waived its right to arbitrate when it submitted false worthless check affidavits.</div>
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Nevertheless, PLS argues that we should follow the Texas Court of Appeals decision in <a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=4218913692241346985&hl=en&as_sdt=6,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Cash Biz, LP v. Henry et al.,</i> 2016 WL 4013794 (Tex. App.-San Antonio 2016, pet. filed)</a>. In <i>Cash Biz,</i> the court found that Defendant Cash Biz did not waive its right to arbitrate when it "contacted the applicable local district attorneys and submitted information necessary to make a criminal complaint." <a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=4218913692241346985&hl=en&as_sdt=6,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Cash Biz,</i> 2016 WL 4013794, at *2</a>. The court stated that "courts consistently evaluate a party's conduct <i>after</i> suit is filed to determine whether it waived its right to arbitration. Here, the parties focus on Cash Biz's conduct in a separate proceeding <i>before</i> the underlying litigation was filed by the Borrowing Parties." <i>Id.</i> at *8 (emphasis in the original). The court also reasoned that "[i]n Texas, the filing of criminal charges and initiation of criminal process is the discretion of the prosecuting attorney." <i>Id.</i> Consequently, the preliminary act of "filing of suit or initiation of litigation is not `substantial invocation of judicial process.'" <i>Id.</i> (quoting <a href="https://scholar.google.com/scholar_case?case=7525206418111218344&hl=en&as_sdt=6,44" style="color: #660099;"><i>G.T. Leach Builders, LLC v. Sapphire V.P., LP,</i> 458 S.W.3d 502, 512 (Tex. 2015)</a>).</div>
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However, despite the obvious factual similarities between <i>Cash Biz</i> and this case, we decline to follow <i>Cash Biz</i> for the following reasons: As the dissent in <i>Cash Biz</i> aptly noted, here, "we are presented with the unique situation of a civil lawsuit and a criminal proceeding, both of which arise out of the same civil debt." <a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=4218913692241346985&hl=en&as_sdt=6,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Cash Biz,</i> 2016 WL 4013794, at *10 (Martinez, J., dissenting)</a>. Moreover, it is alleged that the criminal proceedings were an integral component of PLS's litigation strategy to collect on outstanding debt. If PLS attempted to "game the system" by initiating theft by check proceedings in place of submitting collection actions to an arbitrator, PLS should not be allowed "a second bite at the apple through arbitration" to resolve related issues. <i>See </i><a href="https://scholar.google.com/scholar_case?case=5920656780209451381&hl=en&as_sdt=6,44" style="color: #660099;"><i>Cargill Ferrous Int'l v. SEA PHX. MV,</i> 325 F.3d 695, 701 (5th Cir. 2003)</a> ("Under the facts of this case, it is clear Serene is not gaming the system by seeking a win at trial, and in the case of loss, anticipating a second bite at the apple through arbitration.").</div>
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In addition, we also agree with the <i>Cash Biz</i> dissent that the majority in that case did not sufficiently consider the critical role that the Defendant played in the criminal proceedings as the complainant. <i>See </i><a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=4218913692241346985&hl=en&as_sdt=6,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Cash Biz,</i> 2016 WL 4013794, at *10 (Martinez, J., dissenting)</a> ("[W]hile the formal parties in a criminal proceeding are the defendant and the State of Texas, the victim or complaintant [sic] has a personal interest in the prosecution and thus plays a unique role in criminal proceedings."). Here, Vine and Pond allege that PLS had a great "personal interest in the prosecution" as it constituted a means to achieve repayment of its loans while avoiding arbitration. Furthermore, documents incorporated by reference into Vine and Pond's complaint arguably show that PLS drove all theft by check criminal proceedings when it submitted the worthless check affidavits to local district attorneys' offices. In other words, had PLS not submitted the worthless check affidavits, "no criminal prosecution would have occurred." <i>See id.</i> at *9 (Martinez, J., dissenting).</div>
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Therefore, by allegedly submitting false worthless check affidavits, PLS "invoke[d] the judicial process to the extent it litigate[d] a specific claim it subsequently [sought] to arbitrate." <i>See </i><a href="https://scholar.google.com/scholar_case?case=6305900805080878085&hl=en&as_sdt=6,44" style="color: #660099;"><i>Subway Equip. Leasing Corp.,</i> 169 F.3d at 328</a>. As the district court made clear, "Defendants have initiated a process that invites Texas district attorneys' offices to address issues that are at stake in the instant action." Most obviously, all claims involve whether PLS misled or threatened Vine, Pond, and the class of PLS customers they purport to represent in order to obtain outstanding debt owed to PLS.</div>
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B.</h2>
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Vine and Pond have also demonstrated detriment or prejudice from PLS's submission of worthless check affidavits. "Prejudice in the context of arbitration waiver refers to delay, expense, and damage to a party's legal position." <a href="https://scholar.google.com/scholar_case?case=17783150183982943149&hl=en&as_sdt=6,44" style="color: #660099;"><i>Nicholas v. KBR, Inc.,</i> 565 F.3d 904, 910 (5th Cir. 2009)</a>. Here, Vine and Pond would have borne the costs of defending against any theft by check prosecution. In addition, they would have suffered the preclusive effect of a conviction in any subsequent litigation. Consequently, they have sufficiently shown detriment or prejudice. <i>See </i><a href="https://scholar.google.com/scholar_case?case=6305900805080878085&hl=en&as_sdt=6,44" style="color: #660099;"><i>Subway Equip. Leasing Corp.,</i> 169 F.3d at 327</a>.</div>
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CONCLUSION</h2>
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For the reasons stated above, we AFFIRM the judgment of the district court.</div>
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STEPHEN A. HIGGINSON, Circuit Judge, dissenting.</div>
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Although I agree with the majority that the district court did not err by deciding litigation-conduct waiver, I would hold that PLS's conduct did not amount to waiver of arbitration. I believe the question is close, due largely to the unique procedural nature of theft-by-check cases—especially here, where there is evidence that PLS not only intended to force repayment of these loans by submitting worthless check affidavits, but in fact achieved that result. However, my read of our law in <i>Subway Equipment</i> is that more is required for a party to have "substantially invoke[d] the judicial process." <a href="https://scholar.google.com/scholar_case?case=6305900805080878085&hl=en&as_sdt=6,44" style="color: #660099;"><i>Subway Equipment Leasing Corp. v. Forte,</i> 169 F.3d 324, 326 (5th Cir. 1999)</a>.</div>
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To the extent it applies, my read of Texas law is the same. <i>See </i><a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=4218913692241346985&hl=en&as_sdt=6,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Cash Biz, LP v. Henry,</i>No. 04-15-00469-CV, 2016 WL 4013794, at *6 (Tex. App.-San Antonio July 27, 2016, pet. filed)</a> ("To waive arbitration, the party must engage in some overt act in court that evince[s] a desire to resolve the arbitrable dispute through litigation rather than arbitration." (internal quotation marks and citations omitted)). Furthermore, even accepting its legal framework, I view the Nevada Supreme Court's decision in <i>Harrison</i>as distinguishable due to the particularly overt and affirmative steps taken by the lender in that case, namely, "fil[ing] . . . individual collection actions in justice court" and "secur[ing] thousands of default judgments against . . . borrowers who failed to appear and defend the collection lawsuits." <a href="https://scholar.google.com/scholar_case?case=2390100641788347568&hl=en&as_sdt=6,44" style="color: #660099;"><i>Principal Invs., Inc. v. Harrison,</i> 366 P.3d 688, 690-91 (Nev. 2016)</a>.</div>
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I share the majority's discomfort that PLS may be gaming the system through its submission of the worthless check affidavits, which is inconsistent with the company's current pro-arbitration stance. As Appellees note, attempting to secure repayment through the local district attorney's office not only provides PLS with two bites at the apple, but also allows it to avoid potential costs associated with arbitration, such as arbitrator and attorney's fees. Nevertheless, I believe our law requires something more than the actions alleged here.</div>
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Accordingly, I respectfully dissent.</div>
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<span style="font-size: x-small;"><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=497476112712532409&hl=en&as_sdt=6,44#r[1]" name="[1]" style="color: #660099;">[*]</a> Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4.</span></div>
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<span style="font-size: x-small;"><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=497476112712532409&hl=en&as_sdt=6,44#r[2]" name="[2]" style="color: #660099; text-decoration: underline;">[1]</a> In ruling on motions to dismiss, courts may examine documents incorporated into the complaint by reference. <i>See </i><a href="https://scholar.google.com/scholar_case?case=3627192056277031648&hl=en&as_sdt=6,44" style="color: #660099; text-decoration: underline;"><i>Lormand v. US Unwired, Inc.,</i> 565 F.3d 228, 251 (5th Cir. 2009)</a>.</span></div>
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<b>226 F.Supp.3d 719 (2016)</b></center>
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Lucinda VINE, Kristy Pond, on behalf themselves and for all others similarly situated, Plaintiffs,<br />v.<br />PLS FINANCIAL SERVICES, INC., and PLS Loan Store of Texas, Inc., Defendants.</h3>
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<a href="https://scholar.google.com/scholar?scidkt=15268388345914435855&as_sdt=2&hl=en" style="color: #660099;">EP-16-CV-31-PRM.</a></center>
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<b>United States District Court, W.D. Texas, El Paso Division.</b></div>
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Signed June 6, 2016.</center>
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<a class="gsl_pagenum" href="https://scholar.google.com/scholar_case?case=11522397606063696848&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#p722" style="color: #aaaaaa; font-size: 13px; left: -55px; position: absolute; text-decoration-line: none;">722</a>H. Mark Burck, Daniel R. Dutko, Hanszen Laporte L.L.P., Houston, TX, M. Mitchell Moss, Finger & Thurmond, P.C., El Paso, TX, Priscilla Marquez, Scott Hulse, P.C., El Paso, TX, for Plaintiff.</div>
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Richard Andrew Bonner, Jose Abelardo Howard-Gonzalez, Mark N. Osborn, Shelly W. Rivas, Kemp Smith L.L.P., El Paso, TX, for Defendant.</div>
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MEMORANDUM OPINION AND ORDER DENYING DEFENDANTS' MOTIONS TO DISMISS AND TO COMPEL PLAINTIFFS TO ARBITRATION</h2>
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PHILIP R. MARTINEZ, UNITED STATES DISTRICT JUDGE.<br />
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On this day, the Court considered Defendants PLS Financial Services, Inc. and PLS Loan Store of Texas, Inc.'s "Motion to Dismiss Proceedings and to Compel Kristy Pond to Arbitration" (ECF No. 18) [hereinafter "Pond MTD"], filed on March 23, 2016; Defendants' "Motion to Dismiss and to Compel Lucinda Vine to Arbitration" (ECF No. 19) [hereinafter "Vine MTD"], filed on March 23, 2016; Plaintiffs Lucinda Vine and Kristy Pond's<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=11522397606063696848&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#[1]" name="r[1]" style="color: #660099;">[1]</a></sup> "Response <a class="gsl_pagenum" href="https://scholar.google.com/scholar_case?case=11522397606063696848&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#p723" style="color: #aaaaaa; font-size: 13px; left: -55px; position: absolute; text-decoration-line: none;">723</a><a class="gsl_pagenum2" href="https://scholar.google.com/scholar_case?case=11522397606063696848&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#p723" id="p723" style="color: #aaaaaa; font-size: 13px; text-decoration-line: none;">*723</a> and Objection to Defendants' Motions to Dismiss and Compel Plaintiffs to Arbitration" (ECF No. 25-1) [hereinafter "Response"], filed on April 22, 2016; Defendants' "Reply in Support of Motions to Dismiss and to Compel Arbitration" (ECF No. 28) [hereinafter "Reply"], filed on April 29, 2016; Plaintiffs' "Motion to Compel Discovery" (ECF No. 20), filed on April 8, 2016; and Defendants' "Response to Motion to Compel Discovery" (ECF No. 27), filed on April 28, 2016, in the above-captioned cause.<br />
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After due consideration, the Court is of the opinion that Defendants' Vine MTD and Pond MTD will be denied for the reasons that follow. The Court will also deny Plaintiffs' Motion to Compel Discovery as moot.</div>
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I. FACTUAL AND PROCEDURAL BACKGROUND</h2>
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This case arises out of a dispute concerning loans and their nonpayment.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=11522397606063696848&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#[2]" name="r[2]" style="color: #660099;">[2]</a></sup> Defendants provide short-term loans to borrowers who are required to present post-dated blank personal checks for the amount borrowed plus a finance charge. Pls.' First Am. Class Action Compl. 4, Mar. 11, 2016, ECF No. 17 [hereinafter "Complaint"]. According to Plaintiffs, Defendants inform borrowers that no deposit of the post-dated or blank personal checks will occur. <i>Id.</i> Rather, Plaintiffs allege, Defendants make assurances that they secure these post-dated or blank personal checks to verify that the borrowers indeed have bank accounts. <i>Id.</i><br />
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Despite these assurances, Plaintiffs allege that Defendants would deposit these post-dated or blank personal checks if a borrower missed a payment. <i>Id.</i> This occurred despite Defendants knowing that the accounts on which the checks were drawn had insufficient funds. <i>Id.</i> After these checks "bounced," Defendants would threaten the delinquent borrowers with criminal prosecution. <i>Id.</i></div>
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If the delinquent borrowers failed to completely repay the loan, Defendants would allegedly take these post-dated or blank personal checks to the "local district attorney's office and represent[ ] to the district attorney [that] the borrower[s] committed theft by check." <i>Id.</i><br />
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Plaintiffs Vine and Pond, on behalf of themselves and for all others similarly situated, filed the instant class action lawsuit alleging (1) malicious prosecution, (2) Texas Deceptive Trade Practices Act violations, (3) fraud, and (4) Texas Finance Code § 392.301 violations. <i>Id.</i> at 5-7.</div>
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Defendants assert that Defendant PLS Loan Store of Texas, Inc. ("Defendant PLS Loan Store")<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=11522397606063696848&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#[3]" name="r[3]" style="color: #660099;">[3]</a></sup> requires all borrowers to agree and sign a Credit Services Agreement ("Agreement"). Pond MTD 2; Vine MTD 2. Defendants provide two Agreements for the Court's review: one attached to the Pond MTD and the other attached to the Vine MTD. Pond MTD Ex. Al; Vine MTD Ex. Al. While Defendants provide an Agreement with Plaintiff Pond's signature, Defendants fail to attach an executed Agreement for Plaintiff Vine.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=11522397606063696848&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#[4]" name="r[4]" style="color: #660099;">[4]</a></sup> Mark McNall, Vice President of Operations <a class="gsl_pagenum" href="https://scholar.google.com/scholar_case?case=11522397606063696848&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#p724" style="color: #aaaaaa; font-size: 13px; left: -55px; position: absolute; text-decoration-line: none;">724</a><a class="gsl_pagenum2" href="https://scholar.google.com/scholar_case?case=11522397606063696848&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#p724" id="p724" style="color: #aaaaaa; font-size: 13px; text-decoration-line: none;">*724</a> Strategy and Retail Marketing for Defendant PLS Loan Store, avers that "all PLS [Loan Store] customers were required" to sign the Agreement. Vine MTD Ex. A. According to McNall, the Agreement "form is electronically generated when a customer seeks to do business with [Defendant] PLS [Loan Store]." <i>Id.</i> "However, executed [Agreements] are not electronically scanned and stored." <i>Id.</i> Despite a "diligent search," Defendants have not located Plaintiff Vine's signed Agreement. <i>Id.</i><br />
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Curiously, the Agreement attached to the Pond MTD differs textually from the one attached to the Vine MTD.</div>
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A. Pond Agreement</h2>
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The Pond Agreement includes an Arbitration Provision ("Pond Arbitration Provision"), which provides the following:</div>
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You acknowledge and agree that by entering this [Pond] Arbitration Provision:</blockquote>
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(a) YOU ARE GIVING UP YOUR RIGHT TO HAVE A TRIAL BY JURY TO RESOLVE ANY DISPUTE ALLEGED AGAINST [Defendant PLS Loan Store], THE LENDER AND/OR OUR/ITS RELATED THIRD PARTIES;</blockquote>
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(b) YOU ARE GIVING UP YOUR RIGHT TO HAVE A COURT, OTHER THAN SMALL CLAIMS TRIBUNAL, RESOLVE ANY DISPUTE ALLEGED AGAINST [Defendant PLS Loan Store], THE LENDER AND/OR OUR/ITS RELATED THIRD PARTIES; AND</blockquote>
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(c) YOU ARE GIVING UP YOUR RIGHT TO SERVE AS A REPRESENTATIVE... OR TO PARTICIPATE AS A MEMBER OF A CLASS ... IN ANY LAWSUIT FILED AGAINST [Defendant PLS Loan Store], THE LENDER AND/OR OUR/ITS RELATED THIRD PARTIES. YOUR DISPUTE MAY NOT BE CONSOLIDATED WITH THE DISPUTE OF ANY OTHER PERSON(S) FOR ANY PURPOSE(S).</blockquote>
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Pond MTD Ex. Al, at 3.<br />
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The Pond Arbitration Provision also defines its scope:</div>
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[T]he words "dispute" and "disputes" are given the broadest possible meaning and include, without limitation ...</blockquote>
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(b) all federal or state law claims, disputes or controversies, arising from or relating directly or indirectly to this Agreement (including the Arbitration Provision); ...</blockquote>
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(i) all claims asserted by you ... as a representative and member of a class of persons.</blockquote>
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<i>Id.</i> at 2.</div>
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B. Vine Agreement</h2>
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The Vine Agreement is similar to the Pond Agreement in certain key respects: <i>e.g.,</i> both contain similar provisions regarding the description of services, disclosure of fees as a finance charge, recovery of collection expenses, and the governing law. <i>Compare</i> Pond MTD Ex. A1 <i>with</i> Vine MTD Ex. Al. Yet, the Arbitration Provisions in each of the Agreements differ textually. Specifically, the Vine Agreement contains an Arbitration Provision ("Vine Arbitration Provision"), which states the following: "Upon the election by you, [Defendant PLS Loan Store], or Lender, any Claim shall be resolved by binding arbitration...." Vine MTD Ex. Al, at 3.<br />
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The Vine Arbitration Provision also defines its scope:</div>
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"Claim" means any dispute, claim or controversy between you and [Defendant PLS Loan Store] and/or Lender arising from or relating to:</blockquote>
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(a) The current credit services agreement, loan, [A]greement, or obligation...</blockquote>
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<a class="gsl_pagenum" href="https://scholar.google.com/scholar_case?case=11522397606063696848&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#p725" style="color: #aaaaaa; font-size: 13px; left: -55px; position: absolute; text-decoration-line: none;">725</a>(d) The actions of you, [Defendant PLS Loan Store], Lender, or third parties, including claims for money damages, penalties, or equitable relief.</blockquote>
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Vine MTD Ex. Al, at 3.</div>
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Defendants now seek to compel arbitration against both named Plaintiffs.</div>
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II. LEGAL STANDARD</h2>
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A. Diversity Case</h2>
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Because the present action is based on diversity jurisdiction, the Court must apply state substantive law. <a href="https://scholar.google.com/scholar_case?case=4671607337309792720&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Erie R.R. Co. v. Tompkins,</i> 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938)</a>. "[F]ederal courts must apply the choice of law rules in the forum state in which the court sits." <a href="https://scholar.google.com/scholar_case?case=8926057786751319194&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Am. Int'l Specialty Lines Ins. Co. v. Canal Indem. Co.,</i> 352 F.3d 254, 260 (5th Cir. 2003)</a>. The parties also agree that Texas law controls as evidenced by Plaintiffs' Texas state law claims and Defendants' reliance on the Agreement, which contains a Texas governing law clause. <i>See </i><a href="https://scholar.google.com/scholar_case?case=17704431722702403881&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Sharpe v. AmeriPlan Corp.,</i> 769 F.3d 909, 915 (5th Cir. 2014)</a> (honoring the parties' agreement that Texas law controls in an arbitration provision). Consequently, the Court will apply Texas law in the instant matter.</div>
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B. Motion to Compel Arbitration</h2>
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When considering a motion to compel arbitration under the Federal Arbitration Act ("FAA"), a court employs a two-step analysis. "First, a court must `determine whether the parties agreed to arbitrate the dispute in question.'" <a href="https://scholar.google.com/scholar_case?case=7225342590349545589&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Tittle v. Enron Corp.,</i> 463 F.3d 410, 418 (5th Cir. 2006)</a> (quoting <a href="https://scholar.google.com/scholar_case?case=389775322315489139&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Webb v. Investacorp., Inc.,</i> 89 F.3d 252, 258 (5th Cir. 1996)</a>). "Second, a court must determine `whether legal constraints external to the parties' agreement foreclosed the arbitration of those claims.'" <a href="https://scholar.google.com/scholar_case?case=2557846859875066571&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Fleetwood Enters., Inc. v. Gaskamp,</i> 280 F.3d 1069, 1073 (5th Cir. 2002)</a> (quoting <a href="https://scholar.google.com/scholar_case?case=5055691423012357826&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,</i> 473 U.S. 614, 628, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985)</a>). Because no party has argued that external legal constraints have foreclosed the arbitration of the claims at issue in this case, the Court need only conduct the first step of the analysis to resolve the parties' agreement to arbitrate.</div>
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The first step of the analysis—whether the parties agreed to arbitrate the dispute in question—consists of two distinct prongs: "(1) whether there is a valid agreement to arbitrate between the parties; and (2) whether the dispute in question falls within the scope of that arbitration agreement." <i>Id.</i> at 418-19 (quoting <a href="https://scholar.google.com/scholar_case?case=389775322315489139&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Webb,</i> 89 F.3d at 258</a>).</div>
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III. DISCUSSION</h2>
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A. Agreement to Arbitrate</h2>
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1. Valid Agreement</h2>
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The FAA "reflects a liberal federal policy favoring arbitration." <a href="https://scholar.google.com/scholar_case?case=702680658242393369&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Carey v. 24 Hour Fitness, USA, Inc.,</i> 669 F.3d 202, 205 (5th Cir. 2012)</a> (internal quotation marks and citation omitted). Still, this policy "does not apply to the determination of whether there is a valid agreement to arbitrate between the parties." <a href="https://scholar.google.com/scholar_case?case=4544828546489696148&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Morrison v. Amway Corp.,</i> 517 F.3d 248, 254 (5th Cir. 2008)</a>. Instead, "to determine whether an agreement to arbitrate is valid, courts apply ordinary state-law principles that govern the formation of contracts." <a href="https://scholar.google.com/scholar_case?case=702680658242393369&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Carey,</i>669 F.3d at 205</a> (internal quotation marks and citation omitted).</div>
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The Court, at this juncture, finds that both Plaintiffs agreed to their respective Arbitration Provisions. <i>See</i> Pond MTD Ex. A1.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=11522397606063696848&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#[5]" name="r[5]" style="color: #660099;">[5]</a></sup></div>
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<a class="gsl_pagenum" href="https://scholar.google.com/scholar_case?case=11522397606063696848&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#p726" style="color: #aaaaaa; font-size: 13px; font-weight: normal; left: -55px; position: absolute; text-decoration-line: none;">726</a>2. Scope of the Arbitration Clause</h2>
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"To determine the scope of the Arbitration [Provision] at issue in this case, this court must apply Texas rules of contract interpretation." <a href="https://scholar.google.com/scholar_case?case=7225342590349545589&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Tittle,</i> 463 F.3d at 419</a>. "[A] court construing a contract must read that contract in a manner that confers meaning to all of its terms, rendering the contract's terms consistent with one another." <a href="https://scholar.google.com/scholar_case?case=6652391532974028465&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Indem. Ins. Co. of N. Am. v. W & T Offshore, Inc.,</i> 756 F.3d 347, 351 (5th Cir. 2014)</a> (quoting <a href="https://scholar.google.com/scholar_case?case=7225342590349545589&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Tittle,</i> 463 F.3d at 419</a>) (alteration in original). "In doing so, courts should examine and consider the entire writing in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless. No single provision taken alone will be given controlling effect; rather, all the provisions must be considered with reference to the whole instrument." <i>Id.</i> at 351-52 (quoting <a href="https://scholar.google.com/scholar_case?case=7225342590349545589&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Tittle,</i> 463 F.3d at 419</a>).<br />
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"Contracting parties are free to structure their contractual undertaking and allocate risk as they see fit." <a href="https://scholar.google.com/scholar_case?case=5493896804038148820&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>El Paso Field Servs., L.P. v. MasTec N. Am. Inc.,</i> 389 S.W.3d 802, 811-12 (Tex. 2012)</a>. "The role of courts is not to protect parties from their own agreements, but to enforce contracts that parties enter into freely and voluntarily." <i>Id.</i> at 810-11.<br />
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In the Pond Agreement, Plaintiff Pond agreed that her "dispute" would include "<i>all </i>federal or state law claims, disputes or controversies, arising from or relating directly or <i>indirectly</i> to this Agreement (including the Arbitration Provision)." <i>See</i> Pond MTD Ex. Al, at 2 (emphasis added). Moreover, Plaintiff Pond agreed to arbitrate "all claims asserted by [Plaintiff Pond] ... as a representative and member of a class of persons." <i>See id.</i>Similarly, the Vine Arbitration Provision has broad language that encompasses "claims for money damages, penalties, or equitable relief." <i>See</i> Vine MTD Ex. Al, at 3.<br />
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Plaintiffs' suit arises indirectly from their alleged agreement to receive pecuniary loans. In other words, but for these contractual loans, Defendants would not have allegedly sent bounced checks to a district attorney for criminal prosecution. Thus, the scope of the Arbitration Provision encompasses Plaintiffs' "dispute" as their federal and state law claims are asserted by them as "representative[s] and member[s] of a class of persons." <i>See</i> Pond MTD Ex. Al, at 2.<br />
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Therefore, the Court finds that Plaintiffs' claims fall within the scope of their respective agreements.</div>
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B. Arbitration Waiver</h2>
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"Although parties may have an agreement to arbitrate, `[t]he right to arbitrate a dispute, like all contractual rights, is subject to waiver.'" <a href="https://scholar.google.com/scholar_case?case=11178317105542937464&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Al Rushaid v. Nat'l Oilwell Varco, Inc.,</i> 757 F.3d 416, 421 (5th Cir. 2014)</a> (quoting <a href="https://scholar.google.com/scholar_case?case=17783150183982943149&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Nicholas v. KBR, Inc.,</i> 565 F.3d 904, 907 (5th Cir. 2009)</a>) (alteration in original). A party, who is seeking arbitration, may waive its right to arbitrate when it (1) "substantially invokes the judicial process" and (2) thereby causes "detriment or prejudice" to the other party. <i>Id.</i> (quoting <a href="https://scholar.google.com/scholar_case?case=6931878422019040640&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Miller Brewing Co. v. Fort Worth Distrib. Co.,</i> 781 F.2d 494, 497 (5th Cir. 1986)</a>). Still, in light of the FAA policy favoring arbitration, "[t]here is a strong presumption against finding a waiver of arbitration." <i>Id.</i> at 421-22 (<i>quoting </i><a href="https://scholar.google.com/scholar_case?case=344091242446980960&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Republic Ins. Co. v. PAICO Receivables, LLC,</i> 383 F.3d 341, 344 (5th Cir. 2004)</a>).</div>
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<a class="gsl_pagenum" href="https://scholar.google.com/scholar_case?case=11522397606063696848&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#p727" style="color: #aaaaaa; font-size: 13px; font-weight: normal; left: -55px; position: absolute; text-decoration-line: none;">727</a>1. Substantially Invokes the Judicial Process</h2>
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"[A] party only invokes the judicial process to the extent it litigates a specific claim it subsequently wants to arbitrate." <a href="https://scholar.google.com/scholar_case?case=6305900805080878085&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Subway Equip. Leasing Corp. v. Forte,</i> 169 F.3d 324, 328 (5th Cir. 1999)</a>.<br />
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Plaintiffs assert that Defendants "substantially invoked the judicial process by filing criminal charges before seeking arbitration and therefore, waived its [sic] right to compel arbitration." Resp. 10. Plaintiffs contend that Defendants would submit "Worthless Check Affidavits" to district attorneys' offices across Texas. <i>Id.</i> at 4.</div>
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<i>a. Invoke</i></h2>
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To begin the inquiry on whether Defendants invoked the judicial process, the Court must examine what "invoking" entails. The Fifth Circuit has "use[d] the term [invoking] to describe the act of implementing or enforcing the judicial process, not the act of calling upon for support or assistance, as say, one would invoke a spirit or the elements." <a href="https://scholar.google.com/scholar_case?case=6305900805080878085&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Subway Equip. Leasing Corp.,</i> 169 F.3d at 329</a>. To invoke the judicial process, the waiving party must "engage in some overt act in court that evinces a desire to resolve the arbitrable dispute through litigation rather than arbitration." <i>Id.</i></div>
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<i>b. Criminal Law and Arbitration</i></h2>
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Courts have rarely encountered the issue present here: whether a party, who affirmatively submits documentation for the initiation of criminal charges and attendant proceedings, has invoked the judicial process and thereby waived arbitration in a subsequent civil action. However, a Texas appellate case is instructive: <a href="https://scholar.google.com/scholar_case?case=16364992834588015315&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>In re Christus Spohn Health System Corporation,</i> 231 S.W.3d 475, 481 (Tex. App.-Corpus Christi 2007, no pet.)</a>.<br />
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<i>Christus Spohn</i> was a premises liability case arising out of a murder in a hospital parking garage. Debra Slough worked as a nurse for a hospital. <a href="https://scholar.google.com/scholar_case?case=16364992834588015315&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>In re Christus Spohn Health Sys. Corp.,</i> 231 S.W.3d at 478</a>. Tragically, Jesus Alvarez abducted Slough from the hospital parking garage and murdered her. <i>Id.</i> Slough's husband filed a civil suit against the hospital, which temporally overlapped with the criminal case against Alvarez. <i>Id.</i> The hospital defendant did not ask for arbitration until the lawsuit had been pending for fourteen months, during which time "the parties [had] substantially litigated the case" by engaging in voluminous discovery. <i>Id.</i> at 480.<br />
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As part of its strategy in the civil case, the hospital sought an order of contempt against the husband's counsel in the criminal case. <i>Id.</i> at 481. Specifically, the hospital pursued a contempt proceeding because it believed that the husband's counsel was seeking to obtain Alvarez's sworn statement. <i>Id.</i> The hospital aimed to prevent the husband's counsel from using Alvarez's sworn statement against the hospital in the civil trial. <i>Id.</i><br />
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The Texas court of appeals noted that while it "ordinarily would not consider actions in a separate cause as indicative of waiver," the hospital's actions in the criminal case were "part of its strategic plan of defense in the underlying matter that would be inconsistent with a right to arbitrate." <i>Id.</i> Therefore, the Texas appellate court concluded that a party can invoke the judicial process by strategically filing a contempt motion in a related criminal matter. <i>See id.</i><br />
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While instructive, this case is neither binding upon the Court nor does it compel a certain result.</div>
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<i>c. Application</i></h2>
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Although the Court is cognizant that "[t]here is a strong presumption against finding a waiver of arbitration," <i>see Al </i><a href="https://scholar.google.com/scholar_case?case=11178317105542937464&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Rushaid,</i> 757 F.3d at 421-22,</a> Defendants in the instant action have invoked the judicial process to litigate "a specific claim [they] subsequently want[ ] to arbitrate." <a class="gsl_pagenum" href="https://scholar.google.com/scholar_case?case=11522397606063696848&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#p728" style="color: #aaaaaa; font-size: 13px; left: -55px; position: absolute; text-decoration-line: none;">728</a><i>See </i><a href="https://scholar.google.com/scholar_case?case=6305900805080878085&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Subway Equip. Leasing Corp.,</i> 169 F.3d at 328</a>.<br />
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Specifically, Defendants have initiated a process that invites Texas district attorneys' offices to address issues that are at stake in the instant action. For instance, Plaintiffs' malicious prosecution claim contains the element of a plaintiff's innocence.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=11522397606063696848&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#[6]" name="r[6]" style="color: #660099;">[6]</a></sup> Since Plaintiffs would likely contest the criminal charges of theft by check, the issue of their innocence would necessarily have to be litigated in this prior-filed criminal proceeding. To be sure, Plaintiffs' other three current civil claims—Texas Deceptive Trade Practices Act violations, fraud, and Texas Finance Code § 392.301 violations—all would involve Plaintiffs raising the defense in their criminal actions that Defendants misled or threatened Plaintiffs in order to obtain the amount owed. Again, this would entail claims that necessarily have to be litigated in a previously filed criminal proceeding.<br />
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The Fifth Circuit precedent does not require that a defendant litigate <i>identical</i> claims to invoke the judicial process, but rather "a <i>specific</i> claim it subsequently wants to arbitrate." <i>See </i><a href="https://scholar.google.com/scholar_case?case=6305900805080878085&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Subway Equip. Leasing Corp.,</i> 169 F.3d at 328</a> (emphasis added). The specific claim in the instant action concerns the issue of non-payment from which all Plaintiffs' causes of actions derive.<br />
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Similar to the hospital in <i>Christus Spohn,</i> Defendants have elected to accuse Plaintiffs of theft by check and initiate criminal proceedings as "part of [their] strategic plan of defense in the underlying matter that would be inconsistent with a right to arbitrate." <i>See </i><a href="https://scholar.google.com/scholar_case?case=16364992834588015315&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>In re Christus Spohn Health Sys. Corp.,</i> 231 S.W.3d at 481</a>. If what Plaintiffs allege is true, Defendants conduct is merely a pretext to obtain a favorable ruling, which Defendants can then use in either defending or prosecuting a lawsuit brought by or against Plaintiffs in an arbitration proceeding. Defendants allegedly engaged in the overt act of representing to Texas district attorneys that Plaintiffs had committed theft by check in criminal court proceedings, which "evinces a desire to resolve the arbitrable dispute through litigation rather than arbitration." <i>See </i><a href="https://scholar.google.com/scholar_case?case=6305900805080878085&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Subway Equip. Leasing Corp.,</i> 169 F.3d at 329</a>.<br />
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While Defendants, unlike the hospital in <i>Christus Spohn,</i> have not conducted extensive discovery, the Court finds that Defendants have sought to gain a significant benefit by engaging the criminal justice system. To be sure, Defendants are not afforded a "second bite at the apple" through arbitration. <i>Cf. </i><a href="https://scholar.google.com/scholar_case?case=5920656780209451381&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Cargill Ferrous Int'l v. SEA PHX. MV,</i> 325 F.3d 695, 701 (5th Cir. 2003)</a> ("[I]t is clear [the defendant] is not gaming the system by seeking a win at trial, and in the case of a loss, anticipating a second bite at the apple through arbitration.").</div>
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The Court concludes that Defendants have invoked the judicial process by deploying the criminal justice system to litigate theft by check.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=11522397606063696848&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#[7]" name="r[7]" style="color: #660099;">[7]</a></sup></div>
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<a class="gsl_pagenum" href="https://scholar.google.com/scholar_case?case=11522397606063696848&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#p729" style="color: #aaaaaa; font-size: 13px; font-weight: normal; left: -55px; position: absolute; text-decoration-line: none;">729</a>2. Prejudice to Plaintiffs</h2>
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"Prejudice in the context of arbitration waiver refers to delay, expense, and damage to a party's legal position." <a href="https://scholar.google.com/scholar_case?case=17783150183982943149&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Nicholas,</i> 565 F.3d at 910</a>. One way a defendant can damage a plaintiff's legal position is by issue preclusion, which can be applied in a civil case after a prior criminal conviction. <i>See </i><a href="https://scholar.google.com/scholar_case?case=1877029133660095970&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Wolfson v. Baker,</i> 623 F.2d 1074, 1077 (5th Cir. 1980)</a> ("[T]he general doctrine of [issue preclusion], which bars relitigation of an issue actually and necessarily decided in a prior action is as applicable to the decisions of criminal courts as to those of civil jurisdiction.") (internal citations and quotation marks omitted). "Because of the existence of a higher standard of proof and greater procedural protection in a criminal prosecution, a conviction is conclusive as to an issue arising against the criminal defendant in a subsequent civil action." <a href="https://scholar.google.com/scholar_case?case=3025182686086247065&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>United States v. Thomas,</i>709 F.2d 968, 972 (5th Cir. 1983)</a> (citing <a href="https://scholar.google.com/scholar_case?case=14231733543979466752&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>In re Raiford,</i> 695 F.2d 521, 523 (11th Cir. 1983)</a>).<br />
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Here, Plaintiffs' legal position would be compromised in a civil action if Plaintiffs were convicted of theft by check. <i>See </i><a href="https://scholar.google.com/scholar_case?case=17783150183982943149&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Nicholas,</i> 565 F.3d at 910</a>. This is true because Defendants may seek to use these criminal convictions in a successive civil action as either a sword in prosecuting their civil claims initiated by Plaintiffs or as a shield to defend themselves in a civil matter against Plaintiffs. <i>See </i><a href="https://scholar.google.com/scholar_case?case=1877029133660095970&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Wolfson,</i> 623 F.2d at 1077</a>.<br />
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In addition, Plaintiffs would necessarily be required to bear the expense of defending the criminal allegations. <i>See </i><a href="https://scholar.google.com/scholar_case?case=17783150183982943149&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Nicholas,</i> 565 F.3d at 910</a>. Therefore, the Court also concludes that Defendants' invocation of the judicial process has prejudiced Plaintiffs in this respect.<br />
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Because Defendants have invoked the judicial process and its use will prejudice Plaintiffs, the Court finds that Defendants have waived their right to invoke the Agreement's Arbitration Provision.</div>
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C. Motion to Compel Discovery</h2>
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Plaintiffs seek to obtain pre-arbitration discovery from Defendants in an effort to challenge the arbitrability of the instant action. <i>See</i> Pls.' Mot. to Compel Disc. 2. Given that the Court has found an arbitration waiver, the Court will deny Plaintiffs' Motion to Compel Discovery as moot.</div>
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IV. CONCLUSION</h2>
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Accordingly, IT IS ORDERED that Defendants PLS Financial Services, Inc. and PLS Loan Store of Texas, Inc.'s "Motion to Dismiss Proceedings and to Compel Kristy Pond to Arbitration" (ECF No. 18) is DENIED.<br />
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IT IS FURTHER ORDERED that Defendants PLS Financial Services, Inc. and PLS Loan Store of Texas, Inc.'s "Motion to Dismiss and to Compel Lucinda Vine to Arbitration" (ECF No. 19) is DENIED.</div>
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IT IS FURTHER ORDERED that Plaintiffs' "Motion to Compel Discovery" (ECF No. 20) is DENIED as MOOT.</div>
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<span style="font-size: x-small;"><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=11522397606063696848&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#r[1]" name="[1]" style="color: #660099;">[1]</a> Plaintiffs bring this suit on behalf of themselves and for all others similarly situated.</span></div>
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<span style="font-size: x-small;"><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=11522397606063696848&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#r[2]" name="[2]" style="color: #660099;">[2]</a> In considering Defendants' Motions, the Court accepts Plaintiffs' facts as true. <i>See </i><a href="https://scholar.google.com/scholar_case?case=7265302966203116984&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Suburban Leisure Ctr., Inc. v. AMF Bowling Prods., Inc.,</i> 468 F.3d 523, 525 (8th Cir. 2006)</a> (stating that a motion to compel arbitration is generally treated as a motion to dismiss for failure to state a claim upon which relief can be granted); <a href="https://scholar.google.com/scholar_case?case=3368518643548148620&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Palcko v. Airborne Express, Inc.,</i> 372 F.3d 588, 597 (3d Cir. 2004)</a> (noting the same).</span></div>
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<span style="font-size: x-small;"><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=11522397606063696848&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#r[3]" name="[3]" style="color: #660099;">[3]</a> Defendants do not describe the relationship between Defendants PLS Financial Services, Inc. and PLS Loan Store of Texas, Inc.</span></div>
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<span style="font-size: x-small;"><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=11522397606063696848&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#r[4]" name="[4]" style="color: #660099;">[4]</a> Defendants attach a blank Agreement to the Vine MTD. <i>See</i> Vine MTD Ex. Al.</span></div>
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<span style="font-size: x-small;"><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=11522397606063696848&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#r[5]" name="[5]" style="color: #660099;">[5]</a> The Court need not rule on the issue of whether Plaintiff Vine as a purported nonsignatory, and those similarly situated, signed the Arbitration Provision because the Court finds that Defendants waived their right to arbitrate. <i>See infra</i> Part III.B. Indeed, Defendants contend that Plaintiff Vine "must have signed and agreed" to the Agreement. <i>See</i> Vine MTD 1. Therefore, the Court will assume, <i>arguendo,</i> that Plaintiff Vine did sign the Agreement. <i>See infra</i> Part III.B.</span></div>
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<span style="font-size: x-small;"><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=11522397606063696848&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#r[6]" name="[6]" style="color: #660099;">[6]</a> "To prevail on a malicious-prosecution claim, a plaintiff must establish the following elements: (1) the commencement of a criminal prosecution against the plaintiff; (2) causation (initiation or procurement) of the action by the defendant; (3) termination of the prosecution in the plaintiff's favor; (4) the plaintiff's innocence; (5) the absence of probable cause for the proceedings; (6) malice in filing the charge; and (7) damage to the plaintiff." <a href="https://scholar.google.com/scholar_case?case=1104598693345611884&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Davis v. Prosperity Bank,</i> 383 S.W.3d 795, 802 (Tex. App.-Houston [14th Dist.] 2012, no pet.)</a> (citing <a href="https://scholar.google.com/scholar_case?case=11101786102859353708&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44" style="color: #660099;"><i>Richey v. Brookshire Grocery Co.,</i> 952 S.W.2d 515, 517 (Tex. 1997)</a>).</span></div>
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<span style="font-size: x-small;"><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=11522397606063696848&q=Vine+v.+PLS+Financial+Services,+Inc&hl=en&as_sdt=3,44#r[7]" name="[7]" style="color: #660099; text-decoration: underline;">[7]</a> In its Reply, Defendants argue that the "mere filing of a criminal complaint does not establish waiver of an arbitration provision." Reply 4. To support this proposition, Defendants cite a laundry-list of various published and unpublished federal district court cases and a New Jersey appellate case. <i>See id.</i> Yet, Defendants fail to provide any analysis or justification to convince the Court of the applicability of these cases to the instant action. Above all, none of the cases are binding on the Court nor do they compel a different result in this case.</span></div>
<br />MOTPhttp://www.blogger.com/profile/15883011307129083993noreply@blogger.com0tag:blogger.com,1999:blog-9105536336033560224.post-91391901029146041212019-05-18T09:27:00.000-07:002019-05-18T15:21:04.734-07:00From Arthur Andersen to Rohrmoos Venture: New leading case for attorney fee awards in Texas <div style="text-align: center;">
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<b><span style="color: red;">THE LODESTAR COMES TO ALL LONE STAR STATE COURTS </span></b></div>
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Last month the Texas Supreme Court handed down an
important decision on attorney’s fees in a case involving a dispute over a commercial lease. <i><a href="http://search.txcourts.gov/SearchMedia.aspx?MediaVersionID=6cfadf8c-2edf-4746-bc05-c274aa0bc620&coa=cossup&DT=OPINION&MediaID=c2401ca4-f452-4155-9cd7-2ebaed50d8f0" target="_blank">Rohrmoos Venture v. UTSW DVA Healthcare, LLP</a></i>, No. <a href="http://search.txcourts.gov/Case.aspx?cn=16-0006&coa=cossup" target="_blank">16-0006</a> (Tex. Apr. 26, 2019).<br />
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While the resolution of the case pivots on issues of contract law in the leasing context, the lengthy portion of the opinion addressing the matter of attorneys fees <span style="color: blue;">[see cut & pasted below]</span> will have much broader impact across a wide array of practice areas. This is because the Texas Supreme Court blessed and adopted the
Lodestar approach in reversing an award of more than $800,000 in attorney’s in the case for insufficient
supporting evidence in the record. <o:p></o:p></div>
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The Lodestar approach has long been in use in the federal
courts when fees may be awarded under a fee-shifting statute (such as the civil rights act), but was limited in Texas state court mostly to employment
discrimination cases and cases in which an attorney chose to present Lodestar-type
evidence in support of a claim under a fee-shifting statute.<br />
<br />
The essence of the Lodestar method for valuing attorney work in litigation consists of a simple formula:
reasonable hourly rate of the attorney that performed the work x reasonable number of hours, based on time-keeping records showing who did what. The trial
court judge can then adjust the product of this calculation based on factors
not already reflected in the hourly rate and the number of hours.</div>
<div class="MsoNormal">
<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It remains to be seen it this new SCOTX precedent will have any
impact on debt collection litigation against consumers. Some creditors do not seek attorney’s fees
at all while others claim and regularly obtain egregious amounts of fees in
cases which see little attorney involvement because they are handled in litigation-mill
fashion. In default judgment cases a live attorney appearance may not even be
necessary. And attorney fee affidavits are often very rudimentary and sketchy on facts. Most do not satisfy the Lodestar criteria. Many, at best, pay lip service to the <i>Arthur Andersen </i>fee factors, or at least some of them. When such affidavits do contain information on what the attorney claims to have done, and how many hours were expended on litigation tasks, it often shows how inflated the attested-to fee amounts are.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgG946881p0hHgSdpBj92QYymI3boTPbekDo4V8_GMeQnVLlWy2sggtN2afckgnSEsK3nA-ENag1xInTmmB-4ubSgTZxzVtwJT8JNL1jiBlXx56ItFE0uhHMZbWGeIzKMubj745UbuHxtu2/s1600/Regent-fee-aff-in-NCSLT-case.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="938" data-original-width="1587" height="236" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgG946881p0hHgSdpBj92QYymI3boTPbekDo4V8_GMeQnVLlWy2sggtN2afckgnSEsK3nA-ENag1xInTmmB-4ubSgTZxzVtwJT8JNL1jiBlXx56ItFE0uhHMZbWGeIzKMubj745UbuHxtu2/s400/Regent-fee-aff-in-NCSLT-case.JPG" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Example of an egregious fee affidavit with Lodestar-type testimony: <br />
3 hours to "draft" a standard collection case petition;<br />
20+ hours to obtain a default judgment. </td></tr>
</tbody></table>
<br />
Collection
attorneys could rarely swear in good faith about many hours of work having been expended in
individual cases because garden-variety collection cases are handled by litigation support staffers using document-production-software. and standard operating procedures. They are run-of-the-mill. Relative to the entire caseload of a particular collection law firm, few cases go to trial and if they do, such trials typically take no more than a few minutes. Some collection attorneys claim thousands of dollars in fees anyhow, even in cases that do not go to trial. <o:p></o:p></div>
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</div>
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The Dallas Court of Appeals recently reversed a default judgment
(albeit for unrelated reasons) in a case in which a bank had claimed an
attorney fee of $3,000 for obtaining the default judgment on an alleged credit
card debt, $1,500 for defending a post-judgment motion, plus an additional $10,000
in additional contingent fees for defending the default judgment on appeal. <i>See
<a href="https://scholar.google.com/scholar_case?case=4416493720307867064&q=05-18-00168-CV&hl=en&as_sdt=4,44" target="_blank">Gattenby v. TIB - The Independent Bankersbank</a></i>, No. <a href="http://www.search.txcourts.gov/Case.aspx?cn=05-18-00168-CV&coa=coa05" target="_blank">05-18-00168-CV</a> (Tex.App. -
Dallas Feb. 6, 2019, no. pet.). But many default judgments in collection cases brought on consumer debt in Texas are never challenged,
and many old judgments containing hefty attorney’s fees re-surface years later when
the creditor (or its assignee) files an application for a writ of garnishment to freeze
and seize a judgment-debtor’s bank account.</div>
<div class="MsoNormal">
<o:p></o:p></div>
<div class="MsoNormal">
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj-wP4c1Yn3hJb3qwJocHlsSm7JqUPkEKowZ4s8-E7J3aw-0p2JsPsbeM8D9vsNCeA0D5DaXEl7sPlmMkjND6iobS_Jw92sdW-HsYHoHwHsQeKCKpNOYUYS3JQE4zIEiWEmZn1UyeFGWmcM/s1600/05-18-00168-CV+Warren+Gattenby+v+TIB+-+Default+Judgment+%2528reversed%2529.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img alt="Gattenby Default Judgment on credit card debt claim with high attorney's fees " border="0" data-original-height="944" data-original-width="917" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj-wP4c1Yn3hJb3qwJocHlsSm7JqUPkEKowZ4s8-E7J3aw-0p2JsPsbeM8D9vsNCeA0D5DaXEl7sPlmMkjND6iobS_Jw92sdW-HsYHoHwHsQeKCKpNOYUYS3JQE4zIEiWEmZn1UyeFGWmcM/s400/05-18-00168-CV+Warren+Gattenby+v+TIB+-+Default+Judgment+%2528reversed%2529.JPG" title="Gattenby Default Judgment on credit card debt claim with high attorney's fees " width="387" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Gattenby Default Judgment </td></tr>
</tbody></table>
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<h3 id="gsl_case_name" style="border: 0px; margin: 1em 0px; padding: 0px;">
ROHRMOOS VENTURE, ERIC LANGFORD, DAN BASSO, AND TOBIN GROVE, Petitioners,<br />v.<br />UTSW DVA HEALTHCARE, LLP, Respondent.</h3>
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<a href="https://scholar.google.com/scholar?scidkt=13096812598874327105&as_sdt=2&hl=en" style="color: #660099;">No. 16-0006.</a></center>
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<b>Supreme Court of Texas.</b></div>
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Argued October 31, 2018.</center>
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Opinion delivered: April 26, 2019.</center>
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On Petition for Review from the Court of Appeals for the Fifth District of Texas.</div>
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JUSTICE PAUL W. GREEN delivered the opinion of the Court.</div>
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In this case, we must decide whether a tenant can terminate a commercial lease contract for the landlord's prior material breach. We hold that under <a href="https://scholar.google.com/scholar_case?case=16935173706944978409&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Davidow v. Inwood North Professional Group-Phase I,</i> 747 S.W.2d 373 (Tex. 1988),</a>termination is a justified remedy when the landlord breaches the commercial lease. We also must consider whether the evidence offered to prove attorney's fees is sufficient under our precedent for fee-shifting awards. We hold that it is not. When a fee claimant seeks to recover attorney's fees from an opposing party, it must put on evidence of reasonable hours worked multiplied by a reasonable hourly rate, yielding a base figure that can be adjusted by considerations not already accounted for in either the hours worked or the rate. Because the record does not contain this evidence, we affirm the court of appeals' judgment in part, reverse as to the award of attorney's fees, and remand the case to the trial court for further proceedings.</div>
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<h2 style="background-color: white; border: 0px; color: #222222; font-family: Arial, sans-serif; margin: 1em 0px; padding: 0px; position: relative;">
I. Background</h2>
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Landlord Rohrmoos Venture executed a commercial lease with tenant UT Southwestern DVA Healthcare, LLP (UTSW), for a commercial building in Dallas, Texas.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=12251745114633409184&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019#[1]" name="r[1]" style="color: #660099;">[1]</a></sup> UTSW used the commercial building for a dialysis clinic. At some point UTSW began experiencing water penetration in the building's concrete foundation and installed ceramic floor tiles because of the moisture problems.</div>
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Around September 2007, state health inspectors evaluated UTSW's dialysis clinic and criticized the facility because some ceramic floor tiles had come loose from the concrete slab and moisture could be seen under the tiles. UTSW notified Rohrmoos of the inspection results and over the following months, the two exchanged extensive communication in an attempt to diagnose and fix the issue. Neither party accepted responsibility. Multiple engineers and contractors were called in, but the issue persisted into 2009 and then began to worsen as the building apparently suffered significant water penetration.</div>
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Because UTSW viewed the commercial building as unsuitable for its intended commercial purpose, UTSW terminated its lease early, vacated the premises, and relocated to Irving, Texas, while still allegedly owing approximately $250,000 in unpaid rent. UTSW then sued Rohrmoos and the joint-venturers behind it for breach of contract and breach of the implied warranty of suitability. UTSW also sought declaratory judgment that: (1) a casualty occurred in accordance with the lease, (2) Rohrmoos failed to remedy the casualty, and (3) UTSW had the right to terminate the lease. Rohrmoos answered with several affirmative defenses, including waiver and prior material breach. Rohrmoos also counterclaimed for negligence and breach of contract. UTSW asserted its own affirmative defenses to Rohrmoos's counterclaims.</div>
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The case was submitted to a jury. The jury found that UTSW and Rohrmoos both failed to comply with the lease, that Rohrmoos failed to comply first, and that Rohrmoos breached the implied warranty of suitability. Although UTSW initially sought money damages, it did not submit that claim to the jury. Accordingly, no money damages were awarded to UTSW.</div>
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Regarding attorney's fees, the parties' lease agreement provided for a fee-shifting arrangement whereby "the prevailing party shall be entitled to an award for its reasonable attorneys' fees" from the non-prevailing party "[i]n any action to enforce the terms of [the] Lease." In an attempt to prove the reasonableness and necessity of the requested attorney's fees at trial, UTSW's attorney, Wade Howard, testified that he had twenty years of litigation experience, the standard rate he charges is $430 per hour, he has handled cases similar in nature to this one before, and a reasonable and necessary number of hours to spend on this case would be around 750 to 1,000. Those hours multiplied by his standard hourly rate equals between $322,500 and $400,000, so he testified that a reasonable and necessary fee would be between $300,000 and $400,000. But then Howard went on to state, "This case, for whatever reason, has not been worked up in a reasonable fashion. . . . But because of that, the fees in this case are much closer — my fees are much closer to 800 — over $800,000." He gave some examples of why the cost of this litigation was so high—searching through "millions" of emails and reviewing "hundreds of thousands" of documents during discovery, over forty depositions taken, and a forty-page motion for summary judgment. Howard did not explain how much time was spent on each of those tasks, however, and it was clear that not all the tasks he performed were included in his testimony. Rather, he stated that the factors relevant to his attorney's fees were (1) the amount in controversy, (2) the complexity of the case, and (3) his knowledge and experience—three of the eight factors set out in <a href="https://scholar.google.com/scholar_case?case=1751498717150008353&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Arthur Andersen & Co. v. Perry Equipment Corp.,</i> 945 S.W.2d 812, 818 (Tex. 1997)</a>. The jury determined reasonable attorney's fees for both UTSW and Rohrmoos at $800,000 for representation in the trial court, $150,000 in the court of appeals, and $75,000 for representation in this Court.</div>
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The trial court entered final judgment against Rohrmoos, stating:</div>
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1. [Rohrmoos] materially breached the lease agreement first.</blockquote>
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2. [Rohrmoos] breached the implied warranty of suitability.</blockquote>
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3. Because [Rohrmoos] materially breached the lease agreement first and breached the implied warranty of suitability, UTSW had the right to terminate the lease agreement.</blockquote>
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4. Rohrmoos Venture takes nothing on all of its claims against UTSW and Counter-Defendants . . . .</blockquote>
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The trial court awarded UTSW attorney's fees in the amount determined by the jury—totaling $1,025,000 with the conditional appellate awards. Rohrmoos moved to reform the judgment or, alternatively, for a new trial. The trial court denied the motion.</div>
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Because the trial court's judgment authorized UTSW to <i>terminate</i> the commercial lease, Rohrmoos, on appeal, attacked the jury's finding that it breached the implied warranty of suitability established under <i>Davidow. See </i><a href="https://scholar.google.com/scholar_case?case=16935173706944978409&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Davidow,</i> 747 S.W.2d at 377</a> (holding that "there is an implied warranty of suitability by the landlord in a commercial lease that the premises are suitable for their intended commercial purpose"). Rohrmoos reasoned that unless <i>Davidow</i> is waived under the lease or the lease contains a provision that supersedes <i>Davidow</i>'s implied warranty of suitability, a tenant can terminate a commercial lease only by proving a breach of the implied warranty of suitability. Otherwise, posited Rohrmoos, why would a commercial tenant go through the rigors of proving a <i>Davidow</i> breach if instead it could obtain the same remedy—termination—by merely convincing a jury that the landlord had materially breached the lease? Rohrmoos therefore devoted most of its briefing to challenging the jury's finding that it breached <i>Davidow</i>'s implied warranty of suitability. Rohrmoos did not challenge the jury's finding that it materially breached the lease.</div>
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The court of appeals initially missed Rohrmoos's primary argument under <i>Davidow,</i> largely because Rohrmoos did not brief the <i>Davidow</i> issue fully. On this point, the court of appeals held:</div>
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All of [Rohrmoos's <i>Davidow</i> arguments] are irrelevant unless Rohrmoos also defeats the answers to questions one through three [of the jury charge], which support [UTSW]'s prior material breach of contract defense to Rohrmoos's counterclaim. But, as discussed later, Rohrmoos does not properly challenge the sufficiency of the evidence to support the jury's breach of contract findings. And unchallenged jury findings are binding on this court.</blockquote>
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559 S.W.3d 155, 160 (Tex. App.-Dallas 2015, pet. granted) (mem. op.) (footnote omitted) (citation omitted).</div>
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Rohrmoos filed a motion for reconsideration, asserting that the court of appeals overlooked Rohrmoos's primary argument under <i>Davidow</i> that a material breach of contract does not support the termination of a commercial lease. The court of appeals withdrew its opinion, vacated its judgment, and published a new opinion with the following language:</div>
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Rohrmoos's motion for reconsideration improperly now argues that we should ignore the answers to Questions One through Three [of the jury charge] because the right to terminate a commercial lease for failure to make repairs exists only with respect to a breach of the implied warranty of suitability that the Supreme Court established in <a href="https://scholar.google.com/scholar_case?case=16935173706944978409&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Davidow v. Inwood North Professional Group-Phase I,</i> 747 S.W.2d 373, 376-77 (Tex. 1988)</a> and does not exist for a prior material breach of an express duty [to] repair contained in the lease. But Rohrmoos did not assert that objection to Questions One through Three in the trial court, or otherwise preserve the point in the trial court. <i>See</i> TEX. R. CIV. P. 274 ("A party objecting to a charge must point out distinctly the matter to which he objects and the grounds of his objection.").</blockquote>
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<i>Id.</i> at 163. The court of appeals decided Rohrmoos's remaining points of error against Rohrmoos and affirmed the trial court's judgment. <i>See id.</i> at 160-64, 169.</div>
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Regarding the $1,025,000 in attorney's fees, Rohrmoos challenged the award in the court of appeals on two grounds: (1) UTSW was not a "prevailing party" under the lease and therefore was not entitled to recover attorney's fees, and (2) the evidence was insufficient to support the fee award.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=12251745114633409184&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019#[2]" name="r[2]" style="color: #660099;">[2]</a></sup> <i>Id.</i> at 164-66. The court of appeals disagreed with Rohrmoos on both counts, holding that UTSW was a "prevailing party" under the lease, and that <a href="https://scholar.google.com/scholar_case?case=5556380148629311996&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>El Apple I, Ltd. v. Olivas,</i> 370 S.W.3d 757 (Tex. 2012),</a> and its progeny, which use the "lodestar method" for calculating attorney's fees, do not apply in this case. 559 S.W.3d at 165-68. The court of appeals further held that billing records are not required to prove attorney's fees, and testimony about the attorney's experience, the total amount of fees, and the reasonableness of the fees complied with <i>Arthur Andersen</i> and supported the fee award. <i>Id.</i> at 167-68. Rohrmoos petitioned this Court for review, and we granted the petition. 61 Tex. Sup. Ct. J. 1505 (June 22, 2018).</div>
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II. Davidow `s Implied Warranty of Suitability</h2>
[...]<br />
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IV. Attorney's Fees</h2>
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In Texas, as in the federal courts, each party generally must pay its own way in attorney's fees. <i>See </i><a href="https://scholar.google.com/scholar_case?case=14594284913231871642&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Perdue v. Kenny A. ex rel. Winn,</i> 559 U.S. 542, 550 (2010)</a>("The general rule in our legal system is that each party must pay its own attorney's fees and expenses."); <a href="https://scholar.google.com/scholar_case?case=15173305528652236159&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Ashford Partners, Ltd. v. ECO Res., Inc.,</i> 401 S.W.3d 35, 41 (Tex. 2012)</a> ("As a general rule, litigants in Texas are responsible for their own attorney's fees and expenses in litigation."). But there are certain circumstances in which the prevailing party can recover fees from the opposing party. <i>See </i><a href="https://scholar.google.com/scholar_case?case=12375315779177033661&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Baker Botts LLP v. ASARCO LLC,</i> 135 S. Ct. 2158, 2164 (2015)</a> ("Our basic point of reference when considering the award of attorney's fees is the bedrock principle known as the American Rule: Each litigant pays his own attorney's fees, win or lose, unless a statute or contract provides otherwise." (quoting <a href="https://scholar.google.com/scholar_case?case=13596907832122885396&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Hardt v. Reliance Standard Life Ins. Co.,</i> 560 U.S. 242, 252-53 (2010)</a>)); <a href="https://scholar.google.com/scholar_case?case=6228523148686193851&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>In re Nat'l Lloyds Ins. Co.,</i> 532 S.W.3d 794, 809 (Tex. 2017)</a> (orig. proceeding) ("Texas follows the American rule on attorney's fees, which provides that, generally, `a party may not recover attorney's fees unless authorized by statute or contract.'" (quoting <a href="https://scholar.google.com/scholar_case?case=5577571589296316264&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Wheelabrator Air Pollution Control, Inc. v. City of San Antonio,</i>489 S.W.3d 448, 453 n.4 (Tex. 2016)</a>)). When fee-shifting is authorized, whether by statute or contract, the party seeking a fee award must prove the reasonableness and necessity of the requested attorney's fees. <i>See, e.g., </i><a href="https://scholar.google.com/scholar_case?case=10343041009404639405&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Kinsel v. Lindsey,</i> 526 S.W.3d 411, 427 (Tex. 2017)</a> ("The party seeking recovery bears the burden of proof to support the award."); <a href="https://scholar.google.com/scholar_case?case=6228523148686193851&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Nat'l Lloyds,</i> 532 S.W.3d at 809</a> ("When fee-shifting is authorized, the party seeking to recover those fees bears the burden of establishing the fees are reasonable and necessary." (citing <a href="https://scholar.google.com/scholar_case?case=593844185078297496&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>In re Bent,</i> 487 S.W.3d 170, 184 (Tex. 2016)</a> (orig. proceeding); <a href="https://scholar.google.com/scholar_case?case=7289189175819495928&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Stewart Title Guar. Co. v. Sterling,</i>822 S.W.2d 1, 10 (Tex. 1991)</a>)).</div>
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With that in mind, we consider the two arguments Rohrmoos raises against the $1,025,000 award of attorney's fees. First, Rohrmoos argues that UTSW is not a "prevailing party" under this Court's precedent and is therefore not entitled to attorney's fees. Second, even if UTSW could be considered a prevailing party, Rohrmoos contends there was legally insufficient evidence to support UTSW's award of attorney's fees. We address each in turn.</div>
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A. Prevailing Party</h2>
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The parties' contract provided that "[i]n any action to enforce the terms of this Lease, the prevailing party shall be entitled to an award for its reasonable attorneys' fees." The lease did not further define the term "prevailing party." Rohrmoos cites our decision in <a href="https://scholar.google.com/scholar_case?case=15549225697323793606&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Intercontinental Group Partnership v. KB Home Lone Star LP,</i> 295 S.W.3d 650 (Tex. 2009),</a> to assert that courts should apply section 38.001 of the Texas Civil Practice and Remedies Code when a contract leaves the term "prevailing party" undefined. <i>See id.</i> at 653 (analyzing the applicability of Chapter 38 to a contract that did not define the term "prevailing party"); <i>see also</i> TEX. CIV. PRAC. & REM. CODE § 38.001(8) ("A person may recover reasonable attorney's fees from an individual or corporation, in addition to the amount of a valid claim and costs, if the claim is for . . . an oral or written contract."). We have held that "[t]o recover attorney's fees under section 38.001, a party must (1) prevail on a cause of action for which attorney's fees are recoverable, and (2) recover damages." <a href="https://scholar.google.com/scholar_case?case=8994625690149538788&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Green Int'l, Inc. v. Solis,</i> 951 S.W.2d 384, 390 (Tex. 1997)</a>. But here, no damages were sought or awarded under the jury charge.</div>
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Although instructive, Chapter 38 and <i>Green International</i> are not controlling in this case. "Parties are free to contract for a fee-recovery standard either looser or stricter than Chapter 38's." <a href="https://scholar.google.com/scholar_case?case=15549225697323793606&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>KB Home,</i> 295 S.W.3d at 653</a>. The commercial lease here plainly states that "[i]n any action to enforce the terms of this Lease, the prevailing party shall be entitled to an award for its reasonable attorneys' fees." Nothing in that contract provision requires that a party receive any damages, as we have held is required under Chapter 38. <i>See </i><a href="https://scholar.google.com/scholar_case?case=8994625690149538788&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Green Int'l,</i> 951 S.W.2d at 390</a>. The operative event under the contract is that a party prevail "[i]n any action to enforce the terms of [the] Lease." That is sufficiently different and less stringent than Chapter 38's standards, rendering section 38.001 inapplicable. The question remains, however, whether UTSW is a prevailing party under the contract when it did not seek or obtain monetary damages.</div>
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In <i>KB Home,</i> we considered whether the plaintiff prevailed for purposes of attorney's fees when the jury found that the defendant violated the contract but awarded no money damages to the plaintiff. <a href="https://scholar.google.com/scholar_case?case=15549225697323793606&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;">295 S.W.3d at 652</a>. Like the commercial lease in this case, the contract in <i>KB Home</i> did not define "prevailing party." <i>Id.</i> We held, after looking to the plain meaning of the term "prevailing party," that the plaintiff did not prevail for purposes of attorney's fees because to prevail requires a plaintiff to "prove compensable injury and secure an enforceable judgment in the form of damages or equitable relief." <i>Id.</i> The plaintiff recovered no damages, secured no declaratory or injunctive relief, obtained no consent decree or settlement in its favor, and received nothing of value of any kind. <i>Id.</i> at 655. No misconduct was deterred or punished, nor did we "perceive any manner in which the outcome materially altered the legal relationship between" the plaintiff and defendant. <i>Id.</i> (citing <a href="https://scholar.google.com/scholar_case?case=4029288770020466344&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Farrar v. Hobby,</i> 506 U.S. 103, 111-12 (1992),</a> which held that to prevail for a claimant means obtaining actual and meaningful relief, something that materially alters the legal relationship of the parties)). KB Home, the plaintiff, sought more than $1,000,000 in damages, but instead left the courthouse with nothing. <i>Id.</i></div>
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At first blush, <i>KB Home</i>'s holding appears damning to UTSW, but in that case we examined only what a <i>plaintiff</i> must prove to be a "prevailing party." <i>See id.</i> at 652 (holding that "a plaintiff must prove compensable injury and secure an enforceable judgment in the form of damages or equitable relief"). Here, although UTSW was the original plaintiff, it argues that it successfully defended—<i>as a defendant</i>—against Rohrmoos's breach of contract counterclaim. This is true. In an attempt to relieve itself of its future obligations to perform under the contract, UTSW sought a jury finding that Rohrmoos breached the lease first. The jury found that both Rohrmoos and UTSW breached the lease but that Rohrmoos breached first. The trial court entered judgment accordingly and ordered that Rohrmoos take nothing on its counterclaim for approximately $250,000 in back rent. The court of appeals employed this logic to hold that UTSW, as counter-defendant, was the prevailing party because it was vindicated by the court's judgment. 559 S.W.3d at 166 (citing <a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=12256693937534648862&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Johnson v. Smith,</i> No. 07-10-00017-CV, 2012 WL 140654, at *3 (Tex. App.-Amarillo Jan. 18, 2012, no pet.)</a> (mem. op.)).</div>
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Interestingly, this specific question regarding prevailing defendants presented itself in <i>KB Home,</i> but we did not address it because it was not preserved for our review. <i>See</i> <a href="https://scholar.google.com/scholar_case?case=15549225697323793606&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;">295 S.W.3d at 659</a> ("The issue of whether a breaching-but-nonpaying defendant can be a `prevailing party' under an attorney's-fees provision like this is interesting legally, but not before us procedurally."). We did hold, however, that to prevail means to "obtain actual and meaningful relief, something that materially alters the parties' legal relationship." <i>Id.</i> at 652 (citing <a href="https://scholar.google.com/scholar_case?case=4029288770020466344&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Farrar,</i> 506 U.S. at 111-12</a>). Since <i>KB Home,</i> courts of appeals have held that a defendant who did not recover actual damages can be a prevailing party for defending against a plaintiff's breach of contract claim when it achieves a material alteration in its legal relationship with the plaintiff. <i>See, e.g., </i><a href="https://scholar.google.com/scholar_case?case=9266964839563246842&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>SEECO, Inc. v. K.T. Rock, LLC,</i> 416 S.W.3d 664, 674 (Tex. App.-Houston [14th Dist.] 2013, pet. denied)</a> (holding that a successful breach of contract defense entitled the defendant to attorney's fees as the prevailing party); <a href="https://scholar.google.com/scholar_case?case=18116355329880442128&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Fitzgerald v. Schroeder Ventures II, LLC,</i> 345 S.W.3d 624, 629 (Tex. App.-San Antonio 2011, no pet.)</a> (concluding that there was no basis for denying the defendants attorney's fees under the contract with a "prevailing party" provision after analyzing and agreeing with another intermediate appellate court that held <i>KB Home</i> did not apply to attorney's fees sought by a defendant defending against a claim for breach of contract).</div>
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We agree. A defendant can obtain actual and meaningful relief, materially altering the parties' legal relationship, by successfully defending against a claim and securing a take-nothing judgment on the main issue or issues in the case. Our holding is consistent with the United States Supreme Court's interpretation of what it means to prevail as a defendant. <i>See </i><a href="https://scholar.google.com/scholar_case?case=4456280429408240319&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>CRST Van Expedited, Inc. v. Equal Emp't Opportunity Comm'n,</i> 136 S. Ct. 1642, 1651 (2016)</a> ("The defendant may prevail even if the court's final judgment rejects the plaintiff's claim for a nonmerits reason."). Here, UTSW was not just a plaintiff; it also successfully defended against Rohrmoos's breach of contract counterclaim, and the trial court rendered a take-nothing judgment in UTSW's favor as a counter-defendant. The jury's finding and the trial court's judgment altered the legal relationship between the parties. UTSW is therefore a "prevailing party" under the lease and is entitled to reasonable and necessary attorney's fees.</div>
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B. Legal Sufficiency</h2>
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The jury awarded $800,000 in attorney's fees for trial work and conditional fee awards of $150,000 for appeal to the intermediate appellate court and $75,000 for appeal to this Court. The trial court's judgment awarded UTSW fees according to the verdict and ordered that Rohrmoos take nothing. In this Court, Rohrmoos challenges the evidence offered by UTSW's attorney, Wade Howard, as legally insufficient to support the fee awards, claiming that the lodestar method applies and Howard should have submitted detailed proof, likely in the form of billing records, so the jury could have conducted a meaningful review to determine the reasonableness of the fees. Howard did not attempt to introduce billing records into evidence, nor did he testify to the details of his work, which Rohrmoos claims prevented the jury from determining whether the hundreds of hours spent were reasonable or necessary. Rohrmoos asserts that this award of more than $1,000,000 in attorney's fees cannot be based on the <i>ipse dixit</i> of the testifying expert. UTSW, on the other hand, argues that Howard's testimony is sufficient to support the fee award under <i>Arthur Andersen</i> because Howard testified to the total amount of fees, the reasonableness of the fees, and his experience.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=12251745114633409184&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019#[7]" name="r[7]" style="color: #660099;">[7]</a></sup></div>
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Before addressing the parties' arguments and the evidence presented in this case, we first examine the law governing attorney's fees in a fee-shifting situation. In short, to secure an award of attorney's fees from an opponent, the prevailing party must prove that: (1) recovery of attorney's fees is legally authorized, and (2) the requested attorney's fees are reasonable and necessary for the legal representation, so that such an award will compensate the prevailing party generally for its losses resulting from the litigation process.</div>
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1. Legally Authorized</h2>
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Legal authorization begins, as we have mentioned, with the American Rule, which provides that a prevailing party has no inherent right to recover attorney's fees from the non-prevailing party unless there is specific statutory or contractual authority allowing it. <i>E.g., </i><a href="https://scholar.google.com/scholar_case?case=6228523148686193851&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Nat'l Lloyds,</i> 532 S.W.3d at 809</a>; <a href="https://scholar.google.com/scholar_case?case=3994486142378722337&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Tony Gullo Motors I, LP v. Chapa,</i> 212 S.W.3d 299, 310-11 (Tex. 2006)</a> (observing that Texas law has followed the American Rule for more than a century). When fee-shifting is authorized, whether by statute or contract, there are a few key principles that serve as the basis for our attorney's fee jurisprudence.</div>
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First, the idea behind awarding attorney's fees in fee-shifting situations is to compensate the prevailing party generally for its reasonable losses resulting from the litigation process. <i>See generally </i><a href="https://scholar.google.com/scholar_case?case=478653375077320916&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>In re Nalle Plastics Family Ltd. P'ship,</i> 406 S.W.3d 168, 173 (Tex. 2013)</a> (orig. proceeding) (observing that although attorney's fees are not awarded as damages, they can be viewed as compensating the prevailing party for its losses because the award helps make the party whole). The award and the ability to enforce it thus belongs to the party, not the attorney, absent express statutory or contractual text mandating otherwise. <i>See, e.g.,</i> TEX. FAM. CODE § 6.708(c) (providing that the court may award reasonable attorney's fees and expenses in suits for the dissolution of marriage, and "[t]he court may order the fees and expenses and any postjudgment interest to be paid directly to the attorney, who may enforce the order in the attorney's own name by any means available for the enforcement of a judgment for debt").</div>
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Second, because such fee awards are compensatory in nature, fee-shifting is not a mechanism for greatly improving an attorney's economic situation. <i>Cf. </i><a href="https://scholar.google.com/scholar_case?case=1400760332852773921&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Pennsylvania v. Del. Valley Citizens' Council for Clean Air,</i> 478 U.S. 546, 565 (1986)</a> (noting that fee-shifting statutes are enacted to "enable private parties to obtain legal help in seeking redress for injuries" and not to improve significantly the financial lot of attorneys as a form of economic relief, "nor were they intended to replicate exactly the fee an attorney could earn through a private fee arrangement with his client"). Thus, only fees reasonable and necessary for the legal representation will be shifted to the non-prevailing party, and not necessarily the amount contracted for between the prevailing party and its attorney, as a client's agreement to a certain fee arrangement or obligation to pay a particular amount does not necessarily establish that fee as reasonable and necessary. <i>See </i><a href="https://scholar.google.com/scholar_case?case=1751498717150008353&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Arthur Andersen,</i> 945 S.W.2d at 818</a> ("[W]e cannot agree that the mere fact that a party and a lawyer have agreed to a contingent fee means that the fee arrangement is in and of itself reasonable for purposes of shifting that fee to the defendant."). Stated differently, an amount incurred or contracted for is not conclusive evidence of reasonableness or necessity. <i>See id.</i> The fee claimant still has the burden to establish reasonableness and necessity. <a href="https://scholar.google.com/scholar_case?case=6228523148686193851&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Nat'l Lloyds,</i> 532 S.W.3d at 809</a>.</div>
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Third, a party must be represented by an attorney to secure an award of attorney's fees. For example, courts have held that a corporate client can be awarded fees for representation by its in-house counsel. <i>See, e.g., </i><a href="https://scholar.google.com/scholar_case?case=6589432628326918733&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Tesoro Petrol. Corp. v. Coastal Ref. & Mktg., Inc.,</i> 754 S.W.2d 764, 766-67 (Tex. App.-Houston [1st Dist.] 1988, writ denied)</a> ("[T]he award of reasonable attorney's fees for services performed by in-house counsel compensates the prevailing party for time counsel could have spent on other corporate matters." (citing <a href="https://scholar.google.com/scholar_case?case=9827509506089471595&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Textor v. Bd. of Regents of N. Ill. Univ.,</i> 711 F.2d 1387, 1396-97 (7th Cir. 1983)</a>)). Likewise, courts have held that a law firm can be awarded fees for representation by its own attorney. <i>See, e.g., </i><a href="https://scholar.google.com/scholar_case?case=9092002027931913375&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Campbell, Athey & Zukowski v. Thomasson,</i> 863 F.2d 398, 400 (5th Cir. 1989)</a>(citing <i>Tesoro</i> to hold that "[j]ust as the corporation should be entitled to compensation for the time which in-house counsel could have spent on other corporate matters, so is a law firm entitled to compensation for the time which the representing attorney could have spent on other client matters"). Attorneys have been awarded fees for their own pro se representation.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=12251745114633409184&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019#[8]" name="r[8]" style="color: #660099;">[8]</a></sup> <i>E.g., </i><a href="https://scholar.google.com/scholar_case?case=17332136470704983107&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Beckstrom v. Gilmore,</i> 886 S.W.2d 845, 847 (Tex. App.-Eastland 1994, writ denied)</a> (awarding fees to an attorney representing himself pro se). <i>But see </i><a href="https://scholar.google.com/scholar_case?case=13326874147952835235&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Jackson v. State Office of Admin. Hearings,</i> 351 S.W.3d 290, 299-300 (Tex. 2011)</a> (denying attorney's fees to a pro se attorney because the attorney did not incur the fees as required by the applicable statute). And the State of Texas can be awarded fees under certain statutes for representation by Attorney General's Office attorneys. <i>See, e.g.,</i> TEX. GOV'T CODE § 402.006(c) ("In a case in which the state is entitled to recover a penalty or damages the attorney general is entitled, on behalf of the state, to reasonable attorney's fees and court costs."); <a href="https://scholar.google.com/scholar_case?case=16279772567226749330&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Merchs. Fast Motor Lines, Inc. v. State,</i> 917 S.W.2d 518, 523-24 (Tex. App.-Waco 1996, writ denied)</a> (upholding the State's attorney's fee award under section 402.006(c)).</div>
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Here, the parties' contract provides for a fee-shifting arrangement by stating, "In any action to enforce the terms of this Lease, the prevailing party shall be entitled to an award for its reasonable attorneys' fees." The contract does not define "reasonable" attorney's fees, so we turn to our attorney's fee jurisprudence in considering reasonableness.</div>
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2. Reasonable and Necessary</h2>
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As an initial matter, we note that parties in their contracts and the Legislature in its enabling statutes will often loosely employ a reasonable and necessary standard, sometimes using both terms "reasonable and necessary" and other times just "reasonable." <i>Compare</i> TEX. BUS. & COM. CODE § 17.50(d) ("Each consumer who prevails [under the Deceptive Trade Practices Act] shall be awarded court costs and reasonable and necessary attorneys' fees."), <i>with</i> TEX. CIV. PRAC. & REM. CODE § 38.001 (providing that "[a] person may recover reasonable attorney's fees from an individual or corporation, in addition to the amount of a valid claim and costs" for, among other things, breach of contract). The distinction between such provisions is immaterial. When a claimant wishes to obtain attorney's fees from the opposing party, the claimant must prove that the requested fees are both reasonable and necessary. <i>See </i><a href="https://scholar.google.com/scholar_case?case=6228523148686193851&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Nat'l Lloyds,</i> 532 S.W.3d at 809</a> (stating that a party seeking recovery of attorney's fees from the losing party "bears the burden of establishing the fees are reasonable <i>and</i> necessary" (emphasis added)). Both elements are questions of fact to be determined by the fact finder and act as limits on the amount of fees that a prevailing party can shift to the non-prevailing party. <i>See </i><a href="https://scholar.google.com/scholar_case?case=17572494353043337676&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Transcon. Ins. Co. v. Crump,</i> 330 S.W.3d 211, 231 (Tex. 2010)</a> (observing that generally the reasonableness of particular fees presents a fact question that the fact finder must decide, as does necessity); <i>see also </i><a href="https://scholar.google.com/scholar_case?case=15052939308021524816&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Bocquet v. Herring,</i> 972 S.W.2d 19, 21 (Tex. 1998)</a> (explaining that reasonableness is a question of fact for the jury, and that "[t]he second limitation, that fees must be necessary, is likewise a fact question" (citing <a href="https://scholar.google.com/scholar_case?case=14527081982641822034&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Gen. Motors Corp. v. Bloyed,</i> 916 S.W.2d 949, 961 (Tex. 1996)</a>)).</div>
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Furthermore, some enabling statutes have an explicit reference to attorney's fees that are "incurred." <i>See, e.g.,</i> TEX. CIV. PRAC. & REM. CODE § 74.351(b)(1) (allowing the recovery of "reasonable attorney's fees and costs of court incurred by the physician or health care provider" for certain situations under the Texas Medical Liability Act); <i>id.</i> § 27.009(a)(1) (providing for recovery of "court costs, reasonable attorney's fees, and other expenses incurred in defending against the legal action as justice and equity may require" under the Texas Citizens Participation Act). In those instances, we have held that the word "incurred," just as the word "reasonable," acts to limit the amount of fees the court may award, and "[a] fee is incurred when one becomes liable for it." <a href="https://scholar.google.com/scholar_case?case=16306918893560279939&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Garcia v. Gomez,</i> 319 S.W.3d 638, 642 (Tex. 2010)</a> (holding that "[b]oth the adjective `reasonable' and the verb `incurred' [in section 74.351(b)(1)] act to limit the amount of attorney's fees the trial court may award"); <i>see also </i><a href="https://scholar.google.com/scholar_case?case=13326874147952835235&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Jackson,</i> 351 S.W.3d at 299-300</a>(denying a pro se attorney fees under the Texas Public Information Act, which has an "incurred" requirement, because he "did not incur attorney's fees as that term is used in its ordinary meaning because he did not at any time become liable for attorney's fees"). As we have explained, attorney's fee awards are compensatory in nature, intended generally to make the prevailing party whole as to reasonable and necessary fees for successfully prosecuting or defending against a claim. <i>See </i><a href="https://scholar.google.com/scholar_case?case=478653375077320916&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Nalle Plastics,</i> 406 S.W.3d at 173</a>. But when statutes do not contain an explicit requirement that fees be "incurred," <i>e.g.,</i> TEX. CIV. PRAC. & REM. CODE § 38.001, we do not imply such a term; rather, we evaluate whether legally sufficient evidence supports that the amount of attorney's fees awarded is reasonable and necessary for the legal representation, so that an award of such fees will compensate the prevailing party generally for its losses resulting from the litigation process.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=12251745114633409184&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019#[9]" name="r[9]" style="color: #660099;">[9]</a></sup> <i>See, e.g., </i><a href="https://scholar.google.com/scholar_case?case=7752149503288853185&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Long v. Griffin,</i> 442 S.W.3d 253, 255 (Tex. 2014) (per curiam)</a>. And when contracts provide for recovery of attorney's fees, we similarly do not imply terms but adhere to the parties' intent as expressed in the language of the contract. <i>See </i><a href="https://scholar.google.com/scholar_case?case=4094152628049594957&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>URI, Inc. v. Kleberg Cty.,</i> 543 S.W.3d 755, 763 (Tex. 2018)</a>(noting that "our primary objective is to ascertain and give effect to the parties' intent as expressed in the instrument"). Here, because there is no "incurred" requirement on the face of the contract, we evaluate whether legally sufficient evidence supports that the amount of attorney's fees awarded is reasonable and necessary for the legal representation, so that a fee-shifting award will compensate the prevailing party generally for its losses resulting from the litigation process.</div>
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Historically, claimants have proven reasonableness and necessity of attorney's fees through an expert's testimony—often the very attorney seeking the award—who provided a basic opinion as to the requested attorney's fees. <i>See generally </i><a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=2202764497810435185&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Penn Mut. Life Ins. v. Maner,</i> 109 S.W. 1084, 1084 (Tex. 1908)</a>. In recent years, Texas law has developed with references to the <i>Arthur Andersen</i> method (sometimes referred to as the "traditional" method) and the lodestar method for proving the reasonableness and necessity of attorney's fees. <i>See, e.g., </i><a href="https://scholar.google.com/scholar_case?case=13218555992985684188&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Metroplex Mailing Servs.,</i> 410 S.W.3d at 900</a> (suggesting that "[u]nder the traditional method of awarding fees, [as opposed to the lodestar method,] documentary evidence is not a prerequisite"). The court of appeals in this case referenced both methods, distinguishing them and concluding that "Rohrmoos does not assert, and the record does not show, that the lodestar method was statutorily required or that [UTSW] `chose to prove up attorney's fees using this method.'" 559 S.W.3d at 167 (citations omitted). The court of appeals then affirmed the attorney's fee award, holding that "Howard's testimony concerning his experience, the total amount of fees, and the reasonableness of the fees charged was sufficient to support the award" under <i>Arthur Andersen. Id.</i> at 168.</div>
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These two seemingly different methods for evaluating claims for attorney's fees have created confusion for practitioners and courts alike. As explained below, however, the lodestar method developed as a "short hand version" of the <i>Arthur Andersen</i> factors and was never intended to be a separate test or method. With that in mind, we clarify the law governing recovery of attorney's fees in Texas courts. We begin by reviewing fee-shifting and attorney's fee jurisprudence in the federal courts.</div>
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a. <i>Johnson</i> Factors and Lodestar in Federal Courts</h2>
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To assist district courts in awarding attorney's fees, the Fifth Circuit in <a href="https://scholar.google.com/scholar_case?case=2009664919588302672&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Johnson v. Georgia Highway Express, Inc.,</i> 488 F.2d 714 (5th Cir. 1974),</a> set out twelve factors that a court should consider in determining a reasonable fee. <i>Id.</i> at 717-19. Those factors, consistent with the American Bar Association's Code of Professional Responsibility then in effect, included:</div>
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(1) the time and labor required;</blockquote>
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(2) the novelty and difficulty of the questions;</blockquote>
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(3) the skill requisite to perform the legal service properly;</blockquote>
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(4) the preclusion of other employment by the attorney due to acceptance of the case;</blockquote>
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(5) the customary fee;</blockquote>
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(6) whether the fee is fixed or contingent;</blockquote>
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(7) time limitations imposed by the client or the circumstances;</blockquote>
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(8) the amount involved and the results obtained;</blockquote>
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(9) the experience, reputation, and ability of the attorneys;</blockquote>
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(10) the "undesirability" of the case;</blockquote>
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(11) the nature and length of the professional relationship with the client; and</blockquote>
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(12) awards in similar cases.</blockquote>
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<i>Id. Johnson</i> was widely followed by other courts. <i>E.g., </i><a href="https://scholar.google.com/scholar_case?case=9948957338858604303&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Reynolds v. Coomey,</i> 567 F.2d 1166, 1167 (1st Cir. 1978)</a> (observing that the district court properly applied the <i>Johnson</i> factors as a guide in determining the amount of attorney's fees); <a href="https://scholar.google.com/scholar_case?case=7592022289383743275&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Allen v. Amalgamated Transit Union Local</i> <i>788,</i> 554 F.2d 876, 884 (8th Cir. 1977)</a>(approving the <i>Johnson</i> factors for determining the reasonableness of attorney's fee claims). But as the United States Supreme Court observed, this method "gave very little actual guidance to district courts" and "[s]etting attorney's fees by reference to a series of sometimes subjective factors placed unlimited discretion in trial judges and produced disparate results." <a href="https://scholar.google.com/scholar_case?case=1400760332852773921&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Del. Valley Citizens' Council,</i> 478 U.S. at 563</a>.</div>
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For this reason, the Third Circuit developed the lodestar method for calculating reasonable attorney's fees. <i>See </i><a href="https://scholar.google.com/scholar_case?case=1575737114906353290&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Lindy Bros. Builders, Inc. of Phila. v. Am. Radiator & Standard Sanitary Corp.</i> (<i>Lindy I</i>), 487 F.2d 161, 167-68 (3d Cir. 1973)</a>; <i>see also </i><a href="https://scholar.google.com/scholar_case?case=1400760332852773921&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Del. Valley Citizens' Council,</i> 478 U.S. at 563-65</a> (providing a historical analysis of the development of the lodestar method). This method involved two steps. <i>See </i><a href="https://scholar.google.com/scholar_case?case=1575737114906353290&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Lindy I,</i> 487 F.2d at 167-68</a>. First, for each attorney involved, the court was to multiply the hours reasonably spent on the case by a reasonable hourly rate of compensation to form a base number or "lodestar." <i>Id.</i> Second, the court could then adjust this lodestar figure to account for whether the expenses incurred and hours invested were based on a contingent agreement (i.e., without assurances of compensation), as well as the quality of the work performed, as evidenced by the recovery obtained and complexity of the case. <i>See </i><a href="https://scholar.google.com/scholar_case?case=2115968421967738802&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Lindy Bros. Builders, Inc. of Phil. v. Am. Radiator & Standard Sanitary Corp.</i> (<i>Lindy II</i>), 540 F.2d 102, 117 (3d Cir. 1976)</a>. This lodestar formulation produced a more focused analysis than the <i>Johnson</i> factors by emphasizing the objective consideration of amount of time expended by the attorneys. <i>See </i><a href="https://scholar.google.com/scholar_case?case=1400760332852773921&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Del. Valley Citizens' Council,</i> 478 U.S. at 563</a>(explaining that the lodestar "formulation emphasized the amount of time expended by the attorneys, and provided a more analytical framework for lower courts to follow than the unguided `factors' approach provided by <i>Johnson</i>"). It also allowed for greater consistency in awards of attorney's fees, although "allowing the courts to adjust the lodestar amount based on considerations of the `riskiness' of the lawsuit and the quality of the attorney's work could still produce inconsistent and arbitrary fee awards." <i>Id.</i></div>
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The United States Supreme Court refined the lodestar method in <a href="https://scholar.google.com/scholar_case?case=5179727217217722884&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Hensley v. Eckerhart,</i> 461 U.S. 424 (1983),</a> adopting a hybrid approach for calculating reasonable attorney's fees that shared elements of both the lodestar method and <i>Johnson</i> factors. <i>See id.</i> at 433-35. The Court explained: "The most useful starting point for determining the amount of a reasonable fee is the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate. This calculation provides an objective basis on which to make an initial estimate of the value of a lawyer's services." <i>Id.</i> at 433. The Court's analysis was consistent with the lodestar's first step described by the Third Circuit, but then the Court we went on to state: "The product of reasonable hours times a reasonable rate does not end the inquiry. There remain other considerations that may lead the district court to adjust the fee upward or downward . . . ." <i>Id.</i> at 434. The "other considerations" included, but were not limited to, the <i>Johnson</i> factors, but the Court made clear that many of the factors listed in <i>Johnson</i> would usually be "subsumed within the initial calculation of hours reasonably expended at a reasonable hourly rate." <i>Id.</i> at 434 n.9 (citation omitted).</div>
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The Court further refined its views on the appropriate method for determining a reasonable fee award in <a href="https://scholar.google.com/scholar_case?case=14012192812481338663&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Blum v. Stenson,</i> 465 U.S. 886 (1984),</a> again affirming its preference for the lodestar method. <i>See id.</i> at 888. Consistent with previous rulings, <i>Blum</i> explained that the proper first step in determining a reasonable attorney's fee is to multiply "the number of hours reasonably expended on the litigation times a reasonable hourly rate." <i>Id.</i> But the Court went a step further, emphasizing that this base calculation is not an initial approximation of the final award to be made but is instead a presumed reasonable fee if the applicant "has carried his burden of showing that the claimed rate and number of hours are reasonable." <i>Id.</i> at 897. The <i>Blum</i> Court also restricted the adjusting factors courts could use to increase or decrease the base lodestar amount. <i>See id.</i> at 898-900. That is, after affirming <i>Hensley</i>'s position that many of the <i>Johnson</i> factors "are subsumed within the initial calculation" of the lodestar, the Court specifically held in <i>Blum</i> that the "novelty and complexity of the issues," "the special skill and experience of counsel," the "quality of representation," and the "results obtained" from the litigation generally cannot serve as independent bases for increasing the base fee award because those considerations are fully reflected in the lodestar amount. <i>Id.</i> Upward adjustments of the lodestar figure, although still permissible, are proper only in certain "rare" and "exceptional" cases, supported by both detailed findings by the lower courts and specific evidence on the record. <i>See id.</i>at 898-901. And in a later ruling, the Court clarified that contingent fee arrangements also should not enhance the base lodestar:</div>
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We note at the outset that an enhancement for contingency would likely duplicate in substantial part factors already subsumed in the [base] lodestar. The risk of loss in a particular case (and, therefore, the attorney's contingent risk) is the product of two factors: (1) the legal and factual merits of the claim, and (2) the difficulty of establishing those merits. The second factor, however, is ordinarily reflected in the lodestar—either in the higher number of hours expended to overcome the difficulty, or in the higher hourly rate of the attorney skilled and experienced enough to do so. Taking account of it again through lodestar enhancement amounts to double counting.</blockquote>
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The first factor (relative merits of the claim) is not reflected in the [base] lodestar, but there are good reasons why it should play no part in the calculation of the award. It is, of course, a factor that <i>always</i>exists (no claim has a 100% chance of success), so that computation of the lodestar would never end the court's inquiry in contingent-fee cases.</blockquote>
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<a href="https://scholar.google.com/scholar_case?case=2557094556311036785&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Burlington v. Dague,</i> 505 U.S. 557, 562-63 (1992)</a> (citations omitted).</div>
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In its most current form, the lodestar method as described in <i>Blum</i> has achieved dominance in the federal courts and has "become the guiding light" for fee-shifting jurisprudence. <i>See </i><a href="https://scholar.google.com/scholar_case?case=12994163253801574929&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Gisbrecht v. Barnhart,</i> 535 U.S. 789, 801 (2002)</a> (quoting <a href="https://scholar.google.com/scholar_case?case=2557094556311036785&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Burlington,</i> 505 U.S. at 562</a>)). As recently as 2010, the Court again outlined the value of the lodestar calculation.</div>
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<i>See </i><a href="https://scholar.google.com/scholar_case?case=14594284913231871642&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Perdue,</i> 559 U.S. at 551-57</a>. The Court explained:</div>
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Although the lodestar method is not perfect, it has several important virtues. First, in accordance with our understanding of the aim of fee-shifting statutes, the lodestar looks to "the prevailing market rates in the relevant community." Developed after the practice of hourly billing had become widespread, the lodestar method produces an award that <i>roughly</i> approximates the fee that the prevailing attorney would have received if he or she had been representing a paying client who was billed by the hour in a comparable case. Second, the lodestar method is readily administrable; and unlike the <i>Johnson</i> approach, the lodestar calculation is "objective" and thus cabins the discretion of trial judges, permits meaningful judicial review, and produces reasonably predictable results.</blockquote>
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<i>Id.</i> at 551-52 (citations omitted). The Court went on to observe that the presumptive reasonableness of the base lodestar calculation accounts for most of the <i>Johnson</i> factors:</div>
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[W]e have noted that "the lodestar figure includes most, if not all, of the relevant factors constituting a `reasonable' attorney's fee" and have held that an enhancement may not be awarded based on a factor that is subsumed in the lodestar calculation. We have thus held that the novelty and complexity of a case generally may not be used as a ground for an enhancement because these factors "presumably [are] fully reflected in the number of billable hours recorded by counsel." We have also held that the quality of an attorney's performance generally should not be used to adjust the lodestar "[b]ecause considerations concerning the quality of a prevailing party's counsel's representation normally are reflected in the reasonable hourly rate."</blockquote>
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<i>Id.</i> at 553 (citations omitted) (second and third alteration in original). This remains the standard for attorney's fee awards in federal courts today.</div>
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b. <i>Arthur Andersen</i> Factors and Lodestar in Texas Courts</h2>
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Similar to the federal system, Texas jurisprudence first developed a factor-based method for the fact finder to assess what fees are reasonable and necessary, the cornerstone for shifting attorney's fees away from the prevailing party. <i>See </i><a href="https://scholar.google.com/scholar_case?case=1751498717150008353&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Arthur Andersen,</i> 945 S.W.2d at 818</a>. Like the Fifth Circuit in <i>Johnson,</i> this Court identified non-exclusive factors to guide the fact finder in determining the reasonableness and necessity of attorney's fees. <i>See id.</i> Those factors are:</div>
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(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill required to perform the legal service properly;</blockquote>
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(2) the likelihood . . . that the acceptance of the particular employment will preclude other employment by the lawyer;</blockquote>
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(3) the fee customarily charged in the locality for similar legal services;</blockquote>
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(4) the amount involved and the results obtained;</blockquote>
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(5) the time limitations imposed by the client or by the circumstances;</blockquote>
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(6) the nature and length of the professional relationship with the client;</blockquote>
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(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and</blockquote>
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(8) whether the fee is fixed or contingent on results obtained or uncertainty of collection before the legal services have been rendered.</blockquote>
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<i>Id.</i> (quoting TEX. DISCIPLINARY R. PROF'L CONDUCT 1.04, <i>reprinted in</i> TEX. GOV'T CODE, tit. 2, subtit. G, app. A (TEX. STATE BAR R. art. X, § 9)). We explained that without evidence of the factors identified in Disciplinary Rule 1.04, the fact finder has no meaningful way to determine if the fees sought are in fact reasonable and necessary. <i>Id.</i> at 818-19. The factors were designed to be applicable across all fee-shifting awards, whether determined by the jury or trial court. <i>See </i><a href="https://scholar.google.com/scholar_case?case=6298326732350685872&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Young v. Qualls,</i> 223 S.W.3d 312, 314 (Tex. 2007) (per curiam)</a>.</div>
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In 2012, we provided additional guidelines for determining reasonableness and necessity by introducing the lodestar calculation to Texas jurisprudence. <i>See </i><a href="https://scholar.google.com/scholar_case?case=5556380148629311996&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>El Apple,</i> 370 S.W.3d at 760</a> (analyzing a fee award under the Texas Commission on Human Rights Act (TCHRA)); <i>see also</i> TEX. LAB. CODE § 21.259(a) ("In a proceeding under [the TCHRA], a court may allow the prevailing party . . . a reasonable attorney's fee as part of the costs."). We explained that:</div>
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Under the lodestar method, the determination of what constitutes a reasonable attorney's fee involves two steps. First, the court must determine the reasonable hours spent by counsel in the case and a reasonable hourly rate for such work. The court then multiplies the number of such hours by the applicable rate, the product of which is the base fee or lodestar. The court may then adjust the base lodestar up or down (apply a multiplier), if relevant factors indicate an adjustment is necessary to reach a reasonable fee in the case.</blockquote>
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<a href="https://scholar.google.com/scholar_case?case=5556380148629311996&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>El Apple,</i> 370 S.W.3d at 760</a> (citations omitted). The relevant factors are straight from <i>Arthur Andersen. Id.</i> at 760-61.</div>
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We ultimately overturned the fee award in <i>El Apple</i> even though the trial court employed the lodestar method, concluding that the evidence was legally insufficient to support the reasonableness and necessity of the fee award. <i>Id.</i> at 763-64. The plaintiff's attorneys testified that they collectively spent 890 hours on the case (as estimated), and that those hours were attributed to "the number of discovery instruments and pleadings, the number of depositions and witness interviews, as well as the quality of representation." <i>Id.</i> at 759. They also testified that their time was reasonable and necessary given the results obtained and nature of the case. <i>Id.</i> But that was not enough. <i>See id.</i> at 762-63. The starting point for determining a lodestar fee award, we noted, is the number of hours "reasonably expended on the litigation," and proof of reasonable hours "should include the basic facts underlying the lodestar, which are: (1) the nature of the work, (2) who performed the services and their rate, (3) approximately when the services were performed, and (4) the number of hours worked." <i>Id.</i> Applying that standard to the case, we held that the evidence was insufficient because:</div>
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[N]either attorney indicated how the 890 hours they spent in the aggregate were devoted to any particular task or category of tasks. Neither attorney presented time records or other documentary evidence. Nor did they testify based on their recollection of such records. The attorneys instead based their time estimates on generalities such as the amount of discovery in the case, the number of pleadings filed, the number of witnesses questioned, and the length of the trial. While all this is relevant, it provides none of the specificity needed for the trial court to make a meaningful lodestar determination. The court could not discern from the evidence how many hours each of the tasks required and whether that time was reasonable. Without at least some indication of the time spent on various parts of the case, a court has little basis upon which to conduct a meaningful review of the fee award.</blockquote>
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<i>Id.</i> at 763.</div>
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After <i>El Apple,</i> questions surfaced regarding whether the lodestar method applies in cases where the request for attorney's fees is not based on the TCHRA or other state statutes that require application of the lodestar method. But any doubt as to the lodestar method's applicability should have been resolved when we applied <i>El Apple</i>'s holding to a $339,000 award under a different fee-shifting statute that did not "require that attorney's fees be determined under a lodestar method." <a href="https://scholar.google.com/scholar_case?case=3357965753455607838&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>City of Laredo v. Montano,</i> 414 S.W.3d 731, 736 (Tex. 2013) (per curiam)</a>; <i>see also</i> TEX. PROP. CODE § 21.019(c) (allowing courts to award reasonable and necessary attorney's fees incurred by a property owner successfully defending a condemnation suit). Although we did not explain why, the opinion made clear that we viewed the lodestar method as having an expansive application to be used when evidence of reasonable hours worked multiplied by reasonable hourly rates can provide an objective analytical framework that is presumptively reasonable. <i>See </i><a href="https://scholar.google.com/scholar_case?case=3357965753455607838&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Montano,</i> 414 S.W.3d at 736</a>. Moreover, we gave additional guidance for sufficient proof when we determined that, like the proof in <i>El Apple,</i> the plaintiff's testimony in <i>Montano</i> was devoid of substance and could not support an award of reasonable attorney's fees. <i>See id.</i> We overturned the fee award, explaining that time estimates based on generalities were not sufficient to support a fee-shifting award:</div>
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Gonzalez offered nothing to document his time in the case other than the "thousands and thousands and thousands of pages" generated during his representation of the Montanos and his belief that he had reasonably spent 1,356 hours preparing and trying the case. We rejected similar proof in <i>El Apple.</i></blockquote>
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Gonzalez's testimony that he spent "a lot of time getting ready for the lawsuit," conducted "a lot of legal research," visited the premises "many, many, many, many times," and spent "countless" hours on motions and depositions is not evidence of a reasonable attorney's fee under lodestar. . . . In <i>El Apple,</i> we said that a lodestar calculation requires certain basic proof, including itemizing specific tasks, the time required for those tasks, and the rate charged by the person performing the work.</blockquote>
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<i>Id.</i> (citations omitted).</div>
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A year after that, we again confirmed our position that the lodestar method applies when the fee claimant puts on evidence of reasonable fees by relating the hours worked multiplied by hourly rates for a total fee. <a href="https://scholar.google.com/scholar_case?case=7752149503288853185&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Long,</i> 442 S.W.3d at 255</a>. We overturned the fee award in <i>Long,</i> just as we had in <i>El Apple</i> and <i>Montano:</i></div>
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Here, as in <i>El Apple</i> and <i>Montano,</i> the affidavit supporting the request for attorney's fees only offers generalities. It indicates that one attorney spent 300 hours on the case, another expended 344.50 hours, and the attorneys' respective hourly rates. The affidavit posits that the case involved extensive discovery, several pretrial hearings, multiple summary judgment motions, and a four and one-half day trial, and that litigating the matter required understanding a related suit that settled after ten years of litigation. But no evidence accompanied the affidavit to inform the trial court [of] the time spent on specific tasks. . . . [W]ithout any evidence of the time spent on specific tasks, the trial court had insufficient information to meaningfully review the fee request.</blockquote>
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<i>Id.</i> (citations omitted).</div>
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Based on our recent precedent, it should have been clear that the lodestar method developed as a "short hand version" of the <i>Arthur Andersen</i> factors and was never intended to be a separate test or method. <i>See </i><a href="https://scholar.google.com/scholar_case?case=7289189175819495928&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Stewart Title,</i> 822 S.W.2d at 10</a>("Although courts should consider several factors when awarding attorney's fees, a short hand version of these considerations is that the trial court may award those fees that are `reasonable and necessary' for the prosecution of the suit."); <i>see also </i><a href="https://scholar.google.com/scholar_case?case=17306533183869561873&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Hill v. Shamoun & Norman, LLP,</i> 544 S.W.3d 724, 744 (Tex. 2018)</a> (remanding for a new trial to determine attorney's fees and referencing <i>Arthur Andersen</i> factors but citing <a href="https://scholar.google.com/scholar_case?case=14527081982641822034&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Bloyed,</i> 916 S.W.2d at 961,</a> for the proposition that on remand, "any fee awarded . . . should be tested against the lodestar approach to prevent grossly excessive attorney's fee awards"). As we have explained, if the non-prevailing party is subject to paying the prevailing party's attorney's fees, the fees must be reasonable and necessary for success in prosecuting or defending the claim, and the award is intended to compensate the prevailing party generally for its legal representation. The lodestar method provides for this, as it is a focused and objective analysis of whether the fees sought are reasonable and necessary, yielding a base figure that reflects most <i>Arthur Andersen</i> factors and is thus presumptively reasonable. But that figure is subject to adjustment if the presumption is overcome by other factors not accounted for in the base lodestar figure.</div>
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Incidentally, as the court of appeals did in this case, some courts have decided that testimony about an attorney's experience, the total amount of fees, and the reasonableness of the fees complies sufficiently with <i>Arthur Andersen</i> to support an attorney's fee award. <i>See, e.g.,</i> 559 S.W.3d at 168; <i>Jeff Kaiser, PC v. State,</i> No. 03-15-00019-CV, 2016 WL 1639731, at *5 (Tex. App.-Austin Apr. 20, 2016, pet. denied) (mem. op.); <i>Jimoh v. Nwogo,</i> No. 01-13-00675-CV, 2014 WL 7335158, at *7 (Tex. App.-Houston [1st Dist.] Dec. 23, 2014, no pet.) (mem. op.); <a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=17592887039383016169&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Ferrant v. Graham Assocs. Inc.,</i> No. 02-12-00190-CV, 2014 WL 1875825, at *9 (Tex. App.-Fort Worth May 8, 2014, no pet.)</a> (mem. op.); <a href="https://scholar.google.com/scholar_case?case=13218555992985684188&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Metroplex Mailing Servs.,</i> 410 S.W.3d at 900</a>. We have clearly held, however, that generalities such as these are not sufficient to support a fee-shifting award under the lodestar method, which applies in fee-shifting situations. <i>See </i><a href="https://scholar.google.com/scholar_case?case=7752149503288853185&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Long,</i> 442 S.W.3d at 255</a>; <a href="https://scholar.google.com/scholar_case?case=3357965753455607838&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Montano,</i> 414 S.W.3d at 736</a>; <a href="https://scholar.google.com/scholar_case?case=5556380148629311996&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>El Apple,</i> 370 S.W.3d at 763</a>.</div>
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Additionally, some courts of appeals have relied on our decision in <i>Garcia,</i> in which we stated that an attorney's testimony about his experience and his estimate of a reasonable and necessary fee in a case was "some evidence of a reasonable fee." <a href="https://scholar.google.com/scholar_case?case=16306918893560279939&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;">319 S.W.3d at 642</a>; <i>see, e.g., </i><a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=2260922154314583464&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Barnett v. Schiro,</i> No. 05-16-00999-CV, 2018 WL 329772, at *10 (Tex. App.-Dallas Jan. 9, 2018, pet. filed)</a> (mem. op.) (citing <i>Garcia</i>to say that an "attorney's brief testimony about experience, total amount of fees, and that [the] total amount of fees was reasonable and necessary is `some evidence' of reasonableness of attorney's fees"). But as we explained in <i>El Apple, Garcia</i> involved a statute that required a trial court to dismiss a healthcare liability claim and award attorney's fees if the plaintiff did not timely serve an expert report. <i>See </i><a href="https://scholar.google.com/scholar_case?case=5556380148629311996&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>El Apple,</i> 370 S.W.3d at 762</a> (citing <a href="https://scholar.google.com/scholar_case?case=16306918893560279939&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Garcia,</i> 319 S.W.3d at 641</a>); <i>see also</i> TEX. CIV. PRAC. & REM. CODE § 74.351(b)(1) (mandating that if, "as to a defendant physician or health care provider, an expert report has not been served within [120 days], the court . . . shall . . . enter an order that: (1) awards to the affected physician or health care provider reasonable attorney's fees and costs of court incurred"). The report was not provided in <i>Garcia,</i> but the trial court did not award attorney's fees as required by the statute after the fee claimant testified briefly to his experience and his customary fee for handling a case up to the point of dismissal. <i>See </i><a href="https://scholar.google.com/scholar_case?case=16306918893560279939&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Garcia,</i> 319 S.W.3d at 640-41</a>. The court of appeals in <i>Garcia</i>affirmed, concluding that the attorney's testimony was conclusory and therefore no evidence of the reasonable attorney's fees incurred by Dr. Garcia. <a href="https://scholar.google.com/scholar_case?case=13517618087555898622&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Garcia v. Gomez,</i> 286 S.W.3d 445, 449 (Tex. App.-Corpus Christi-Edinburg 2008),</a> <i>aff'd in part, rev'd in part,</i> <a href="https://scholar.google.com/scholar_case?case=16306918893560279939&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;">319 S.W.3d 638 (Tex. 2010)</a>. However, "[w]e concluded that the statute mandated the award of attorney's fees, on motion, and that the attorney's uncontested, albeit cursory, testimony about his fee, along with the other circumstances, <i>was enough to present the issue to the court.</i>" <a href="https://scholar.google.com/scholar_case?case=5556380148629311996&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>El Apple,</i> 370 S.W.3d at 762</a> (emphasis added) (citing <a href="https://scholar.google.com/scholar_case?case=16306918893560279939&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Garcia,</i> 319 S.W.3d at 641</a>). But what we <i>did not say</i> was that such cursory testimony was sufficient to support an award of attorney's fees. <i>Garcia</i> is confined to a no-evidence challenge and should not be read, in any way, as a guiding statement on the standard for whether evidence is legally sufficient to support a fee-shifting award of attorney's fees.</div>
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Related to <i>Garcia</i> is our decision in <a href="https://scholar.google.com/scholar_case?case=10343041009404639405&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Kinsel v. Lindsey</i></a><i>,</i> which likewise deals with the evidence to defeat a no-evidence challenge. We held:</div>
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To support its claim for attorney's fees, counsel for the Kinsels testified regarding legal services rendered and various work performed through trial, each attorney's related experience, and what factors each considered to determine a reasonable fee. Although the court of appeals found this testimony "lacking in specifics," it was "at the very least, the quantum of evidence found sufficient" by this Court in <a href="https://scholar.google.com/scholar_case?case=16306918893560279939&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Garcia v. Gomez,</i> 319 S.W.3d 638 (Tex. 2010)</a>. We agree.</blockquote>
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<a href="https://scholar.google.com/scholar_case?case=10343041009404639405&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;">526 S.W.3d at 427</a> (citation omitted). Because the claimant had not segregated legal fees accrued among the one recoverable and two non-recoverable claims, the court of appeals remanded the case to the trial court for a new trial on attorney's fees. <i>See </i><a href="https://scholar.google.com/scholar_case?case=7894856053722013900&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Jackson Walker, LLP v. Kinsel,</i> 518 S.W.3d 1, 25-28 (Tex. App.-Amarillo 2015),</a> <i>aff'd and remanded sub nom. </i><a href="https://scholar.google.com/scholar_case?case=10343041009404639405&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Kinsel v. Lindsey,</i> 526 S.W.3d 411 (Tex. 2017)</a>. Having determined that the claimant presented some evidence of fees incurred on the recoverable claim, we affirmed the remand for a redetermination of fees. <i>See </i><a href="https://scholar.google.com/scholar_case?case=10343041009404639405&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Kinsel,</i> 526 S.W.3d at 427-28</a>. As in <i>Garcia,</i> our opinion in <i>Kinsel</i> addressed only the quantum of proof required to defeat a no-evidence challenge.</div>
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c. Applicable Standard for Proving Reasonable Attorney's Fees</h2>
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(1) Base Calculation: Time × Rate = Presumptively Reasonable</h2>
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It should have been clear from our opinions in <i>El Apple, Montano,</i> and <i>Long</i> that we intended the lodestar analysis to apply to any situation in which an objective calculation of reasonable hours worked times a reasonable rate can be employed. We reaffirm today that the fact finder's starting point for calculating an attorney's fee award is determining the reasonable hours worked multiplied by a reasonable hourly rate, and the fee claimant bears the burden of providing sufficient evidence on both counts. <i>See </i><a href="https://scholar.google.com/scholar_case?case=5556380148629311996&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>El Apple,</i> 370 S.W.3d at 760</a>. Sufficient evidence includes, at a minimum, evidence of (1) particular services performed, (2) who performed those services, (3) approximately when the services were performed, (4) the reasonable amount of time required to perform the services, and (5) the reasonable hourly rate for each person performing such services. <i>See id.</i> at 762-63. This base lodestar figure should approximate the reasonable value of legal services provided in prosecuting or defending the prevailing party's claim through the litigation process. <i>Cf. </i><a href="https://scholar.google.com/scholar_case?case=10071675908916809931&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Blanchard v. Bergeron,</i> 489 U.S. 87, 93 (1989)</a>(explaining that a fee-shifting statute "contemplates reasonable compensation . . . for the time and effort expended by the attorney for the prevailing [party], no more and no less"). And the lodestar calculation should produce an objective figure that approximates the fee that the attorney would have received had he or she properly billed a paying client by the hour in a similar case. <i>See </i><a href="https://scholar.google.com/scholar_case?case=14594284913231871642&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Perdue,</i> 559 U.S. at 551</a>(noting that "the lodestar method produces an award that <i>roughly</i> approximates the fee that the prevailing attorney would have received if he or she had been representing a paying client who was billed by the hour in a comparable case" (emphasis in original)). This readily administrable and objectively reasonable calculation is the standard for calculating the reasonableness and necessity of attorney's fees in a fee-shifting situation. <i>See id.</i> at 551-52 (recognizing that the lodestar method is administrable and objective, cabins discretion of trial court judges, permits meaningful judicial review, and produces reasonably predictable results).</div>
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It is worth repeating that because fee-shifting awards are to be reasonable and necessary for successfully prosecuting or defending against a claim, reasonableness and necessity are not dependent solely on the contractual fee arrangement between the prevailing party and its attorney. <i>Cf. </i><a href="https://scholar.google.com/scholar_case?case=10071675908916809931&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Blanchard,</i> 489 U.S. at 96</a> (explaining that "[f]ee awards are to be reasonable, reasonable as to billing rates and reasonable as to the number of hours spent in advancing the successful claims"); <a href="https://scholar.google.com/scholar_case?case=1400760332852773921&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Del. Valley Citizens' Council,</i> 478 U.S. at 565</a> (explaining that fee-shifting statutes are not "intended to replicate exactly the fee an attorney could earn through a private fee arrangement with his client"); <i>see also </i><a href="https://scholar.google.com/scholar_case?case=1751498717150008353&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Arthur Andersen,</i> 945 S.W.2d at 818-19</a> (holding that although "[a] contingent fee may indeed be a reasonable fee from the standpoint of the parties to the contract," it is not "in and of itself reasonable for purposes of shifting that fee to the defendant"; the fact finder is still required to "decide the question of attorney's fees specifically in light of the work performed in the very case for which the fee is sought"). Therefore, the base lodestar calculation should reflect hours reasonably expended for services necessary to the litigation. <i>See </i><a href="https://scholar.google.com/scholar_case?case=5179727217217722884&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Hensley,</i> 461 U.S. at 434</a> ("Counsel for the prevailing party should make a good-faith effort to exclude from a fee request hours that are excessive, redundant, or otherwise unnecessary, just as a lawyer in private practice ethically is obligated to exclude such hours from his fee submission."); <a href="https://scholar.google.com/scholar_case?case=5556380148629311996&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>El Apple,</i> 370 S.W.3d at 762</a> ("Charges for duplicative, excessive, or inadequately documented work should be excluded." (citing <a href="https://scholar.google.com/scholar_case?case=2911279578939088288&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Watkins v. Fordice,</i> 7 F.3d 453, 457 (5th Cir. 1993)</a>)). Likewise, the base calculation should reflect a reasonable hourly rate for the attorney to prosecute or defend successfully against the claim at issue.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=12251745114633409184&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019#[10]" name="r[10]" style="color: #660099;">[10]</a></sup> <i>See </i><a href="https://scholar.google.com/scholar_case?case=14594284913231871642&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Perdue,</i> 559 U.S. at 551-56</a> (recognizing that the lodestar method "[d]eveloped after the practice of hourly billing had become widespread" and provides a rough approximation of such billing practices, but "if hourly billing becomes unusual, an alternative to the lodestar method may have to be found"); <a href="https://scholar.google.com/scholar_case?case=8733218411511751532&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Missouri v. Jenkins,</i> 491 U.S. 274, 283 (1989)</a> (stating that fee-shifting awards for attorney's fees "are to be based on market rates for the services rendered"); <a href="https://scholar.google.com/scholar_case?case=14012192812481338663&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Blum,</i> 465 U.S. at 895 n.11</a> (recognizing that "determining an appropriate `market rate' for the services of a lawyer is inherently difficult," as rates are based on supply and demand in a particular community, as well as on a lawyer's experience, skill, and reputation; however, a rate shown to be "in line with those prevailing in the community for similar services by lawyers of reasonably comparable skill, experience, and reputation" is "normally deemed to be reasonable"). In light of our recent attorney's fees jurisprudence, we clarify today that there is a presumption that the base lodestar calculation, when supported by sufficient evidence, reflects the reasonable and necessary attorney's fees that can be shifted to the non-prevailing party. <i>See </i><a href="https://scholar.google.com/scholar_case?case=5556380148629311996&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>El Apple,</i> 370 S.W.3d at 760</a>; <i>see also </i><a href="https://scholar.google.com/scholar_case?case=14594284913231871642&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Perdue,</i> 559 U.S. at 551-52</a>; <a href="https://scholar.google.com/scholar_case?case=14012192812481338663&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Blum,</i> 465 U.S. at 897</a> (explaining that the base lodestar figure is presumed reasonable if the claimant "has carried his burden of showing that the claimed rate and number of hours are reasonable").</div>
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(2) Enhancing or Reducing Base Calculation</h2>
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Some commentators have opined that our willingness to apply the lodestar method to any situation in which an attorney testifies to reasonable hours multiplied by reasonable rates—as we did in <i>Long</i> and <i>Montano</i>—renders <i>El Apple</i>'s two-step process invalid. <i>See, e.g.,</i> Mark E. Steiner, <i>Will</i> El Apple <i>Today Keep Attorneys' Fees Away?,</i> 19 J. CONSUMER & COM. L. 114, 117 (2016) (expressing that both <i>Long</i> and <i>Montano</i> "appear to apply the term `lodestar' to any situation that involves recovering attorneys' fees on the basis of `reasonable hours times reasonable rate.' There is no sense that lodestar is a two-step process, which is how the Court had described it in <i>El Apple</i>"). To the contrary, both <i>Long</i> and <i>Montano</i> analyzed the issue of whether the evidence was sufficient under our precedent dealing with the lodestar method—based on <i>El Apple. See </i><a href="https://scholar.google.com/scholar_case?case=7752149503288853185&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Long,</i> 442 S.W.3d at 255</a>; <a href="https://scholar.google.com/scholar_case?case=3357965753455607838&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Montano,</i> 414 S.W.3d at 736</a>. Our opinions in <i>Long</i> and <i>Montano</i>referenced and followed <i>El Apple,</i> and both resulted in remand to the trial court for redetermination of attorney's fees. <i>See </i><a href="https://scholar.google.com/scholar_case?case=7752149503288853185&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Long,</i> 442 S.W.3d at 255-56</a>; <a href="https://scholar.google.com/scholar_case?case=3357965753455607838&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Montano,</i> 414 S.W.3d at 736-37</a>. The second part of <i>El Apple</i>'s two-step analysis—adjusting the base calculation up or down based on relevant considerations—remains very much intact. Like our federal counterpart, we recognize that the base lodestar figure accounts for most of the relevant <i>Arthur Andersen</i> considerations.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=12251745114633409184&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019#[11]" name="r[11]" style="color: #660099;">[11]</a></sup> <i>See </i><a href="https://scholar.google.com/scholar_case?case=1751498717150008353&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Arthur Andersen,</i> 945 S.W.2d at 818</a>; <i>cf. </i><a href="https://scholar.google.com/scholar_case?case=14594284913231871642&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Perdue,</i> 559 U.S. at 553</a>; <a href="https://scholar.google.com/scholar_case?case=2557094556311036785&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Burlington,</i> 505 U.S. at 562-63</a>; <a href="https://scholar.google.com/scholar_case?case=14012192812481338663&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Blum,</i> 465 U.S. at 898-900</a>. And an enhancement or reduction of the base lodestar figure cannot be based on a consideration that is subsumed in the first step of the lodestar method. <i>Cf. </i><a href="https://scholar.google.com/scholar_case?case=14594284913231871642&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Perdue,</i> 559 U.S. at 553</a> (reaffirming that a lodestar enhancement may not be based on a factor that is included in the base lodestar calculation). As in the federal courts, the base lodestar calculation usually includes at least the following considerations from <i>Arthur Andersen:</i> "the time and labor required," "the novelty and difficulty of the questions involved," "the skill required to perform the legal service properly," "the fee customarily charged in the locality for similar legal services," "the amount involved," "the experience, reputation, and ability of the lawyer or lawyers performing the services," "whether the fee is fixed or contingent on results obtained," "the uncertainty of collection before the legal services have been rendered," and "results obtained."<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=12251745114633409184&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019#[12]" name="r[12]" style="color: #660099;">[12]</a></sup> <i>See </i><a href="https://scholar.google.com/scholar_case?case=1751498717150008353&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Arthur Andersen,</i> 945 S.W.2d at 818</a>; <i>cf. </i><a href="https://scholar.google.com/scholar_case?case=14594284913231871642&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Perdue,</i> 559 U.S. at 553</a> (noting that the base lodestar calculation appropriately accounts for the novelty and complexity of a case because those considerations are presumably "fully reflected in the number of billable hours recorded by counsel," and that the quality of the attorney's performance is likewise already accounted for because "considerations concerning the quality of a prevailing party's counsel's representation normally are reflected in the reasonable hourly rate" (quoting <a href="https://scholar.google.com/scholar_case?case=14012192812481338663&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Blum,</i> 465 U.S. at 898</a>; <a href="https://scholar.google.com/scholar_case?case=1400760332852773921&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Del. Valley Citizens' Council,</i> 478 U.S. at 566</a>)); <a href="https://scholar.google.com/scholar_case?case=2557094556311036785&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Burlington,</i> 505 U.S. at 562-63</a> (disallowing an enhancement for contingency because it would likely duplicate in substantial part considerations already subsumed in the base lodestar calculation, as "[t]he risk of loss in a particular case (and, therefore, the attorney's contingent risk) . . . is ordinarily reflected in the lodestar—either in the higher number of hours expended to overcome the difficulty, or in the higher hourly rate of the attorney skilled and experienced enough to do so"). These considerations therefore may not be used to enhance or reduce the base calculation to the extent that they are already reflected in the reasonable hours worked and reasonable hourly rate. If a fee claimant seeks an enhancement, it must produce specific evidence showing that a higher amount is necessary to achieve a reasonable fee award. <i>See </i><a href="https://scholar.google.com/scholar_case?case=14594284913231871642&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Perdue,</i> 559 U.S. at 553</a> (observing that the requirement of "specific evidence" is essential "if the lodestar method is to realize one of its chief virtues, <i>i.e.,</i> providing a calculation that is objective and capable of being reviewed on appeal"); <a href="https://scholar.google.com/scholar_case?case=5556380148629311996&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>El Apple,</i> 370 S.W.3d at 760</a>. Likewise, if a fee opponent seeks a reduction, it bears the burden of providing specific evidence to overcome the presumptive reasonableness of the base lodestar figure.</div>
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d. Standard Summary</h2>
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To summarize, the lodestar method as we presented it in <i>El Apple</i> applies for determining the reasonableness and necessity of attorney's fees in a fee-shifting situation:</div>
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Under the lodestar method, the determination of what constitutes a reasonable attorney's fee involves two steps. First, the [fact finder] must determine the reasonable hours spent by counsel in the case and a reasonable hourly rate for such work. The [fact finder] then multiplies the number of such hours by the applicable rate, the product of which is the base fee or lodestar. The [fact finder] may then adjust the base lodestar up or down (apply a multiplier), if relevant factors indicate an adjustment is necessary to reach a reasonable fee in the case.</blockquote>
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<a href="https://scholar.google.com/scholar_case?case=5556380148629311996&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;">370 S.W.3d at 760</a> (citations omitted). Thus, the fact finder must first determine a base lodestar figure based on reasonable hours worked multiplied by a reasonable hourly rate. <i>Id.</i> In a jury trial, the jury should be instructed that the base lodestar figure is presumed to represent reasonable and necessary attorney's fees, but other considerations may justify an enhancement or reduction to the base lodestar; accordingly, the fact finder must then determine whether evidence of those considerations overcomes the presumption and necessitates an adjustment to reach a reasonable fee. <i>Id.</i> at 765; <i>see also </i><a href="https://scholar.google.com/scholar_case?case=14594284913231871642&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Perdue,</i> 559 U.S. at 558-59</a>(suggesting that adequate appellate review is only feasible when the fact finder makes reasonably specific findings as to each step of the fee determination). <i>Arthur Andersen</i> lists relevant considerations that may justify an adjustment, but as explained above, considerations already incorporated into the base calculation may not be applied to rebut the presumption that the base calculation reflects reasonable and necessary attorney's fees. <i>See </i><a href="https://scholar.google.com/scholar_case?case=1751498717150008353&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Arthur Andersen,</i> 945 S.W.2d at 818</a>; <i>cf. </i><a href="https://scholar.google.com/scholar_case?case=14594284913231871642&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Perdue,</i> 559 U.S. at 553</a>; <a href="https://scholar.google.com/scholar_case?case=2557094556311036785&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Burlington,</i> 505 U.S. at 562-63</a>; <a href="https://scholar.google.com/scholar_case?case=14012192812481338663&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Blum,</i> 465 U.S. at 898-900</a>. General, conclusory testimony devoid of any real substance will not support a fee award. Thus, a claimant seeking an award of attorney's fees must prove the attorney's reasonable hours worked and reasonable rate by presenting sufficient evidence to support the fee award sought. <i>See </i><a href="https://scholar.google.com/scholar_case?case=7752149503288853185&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Long,</i> 442 S.W.3d at 255-56</a>; <a href="https://scholar.google.com/scholar_case?case=3357965753455607838&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Montano,</i> 414 S.W.3d at 736-37</a>; <a href="https://scholar.google.com/scholar_case?case=5556380148629311996&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>El Apple,</i> 370 S.W.3d at 763-64</a>. Sufficient evidence includes, at a minimum, evidence of (1) particular services performed, (2) who performed those services, (3) approximately when the services were performed, (4) the reasonable amount of time required to perform the services, and (5) the reasonable hourly rate for each person performing such services. <i>See </i><a href="https://scholar.google.com/scholar_case?case=5556380148629311996&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>El Apple,</i> 370 S.W.3d at 762-63</a>.</div>
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As the United States Supreme Court has observed, "[t]he lodestar method was never intended to be conclusive in all circumstances"; rather, "there is a `strong presumption' that the [base] lodestar figure is reasonable, but that presumption may be overcome in those rare circumstances in which the lodestar does not adequately take into account a factor that may properly be considered in determining a reasonable fee." <a href="https://scholar.google.com/scholar_case?case=14594284913231871642&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Perdue,</i> 559 U.S. at 553-54</a>. Thus, the second step of the lodestar method allows for the base lodestar figure to be adjusted up when considerations not already accounted for in the first step establish that the base lodestar figure represents an unreasonably low fee award, depriving fair compensation to the prevailing party's attorney. Likewise, the base lodestar figure can be adjusted down when it is established, based on considerations not already accounted for in the first step, to be an unreasonably high or excessive fee award, creating a windfall for the prevailing party or its attorney.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=12251745114633409184&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019#[13]" name="r[13]" style="color: #660099;">[13]</a></sup></div>
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e. Billing Records</h2>
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Contemporaneous billing records are not required to prove that the requested fees are reasonable and necessary. <i>See </i><a href="https://scholar.google.com/scholar_case?case=5556380148629311996&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>El Apple,</i> 370 S.W.3d at 763</a>; <i>see also </i><a href="https://scholar.google.com/scholar_case?case=3357965753455607838&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Montano,</i> 414 S.W.3d at 736</a> (explaining that "<i>El Apple</i> does not hold that a lodestar fee can only be established through time records or billing statements"). Nevertheless, billing records are <i>strongly</i> encouraged to prove the reasonableness and necessity of requested fees when those elements are contested. In <i>El Apple,</i>we acknowledged the value of contemporaneous records for lodestar calculations:</div>
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An attorney could, of course, testify to these details, but in all but the simplest cases, the attorney would probably have to refer to some type of record or documentation to provide this information. Thus, when there is an expectation that the lodestar method will be used to calculate fees, attorneys should document their time much as they would for their own clients, that is, contemporaneous billing records or other documentation recorded reasonably close to the time when the work is performed.</blockquote>
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<a href="https://scholar.google.com/scholar_case?case=5556380148629311996&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;">370 S.W.3d at 763</a>; <i>see also id.</i> at 762 (observing that hours "not properly billed to one's client also are not properly billed to one's adversary" under a fee-shifting statute (quoting <a href="https://scholar.google.com/scholar_case?case=5179727217217722884&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Hensley,</i> 461 U.S. at 434</a>)). Creating the documents makes them available for production, provides a basis for testifying as to the reasonableness and necessity of the requested fees, and permits cross-examination.</div>
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Importantly, however, we are not endorsing satellite litigation as to attorney's fees. The fact finder will generally not benefit from attorneys cross-examining each other point-by-point on every billable matter. <i>See </i><a href="https://scholar.google.com/scholar_case?case=5179727217217722884&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Hensley,</i> 461 U.S. at 437</a> ("A request for attorney's fees should not result in a second major litigation. Ideally, of course, litigants will settle the amount of a fee. Where settlement is not possible, the fee applicant bears the burden of establishing entitlement to an award and documenting the appropriate hours expended and hourly rates."). Parties should use discovery and pretrial procedure to evaluate attorney's fee claims and the evidence supporting them, then present to the fact finder the evidence relevant to determining a reasonable and necessary fee as discussed in this opinion.</div>
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<h2 style="background-color: white; border: 0px; color: #222222; font-family: Arial, sans-serif; margin: 1em 0px; padding: 0px; position: relative;">
3. Howard's Testimony</h2>
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Finally, we consider the evidence presented at trial supporting the award of attorney's fees. As mentioned, the trial court awarded $1,025,000 in attorney's fees, including the conditional awards. Because UTSW secured the attorney's fees in the final judgment over Rohrmoos, we focus on the testimony of UTSW's attorney, Wade Howard. On direct examination, Howard testified that "all I've done for my 20 years" of legal experience is litigation. "The standard rate[] that I charge is generally around $430 an hour. I know that sounds ridiculously high. I often think myself it is ridiculously high. But it is — it pays for a lot of things," namely, the logistics of running a law firm. Howard then stated:</div>
<blockquote style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; margin: 1em 0px; padding: 0px 40px; position: relative;">
I have handled cases similar in nature to this. . . . [A] reasonable and necessary amount of hours in this case, I would think would be at around 750 to 1,000 hours. So that would put the attorney's fees at my rate somewhere in the 3 to $400,000 range. Again, I know that sounds very high, but I do believe based on my experience, 20 years of experience in the legal profession, and handling these types of cases at this magnitude that [this] is really what would be a reasonable and necessary fee if this case were worked up by both sides in a reasonable and necessary fashion.</blockquote>
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Howard went on:</div>
<blockquote style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; margin: 1em 0px; padding: 0px 40px; position: relative;">
This case, for whatever reason, has not been worked up in a reasonable fashion. Now, of course, I'm going to say that I've put most of that on the other side. And I'll talk about that in a little more detail. But because of that, the fees in this case are much closer — my fees are much closer to 800 — over $800,000. Now, I will be the first to admit, that is a ridiculous number. Okay. They should never have gotten [that] high.</blockquote>
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Howard explained how Rohrmoos's actions, in his view, caused the fees to reach such a high amount. He talked about the volume of document production, saying his firm had to "search literally millions of emails to find the documents that you see here in the courtroom. And we [had] to review all of those emails when we [ran] our searches to make sure that they're relevant to this case and also that they don't contain any patient information."<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=12251745114633409184&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019#[14]" name="r[14]" style="color: #660099;">[14]</a></sup></div>
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Next, Howard described having to produce large numbers of hard-copy documents. "It was about 60 bankers boxes of documents," Howard said, and "[t]hose bankers boxes will hold — the small ones will hold around 3,000 pages, the larger ones around 7,000 pages of documents." Tasked with reviewing all those documents were the paralegals, who bill the client for their time. They "had to go through every single one of those documents, page by page, and remove all of the old patient files that we had in [those] boxes of documents. . . . That's one of the reasons why the costs in this case have gotten so ridiculously high."</div>
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From there, Howard went to depositions. "Okay. When somebody — when a witness gets deposed, both sides have to prepare for the deposition. Then you have to go to the deposition. Then you have time reviewing the deposition afterwards, getting it summarized and making it ready for if it's actually called to trial." Those get expensive, "[s]o that's another thing that's contributed." Howard testified summarily that more than forty depositions occurred in this case. He then ended with an analogy aimed at shedding light on Rohrmoos's actions:</div>
<blockquote style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; margin: 1em 0px; padding: 0px 40px; position: relative;">
[I]t's kind of like when you go to the doctor and the doctor says, I think I need to run the following tests. You, as the patient, just kind of go, okay. . . . And when a lawyer has that kind of control, they can just run up the fees. They can just say, oh, I need to investigate this. I need to do research on that. I want to file a motion on that.</blockquote>
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This all led to a lengthy discussion of motion practice. "I think [there were] four or five motions to compel" and a forty-page motion for summary judgment. Howard explained:</div>
<blockquote style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; margin: 1em 0px; padding: 0px 40px; position: relative;">
I can tell you from my experience, to draft a motion of that length is expensive. Probably was 30, $40,000 to draft that type of detailed motion on the law.</blockquote>
<blockquote style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; margin: 1em 0px; padding: 0px 40px; position: relative;">
I then have to respond to it. I file my response. He then filed a 30 or 35-page what they call reply to my response. Then we have to have a hearing on it. Lasted for several hours. That one motion alone, probably cost the parties $80,000. And in my opinion, it just wasn't necessary. It wasn't reasonable. It wasn't necessary. And it just caused both parties to spend a lot of money that wasn't necessary.</blockquote>
<blockquote style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; margin: 1em 0px; padding: 0px 40px; position: relative;">
And so, you know, again, I'm sure when [opposing counsel] takes the stand, he's going to say, I've done things that have run on up the cost. The simple reality is, both parties probably have to take some blame. The costs got way out of control here and the fees were not reasonable or necessary. I think the 3 to $400,000 range is where fees are reasonable and necessary. I do think, however, that if you find that we prevail in this case, that our fees should be something higher than that. I won't even wager a guess as to what it should be higher than that. Whatever you think is necessary. But I think our fees were higher than what were reasonable and necessary because we had to respond to all of the experts that [opposing counsel] designated. We had to appear at all the depositions that he noticed. I can't just ignore those things.</blockquote>
<blockquote style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; margin: 1em 0px; padding: 0px 40px; position: relative;">
So, if we prevail, I think our fees should be somewhat higher [than] the 3 to $400,000 range, but I'll leave that to your discretion. But I will tell you that if both sides had just approached this case in a reasonable fashion, the fees in this case should not have exceeded 3 or $400,000.</blockquote>
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That concluded Howard's direct testimony. Rohrmoos's counsel immediately moved to strike it, asserting that Howard did not comply with the <i>Arthur Andersen</i>factors to prove the reasonableness of the fees. The trial court denied the motion after Howard responded, "The amount in controversy, Your Honor, the complexity of the case, my knowledge and experience. I think that's really the factors that were relevant in this case." The court of appeals then affirmed the award, holding that "Howard's testimony concerning his experience, the total amount of fees, and the reasonableness of the fees charged was sufficient to support the award" under <i>Arthur Andersen.</i> 559 S.W.3d at 168.</div>
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We understand Howard's testimony that $800,000 in attorney's fees for trial work may seem unreasonable for a breach of lease case that implicated roughly $300,000 in damages.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=12251745114633409184&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019#[15]" name="r[15]" style="color: #660099;">[15]</a></sup> We also understand Howard's position that opposing counsel's actions drove the cost of litigation, in most instances, and that made UTSW's $800,000 in requested attorney's fees necessary, even reasonable.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=12251745114633409184&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019#[16]" name="r[16]" style="color: #660099;">[16]</a></sup>However true this may be, Howard's justification for why his fees should be $800,000—searching through "millions" of emails and reviewing "hundreds of thousands" of papers in discovery, more than forty depositions taken, and a forty-page motion for summary judgment—is too general to establish that the requested fees were reasonable and necessary. Without detail about the work done, how much time was spent on the tasks, and how he arrived at the $800,000 sum, Howard's testimony lacks the substance required to uphold a fee award. <i>See </i><a href="https://scholar.google.com/scholar_case?case=7752149503288853185&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Long,</i> 442 S.W.3d at 255-56</a>; <a href="https://scholar.google.com/scholar_case?case=3357965753455607838&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Montano,</i> 414 S.W.3d at 736-37</a>; <a href="https://scholar.google.com/scholar_case?case=5556380148629311996&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>El Apple,</i> 370 S.W.3d at 763-64</a>. Attorneys should not have to take the stand for days and testify to every detail of a three-year-long case, but they must provide more than what Howard has said here. We conclude that Howard's testimony is legally insufficient to support the attorney's fee award.</div>
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<h2 style="background-color: white; border: 0px; color: #222222; font-family: Arial, sans-serif; margin: 1em 0px; padding: 0px; position: relative;">
V. Conclusion</h2>
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In summary, we hold that a commercial tenant can terminate a commercial lease based on the landlord's prior material breach. Our holding is not inconsistent with <a href="https://scholar.google.com/scholar_case?case=16935173706944978409&q=rohrmoos&hl=en&as_sdt=4,44&as_ylo=2019" style="color: #660099;"><i>Davidow v. Inwood North Professional Group-Phase I,</i> 747 S.W.2d 373 (Tex. 1988)</a>. We affirm the court of appeals' judgment as to breach of the implied warranty of suitability, but on different grounds. We also hold that the evidence used to prove attorney's fees is not legally sufficient to support the fee award. Because the record does not provide the requisite details to support a fee award, we reverse the court of appeals' judgment as to the attorney's fee award and remand the case to the trial court for a redetermination of fees consistent with this opinion.</div>
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MOTPhttp://www.blogger.com/profile/15883011307129083993noreply@blogger.com0tag:blogger.com,1999:blog-9105536336033560224.post-80795363729650313112019-05-16T10:21:00.003-07:002019-05-24T18:07:29.453-07:00UCC vs. Common Law in Texas: Cadence Bank v. Elizondo (Tex.App. 2019) Houston appellate court panel splits in dispute between attorney and bank over charge-back for a fraudulent settlement check <div class="tr_bq" style="text-align: center;">
<b><span style="color: #cc0000;">THE CASE OF THE SCAMMED ATTORNEY: </span></b></div>
<div class="tr_bq" style="text-align: center;">
<b><span style="color: #cc0000;">WHO SHOULD BEAR THE RISK AND LOSS - BANK OR BANK CUSTOMER? </span></b></div>
<div style="text-align: center;">
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Houston court of appeals panel splits on bank's overdraft claim against attorney resulting from chargeback applied to IOLTA account when counterfeit settlement check was dishonored where bank had executed wire transfer of a large junk of the amount of the check prior to its collection based on provisional settlement credit contrary to wire transfer agreement. <i><a href="http://www.search.txcourts.gov/Case.aspx?cn=01-17-00886-CV&coa=coa01" target="_blank">Cadence Bank v. Elizondo</a></i>, No. <a href="http://www.search.txcourts.gov/Case.aspx?cn=01-17-00886-CV&coa=coa01" target="_blank">01-17-00886-CV</a> (Tex.App. - Houston [1st Dist.] May 16, 2019, no pet. h)(<a href="http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=b3adc3fe-1922-41b2-b316-6f46e56352f3&MediaID=b49250a6-13e5-4625-8722-55bdf4aec432&coa=%22%20+%20this.CurrentWebState.CurrentCourt%20+%20@%22&DT=Opinion" target="_blank">majority opinion</a>)(<a href="http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=0b5172b6-50a0-41fa-96c8-3026a227ac91&MediaID=fff2e737-fdfb-48cc-9e46-0aed4edb8474&coa=%22%20+%20this.CurrentWebState.CurrentCourt%20+%20@%22&DT=Opinion" target="_blank">dissenting opinion</a>).<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgLffCvPBcaq3XyDyNYGaCqTq8h8-FM1MhTwT8qb4HlTG6KU2EPEVTOGEHoGiGuU8VRCA_fsfn7tCpnbKFoplPMnPaU21rqLubff3WAiv-JX9VrpaPvCymeYpaZ6wRKNgndTlu0vZXQ9RS_/s1600/Cadence+Bank+v+Roy+J.+Elizondo+%2528case+style%2529.JPG" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="862" data-original-width="1146" height="150" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgLffCvPBcaq3XyDyNYGaCqTq8h8-FM1MhTwT8qb4HlTG6KU2EPEVTOGEHoGiGuU8VRCA_fsfn7tCpnbKFoplPMnPaU21rqLubff3WAiv-JX9VrpaPvCymeYpaZ6wRKNgndTlu0vZXQ9RS_/s200/Cadence+Bank+v+Roy+J.+Elizondo+%2528case+style%2529.JPG" width="200" /></a></div>
The First Court of Appeals today decided a dispute over who should bear the loss for damages caused by a sophisticated international scam involving a counterfeit cashier’s check (a purported settlement check) deposited into an attorney’s IOLTA account at Cadence Bank. The bank had wired funds representing a large portion of the provisional credit for the face value of the deposited check to an account in Japan at the attorney’s instructions, and the money was gone by time the purported settlement check was dishonored and returned unpaid. Cadence then charged back the amount of the dishonored check to the attorney’s IOLTA account, which created an overdraft in the amount of $398,980.<br />
<br />
The legal issue in the case centered on the definition of “collected balance” in the wire transfer agreement between the attorney and the bank, and whether the attorney could avoid the overdraft created by the charge-back because the bank executed the wire transfer based on provisional settlement funds that the bank had credited to the attorney’s account (making them part of the available balance), but had not yet, in fact, collected.<br />
<br />
The trial court entered a take-nothing judgment against the bank on cross-motions for summary judgment, and the majority affirmed. But one justice dissented, charging the majority with contravening “the established rule of law that the Uniform Commercial Code (the UCC) preempts common-law claims and defenses that conflict with established principles of banking and commercial law.”). The dissenting justice would have reversed the trial court and rendered judgment for Cadence based on UCC preemption of common-law defenses to a bank’s right to charge back provisional settlement funds.<br />
<br />
The attorney argued that Cadence breached its duty, as set out in the wire-transfer agreement, by transferring funds without verifying whether the funds came from a verified “collected balance” and that the wire transfer agreement was the relevant agreement for analyzing the bank’s claim. If Cadence had done the proper verification, it would have discovered that sufficient funds were not available to execute the wire transfer, and the bank would not have suffered any loss when the deposited check was later returned unpaid because it would simply have reversed the provisional credit to the IOLTA account.<br />
<br />
To the dissenting justice’s chagrin, the majority agreed with the attorney that Cadence “breached the parties’ wire transfer agreement, thereby causing the overdraft and entitling Elizondo to offset the chargeback by the amount of overdrawn funds.” It rejected the argument that the UCC preempts Elizondo’s affirmative defense of the right to an offset based on Cadence’s breach of the subsequent wire transfer agreement.<br />
<br />
Since January 1, 2019, the composition of the previously all-Republican First Court of Appeals is mixed, but in this case two long-time Republican incumbents faced off against each other. Only one of the justices on the three-member panel was elected in the Democratic sweep in November 2018. She did not write an opinion, but was in effect the swing vote between the author of the majority opinion (Laura Carter Higley) and the dissent (Evelyn V. Keyes) in this dispute over the application of the UCC and state contract law. There is a good chance the case will be taken to the Texas Supreme Court if the panel’s 2:1 disposition is not undone by the nine-member intermediate court of appeals sitting <i>en banc</i>.<br />
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<img alt="Cadence Bank Branch in Houston" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiuN6XiAcRvEx7klDN1aT5ke7oEsbPLtizpBdcf3HfGZmsBAT7AGR43eu7A2Q8G9SjSta8Fry6lDG-fc7tCXGBze0YlHmMDbk9fdYAmO6Tmh95uaDVIAHajZFl_Veu-4haKJfPPZz3QumfI/s400/DSC06368-WD-Cadence-Bank.jpg" /></div>
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<b><span style="color: #0b5394;">EXCERPT FOR MAJORITY OPINION</span></b> </div>
<blockquote class="tr_bq">
In this appeal from a take-nothing judgment, the principal issue is who is<br />
liable for funds that were wire transferred from an attorney’s IOLTA account to a<br />
third-party account overseas: the attorney or the bank? Attorney Roy J. Elizondo<br />
III and his firm, Roy J. Elizondo III, PLLC (collectively, “Elizondo”) unwittingly<br />
deposited a counterfeit check into Elizondo’s IOLTA account with Cadence Bank,<br />
N.A., and Cadence credited the account with provisional settlement funds.<br />
Elizondo then requested that Cadence wire transfer funds from his IOLTA account<br />
to a third-party account overseas, and the parties executed a wire transfer<br />
agreement under which Cadence agreed to transfer the funds from a “verified<br />
collected balance.” Cadence wire transferred the funds from Elizondo’s account,<br />
but it did not verify whether the funds came from a collected balance. The drawee<br />
bank then dishonored the counterfeit check, and Cadence charged back Elizondo’s<br />
account, resulting in an overdraft. </blockquote>
<blockquote class="tr_bq">
Cadence sued Elizondo to recover the overdrawn funds, asserting claims for<br />
breach of the parties’ underlying deposit agreement and breach of warranty under<br />
the Texas Uniform Commercial Code. See TEX. BUS. & COM. CODE § 4.207. The<br />
parties filed cross-dispositive motions, and the trial court entered judgment for<br />
Elizondo. We hold that, by depositing the counterfeit check, Elizondo breached the<br />
parties’ deposit agreement and UCC transfer warranties, thereby entitling Cadence<br />
to charge back the provisional settlement funds. See id. § 4.214(a). However, we<br />
further hold that, by failing to transfer the funds from a “verified collected<br />
balance,” Cadence subsequently breached the parties’ wire transfer agreement,<br />
thereby causing the overdraft and entitling Elizondo to offset the chargeback by the<br />
amount of overdrawn funds. Therefore, we affirm.</blockquote>
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<span style="color: #0b5394;">[...]</span></div>
<blockquote class="tr_bq">
We hold that Cadence’s breach of the wire transfer agreement entitled<br />
Elizondo to offset Cadence’s chargeback by the amount of the overdrawn funds as<br />
a matter of law.<br />
<div style="text-align: center;">
* * *</div>
In sum, Elizondo breached the UCC and the parties’ Deposit Agreement by<br />
depositing the counterfeit check into his IOLTA bank account. Elizondo and<br />
Cadence then entered into a valid and enforceable agreement to wire transfer funds<br />
from Elizondo’s account. The agreement required Cadence to wire transfer the<br />
funds from a “verified collected balance.” Cadence breached the agreement by<br />
making the transfer using the provisional settlement funds credited to Elizondo’s<br />
account for the unpaid, counterfeit check. Had Cadence not breached the<br />
agreement, the chargeback made by Cadence to Elizondo’s account would not<br />
have resulted in an overdraft. Thus, although Cadence had the right under the UCC<br />
and the Deposit Agreement to charge back the provisional settlement funds,<br />
Elizondo was entitled to offset the chargeback by the amount of the overdrawn<br />
funds, thereby negating Cadence’s alleged damages. We hold that the trial court<br />
did not err in granting Elizondo’s motion for summary judgment. Accordingly, we<br />
overrule Cadence’s two issues..</blockquote>
<div style="text-align: center;">
Cadence Bank v. Roy J. Elizondo III, and Roy J. Elizondo III PLLC, No. <a href="http://www.search.txcourts.gov/Case.aspx?cn=01-17-00886-CV&coa=coa01" target="_blank">01-17-00886-CV</a> (Tex.App. - Houston [1st Dist.] May 16, 2019, no pet. h) (<a href="http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=b3adc3fe-1922-41b2-b316-6f46e56352f3&MediaID=b49250a6-13e5-4625-8722-55bdf4aec432&coa=%22%20+%20this.CurrentWebState.CurrentCourt%20+%20@%22&DT=Opinion" target="_blank">majority opinion</a>)(<a href="http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=0b5172b6-50a0-41fa-96c8-3026a227ac91&MediaID=fff2e737-fdfb-48cc-9e46-0aed4edb8474&coa=%22%20+%20this.CurrentWebState.CurrentCourt%20+%20@%22&DT=Opinion" target="_blank">dissenting opinion</a>).</div>
<blockquote>
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<div style="text-align: center;">
Opinion issued May 16, 2019</div>
<div style="text-align: center;">
In The</div>
<div style="text-align: center;">
Court of Appeals</div>
<div style="text-align: center;">
For The</div>
<div style="text-align: center;">
First District of Texas</div>
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<div style="text-align: center;">
NO. 01-17-00886-CV</div>
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<div style="text-align: center;">
CADENCE BANK, Appellant</div>
<div style="text-align: center;">
V.</div>
<div style="text-align: center;">
ROY J. ELIZONDO III AND ROY J. ELIZONDO III PLLC, Appellees</div>
<div style="text-align: center;">
On Appeal from the 234th District Court</div>
<div style="text-align: center;">
Harris County, Texas</div>
<div style="text-align: center;">
Trial Court Case No. 2014-65226</div>
<b></b><br />
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<b><b><span style="color: red; font-size: large;">DISSENTING OPINION</span></b></b></div>
<b>
</b>I respectfully dissent. In this suit, appellant Cadence Bank sued appellee Roy<br />
J. Elizondo III and his law firm, Roy J. Elizondo III PLLC, to recover funds<br />
charged back to Elizondo by the bank when a cashier’s check was dishonored that<br />
Elizondo had deposited and from which he had directed that funds be wire-<br />
2<br />
transferred to a foreign third party during the provisional settlement period. The<br />
trial court entered summary judgment in favor of Elizondo on common-law<br />
counterclaims and defenses he asserted against the bank in cross-motions for<br />
summary judgment. Cadence has appealed. The majority affirms. I would not.<br />
The majority opinion contravenes the established rule of law that the<br />
Uniform Commercial Code (the UCC) preempts common-law claims and defenses<br />
that conflict with established principles of banking and commercial law. I agree<br />
with the majority that Elizondo breached both his deposit agreement with Cadence<br />
Bank (the Deposit Agreement) and the warranty he gave the bank pursuant to the<br />
UCC that the cashier’s check he had deposited into his IOLTA account at the bank<br />
was good when he directed Cadence to transfer funds from his account to a foreign<br />
entity during the provisional settlement period. I do not agree with the majority<br />
that the wire transfer form, which stated that the funds had been transferred from a<br />
“verified collected balance,” represented a separate and superseding agreement<br />
between Elizondo and Cadence in which Cadence made a false representation to<br />
Elizondo that overrode Cadence’s right under the UCC to charge the funds back to<br />
Elizondo.<br />
I would render judgment for Cadence.<br />
3<br />
Facts<br />
This case is governed by the UCC and by Elizondo’s Deposit Agreement<br />
with Cadence.<br />
Section 4.214 of the UCC provides:<br />
If a collecting bank has made provisional settlement with its customer<br />
for an item and fails by reason of dishonor, suspension of payments<br />
by a bank, or otherwise to receive settlement for the item that is or<br />
becomes final, the bank may revoke the settlement given by it, charge<br />
back the amount of any credit given for the item to its customer’s<br />
account, or obtain refund from its customer, whether or not it is able<br />
to return the item, if by its midnight deadline or within a longer<br />
reasonable time after it learns the facts it returns the item or sends<br />
notification of the facts.<br />
TEX. BUS. & COM. CODE ANN. § 4.214(a) (emphasis added).<br />
Section 4.207(a) of the UCC provides, “A customer or collecting bank that<br />
transfers an item and receives a settlement or other consideration warrants to the<br />
transferee and to any subsequent collecting bank that . . . the warrantor is a person<br />
entitled to enforce the item” and that “all signatures on the item are authentic and<br />
authorized.” Id. § 4.207(a)(1)–(2) (emphasis added). Section 4.207(b) provides, “If<br />
an item is dishonored, a customer or collecting bank transferring the item and<br />
receiving settlement or other consideration is obliged to pay the amount due on the<br />
item (i) according to the terms of the item at the time it was transferred . . . .” Id.<br />
§ 4.207(b). Finally, section 4.207(c) provides, “A person to whom the warranties<br />
under Subsection (a) are made and who took the item in good faith may recover<br />
4<br />
from the warrantor as damages for breach of warranty an amount equal to the loss<br />
suffered as a result of the breach . . . .” Id. § 4.207(c) (emphasis added). All of<br />
these provisions apply here.<br />
Section 4.201 of the UCC further provides that “[u]nless a contrary intent<br />
clearly appears and before the time that a settlement given by a collecting bank for<br />
an item becomes final, the bank, with respect to the item, is an agent or sub-agent<br />
of the owner of the item and any settlement given for the item is provisional. This<br />
provision applies . . . even though credit given for the item is subject to immediate<br />
withdrawal as of right or is in fact withdrawn . . . .” Id. § 4.201(a) (emphasis<br />
added). However, “the continuance of ownership of an item by its owner and any<br />
rights of the owner to proceeds of the item are subject to rights of a collecting<br />
bank, such as those resulting from outstanding advances on the item and rights of<br />
recoupment or setoff.” Id.<br />
Elizondo and his law firm, Roy J. Elizondo III, PLLC (collectively,<br />
“Elizondo”), maintained an IOLTA account with Cadence Bank. The Deposit<br />
Agreement signed by Elizondo and Cadence expressly affirmed the plain language<br />
of the UCC. The Deposit Agreement specifically provided that any item accepted<br />
for deposit “may be subject to later verification and final payment” and that<br />
Cadence may “deduct funds from your account if an item is . . . returned to us<br />
unpaid . . . even if you have already used the funds.” The Deposit Agreement also<br />
5<br />
stated, “Credit for any item we accept for deposit to your account . . . is provisional<br />
and may be revoked if the item is not finally paid, for any reason, in cash or its<br />
equivalent.” This provision of his Deposit Agreement with Cadence expressed<br />
Elizondo’s understanding that the requirements of UCC sections 4.214(a), 4.207,<br />
and 4.201 applied.<br />
The summary judgment record shows that it was Cadence’s policy to<br />
provide a provisional credit pending final settlement of the check deposited by<br />
Elizondo and that Elizondo knowingly ordered funds to be transferred to a<br />
Japanese account during the period when the funds were only provisionally<br />
credited to his account. These practices complied with the UCC.<br />
On Friday, September 19, 2014, a cashier’s check was delivered to<br />
Elizondo’s office, just as a putative new client Elizondo had never met in person<br />
said it would be. The check was payable to Elizondo in the amount of $496,850<br />
and drawn on JPMorgan Chase Bank, N.A. Elizondo deposited the check into his<br />
IOLTA account with Cadence, and Cadence credited the account with provisional<br />
settlement funds.<br />
On Tuesday, Elizondo contacted Cadence employee Shannon Yang-Oh and<br />
informed her that he needed to wire transfer a portion of the funds in his account to<br />
a third-party account in Japan. He sent Oh an email with the pertinent information,<br />
including the name of the receiving bank, the name of the beneficiary, and the<br />
6<br />
amount to be wired: $398,980. Oh informed Elizondo that she would “prepare [a]<br />
wire form and send it to [Elizondo] for a signature.”<br />
Oh emailed a wire transfer request form to Elizondo. The top half of the<br />
form consisted of fields already filled in with the information that Elizondo had<br />
provided Oh in his earlier email. The form included a signature box for Elizondo<br />
and a declaration stating:<br />
I understand that the bank makes no guarantees concerning the<br />
delivery of international wires. I also understand that I will be<br />
responsible for tracer fees if a problem arises or if the funds are<br />
returned. I will accept the net proceeds. I have been made aware that<br />
this process may take up to 10 business days.<br />
The bottom half of the form contained blank fields to be filled in by Cadence<br />
after Elizondo had signed and submitted the form to the bank. These blank fields<br />
included a field for the amount of the “collected balance” in the account from<br />
which the wire transfer would be made and a field for the name of the “employee<br />
who verified [the] collected balance.” Elizondo signed and emailed the form back<br />
to Oh. Oh then filled out and signed the two “collected balance” fields, indicating<br />
that the wire transfer would be made from a “collected balance” in the account of<br />
$497,643.89. Another Cadence employee, Sharita Baker, wrote in the margins of<br />
the form that $497,643.89 was Elizondo’s “available balance,” a term defined by<br />
the Deposit Agreement to mean the amount “available for immediate withdrawal.”<br />
7<br />
Finally, Assistant Branch Manager Yolanda Villatoro signed the form as the<br />
approving officer.<br />
Cadence employees testified by deposition that when they complete a wire<br />
transfer form, or otherwise provide information regarding account balances, they<br />
rely on the amount that is reflected in Cadence’s computer system, and the<br />
“collected balance” in the computer system represents the end-of-day ledger<br />
balance, minus any debits, plus any credits from the previous day. Thus,<br />
“Collected funds is just a term that is used to identify a particular field within our<br />
system.” This collected balance can include a provisional credit for a deposited<br />
check when any holds have been removed but the check still has not been finally<br />
paid. That was the case here. Moreover, both the deposit slip and the deposit<br />
receipt clearly disclosed that the deposit could be returned and was subject to the<br />
provisions of the UCC. And Elizondo’s Deposit Agreement contained his express<br />
acknowledgement that any item accepted for deposit “may be subject to later<br />
verification and final payment” and that Cadence may “deduct funds from your<br />
account if an item is . . . returned to us unpaid . . . even if you have already used<br />
the funds.”<br />
On Wednesday, September 24, Cadence wire transferred $398,980 to the<br />
Japanese bank account using the provisional settlement funds that Cadence had<br />
credited to Elizondo’s account. The cashier’s check was subsequently dishonored<br />
8<br />
by Chase and returned to Cadence unpaid. Cadence notified Elizondo that the<br />
check had been dishonored, and it charged back the amount that had been<br />
provisionally credited to his account, resulting in a negative account balance of<br />
$398,980.<br />
Cadence demanded that Elizondo repay the overdrawn funds. When<br />
Elizondo refused, Cadence sued Elizondo to recover the overdrawn funds,<br />
asserting claims for breach of Elizondo’s Deposit Agreement and breach of<br />
warranty under the Texas UCC. See TEX. BUS. & COM. CODE ANN. § 4.207(a); see<br />
also id. §§ 4.201(a), 4.207(b)–(c), 4.214(a).<br />
Elizondo raised defenses and filed a counterclaim against Cadence, alleging<br />
common-law causes of action for breach of contract, negligent misrepresentation,<br />
and fraud. He based his claims and defenses on the statement in the wire transfer<br />
request form that the funds were transferred from “a verified collected balance,”<br />
arguing that the balance had not yet been “collected” as Elizondo was using the<br />
term, although the validity of the check had been provisionally verified by<br />
Elizondo himself, the bank had provisionally deposited the funds into his account,<br />
and these practices were fully compliant with the UCC provisions permitting a<br />
bank to charge back to its customer funds ordered transferred from the account by<br />
the customer during the provisional settlement period.<br />
9<br />
The parties filed cross-motions for summary judgment, and the trial court<br />
entered judgment for Elizondo.<br />
Analysis<br />
A. Arguments of the parties<br />
Cadence argues that the trial court erred in denying its motion for summary<br />
judgment because the evidence proves as a matter of law that Elizondo is liable for<br />
breach of warranty under the UCC and for breach of the parties’ Deposit<br />
Agreement. Specifically, Cadence contends that by depositing a counterfeit check<br />
into his bank account Elizondo breached his warranties to Cadence under UCC<br />
section 4.207 that he was “entitled to enforce” the cashier’s check he deposited and<br />
that “all signatures” on the check were “authentic and authorized.” See id.<br />
§ 4.207(a)(1)–(2). Cadence further contends that because it took the check “in<br />
good faith” it was entitled under section 4.207(c) to recover from Elizondo as<br />
damages the amount of the overdraft plus expenses. See id. § 4.207(c) (providing<br />
that warrantee who takes item in good faith may recover as damages amount equal<br />
to loss suffered from breach plus expenses).<br />
Cadence further contends that it is entitled to charge back the provisional<br />
credit to Elizondo’s account and to obtain a refund in the amount of the counterfeit<br />
check under UCC sections 4.201 and 4.214 and Article E, Sections 1, 2, and 14 of<br />
the Deposit Agreement with Elizondo. See id. § 4.201(a) (providing that bank<br />
10<br />
receives check as customer’s agent and that settlement for check is provisional); id.<br />
§ 4.214(a) (providing bank’s right to charge back provisional settlement for<br />
dishonored check). Finally, Cadence contends that the UCC, supplemented by the<br />
Deposit Agreement, preempts Elizondo’s common-law claims and defenses. Thus,<br />
Cadence contends the trial court erred in denying its motion for summary judgment<br />
on its claims for breach of warranty and breach of contract.<br />
Elizondo does not dispute that he breached the transfer warranties of section<br />
4.207 by depositing the counterfeit check. Nor does he dispute that the UCC and<br />
the Deposit Agreement entitle Cadence to charge back provisional settlement funds<br />
credited to an account for a check that is deposited but later dishonored by the<br />
drawee. However, Elizondo argues that his breaches did not cause Cadence’s<br />
damages; they were caused by Cadence’s superseding breach by representing the<br />
transferred funds on the transfer form as transferred from a “verified collected<br />
balance” during the provisional settlement period; therefore, Cadence is not<br />
entitled to recover the overdraft resulting from the charge-back in this case.<br />
Accepting Elizondo’s argument upends the carefully articulated terms of the<br />
UCC and the Deposit Agreement set out above in direct contravention of<br />
controlling law. Accordingly, I dissent.<br />
11<br />
B. Applicable law<br />
Under Texas law, the UCC regulates a bank’s relationship with its Texas<br />
customers. See generally id. §§ 3.101–.605 (negotiable instruments); id. §§ 4.101–<br />
.504 (bank deposits and collections); id. §§ 4A.101–.507 (funds transfers). “The<br />
relationship may also be governed in part by agreements between the bank and its<br />
customer, such as an agreement governing the processing of negotiable instruments<br />
presented to the bank.” Contractors Source, Inc. v. Amegy Bank Nat’l Ass’n, 462<br />
S.W.3d 128, 133 (Tex. App.—Houston [1st Dist.] 2015, no pet.).<br />
The UCC “contains a comprehensive and carefully considered allocation of<br />
responsibility among parties to banking relationships.” Sw. Bank v. Info. Support<br />
Concepts, Inc., 149 S.W.3d 104, 107 (Tex. 2004). It “must be liberally construed<br />
and applied to promote its underlying purposes and policies.” TEX. BUS. & COM.<br />
CODE ANN. § 1.103(a). Those purposes and polices are “(1) to simplify, clarify and<br />
modernize the law governing commercial transactions; (2) to permit the continued<br />
expansion of commercial practices through custom, usage and agreement of the<br />
parties; and (3) to make uniform the law among the various jurisdictions.” Id.; see<br />
Sw. Bank, 149 S.W.3d at 110.<br />
The UCC also provides, “Unless displaced by the particular provisions of<br />
this title, the principles of law and equity . . . shall supplement [the UCC’s]<br />
provisions.” TEX. BUS. & COM. CODE ANN. § 1.103(b). However, “while principles<br />
12<br />
of common law and equity may supplement provisions of the Uniform Commercial<br />
Code, they may not be used to supplant its provisions, or the purposes and policies<br />
those provisions reflect, unless a specific provision of the Uniform Commercial<br />
Code provides otherwise.” TEX. BUS. & COM. CODE ANN. § 1.103 cmt. 2 (emphasis<br />
in original)1<br />
; see Contractors Source, 462 S.W.3d at 138 (“To the extent they do<br />
not conflict with the Uniform Commercial Code’s provisions, common law<br />
principles complement the Uniform Commercial Code.”) (quoting Plano Lincoln<br />
Mercury, Inc. v. Roberts, 167 S.W.3d 616, 624 (Tex. App.—Dallas 2005, no pet.)).<br />
Thus, unless a specific provision of the UCC provides otherwise, the UCC<br />
“preempts principles of common law and equity that are inconsistent with either its<br />
provisions or its purposes and policies.” TEX. BUS. & COM. CODE ANN. § 1.103<br />
cmt. 2. The UCC’s preemptive effect “extends to displacement of other law that is<br />
inconsistent with the purposes and policies of the Uniform Commercial Code, as<br />
well as with its text.” Id.<br />
Chapter 4 of the UCC establishes the rights and duties between banks and<br />
their customers regarding deposits and collections. See id. §§ 4.101–.504; Am.<br />
Airlines Emps. Fed. Credit Union v. Martin, 29 S.W.3d 86, 91 (Tex. 2000).<br />
1 As the Fifth Circuit Court of Appeals has recently observed, “The UCC official<br />
commentary is an authoritative interpretation of the Code.” Jones v. Wells Fargo<br />
Bank, N.A., 666 F.3d 955, 960 n.5 (5th Cir. 2012). “Barring a contrary<br />
interpretation from the Texas courts, we are guided by the official commentary.”<br />
Id.<br />
13<br />
Chapter 4 imposes certain warranty obligations on customers who deposit checks<br />
drawn on other banks, establishes the circumstances under which settlements for<br />
such checks are provisional, and gives banks the right to charge back such<br />
settlements in the event that the check is dishonored by the drawee bank.<br />
Section 4.207 of the UCC imposes the warranty obligations. Under section<br />
4.207, when a customer deposits a check into his bank account and receives a<br />
settlement or other consideration for the check, he makes certain warranties to the<br />
bank. TEX. BUS. & COM. CODE ANN. § 4.207(a). Those warranties include that the<br />
customer is “a person entitled to enforce the item” and that “all signatures on the<br />
item are authentic and authorized.” Id. § 4.207(a)(1)–(2). These warranties “cannot<br />
be disclaimed with respect to checks.” Id. § 4.207(d). If the customer breaches<br />
these warranties, a bank that took the check “in good faith” may recover from the<br />
customer as damages “an amount equal to the loss suffered as a result of the<br />
breach, but not more than the amount of the item plus expenses and loss of interest<br />
incurred as a result of the breach.” Id. § 4.207(c).<br />
Section 4.201 establishes the provisional status of settlements. Under section<br />
4.201, when a bank collects on a check deposited by its customer, the bank acts as<br />
the customer’s agent. Id. § 4.201(a). Unless a contrary intent clearly appears, any<br />
settlement given for the check is provisional until the settlement becomes final. Id.<br />
14<br />
Section 4.201 applies even if credit given for the check is subject to immediate<br />
withdrawal or is in fact withdrawn. Id.<br />
Section 4.214 establishes a bank’s right of charge-back. Under Section<br />
4.214, if a customer deposits a check into his bank account and the bank credits the<br />
customer’s account with provisional settlement funds, the bank may revoke the<br />
settlement and charge back the account if the check is later dishonored by the<br />
drawee. Id. § 4.214(a).<br />
Finally, section 4.103 of the UCC states, in relevant part, that “[t]he effect of<br />
the provisions of this chapter may be varied by agreement.” Id. § 4.103(a). The<br />
official comments explain that section 4.103 “confers blanket power to vary all<br />
provisions of the Article by agreements of the ordinary kind.” Id. § 4.103 cmt. 2.<br />
“The agreement may be direct, as between the owner and the depositary bank; or<br />
indirect, as in the case in which the owner authorizes a particular type of procedure<br />
and any bank in the collection chain acts pursuant to such authorization.” Id. As<br />
applicable here, section 4.103 provides that the terms of the UCC may be varied by<br />
a customer’s deposit account agreement with a bank. However, Elizondo’s Deposit<br />
Agreement was in accord with all of these UCC provisions.<br />
C. The UCC preempts Elizondo’s common-law and equitable<br />
defenses<br />
Contrary to Elizondo’s argument and the majority’s holding, principles of<br />
common law and equity cannot alter the “comprehensive and carefully considered<br />
15<br />
allocation of responsibility among parties to banking relationships.” See Am.<br />
Dream Team, Inc. v. Citizens State Bank, 481 S.W.3d 725, 732 (Tex. App.—Tyler<br />
2015, pet. denied) (citing Sw. Bank, 149 S.W.3d at 107, and Martin, 29 S.W.3d at<br />
91). Accordingly, the UCC preempts common-law defenses to a bank’s right to<br />
charge back provisional settlement funds. See, e.g., id. (holding that depositor’s<br />
claim that charge back breached deposit agreement was preempted by UCC);<br />
Avanta Fed. Credit Union v. Shupak, 223 P.3d 863, 871 (Mont. 2009) (holding that<br />
credit union’s statutory charge-back rights were not subject to equitable estoppel).<br />
The Texas courts have consistently followed this reasoning. See Martin, 29<br />
S.W.3d at 91 (stating that UCC Chapter 4 establishes rights and duties between<br />
banks and their customers regarding deposits and collections); Rodriguez v. NBC<br />
Bank, 5 S.W.3d 756, 765 (Tex. App.—San Antonio 1999, no pet.) (holding that<br />
bank was entitled to charge item back to its customer’s account after payor bank<br />
initially paid item but then subsequently reversed payment); Bill Hart Auto Sales,<br />
Inc. v. Comerica Bank-Tex., 893 S.W.2d 705, 708 (Tex. App.—Eastland 1995, no<br />
pet.) (holding that when customer “authorized the transfer of the funds from its<br />
account, that authorization did not affect the Bank’s right to charge-back the<br />
account for the provisional credit when the Bank failed to receive a settlement for<br />
the item from the drawee bank”).<br />
16<br />
Elizondo ignores the plain language of the UCC, as well as his Deposit<br />
Agreement. He argues that the form requesting that funds be wire-transferred from<br />
his account to a third-party account constituted a subsequent enforceable<br />
agreement with Cadence. He contends that Cadence had a duty under the wiretransfer agreement to transfer the funds from a “verified collected balance”—<br />
which he construes as funds that have actually been collected and their collection<br />
verified, not funds that are only provisionally verified subject to settlement, in<br />
accordance with the bank’s custom and practice and the UCC. He further claims<br />
that Cadence breached its duty, as set out in the wire-transfer agreement, by<br />
transferring funds without verifying whether the funds came from a “collected<br />
balance.” He argues that if Cadence had fulfilled its duty and inquired into the<br />
“collected balance” prior to the wire transfer, it would have determined that he<br />
lacked sufficient funds in the account to complete the wire transfer and it would<br />
not have allowed the wire transfer with provisional funds from a check that had not<br />
been settled by Chase, the drawee bank. Elizondo contends that, if Cadence had<br />
not honored his wire transfer request until after it had collected the settlement<br />
funds from Chase, Cadence would simply have charged back the provisional credit<br />
to Elizondo with no loss to Cadence. Therefore, Elizondo argues, Cadence’s<br />
damages were the result of Cadence’s own actions. Elizondo also argues that<br />
Cadence’s breach of the wire transfer agreement by completing the transfer with<br />
17<br />
only provisionally collected funds entitle him to offset the charge-back by the<br />
amount of the overdraft. The majority agrees with him.<br />
This is not, however, how the law works, as it would nullify Elizondo’s<br />
warranty that the funds represented by the cashier’s check were good, his knowing<br />
request that the funds be transferred while only provisionally deemed collected, his<br />
acceptance of the risk that the funds would not ultimately prove collectible from<br />
Chase, and his agreement in the Deposit Agreement that, should the check be<br />
dishonored by Chase, Cadence could charge the overdraft back to him. In other<br />
words, Elizondo’s argument—which the majority accepts—contradicts the terms<br />
of both the UCC and the Deposit Agreement he executed.<br />
As the majority acknowledges, once the check was dishonored by Chase,<br />
Cadence was entitled to charge back the provisional settlement funds. See Slip Op.<br />
at 2 (citing TEX. BUS. & COM. CODE ANN. § 4.214(a)).<br />
The majority, however, denies that section 4.214(a) controls this case,<br />
holding that, “by failing to transfer the funds from a ‘verified collected balance,’”<br />
as it uniquely defines that term, Cadence “breached the parties’ wire transfer<br />
agreement, thereby causing the overdraft and entitling Elizondo to offset the<br />
chargeback by the amount of overdrawn funds.” Slip Op. at 2. This holding is<br />
contradictory to the plain language of both the UCC and the Deposit Agreement<br />
and depends entirely upon Elizondo’s and the majority’s own construction of the<br />
18<br />
term “verified collected balance,” which is contrary to that used by Cadence in its<br />
ordinary course of business and is inconsistent with the purposes and text of both<br />
the UCC and the Deposit Agreement set out above. See TEX. BUS. & COM. CODE<br />
ANN. § 1.103 cmt. 2 (“[W]hile principles of common law and equity may<br />
supplement provisions of the Uniform Commercial Code, they may not be used to<br />
supplant its provisions, or the purposes and policies those provisions reflect, unless<br />
a specific provision of the Uniform Commercial Code provides otherwise.”).<br />
Elizondo and the majority argue, however, that the UCC does not<br />
necessarily preempt common-law defenses to a bank’s right to recover an overdraft<br />
caused by a statutory charge back of provisional settlement funds. Slip Op. at 20.<br />
Relying on its own construction of terms and common-law principles, the majority<br />
“hold[s] that the parties entered into a valid, enforceable agreement to wire transfer<br />
funds from Elizondo’s account to a third-party account in Japan and that the terms<br />
of that agreement are set forth in the wire transfer request form.” Slip Op. at 24. It<br />
then holds that Cadence breached the contract by signing the blank on the wiretransfer agreement Elizondo had returned to the bank which stated that the funds<br />
were transferred from a “verified collected balance,” when the funds in Elizondo’s<br />
account had not been verified as actually being in the account, as opposed to being<br />
provisionally settled under Elizondo’s warranty, and that Cadence therefore must<br />
bear the loss. See Slip Op. at 25–31. Notably, the only cases the majority cites in<br />
19<br />
support of its holding that Elizondo’s claims against Cadence are not preempted by<br />
the UCC are cases from other states based on a bank’s misrepresentation to its<br />
customer, not to itself on a wire-transfer form. See Slip Op. at 20 (citing cases).<br />
In reaching its holding, the majority does exactly what the UCC prohibits: it<br />
relies on its own construction of terms and common-law principles that directly<br />
contradict the principles and text of the UCC.<br />
Not only does no provision of the UCC provide otherwise, the Deposit<br />
Agreement Elizondo signed expressly affirms the plain language of section 4.214.<br />
The Deposit Agreement specifically provides that any item accepted for deposit<br />
“may be subject to later verification and final payment,” and Cadence may “deduct<br />
funds from your account if an item is . . . returned to us unpaid . . . even if you<br />
have already used the funds.” It also expressly states, “Credit for any item we<br />
accept for deposit to your account . . . is provisional and may be revoked if the<br />
item is not finally paid, for any reason, in cash or its equivalent,” and it was<br />
Cadence’s policy to provide a provisional credit pending final settlement of the<br />
check.<br />
In Southwest Bank, a similar case, the Texas Supreme Court refused to apply<br />
proportionate responsibility provisions of the Texas Civil Practice and Remedies<br />
Code by refusing to permit a bank to join an employee who deposited her<br />
employer’s checks into her personal account at the bank as a responsible third<br />
20<br />
party in the employer’s conversion action against the bank. Id. at 104–05. The<br />
court reasoned, “Were we to impose Texas’s proportionate responsibility scheme<br />
on Revised Article 3 [of the UCC], parties litigating UCC-based conversion claims<br />
in Texas would face a unique liability scheme, overriding the UCC’s express<br />
purpose of furthering uniformity among the states.” Id. at 110. It further observed,<br />
“[T]he UCC is ‘carefully integrated and intended as a uniform codification of<br />
permanent character covering an entire ‘field’ of law, [and] is to be regarded as<br />
particularly resistant to implied repeal.’” Id. at 111 (quoting TEX. BUS. & COM.<br />
CODE ANN. § 1.104 cmt. 1).<br />
The situation in Southwest Bank is analogous to that in this case. Yet here,<br />
rather than following the Texas Supreme Court, the majority overrides UCC<br />
sections 4.201, 4.207, and 4.214, allowing the bank to charge back to the customer<br />
unpaid funds the customer ordered transferred during the time in which the funds<br />
were only provisionally collected, and Elizondo’s Deposit Agreement expressly<br />
acknowledging that right of the bank under the UCC.<br />
21<br />
Conclusion<br />
I would hold that Cadence was entitled to summary judgment. Accordingly,<br />
I would reverse the trial court’s judgment and render judgment for Cadence Bank.<br />
Evelyn V. Keyes<br />
Justice<br />
Panel consists of Justices Keyes, Higley, and Landau.<br />
Justice Keyes, dissenting.<br />
<br />
<div style="text-align: center;">
Opinion issued May 16, 2019</div>
<div style="text-align: center;">
In The</div>
<div style="text-align: center;">
Court of Appeals</div>
<div style="text-align: center;">
For The</div>
<div style="text-align: center;">
First District of Texas</div>
<div style="text-align: center;">
————————————</div>
<div style="text-align: center;">
NO. 01-17-00886-CV</div>
<div style="text-align: center;">
———————————</div>
<div style="text-align: center;">
CADENCE BANK, Appellant</div>
<div style="text-align: center;">
V.</div>
<div style="text-align: center;">
ROY J. ELIZONDO III AND ROY J. ELIZONDO III PLLC, Appellees</div>
<div style="text-align: center;">
On Appeal from the 234th District Court</div>
<div style="text-align: center;">
Harris County, Texas</div>
<div style="text-align: center;">
Trial Court Case No. 2014-65226</div>
<b></b><br />
<div style="text-align: center;">
<b><b><span style="color: #0b5394; font-size: large;">MAJORITY OPINION </span></b></b></div>
<b>
</b>In this appeal from a take-nothing judgment, the principal issue is who is<br />
liable for funds that were wire transferred from an attorney’s IOLTA account to a<br />
third-party account overseas: the attorney or the bank? Attorney Roy J. Elizondo<br />
III and his firm, Roy J. Elizondo III, PLLC (collectively, “Elizondo”) unwittingly<br />
2<br />
deposited a counterfeit check into Elizondo’s IOLTA account with Cadence Bank,<br />
N.A., and Cadence credited the account with provisional settlement funds.<br />
Elizondo then requested that Cadence wire transfer funds from his IOLTA account<br />
to a third-party account overseas, and the parties executed a wire transfer<br />
agreement under which Cadence agreed to transfer the funds from a “verified<br />
collected balance.” Cadence wire transferred the funds from Elizondo’s account,<br />
but it did not verify whether the funds came from a collected balance. The drawee<br />
bank then dishonored the counterfeit check, and Cadence charged back Elizondo’s<br />
account, resulting in an overdraft.<br />
Cadence sued Elizondo to recover the overdrawn funds, asserting claims for<br />
breach of the parties’ underlying deposit agreement and breach of warranty under<br />
the Texas Uniform Commercial Code. See TEX. BUS. & COM. CODE § 4.207. The<br />
parties filed cross-dispositive motions, and the trial court entered judgment for<br />
Elizondo. We hold that, by depositing the counterfeit check, Elizondo breached the<br />
parties’ deposit agreement and UCC transfer warranties, thereby entitling Cadence<br />
to charge back the provisional settlement funds. See id. § 4.214(a). However, we<br />
further hold that, by failing to transfer the funds from a “verified collected<br />
balance,” Cadence subsequently breached the parties’ wire transfer agreement,<br />
thereby causing the overdraft and entitling Elizondo to offset the chargeback by the<br />
amount of overdrawn funds. Therefore, we affirm.<br />
3<br />
Background<br />
The material facts are largely undisputed. Elizondo is a plaintiffs’ lawyer<br />
who works in Houston. He has an IOLTA deposit account with Cadence Bank.1<br />
The account is governed by a Deposit Account Agreement.<br />
In September 2014, Elizondo fell victim to a sophisticated check-fraud<br />
scam. A putative international client solicited Elizondo via email for representation<br />
in a run-of-the-mill collection action. Elizondo agreed to represent the client, and,<br />
almost immediately thereafter, the client informed Elizondo that the putative<br />
debtor had agreed to settle. The client further informed Elizondo that the debtor<br />
would mail him (Elizondo) a cashier’s check in the amount of the settlement. The<br />
client instructed Elizondo to deposit the check into his IOLTA account and to wire<br />
a portion of the funds to a third-party account in Japan. The client emphasized that<br />
time was of the essence, explaining that the dispute with the debtor had disrupted<br />
its cash-flow and caused it to fall into arrears with various entities with which it did<br />
business, including the holder of the Japanese bank account.<br />
1 For the lay reader, IOLTA stands for “Interest on Lawyer Trust Accounts.”<br />
IOLTA programs raise funds to provide legal services to indigent persons by<br />
pooling interest from lawyer trust accounts. What is IOLTA?, IOLTA.ORG:<br />
LEADERSHIP FOR EQUAL JUSTICE (Mar. 19, 2019), https://www.iolta.org/what-isiolta.<br />
4<br />
On Friday, September 19, 2014, a cashier’s check was delivered to<br />
Elizondo’s office, just as the putative client said it would. The check was payable<br />
to Elizondo in the amount of $496,850 and drawn on JPMorgan Chase Bank, N.A.<br />
The following Monday, September 22, Elizondo deposited the check into his<br />
Cadence bank account. That same day, Cadence provisionally credited Elizondo’s<br />
account for the amount of the check.<br />
On Tuesday, September 23, Elizondo contacted Cadence employee S. YangOh and informed her that he needed to wire transfer a portion of the funds in his<br />
account to a third-party account in Japan. He sent Oh an email with the pertinent<br />
information, including the name of the receiving bank, the name of the beneficiary,<br />
and the amount to be wired ($398,980). Oh responded that she would “prepare [a]<br />
wire form and send it to [Elizondo] for a signature.”<br />
Later that day, Oh emailed Elizondo a wire transfer request form. The top<br />
half of the form consisted of fields filled in with the information that Elizondo had<br />
provided Oh in his earlier email. It included a signature box for Elizondo and a<br />
declaration stating:<br />
I understand that the bank makes no guarantees concerning the<br />
delivery of international wires. I also understand that I will be<br />
responsible for tracer fees if a problem arises or if the funds are<br />
returned. I will accept the net proceeds. I have been made aware that<br />
this process may take up to 10 business days.<br />
5<br />
The bottom half of the form included a field that listed Cadence’s fee for the<br />
wire transfer as $55. The rest of the bottom half consisted of blank fields to be<br />
filled in by Cadence after Elizondo had signed and submitted the form. As relevant<br />
here, these included a field for the amount of the “collected balance” from which<br />
the wire transfer would be made and a field for the name of the “employee who<br />
verified [the] collected balance.” The form stated that these two fields “must be<br />
filled in” by Cadence. The bottom half of the form also included a signature box<br />
for the Cadence officer who approved the wire transfer. The form instructed the<br />
officer as follows:<br />
Before signing off, be sure you “know your customer” and have<br />
verified the collected balance and documented any exception<br />
approvals.<br />
The form did not define “collected balance.”<br />
Elizondo signed and emailed the form back to Oh. Oh then filled out and<br />
signed the two “collected balance” fields, indicating that the transfer would be<br />
made from a “collected balance” of $497,643.89. Oh did not verify whether<br />
$497,643.89 had actually been deposited into Elizondo’s account or whether<br />
payment had been received for the check Elizondo had deposited earlier that<br />
Monday. Another Cadence employee, S. Baker, wrote in the margins of the form<br />
that $497,643.89 was Elizondo’s “available balance,” a term defined by the<br />
6<br />
Deposit Agreement to mean the amount “available for immediate withdrawal.”<br />
Assistant Branch Manager Y. Villatoro signed the form as the approving officer.<br />
On Wednesday, September 24, Cadence wire transferred $398,980 to the<br />
Japanese bank account using the provisional settlement funds that Cadence had<br />
credited to Elizondo’s account on Monday.<br />
On Thursday, September 25, the cashier’s check was dishonored by Chase<br />
and returned to Cadence unpaid. Cadence notified Elizondo that the check had<br />
been dishonored and charged back the amount that had been provisionally credited<br />
to his account, resulting in a negative balance of $398,980. Cadence demanded that<br />
Elizondo repay the overdrawn funds. Elizondo refused.<br />
In November 2014, Cadence filed its original petition against Elizondo.<br />
Cadence asserted claims for breach of contract based on the parties’ Deposit<br />
Agreement and breach of warranty under Section 2.07 of the Texas UCC. Cadence<br />
sought to recover the amount of the overdrawn funds ($398,980) plus fees and<br />
costs.<br />
Elizondo filed an answer, asserting a general denial and various affirmative<br />
defenses, including the right to an offset. See TEX. R. CIV. P. 94. Elizondo also<br />
asserted a counterclaim for breach of contract based the wire transfer request form,<br />
arguing that Cadence had breached the parties’ agreement by failing to transfer the<br />
funds from a “verified collected balance.”<br />
7<br />
In February 2017, Cadence filed a motion for summary judgment. Cadence<br />
asserted that it was entitled to summary judgment on its breach-of-contract claim<br />
under three sections of the Deposit Agreement:<br />
• Article E, Section 1, which provides that all items accepted for deposit are<br />
subject to later verification and final payment and that credit for an item<br />
accepted for deposit is provisional and may be revoked if the item is not<br />
finally paid for any reason;<br />
• Article E, Section 2, which provides that items delivered to Cadence for<br />
deposit are received by Cadence as the agent of the account holder and at the<br />
account holder’s risk; and<br />
• Article E, Section 14, which provides that Cadence may charge back a<br />
deposited item drawn on another bank if the item is returned to Cadence for<br />
any reason.<br />
Cadence argued that, because the counterfeit cashier’s check was returned<br />
unpaid, the Deposit Agreement entitled Cadence to reverse the provisional credit to<br />
Elizondo’s account and recover the overdrawn funds from Elizondo.<br />
Cadence also asserted that it was entitled to summary judgment on its claim<br />
for breach of warranty under Section 2.07 of the Texas UCC. Specifically,<br />
Cadence asserted that, by depositing the counterfeit check, Elizondo breached his<br />
warranties that “all signatures” on the check were “authentic and authorized” and<br />
that “the person on whose account the item is drawn authorized the issuance of the<br />
item in the amount for which the item is drawn.” TEX. BUS. & COM.<br />
CODE § 4.207(a)(2), (6). Cadence further asserted that, as a result of Elizondo’s<br />
breaches, it was entitled to charge back the provisional credit and recover as<br />
8<br />
damages the amount of the overdraft. See id. §§ 4.207(c) (permitting warrantee to<br />
recover as damages “an amount equal to the loss suffered as a result of the<br />
breach”), 4.214 (permitting bank to charge back provisional settlement funds for<br />
deposited check that is later dishonored by drawee).<br />
Elizondo filed a response to Cadence’s motion for summary judgment. He<br />
also filed his own motion for summary judgment on his breach-of-contract claim.<br />
Elizondo asserted that the wire transfer request form was a valid, enforceable<br />
contract that required the funds to be transferred from a “verified collected<br />
balance.” Elizondo argued that Cadence breached the contract by transferring the<br />
funds from a balance that consisted of provisional settlement funds from an unpaid<br />
check. Elizondo further argued that Cadence’s breach caused the overdraft and<br />
therefore entitled him to offset Cadence’s right to a chargeback by the amount of<br />
the improperly transferred funds, resulting in zero damages to Cadence. Elizondo<br />
supported his argument with the deposition testimony of his expert witness,<br />
Kenneth Lehrer, who testified that a “collected balance” is an industry term that<br />
refers to a “depositor’s balance minus deposited check in the process of collection,<br />
i.e., minus checks that have not been actually paid by the paying bank.”<br />
Cadence filed a response to Elizondo’s motion for summary judgment.<br />
Cadence asserted that the wire transfer request form did not constitute a valid,<br />
enforceable contract and that the only valid contract between the parties was the<br />
9<br />
Deposit Agreement. Cadence further asserted that Elizondo misconstrued the<br />
meaning of “collected balance,” which, according to Cadence, does not necessarily<br />
consist of funds that have actually been received and can include provisional funds<br />
from unpaid checks. Cadence supported its construction of “collected balance”<br />
with the deposition testimony of its corporate representative and branch<br />
administration manager, J. Scott, who testified that Cadence has its own, internal<br />
definition of “collected balance.” And under this internal definition, Scott testified,<br />
a “collected balance” is “the end-of-day ledger balance less any debits plus any<br />
credits from the previous day.” Scott further testified that the term “collected<br />
funds” does not necessarily include funds from checks that have been paid but<br />
rather simply refers to funds that are available for use.<br />
Cadence further argued that, even if Elizondo had correctly construed<br />
“collected balance,” Elizondo still bore the risk of loss for the transferred funds<br />
because funds deposited into a bank account can be challenged for up to three<br />
years after deposit. According to Cadence, “even if the check had been initially<br />
paid by [Chase], nothing could have prevented [Chase] from bringing claims<br />
against Cadence or Elizondo for up to three years in the future as a result of<br />
[Elizondo’s] decision to negotiate and deposit a fraudulent and/or counterfeit<br />
check.” Finally, Cadence argued that Elizondo’s defensive theory would lead to<br />
absurd results: “if followed, [Elizondo’s] creative contractual interpretation theory<br />
10<br />
would mean that for every single wire transfer Cadence Bank made, it would no<br />
longer seek to recover the money back from its own customer.”<br />
The trial court held a hearing on Cadence’s and Elizondo’s motions for<br />
summary judgment. After the hearing, the trial court denied Cadence’s motion,<br />
granted Elizondo’s motion, and rendered a take-nothing judgment. Cadence<br />
appeals.<br />
Cross-Motions for Summary Judgment<br />
In two issues, Cadence contends that the trial court erred in denying its<br />
motion for summary judgment and in granting Elizondo’s motion for summary<br />
judgment. According to Cadence, this case is governed by Chapter 4 of the UCC<br />
and the parties’ Deposit Agreement. Cadence contends that it proved as a matter of<br />
law that Elizondo is liable for breach of UCC transfer warranties and that Cadence<br />
is entitled to reverse the provisional settlement funds credited to Elizondo’s<br />
account and to recover as damages the amount of the resulting overdraft under both<br />
the UCC and the Deposit Agreement. Cadence further contends that Elizondo’s<br />
defenses are preempted by the UCC or otherwise fail to raise a genuine issue of<br />
material fact and that Elizondo failed to prove as a matter of law each element of<br />
his claim for breach of contract.<br />
Elizondo responds that the case is governed by the wire transfer request<br />
form, which, according to Elizondo, constitutes a valid, enforceable contract that is<br />
11<br />
supported, not preempted, by the UCC. Elizondo contends that the contract<br />
required Cadence to wire transfer the funds from a “verified collected balance” and<br />
that Cadence breached the contract by transferring the funds using provisional<br />
credit for an uncollected check. Elizondo further contends that Cadence’s breach<br />
caused the overdraft to his account and therefore entitles him to offset Cadence’s<br />
chargeback by the amount of the overdrawn funds. Because the offset negates<br />
Cadence’s damages, Elizondo concludes, the trial court properly entered a takenothing judgment in his favor.<br />
A. Standard of review<br />
We review an order granting or denying a motion for summary judgment de<br />
novo. Charles R. Tips Family Tr. v. PB Commercial LLC, 459 S.W.3d 147, 152<br />
(Tex. App.—Houston [1st Dist.] 2015, no pet.). When, as here, both parties moved<br />
for summary judgment and the trial court granted one and denied the other, we<br />
review the summary judgment evidence presented by each party, determine all<br />
questions presented, and render judgment as the trial court should have rendered.<br />
Id. We may affirm the judgment that the trial court rendered or reverse and render<br />
the judgment that the trial court should have rendered. Id.<br />
12<br />
B. Applicable law<br />
1. The UCC governs banking relationships and preempts<br />
inconsistent law<br />
Under Texas law, the UCC regulates a bank’s relationship with its Texas<br />
customers. See generally TEX. BUS. & COM. CODE §§ 3.101–.605 (negotiable<br />
instruments); id. §§ 4.101–.504 (bank deposits and collections); id. §§ 4A.101–<br />
.507 (funds transfers). “The relationship may also be governed in part by<br />
agreements between the bank and its customer, such as an agreement governing the<br />
processing of negotiable instruments presented to the bank.” Contractors Source,<br />
Inc. v. Amegy Bank Nat’l Ass’n, 462 S.W.3d 128, 133 (Tex. App.—Houston [1st<br />
Dist.] 2015, no pet.).<br />
“The UCC contains a comprehensive and carefully considered allocation of<br />
responsibility among parties to banking relationships.” Sw. Bank v. Info. Support<br />
Concepts, Inc., 149 S.W.3d 104, 107 (Tex. 2004). It “must be liberally construed<br />
and applied to promote its underlying purposes and policies.” TEX. BUS. & COM.<br />
CODE § 1.103(a). Those purposes and polices are “(1) to simplify, clarify and<br />
modernize the law governing commercial transactions; (2) to permit the continued<br />
expansion of commercial practices through custom, usage and agreement of the<br />
parties; and (3) to make uniform the law among the various jurisdictions.” Id.<br />
“To the extent they do not conflict with the Uniform Commercial Code’s<br />
provisions, common law principles complement the Uniform Commercial Code.”<br />
13<br />
Contractors Source, 462 S.W.3d at 138 (quoting Plano Lincoln Mercury, Inc. v.<br />
Roberts, 167 S.W.3d 616, 624 (Tex. App.–Dallas 2005, no pet.)); see also TEX.<br />
BUS. & COM. CODE § 1.103(b) (“Unless displaced by the particular provisions of<br />
this title, the principles of law and equity . . . shall supplement its provisions.”).<br />
“Therefore, while principles of common law and equity<br />
may supplement provisions of the Uniform Commercial Code, they may not be<br />
used to supplant its provisions, or the purposes and policies those provisions<br />
reflect, unless a specific provision of the Uniform Commercial Code provides<br />
otherwise.” TEX. BUS. & COM. CODE § 1.103 cmt 2.2 Unless a specific provision of<br />
the UCC provides otherwise, the UCC “preempts principles of common law and<br />
equity that are inconsistent with either its provisions or its purposes and policies.”<br />
Id. The UCC’s preemptive effect “extends to displacement of other law that is<br />
inconsistent with the purposes and policies of the Uniform Commercial Code, as<br />
well as with its text.” Id.<br />
2. Chapter 4 of the UCC governs deposits and collections<br />
Chapter 4 of the UCC establishes the rights and duties between banks and<br />
their customers regarding deposits and collections. See id. §§ 4.101–.504; Am.<br />
Airlines Emps. Fed. Credit Union v. Martin, 29 S.W.3d 86, 91 (Tex. 2000).<br />
2<br />
“The UCC official commentary is an authoritative interpretation of the Code.”<br />
Jones v. Wells Fargo Bank, N.A., 666 F.3d 955, 960 n.5 (5th Cir. 2012). “Barring<br />
a contrary interpretation from the Texas courts, we are guided by the official<br />
commentary.” Id.<br />
14<br />
Chapter 4 imposes certain warranty obligations on customers who deposit checks<br />
drawn on other banks, establishes the circumstances under which settlements for<br />
such checks are provisional, and gives banks the right to charge back such<br />
settlements in the event that the check is dishonored by the drawee.<br />
Section 4.207 imposes the warranty obligations. Under Section 4.207, when<br />
a customer deposits a check into his bank account and receives a settlement or<br />
other consideration for the check, he makes certain warranties to the bank. TEX.<br />
BUS. & COM. CODE § 4.207(a). Those warranties include that the customer is “a<br />
person entitled to enforce the item” and that “all signatures on the item are<br />
authentic and authorized.” Id. § 4.207(a)(1), (2). These warranties “cannot be<br />
disclaimed with respect to checks.” Id. § 4.207(d). If the customer breaches these<br />
warranties, a bank that took the check “in good faith” may recover as damages “an<br />
amount equal to the loss suffered as a result of the breach, but not more than the<br />
amount of the item plus expenses and loss of interest incurred as a result of the<br />
breach.” Id. § 4.207(c).<br />
Section 4.201 establishes the provisional status of settlements. Under<br />
Section 4.201, when a bank collects on a check deposited by its customer, the bank<br />
acts as the customer’s agent. Id. § 4.201(a). Unless a contrary intent clearly<br />
appears, any settlement given for the check is provisional until the settlement<br />
15<br />
becomes final. Id. Section 4.201 applies even if credit given for the check is<br />
subject to immediate withdrawal or is in fact withdrawn. Id.<br />
Section 4.214 establishes a bank’s right of chargeback. Under Section 4.214,<br />
if a customer deposits a check into his bank account and the bank credits the<br />
customer’s account with provisional funds, the bank may charge back the account<br />
if the check is later dishonored by the drawee. Id. § 4.214(a).<br />
Section 4.103 addresses the circumstances under which the provisions of<br />
Chapter 4 may be varied by agreement. It provides:<br />
The effect of the provisions of this chapter may be varied by<br />
agreement, but the parties to the agreement cannot disclaim a bank’s<br />
responsibility for its lack of good faith or failure to exercise ordinary<br />
care or limit the measure of damages for the lack or failure.<br />
Id. § 4.103(a). The official comments explain that Section 4.103 “confers blanket<br />
power to vary all provisions of the Article by agreements of the ordinary kind.” Id.<br />
§ 4.103 cmt. 2. “The agreement may be direct, as between the owner and the<br />
depositary bank; or indirect, as in the case in which the owner authorizes a<br />
particular type of procedure and any bank in the collection chain acts pursuant to<br />
such authorization.” Id.<br />
C. Analysis<br />
Cadence argues that the trial court erred in denying its motion for summary<br />
judgment because the evidence proves as a matter of law that Elizondo is liable for<br />
breach of warranty under the UCC and breach of the parties’ Deposit Agreement.<br />
16<br />
Cadence contends that, by depositing a counterfeit check into his bank account,<br />
Elizondo breached his warranties under Section 4.207 that he was “entitled to<br />
enforce” the check and that “all signatures” on the check were “authentic and<br />
authorized.” Id. § 4.207(a)(1), (2). And because Cadence took the check “in good<br />
faith,” Cadence was entitled under Section 4.207(c) to recover as damages the<br />
amount of the overdraft plus expenses. Id. § 4.207(c) (warrantee who takes item in<br />
good faith may recover as damages amount equal to loss suffered from breach plus<br />
expenses).<br />
Cadence contends that it was also entitled to charge back the provisional<br />
credit to Elizondo’s account and to obtain a refund in the amount of the counterfeit<br />
check under Sections 4.201 and 4.214 of UCC and Article E, Sections 1, 2, and 14<br />
of Deposit Agreement. Id. § 4.201(a) (establishing that Cadence received check as<br />
Elizondo’s agent and that settlement for check was provisional); id. § 4.214(a)<br />
(establishing bank’s right to charge back provisional settlement for dishonored<br />
check). Cadence further contends that Elizondo’s common law defenses are<br />
preempted by the various applicable provisions of the UCC, which are<br />
supplemented by the Deposit Agreement but otherwise dispositive in this case and<br />
provide a clear allocation of responsibility. Thus, Cadence concludes, the trial<br />
court erred in denying its motion for summary judgment on its claims for breach of<br />
warranty and breach of contract.<br />
17<br />
Elizondo does not dispute that he breached the transfer warranties of Section<br />
4.207. Nor does he dispute that the UCC and Deposit Agreement entitle Cadence<br />
to charge back provisional settlement funds credited to an account for a check that<br />
is deposited but later dishonored by the drawee. Elizondo disagrees, however, with<br />
Cadence’s contention that his breaches caused Cadence’s alleged damages. He<br />
likewise disagrees that Cadence was entitled to recover the overdraft resulting from<br />
the chargeback in this case. According to Elizondo, Cadence’s alleged damages<br />
were caused by Cadence itself.<br />
After he breached his Section 4.207 warranties by depositing the counterfeit<br />
check, Elizondo entered into a subsequent agreement with Cadence—an agreement<br />
to wire transfer funds from Elizondo’s account to an international third-party<br />
account. And, as a material term of that agreement, Cadence had a duty to transfer<br />
the funds from a “verified collected balance”—i.e., from funds that had actually<br />
been collected and were not merely provisional. Cadence breached this duty by<br />
wire-transferring funds without verifying whether the funds came from a collected<br />
balance. Had Cadence complied with the agreement, Elizondo argues, it would<br />
have verified that Elizondo lacked sufficient funds to complete the wire transfer<br />
and would not have completed the wire transfer with provisional funds from a<br />
check that had not been paid. Then, once Chase dishonored the check, Cadence<br />
would have charged back the provisional credit, resulting in no loss to Cadence.<br />
18<br />
Thus, Elizondo concludes, Cadence’s subsequent breach of the wire transfer<br />
agreement entitled him to offset the chargeback by the amount of the overdraft.<br />
Cadence responds that Elizondo’s defensive theory—i.e., Elizondo’s theory<br />
that Cadence’s failure to transfer the funds from a “verified collected balance”<br />
entitles Elizondo to an offset—is preempted by the UCC. Cadence further responds<br />
that the wire transfer request form is not a valid, enforceable contract and that,<br />
even if it is, it did not require Cadence to transfer funds from a “verified collected<br />
balance”—at least not as Elizondo construes the term.<br />
1. The UCC does not preempt Elizondo’s right to an offset based on<br />
Cadence’s breach of the wire transfer agreement<br />
We begin by considering whether the UCC preempts Elizondo’s affirmative<br />
defense of the right to an offset. See Lone Starr Multi-Theatres, Ltd. v. Max<br />
Interests, Ltd., 365 S.W.3d 688, 704 (Tex. App.—Houston [1st Dist.] 2011, no<br />
pet.) (right to offset is affirmative defense); see also TEX. R. CIV. P. 94. Elizondo<br />
argues that, although Cadence has the right to charge back his account, Cadence’s<br />
right to recover the overdrawn funds is offset by Cadence’s breach of the wire<br />
transfer agreement, which was the cause of the overdraft. Cadence responds that<br />
Elizondo’s affirmative defense is preempted by the UCC because the UCC<br />
expressly permits Cadence to charge back Elizondo’s account and thus recover the<br />
overdraft.<br />
19<br />
As discussed above, the common law supplements, but does not supplant,<br />
the UCC’s provisions. TEX. BUS. & COM. CODE § 1.103 & cmt 2; Contractors<br />
Source, 462 S.W.3d at 138 (common law principles complement UCC). Unless a<br />
specific provision of the UCC provides otherwise, if a common law defense<br />
conflicts with the UCC’s purpose or text, the UCC preempts that defense. TEX.<br />
BUS. & COM. CODE § 1.103 cmt 2.<br />
Thus, for example, various courts have held that the UCC preempts common<br />
law defenses to a bank’s right to charge back provisional settlement funds. These<br />
courts reason that, because the UCC establishes when the right may be exercised<br />
and when the right terminates, it displaces common law defenses to a bank<br />
exercising the right, including defenses based on the bank’s alleged fraud or<br />
negligence. See, e.g., Am. Dream Team, Inc. v. Citizens State Bank, 481 S.W.3d<br />
725, 732 (Tex. App.—Tyler 2015, pet. denied) (holding that depositor’s claim that<br />
chargeback breached deposit agreement was preempted by UCC); Avanta Fed.<br />
Credit Union v. Shupak, 223 P.3d 863, 871 (Mont. 2009) (holding that credit<br />
union’s statutory charge back rights were not subject to equitable estoppel); Valley<br />
Bank of Ronan v. Hughes, 147 P.3d 185, 191 (Mont. 2006) (holding that<br />
customer’s common law claims relating to bank’s processing of check, including<br />
bank’s exercising its chargeback rights, were preempted by UCC).<br />
20<br />
But the UCC does not necessarily preempt common law defenses to a bank’s<br />
right to recover an overdraft caused by a statutory chargeback of provisional<br />
settlement funds. For example, if a customer spends provisional funds based on the<br />
bank’s misrepresentation regarding the status of the check settlement process, and<br />
the bank then charges back those funds, thereby causing an overdraft, the customer<br />
may assert common law defenses to the bank’s right to recover the overdraft based<br />
on the bank’s misrepresentation. See Shupak, 223 P.3d at 871–73 (holding that<br />
bank was not estopped from exercising right of chargeback but was liable for<br />
negligent misrepresentation that funds from cashier’s check were “secure” and<br />
could be drawn upon); Hughes, 147 P.3d at 192 (holding that, although bank had<br />
right to charge back provisional credit for counterfeit check, customer could<br />
“obtain a judgment to compensate him for the charge-back debt” when bank<br />
employees made misrepresentations regarding status of check); see Holcomb v.<br />
Wells Fargo Bank, N.A., 66 Cal. Rptr. 3d 142, 148 (Cal. Ct. App. 2007) (holding<br />
that, even though California UCC furnished bank with “absolute right” to charge<br />
back check upon drawee’s dishonor, it did not shield bank from “damages due to<br />
its branch manager’s alleged negligent misrepresentations regarding the check’s<br />
status”).<br />
Although the UCC specifies duties and responsibilities for a bank in the<br />
actual check processing procedure, it is silent about the bank’s communications<br />
21<br />
with the customer about that procedure. Am. Dream Team, 481 S.W.3d at 736.<br />
Because such communications are not addressed with specificity by the UCC,<br />
common law principles apply under these circumstances. Id. (holding that trial<br />
court erred in granting summary judgment on bank’s preemption defense asserted<br />
against depositor’s fraud claim arising out of statements made by bank tellers<br />
during check settlement process); see Hughes, 147 P.3d at 193 (“[I]n certain<br />
circumstances, common law and equitable principles may supplement the UCC<br />
where the bank—though not violating its UCC-defined duty of ordinary care with<br />
respect to processing checks—breaches a duty to its depositor by misrepresenting<br />
the status of the check settlement process.”).<br />
As one court explains, preempting common law defenses to a bank’s right to<br />
charge back a provisional settlement, while permitting certain common law<br />
defenses to a bank’s right to recover a resulting overdraft, “preserves the UCC’s<br />
carefully drawn balance between ‘certainty and predictability in commercial<br />
transactions,’ and the comparative fault principles taken from tort law.” Shupak,<br />
223 P.3d at 871 (quoting Call v. Ellenville Nat’l Bank, 774 N.Y.S.2d 76, 78 (N.Y.<br />
App. Div. 2004)). The distinction, moreover, “logically addresses the actual harm<br />
to the parties”: “Rather than estopping the bank from charging back the entire<br />
provisional settlement, an arguably arbitrary measure of damages, the customer<br />
22<br />
may sue [to] recover the actual harm caused by the bank.” Shupak, 223 P.3d at<br />
871.<br />
Here, Elizondo has not asserted a common law defense to Cadence’s<br />
statutory right to chargeback the provisional settlement funds. Nor does his defense<br />
arise from the manner in which Cadence processed the check. Rather, it arises from<br />
Cadence’s representation—memorialized as a material term of the wire transfer<br />
agreement—that it would transfer the funds from a “verified collected balance.”<br />
Because the UCC does not address such representations with specificity,<br />
Elizondo’s defense is analogous to common law defenses based on a bank’s<br />
representations regarding the status of the check settlement process. Moreover,<br />
Elizondo’s defense logically addresses the actual harm he alleged suffered. See id.<br />
We hold that the UCC does not preempt Elizondo’s affirmative defense of the right<br />
to an offset based on Cadence’s breach of the subsequent wire transfer agreement.<br />
2. Elizondo and Cadence entered into a valid and enforceable wire<br />
transfer agreement.<br />
We now turn to whether the parties entered into a valid, enforceable<br />
agreement to wire transfer funds from Elizondo’s account to a third-party account<br />
overseas. “The elements of a valid contract are (1) an offer, (2) an acceptance, (3) a<br />
meeting of the minds, (4) each party’s consent to the terms, and (5) execution and<br />
delivery of the contract with the intent that it be mutual and binding.” Savoy v.<br />
23<br />
Nat’l Collegiate Student Loan Tr. 2005-3, 557 S.W.3d 825, 835 (Tex. App.—<br />
Houston [1st Dist.] 2018, no pet.).<br />
Here, the undisputed evidence shows that Elizondo informed Oh that he<br />
needed to wire transfer funds from his Cadence account to a third-party account in<br />
Japan and provided Oh with the information necessary to complete the transfer.<br />
Oh responded by preparing a wire transfer request form and emailing it to<br />
Elizondo for signature. The top half of the form consisted of fields filled in with<br />
the information that Elizondo had provided Oh. The top half also included a box<br />
for Elizondo’s signature and a declaration that Elizondo understood that Cadence<br />
makes no guarantees concerning the delivery of international wires; that he would<br />
be responsible for tracer fees if a problem arose or if the funds were returned; and<br />
that the transfer could take up to 10 business days. The bottom half of the form<br />
included Cadence’s fee for the wire transfer ($55) and blank fields to be filled in<br />
by Cadence employees after Elizondo had signed and submitted the form. These<br />
blanks included a field for the amount of the “collected balance” from which the<br />
wire transfer would be made and a field for the name of the “employee who<br />
verified [the] collected balance.” The bottom half of the form stated that these two<br />
blank fields had to be filled in by a Cadence employee. The bottom half also<br />
included a signature box for the Cadence officer who approved the wire transfer<br />
and instructed the officer as follows:<br />
24<br />
Before signing off, be sure you “know your customer” and have<br />
verified the collected balance and documented any exception<br />
approvals.<br />
Elizondo reviewed the form, signed it, and emailed it back to Oh. Oh then<br />
filled out and signed the two “collected balance” fields, writing that the “collected<br />
balance” was $497,643.89. Another Cadence employee, S. Baker, filled out several<br />
other fields and wrote in the margins of the form that $497,643.89 was Elizondo’s<br />
“available balance.” And Assistant Branch Manager Y. Villatoro signed the form<br />
as the approving officer. After these Cadence employees filled out the remainder of<br />
the form, Cadence wire transferred funds from Elizondo’s account to the thirdparty account in Japan.<br />
This evidence shows that the parties entered into a valid and enforceable<br />
agreement. By signing the form and returning it to Cadence, Elizondo made an<br />
offer—an offer to pay Cadence $55 to wire transfer “verified collected” funds from<br />
his IOLTA account to a third-party account in Japan. By accepting, completing,<br />
and signing the form, Cadence accepted Elizondo’s offer. The parties’ course of<br />
conduct likewise reflects a meeting of the minds, each party’s consent to the terms,<br />
and execution and delivery of the contract with the intent that it be mutual and<br />
binding. We hold that the parties entered into a valid, enforceable agreement to<br />
wire transfer funds from Elizondo’s account to a third-party account in Japan and<br />
that the terms of that agreement are set forth in the wire transfer request form.<br />
25<br />
3. The agreement required Cadence to transfer funds from a<br />
“verified collected balance.”<br />
Having determined that the parties entered into a valid, enforceable wire<br />
transfer agreement, we now consider whether that agreement required Cadence to<br />
transfer the funds from a “verified collected balance.” Cadence argues that it was<br />
not required, as a material term of the agreement, to transfer the funds from a<br />
collected balance because the fields on the bottom half of the form, including the<br />
fields instructing Cadence to verify the collected balance, were not filled in when<br />
Elizondo signed and submitted the form. We disagree.<br />
Not all the fields on the bottom half of the form were incomplete when<br />
Elizondo signed and submitted the form. Importantly, the field for Cadence’s fee—<br />
which was on the same row as the collected balance fields—was completed and<br />
stated that the fee for the wire transfer would be $55. Because Cadence’s fee was a<br />
material term of the agreement, the field’s placement in the bottom half of the form<br />
next to the collected balance fields indicates that the collected balanced fields<br />
constitute material terms as well. Moreover, the form did not state that the bottom<br />
half was for Cadence’s use only or otherwise indicate that the bottom half did not<br />
constitute part of the agreement. And form contracts are routinely executed in this<br />
manner—with one party signing and submitting a document with various fields left<br />
incomplete and to be filled by the other party. When Elizondo submitted the form,<br />
he knew the bottom would be completed by Cadence, as the form expressly states<br />
26<br />
that the bottom half fields “must be filled in.” We therefore reject Cadence’s<br />
argument that the collected balance fields do not form part of the agreement by<br />
virtue of their location on the bottom half of the form and the time at which they<br />
were completed.<br />
Cadence further argues that, even if the agreement required Cadence to<br />
transfer the funds from a “collected balance,” that term does not bear the meaning<br />
that Elizondo ascribes to it. Thus, we must construe the term “collected balance.”<br />
We construe contract terms according to their plain, common, or generally<br />
accepted meanings unless the contract shows that the parties used words in a<br />
technical or different sense. Plains Expl. & Prod. Co. v. Torch Energy Advisors<br />
Inc., 473 S.W.3d 296, 305 (Tex. 2015); Valence Operating Co. v. Dorsett, 164<br />
S.W.3d 656, 662 (Tex. 2005). Here, both sides agree that the term “collected<br />
balance” is an industry term. To determine the meaning of an industry term, a court<br />
may refer to extrinsic evidence, such as industry dictionaries, statutory definitions,<br />
or expert testimony. Mescalero Energy, Inc. v. Underwriters Indem. Gen. Agency,<br />
Inc., 56 S.W.3d 313, 323 (Tex. App.—Houston [1st Dist.] 2001, pet. denied). In<br />
this case, Elizondo and Cadence offer the deposition testimony of their respective<br />
witnesses to support their proposed alternative constructions of “collected<br />
balance.”<br />
27<br />
Specifically, Elizondo offers the testimony of his expert witness, Dr.<br />
Kenneth Lehrer, a registered investor advisor who has served as chairman of four<br />
banks. In his deposition, Lehrer testified that a “collected balance” is an industry<br />
term that means a “balance minus deposited checks in the process of collection,<br />
i.e., minus checks that have not been actually paid by the paying bank.” Lehrer<br />
explained that the definition of collected balance is “banking 101: Either you got<br />
the money or you don’t.”<br />
Cadence offers the testimony of its corporate representative and branch<br />
administration manager, J. Scott. In her deposition, Scott testified that Cadence has<br />
its own, internal definition of “collected balance.” And under that internal<br />
definition, Scott testified, “collected balance” means “the end-of-day ledger<br />
balance less any debits plus any credits from the previous day,” not including<br />
credits subject to “holds.” Thus, Scott explained, under Cadence’s internal<br />
definition, a “collected balance” does not “necessarily” consist of funds that have<br />
“actually” been “received” and can include provisional credit for uncollected<br />
checks.<br />
Cadence also offered the testimony of its expert witness, Richard McElroy,<br />
Jr. In his deposition, McElroy testified that every bank has its “own definition of<br />
collected balance” based on the bank’s assumption of when funds for deposited<br />
items are collected. McElroy testified that a bank cannot determine on a case-by-<br />
28<br />
case basis when payment has been received for each deposited item and that a bank<br />
therefore determines a customer’s collected balance based on the bank’s<br />
assumption of when payment for each deposited item is most likely to be received.<br />
The bank’s assumption, in turn, is based on the bank’s own “internal calculations<br />
and formulas” and has “has no connection with reality”—i.e., no connection with<br />
when the funds are actually received.<br />
Although neither party has offered any other extrinsic evidence, such as an<br />
industry dictionary or statutory definition, to support their proposed constructions<br />
of “collected balance,” through our own research, we have found authority<br />
supporting both constructions.3<br />
3 Compare In re Cannon, 237 F.3d 716, 720 n.5 (6th Cir. 2001)<br />
(“The collected balance refers to the balance of collected debits and credits; the<br />
ledger balance is the balance of all debits and credits, both collected and<br />
uncollected. Thus, when a bank grants a provisional credit it shows up on the<br />
ledger balance, but not the collected balance.”), and 12 C.F.R. §§ 707.1–.11,<br />
Appendix C to Part 707—Official Staff Interpretations, Bk. Compl. Gd. 6262671<br />
(“Collected balance means the record of balance in a member’s account reflecting<br />
collected funds, that is, cash or checks deposited in the credit union which have<br />
been presented for payment and for which payment has actually been received.”),<br />
with Frost Nat’l Bank v. Parker, No. 95-2150, 1999 WL 33438078, at *2 (C.D. Ill.<br />
Feb. 26, 1999), aff’d sub nom. Frost Nat. Bank v. Midwest Autohaus, Inc., 241<br />
F.3d 862 (7th Cir. 2001) (“The collected balance is the result of the computer’s<br />
estimate of how long it will take to collect [deposited] items through the banking<br />
system, usually between one and five days.”); see also FRB Adopts Truth in<br />
Savings Regulations, Fed. Bank. L. Rep. P 89134, 1992 WL 12914346 (Federal<br />
Reserve Board of Governors observing that “the term ‘collected balance’ does not<br />
have a uniform meaning within the financial services industry”).<br />
29<br />
However, we are convinced that, under these circumstances, the construction<br />
proposed by Elizondo reflects the true intent of the parties as expressed in the<br />
instrument. Quality Infusion Care, Inc. v. Health Care Serv. Corp., 224 S.W.3d<br />
369, 379 (Tex. App.—Houston [1st Dist.] 2006, no pet.) (“In construing a written<br />
contract, our primary concern is to ascertain the true intent of the parties as<br />
expressed in the instrument.”). That is largely because Elizondo’s proposed<br />
construction is the only one that harmonizes and gives effect to the provisions of<br />
both the wire transfer agreement and the underlying Deposit Agreement. See id.<br />
(“We examine the entire writing in an effort to harmonize and give effect to all of<br />
its provisions so that none will be rendered meaningless.”).<br />
The Deposit Agreement does not define “collected balance.” It does,<br />
however, define “available balance” and “posted balance”:<br />
Available Balance—The balance of funds in [the customer’s] account<br />
that is available for immediate withdrawal. Unlike the Posted Balance,<br />
the Available Balance reflects any holds placed on [the] account . . . .<br />
Posted Balance—The balance of funds in [the customer’s] account<br />
based solely on items that have been posted as credits or debits to<br />
[the] account. Unlike the Available Balance, the Posted Balance does<br />
not reflect any holds placed on [the] account.<br />
This indicates that the term “collected balance” must mean something<br />
different than these two defined terms. But as Elizondo points out repeatedly in his<br />
brief, Cadence uses “collected balance” and “available balance” interchangeably.<br />
30<br />
Cadence has not attempted to rebut this point. In fact, Cadence appears to agree. In<br />
its reply brief, Cadence states (with emphasis added by us):<br />
Collected balance in the computer system represents the end-of-day<br />
ledger balance, minus any debits, and plus any credits from the<br />
previous day. This collected balance can include a provisional credit<br />
for a check when holds have been removed regardless whether the<br />
check has been finally paid. Even the version of the form that<br />
Elizondo relies on specifically states: “Ava. Bal: 497,643.80.”<br />
Thus, were we to adopt Cadence’s proposed construction, “collected<br />
balance” and “available balance” would mean the same thing: the customer’s<br />
ledger balance, less any debits, plus any credit not subject to holds. But this would<br />
run afoul of various contextual canons, including the presumption of consistent<br />
usage, according to which a material variation in terms suggests a variation in<br />
meaning;4<br />
and the rule against surplusage, according to which a term should not be<br />
given an interpretation that causes it to duplicate another term or to have no<br />
consequence.5<br />
Moreover, Cadence never disclosed its internal definition of “collected<br />
balance” to Elizondo. Indeed, in its brief, Cadence emphasizes that it construes<br />
“collected balance” according to an “internal definition” that is not disclosed to its<br />
4 See In re CVR Energy, Inc., 500 S.W.3d 67, 77 (Tex. App.—Houston [1st Dist.]<br />
2016, no pet.); Horseshoe Bay Resort, Ltd. v. CRVI CDP Portfolio, LLC, 415<br />
S.W.3d 370, 384 & n.7 (Tex. App.—Eastland 2013, no pet.).<br />
5 See Bishop v. Owens, No. 01-13-00678-CV, 2014 WL 4260520, at *8 (Tex.<br />
App.—Houston [1st Dist.] Aug. 28, 2014, no pet.) (mem. op.).<br />
31<br />
customers. But Cadence’s failure to disclose its internal definition to Elizondo only<br />
underscores that Elizondo had no reason to construe the term according to that<br />
definition.<br />
When a bank uses a form contract to facilitate a transaction with a customer,<br />
and the contract uses a term with various acceptable meanings within the industry,<br />
the bank cannot construe that term according to an internal, undisclosed definition<br />
that has the same meaning as another term defined in a separate document<br />
governing the relationship between the parties. Here, Cadence presented no<br />
evidence that its internal definition of “collected balance” was made available to<br />
Elizondo or that Elizondo would otherwise have reason to construe the term<br />
according to this definition. To the contrary, Cadence’s expert affirmatively<br />
testified that Cadence had no duty and no reason to do so.<br />
We reject Cadence’s contention that the term should be construed according<br />
to Cadence’s internal, undisclosed definition and instead construe the term<br />
according to the definition proposed by Elizondo. Thus, the term “collected<br />
balance,” as used in the wire transfer request form, means the balance of funds that<br />
have actually been collected and therefore excludes funds for unpaid checks and<br />
other items in the process of collection.<br />
32<br />
4. Cadence caused the overdraft by breaching the agreement.<br />
Elizondo and Cadence entered into a valid, enforceable agreement to wire<br />
transfer funds from Elizondo’s IOLTA account to a third-party account overseas.<br />
The agreement required Cadence to transfer the funds from a verified collected<br />
balance—i.e., from a balance consisting of funds from checks for which payment<br />
had actually been received from the paying banks. Cadence failed to do so—it<br />
made the transfer using the provisional settlement funds credited to Elizondo’s<br />
account for the counterfeit check before payment for the check had actually been<br />
received from the paying bank. Thus, Cadence breached the parties’ agreement.<br />
Had Cadence not breached the agreement, the chargeback made by Cadence<br />
to Elizondo’s account would not have resulted in an overdraft. Instead, Cadence<br />
would have verified that Elizondo lacked sufficient funds to complete the wire<br />
transfer and would not have completed the wire transfer with provisional<br />
settlement funds from the unpaid check. Then, once Chase dishonored the check,<br />
Cadence would have charged-back the provisional credit, resulting in no loss to<br />
Cadence.<br />
Cadence nevertheless contends that Elizondo is not entitled to an offset.<br />
Cadence argues that it is irrelevant whether the funds were transferred from a<br />
“collected balance” because a drawee bank may dishonor a check for up to three<br />
years. So even if Chase had initially paid the check—and Cadence had thus<br />
33<br />
transferred funds from a collected balance—Chase would have eventually<br />
discovered that the check was counterfeit and revoked the payment, and Cadence<br />
would have then been entitled to chargeback Elizondo’s account and recover the<br />
overdraft. We disagree.<br />
First, case law across various jurisdictions, including Texas, consistently<br />
recognizes that a customer may assert a bank’s subsequent misrepresentations<br />
regarding the status of the check settlement process as a defense to a bank’s right<br />
to recover an overdraft caused by a chargeback. See, e.g., Am. Dream Team, 481<br />
S.W.3d at 736; Shupak, 223 P.3d at 873; Holcomb, 66 Cal. Rptr. 3d at 148.<br />
Second, whether the funds were transferred from a “collected balance” is<br />
relevant. Even though a drawee bank may dishonor a check for up to three years, a<br />
customer of the collecting bank might reasonably insist that the check be paid<br />
before transferring funds from the check because the drawee’s initial payment<br />
would at least indicate that the check—and the funds from it—were good. Thus,<br />
Elizondo could reasonably insist that funds be transferred from a collected<br />
balance—despite Chase’s right to revoke the settlement for up to three years—<br />
because Chase’s initial payment of the check would indicate (though not<br />
conclusively prove) that the check was good.<br />
34<br />
We hold that Cadence’s breach of the wire transfer agreement entitled<br />
Elizondo to offset Cadence’s chargeback by the amount of the overdrawn funds as<br />
a matter of law.<br />
* * *<br />
In sum, Elizondo breached the UCC and the parties’ Deposit Agreement by<br />
depositing the counterfeit check into his IOLTA bank account. Elizondo and<br />
Cadence then entered into a valid and enforceable agreement to wire transfer funds<br />
from Elizondo’s account. The agreement required Cadence to wire transfer the<br />
funds from a “verified collected balance.” Cadence breached the agreement by<br />
making the transfer using the provisional settlement funds credited to Elizondo’s<br />
account for the unpaid, counterfeit check. Had Cadence not breached the<br />
agreement, the chargeback made by Cadence to Elizondo’s account would not<br />
have resulted in an overdraft. Thus, although Cadence had the right under the UCC<br />
and the Deposit Agreement to charge back the provisional settlement funds,<br />
Elizondo was entitled to offset the chargeback by the amount of the overdrawn<br />
funds, thereby negating Cadence’s alleged damages. We hold that the trial court<br />
did not err in granting Elizondo’s motion for summary judgment. Accordingly, we<br />
overrule Cadence’s two issues.<br />
35<br />
Conclusion<br />
We affirm the trial court’s judgment.<br />
Laura Carter Higley<br />
Justice<br />
Panel consists of Justices Keyes, Higley, and Landau.<br />
Justice Keyes, dissenting.<br />
<br /></blockquote>
MOTPhttp://www.blogger.com/profile/15883011307129083993noreply@blogger.com0tag:blogger.com,1999:blog-9105536336033560224.post-81909272866378600842019-05-11T11:47:00.000-07:002019-05-17T07:28:21.672-07:00Are counter-affidavits effective to defeat summary judgment in credit card collection cases? - Houle v. Capital One (Tex.App. 2019) (summary judgment appeal)Last Friday the Supreme Court of Texas decided two debt collection cases. In <a href="https://causeofactionelements.blogspot.com/2019/05/godoy-v-wells-fargo-scotx-blesses.html" target="_blank">Godoy v. Wells Fargo</a>, the Court approved and enforced a contractual waiver of the 2-year statute of limitations applicable to deficiency claims, and judicially substituted the four-year statute of limitations generally applicable to suits on debt. This decision came in a case where the bank sued the guarantor of a commercial note when foreclosure of the mortgaged property did not cover the remaining loan balance. While affirming summary judgment for the bank because its claim was not barred under the four-year SOL, the Court reaffirmed that a blanket contractual waiver of all statute-of-limitations defenses is against public policy in Texas and therefore unenforceable. <i>See <a href="https://www.blogger.com/u/2/goog_691442748">Godoy v. Wells Fargo Bank, N.A</a></i><a href="http://./">.</a> [opinion in pdf] No. <a href="http://search.txcourts.gov/Case.aspx?cn=18-0071&coa=cossup" target="_blank">18-0071</a> (Tex. May 10, 2019).<br />
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In <i>Houle v. Capital One</i> the Court issued a summary denial of the defendant's <a href="http://search.txcourts.gov/SearchMedia.aspx?MediaVersionID=31bc8b2c-584b-4e9f-a11c-0ce05fbb161c&coa=cossup&DT=BRIEFS&MediaID=22e7f104-319d-4f79-a6a9-56d78d463144" target="_blank">petition for review</a>, letting
stand the judgment and opinion of the intermediate court of appeals in El Paso. This was
expected, given the Texas Supreme Court’s highly selective use of discretionary
review and lack of interest in run-of-the-mill collection cases involving small
amounts (here, about $4,000). <i>See <a href="https://www.blogger.com/u/2/goog_691442778">Robert B. Houle v. Capital One Bank (USA), N.A</a></i><a href="http://./">.</a> , No. <a href="http://search.txcourts.gov/Case.aspx?cn=08-17-00189-CV&coa=coa08" target="_blank">08-17-00189-CV</a> (Tex.App.- El Paso, Dec. 19, 2018, pet. denied under No. <a href="http://search.txcourts.gov/Case.aspx?cn=19-0224&coa=cossup" target="_blank">19-0224</a>). <o:p></o:p></div>
<br />
<div class="MsoNormal" style="text-align: left;">
Houle provides an example of a credit card collection case in which
the defendant had countered the bank’s motion for summary judgment with an
affidavit of his own, but it did him no good because both the trial court and
the court of appeals denied the counter-affidavit the effect of creating a fact
issue precluding summary judgment.<br />
<br /></div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiMJ3RHDVC6Ib2tJc7tU_3zTb1hDiYhI1M89vxRUgl6_yRKZ7rTBNsx1dE4A5SZRANB4X13jkV2bTrfJXwc0Zd6j8tieLDHpU-MUKlhOvotI0hZW9FJB8TY-eDlSYVDEib7vEM3QuFMkJoW/s1600/Capital+One+v+Houle+-+Counter-Affidavit+by+Defendant+%2528snip%2529.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img alt="Controverting Summary Judgment Affidavit of Defendant Robert Houle " border="0" data-original-height="872" data-original-width="1275" height="272" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiMJ3RHDVC6Ib2tJc7tU_3zTb1hDiYhI1M89vxRUgl6_yRKZ7rTBNsx1dE4A5SZRANB4X13jkV2bTrfJXwc0Zd6j8tieLDHpU-MUKlhOvotI0hZW9FJB8TY-eDlSYVDEib7vEM3QuFMkJoW/s400/Capital+One+v+Houle+-+Counter-Affidavit+by+Defendant+%2528snip%2529.JPG" title="Controverting Summary Judgment Affidavit of Defendant Robert Houle " width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Controverting Summary Judgment Affidavit of Defendant Robert Houle<br />
disputing authenticity of records, legitimacy of interest rate, and correctness of amount </td></tr>
</tbody></table>
</div>
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Although the El Paso Court of Appeals withdrew
its original opinion (still available on Google Scholar <a href="https://scholar.google.com/scholar_case?case=2687550739566218626&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" target="_blank">here</a>), and substituted a <a href="https://scholar.google.com/scholar_case?case=2797524786636438621&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" target="_blank">new one</a> in response to the appellant’s
motion for rehearing, it did not change its mind on the disposition. In his
affidavit, Houle had complained--inter alia-- that the bank had arbitrarily raised the interest
rate, that there had been billing disputes on the account, and that pages were
missing from the series of statements proffered as summary judgment proof. All
to no avail. <o:p></o:p></div>
<blockquote class="tr_bq" style="background: white; line-height: normal; margin-left: 0.5in; text-align: left;">
<b><i><span style="color: #222222; font-family: "arial" , sans-serif; font-size: 18.0pt;">Genuine Issue of Material Fact</span></i></b></blockquote>
<blockquote class="tr_bq" style="background: white; line-height: normal; margin-left: 0.5in; text-align: left;">
<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;">The four elements of a breach of contract claim are: (1) the
existence of a valid contract; (2) performance, or tendered performance, by the
plaintiff; (3) breach of the contract by the defendant; and (4) damages to the
plaintiff resulting from that breach. <i>Restrepo v. All. Riggers &
Constructors, Ltd</i>., 538 S.W.3d 724, 740 (Tex.App.-El Paso 2017, no
pet.), </span><span style="background-color: transparent; font-size: 15.3333px; text-align: center;"><span style="color: #222222; font-family: "arial" , sans-serif;">citing Velvet Snout, LLC v. Sharp, 441 S.W.3d 448, 451 (Tex.App.-El Paso 2014, no pet.). A party is entitled to relief for a stated account where: (1) transactions between the parties give rise to indebtedness of one to the other; (2) an agreement, express or implied, between the parties fixes an amount due, and (3) the one to be charged makes a promise, express or implied, to pay the indebtedness. <i>Eaves v. Unifund CCR Partners</i>, 301 S.W.3d 402, 407-08 (Tex.App.-El Paso 2009, no pet.); <i>McFarland v. Citibank (South Dakota), N.A.</i>, 293 S.W.3d 759, 763 (Tex.App.-Waco 2009, no pet.); Dulong v. Citibank (South Dakota), N.A., 261 S.W.3d 890, 893 (Tex.App.-Dallas 2008, no pet.). </span></span></blockquote>
<blockquote class="tr_bq" style="background: white; line-height: normal; margin-left: 0.5in; text-align: left;">
<span style="font-family: "arial" , sans-serif;"><span style="font-size: 11.5pt;">Because an agreement on which an account stated claim is based can be express
or implied, a creditor need not produce a written contract to establish the
agreement between the parties; an implied agreement can arise from the acts and
conduct of the parties. </span></span><i style="font-family: Arial, sans-serif; font-size: 11.5pt;">See </i><span style="font-family: "arial" , sans-serif;"><span style="font-size: 15.3333px;"><i>Walker v. Citibank, N.A.</i>, 458 S.W.3d 689, 692-93 (Tex.App.-Eastland 2015, no pet.)<i>.</i></span></span></blockquote>
<blockquote class="tr_bq" style="background: white; line-height: normal; margin-left: 0.5in; text-align: left;">
<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;">In response to Capital One's motion for summary judgment, Houle
filed an affidavit in which he complained that Capital One's documents were not
original or exact duplicates of account statements he had received, and noted
both that his statements did not contain solid black lines and his account
number had numeric digits rather than the "Xs" contained in Capital
One's summary judgment evidence. Houle acknowledged that although he had
disputes with Capital One regarding charges and credits to his account, Capital
One later credited payment and refunded a late penalty. Houle also complained
that Capital One had increased its interest rate in an arbitrary manner,
specifically in July 2010 when he made a payment and Capital One purportedly
doubled the "interest rate," and without specifying, he asserted in a
conclusory manner that the account is not true and correct and that he does not
owe the amount Capital One claims is due. There is no evidence in the record
from Houle or Capital One regarding payments made in July 2010.</span><span style="background-color: transparent; text-align: center;"> </span></blockquote>
<blockquote class="tr_bq" style="background: white; line-height: normal; margin-left: 0.5in; text-align: left;">
<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;"></span><span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;">The evidence showed that Capital One and Houle entered into a
credit card agreement, that Capital One issued a credit card to Houle, that
Houle used the credit card to make purchases, and that Houle made payments on
the account. Evidence of the card-member agreement was presented to the trial
court through Trittipoe's affidavit. The agreement provides that Capital One
would allow Houle to purchase goods and services with credit in exchange for
payment. According to the terms of the agreement, Capital One would assess
interest charges based on the application of the annual percentage rate, which
varies as the index for the rate increases or decreases, and in the event of
two late payments, the variable annual percentage rate would increase to an unspecified
"penalty annual percentage rate." The June 2010 statement having a
July 2010 due date shows an annual percentage rate of 13.52%. Further, the
record showed that Houle's account was past due for six consecutive months,
from January 2013-June 2013, with an annual percentage rate of 29.40%, incurred
past due and over limit fees, and was thereafter "charged off," with
a final balance of $4007.72.</span><span style="background-color: transparent; text-align: center;"> </span></blockquote>
<blockquote class="tr_bq" style="background: white; line-height: normal; margin-left: 0.5in; text-align: left;">
<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;"></span><span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;">Based on the card-member agreement, Capital One's extension of
credit on Houle's account, Houle's usage of the credit card and failure to pay
on the account in accordance with the terms of the agreement, and Capital One's
resulting damages, we conclude that Capital One satisfied each element of its
breach of contract cause of action and, if necessary for the account-stated
cause of action, conclude or reasonably infer that Houle agreed to pay a fixed
amount equal to the purchases and cash advances he made, plus interest. <i>See </i><a href="https://scholar.google.com/scholar_case?case=10262643112845153830&q=Houle+v+Capital+One&hl=en&as_sdt=4,44"><i><span style="color: #660099;">Dulong,</span></i><span style="color: #660099;"> 261
S.W.3d at 894</span></a>; <a href="https://scholar.google.com/scholar_case?case=6999368687494981910&q=Houle+v+Capital+One&hl=en&as_sdt=4,44"><i><span style="color: #660099;">McFarland,</span></i><span style="color: #660099;"> 293
S.W.3d at 763-64</span></a> (cases holding creditor could collect debt on
account stated where, based on series of transactions reflected on account
statements, creditor established that card holder agreed to full amount shown
on statements and impliedly promised to pay indebtedness). We conclude that no
genuine issue of material fact exists as a matter of law as to any element of
Capital One's causes of action against Houle. Taking Houle's affidavit as true,
and indulging every reasonable inference and resolving any doubts in his favor,
we conclude that Houle failed to satisfy his burden of presenting evidence that
raises a genuine issue of material fact. <i>See </i><a href="https://scholar.google.com/scholar_case?case=1299273196667953801&q=Houle+v+Capital+One&hl=en&as_sdt=4,44"><i><span style="color: #660099;">Nixon,</span></i><span style="color: #660099;"> 690
S.W.2d at 548-49</span></a>.</span></blockquote>
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<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;"><br /></span></div>
<div class="MsoNormal" style="text-align: left;">
The disposition of the affidavit issue mirrors an earlier
case involving American Express, in which the defendant, a former Harris County district court judge, had also filed a controverting affidavit, in which he
denied having received the cardmember agreement on which the bank moved for
summary judgment, and had specially denied that he had consented to the interest
rates charged by American Express. In that case, the Ninth Court of Appeals in
Beaumont likewise affirmed the summary judgment for the bank notwithstanding
the presence of a controverting affidavit, but it reversed the award of
attorney’s fees and remanded that portion of the case back to the trial court. <o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="text-align: left;">
On the matter of fees, the appellate court concluded that
the fee affidavit executed by the bank’s attorney was conclusory, and noted
that the defendant had filed a counter-affidavit disputing the reasonableness
of the amount. Because the defendant was himself an attorney, he was qualified
to offer an expert opinion on the matter. <i>See <a href="https://scholar.google.com/scholar_case?case=11133543910379268899&q=09-10-00166-CV&hl=en&as_sdt=6,44" target="_blank">Devine v. Am. Express CenturionBank</a></i>, No. 09-10-00166-CV, 2011 WL 2732583 (Tex. App.-Beaumont July 14, 2011, no
pet.) (mem. op.). (“the evidence presented by Amex is not conclusive evidence
of reasonable fees. Additionally, while Devine's affidavit appears conclusory,
it controverts the evidence presented by Amex on attorney's fees. Under these
circumstances, we find the trial court erred in granting summary judgment on
attorney's fees.”). <o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="text-align: left;">
But even on the matter of fee proof, appellate dispositions
are inconsistent in credit card cases. In <i>Duran v. Citibank,</i> the attorney for the
defendant had submitted a controverting fee affidavit in opposition to the creditor’s
motion for summary judgment, but the appellate court ultimately found it deficient
because it did not specifically attest to what alternative hourly rate would have
been reasonable.<o:p></o:p></div>
<div class="MsoNormal" style="text-align: left;">
<br /></div>
<div class="MsoNormal" style="margin-left: 0.5in; text-align: left;">
Duran's attorney, John Mastriani,
filed an affidavit in which he stated that he is "familiar with the normal
and customary attorney fees for an action such as this" and opined that
the fees charged ($150.00 per hour for attorneys and $95.00 per hour for paralegals)
were "outrageous and excessive." However, Mastriani failed to provide
evidence of an alternative rate that he would deem reasonable and necessary or
otherwise to controvert Spencer's affidavit with controverting evidence. We
hold that Citibank conclusively established that it was entitled to recover its
attorney's fees as awarded by the trial court.<i> See </i>Tex. Civ. Prac. & Rem.
Code Ann. § 38.001 (Vernon Supp. 2007); <i>see also Hackberry Creek Country Club,
Inc. v. Hackberry Creek Home Owners Ass'n</i>, 205 S.W.3d 46, 56 (Tex. App.-Dallas
2006, pet. denied).<o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="text-align: left;">
<i><a href="https://scholar.google.com/scholar_case?case=8208961631074295155&q=duran+v+citibank&hl=en&as_sdt=4,44" target="_blank">Duran v. Citibank (South Dakota), N.A.</a></i>, No. 01-06-00636-CV,
2008 WL 746532 (Tex.App. - Houston [1st Dist.], March 20, 2008, no pet.) (mem.
op.).<o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="text-align: left;">
<b><span style="color: #3d85c6;">What’s to learn from this? </span></b></div>
<div class="MsoNormal" style="text-align: left;">
<br /></div>
<div class="MsoNormal" style="text-align: left;">
The lesson to learn is that the counter-affidavit disputing the creditor's claim for attorney's fees should be as detailed as possible. </div>
<div class="MsoNormal" style="text-align: left;">
<br /></div>
<div class="MsoNormal" style="text-align: left;">
That lesson is of little use to most <i>pro se</i>
defendants, however, because nonlawyers are deemed incompetent to opine on the
reasonableness of an attorney’s fee. While attorneys get sued on defaulted credit
cards and loans, too, and while they often chose to represent themselves when so sued, statistically that is rare within the universe of collection cases. <o:p></o:p></div>
<div class="MsoNormal" style="text-align: left;">
<br /></div>
<div class="MsoNormal" style="text-align: left;">
As for controverting evidence on the merits of the breach-of-contract
claim, the Houston Court of Appeals noted in <i>Duran</i> that “[i]n response to the motion for
summary judgment, Duran did not present any competent evidence that he did not
receive the agreement or notices of changes in the agreement.” Devine did just
that in this counter-affidavit, but it still did not make any difference in the
resolution of the case. <o:p></o:p></div>
<div class="MsoNormal" style="text-align: left;">
<br /></div>
<div class="MsoNormal" style="background: white; line-height: normal; margin-left: 0.5in; text-align: left;">
<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;">Devine executed an affidavit that was submitted in support of his
response to Amex's motion for summary judgment. Devine argues that his
affidavit contradicts Amex's summary judgment evidence, precluding summary
judgment.<o:p></o:p></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;"><br /></span></div>
<div class="MsoNormal" style="background: white; line-height: normal; margin-left: 0.5in; text-align: left;">
<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;">In support of its motion for summary judgment, and along with a
copy of the purported agreement and a series of monthly statements from Amex to
Devine, Amex submitted the affidavit of an attorney employed by Amex. The
affidavit stated that the attorney was employed by Amex, he was competent to
make the affidavit, was authorized to execute the affidavit on behalf of Amex,
and the statements made therein were within his personal knowledge. The
attorney's affidavit laid the foundation for the business records exception to
the hearsay rule for the records submitted in support of the motion for summary
judgment. The affiant further stated as follows:<o:p></o:p></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;"><br /></span></div>
<div class="MsoNormal" style="background: white; line-height: normal; margin-left: 0.5in; text-align: left;">
<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;">A true and correct copy of the applicable
Agreement between AMEX and [Devine] is attached hereto as Exhibit "A"
and incorporated herein. Under the Agreement, AMEX made cash advances to
[Devine], either as actual cash or in payment for purchases made by [Devine]
from third parties. [Devine] accepted each advance and under the Agreement
became bound to pay AMEX the amounts of such advances, plus additional charges.
The Agreement provides that [Devine] may object to any disputed charges, in
writing and within sixty (60) days of notice of the charge. [Devine] made no
objections to any of the charges included in the balance within that time
period.<o:p></o:p></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;"><br /></span></div>
<div class="MsoNormal" style="background: white; line-height: normal; margin-left: 0.5in; text-align: left;">
<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;">[Devine] has failed to repay all the advances
made under the Agreement. There is a balance of $21,763.75 owing on [Devine's]
account[.]<o:p></o:p></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;"><br /></span></div>
<div class="MsoNormal" style="background: white; line-height: normal; margin-left: 0.5in; text-align: left;">
<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;">In the affidavit submitted in support of his response, Devine
stated in part:<o:p></o:p></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;"><br /></span></div>
<div class="MsoNormal" style="background: white; line-height: normal; margin-left: 0.5in; text-align: left;">
<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;">. . . I did not receive the agreement attached
to Plaintiff's summary judgment. I specifically dispute the attached agreement
as it was not the terms and conditions represented to me as the operative terms
and conditions. Plaintiff fraudulently charged [an] additional interest rate
never agreed upon. Further, my agreement with Plaintiff was for a different
interest rate than Plaintiff is now attempting to charge. I have requested an
accounting from Plaintiff but Plaintiff has refused to provide said accounting
of the charges they now seek to bill me. I never agreed to waive all my rights
simply by not putting in writing within 60 days a specific challenge to
Plaintiff's bill when Plaintiff refuses to provide a detailed accounting of the
charges and to properly account for the interest.<o:p></o:p></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;"><br /></span></div>
<div class="MsoNormal" style="background: white; line-height: normal; margin-left: 0.5in; text-align: left;">
<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;">The agreement attached as "Exhibit A" to Amex's motion
for summary judgment is entitled "Agreement Between Cash Rebate Cardmember
and American Express Centurion Bank, FSB." The agreement states,
"[w]hen you keep, sign or use the Card issued to you (including any
renewal or replacement Cards), or you use the account associated with this Agreement
(your "Account"), you agree to the terms of this Agreement." The
evidence establishes that Devine is an "American Express Cash Rebate
Credit Card" holder. Though Devine argues that he never received the
agreement, courts have held that delivery of an agreement is shown when the
parties manifest an intent through their actions and words that the contract
become effective. <a href="https://scholar.google.com/scholar_case?case=1328956482849360973&q=09-10-00166-CV&hl=en&as_sdt=6,44"><i><span style="color: #660099;">Winchek v. Am. Express Travel Related Servs. Co.,</span></i><span style="color: #660099;"> 232 S.W.3d 197, 204 (Tex. App.-Houston [1st Dist.]
2007, no pet.)</span></a>.<o:p></o:p></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;"><br /></span></div>
<div class="MsoNormal" style="background: white; line-height: normal; margin-left: 0.5in; text-align: left;">
<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;">In <i>Winchek,</i> the defendant, Winchek, argued that
the trial court's grant of summary judgment in favor of Amex was improper
because Amex failed to prove it ever delivered the agreement to her. <i>Id.</i> The
court concluded that Winchek's "conduct in using the card and making
payments on the account for the purchases and charges reflected on her monthly
billing statements manifested her intent that the contract become
effective." <i>Id.</i> Winchek further argued that Amex failed
to show proof of her acceptance of the terms of the agreement. <i>Id.</i> In
holding that Amex met its burden to conclusively establish an agreement between
Amex and Winchek, the Court found significant that the agreement expressly
stated that use of the card constituted acceptance of the terms set forth in
the agreement, and that Winchek did not dispute that she had used the
card. <i>Id.</i> In addition, the court noted that Winchek made
payments each month without ever disputing the accuracy of the statements or
the stated terms. <i>Id.</i><o:p></o:p></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;"><i><br /></i></span></div>
<div class="MsoNormal" style="background: white; line-height: normal; margin-left: 0.5in; text-align: left;">
<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;">Amex provided evidence by affidavit that the agreement attached
as "Exhibit A" was the operative agreement between Amex and Devine.
Amex also provided balance statements from December 2007 through August 2008
showing that Devine used the "American Express Cash Rebate Card"
issued by Amex and made payments on the account. On this record, Devine's
statement that he did not receive the agreement is insufficient to raise a fact
issue regarding the existence of an agreement between the parties. <i>See
id.; see also </i><a href="https://scholar.google.com/scholar_case?about=10738303590737903653&q=09-10-00166-CV&hl=en&as_sdt=6,44"><i><span style="color: #660099;">Ghia v. Am. Express Travel Related Servs.,</span></i><span style="color: #660099;"> No. 14-06-00653-CV, 2007 WL 2990295, at *3 (Tex.
App.-Houston [14th Dist.] Oct. 11, 2007, no pet.)</span></a> (mem. op.)
("Because appellant used her card and made some payments due, she
manifested intent that the agreement become effective, irrespective of whether
she received manual delivery.").<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-left: 0.5in; text-align: left;">
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<o:p>What we can see here is that Texas courts of appeals (or at least some of them) do not give effect to the sworn testimony of the defendant when it is offered to counter a summary judgment motion by the bank suing on a credit card account even though the defendant must necessarily have personal knowledge of the matter. </o:p></div>
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<o:p>The same cannot be said of representatives of credit card banks or their servicer who sign affidavits by the hundreds on a regular basis, and can only rely on whatever records are available to them. </o:p></div>
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<o:p>To the extent affidavit testimony by a credit card defendant raises credibility issues, those credibility issues should be resolved at a trial on the merits, rather than in a summary judgment proceeding. Summary Judgment, after all, requires that the movant establish its entitlement to judgment conclusively and as a matter of law, which no disputed issue of material facts. </o:p></div>
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ROBERT G. HOULE, Appellant,<br />v.<br />CAPITAL ONE BANK (USA), N.A., Appellee.</h3>
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<a href="https://scholar.google.com/scholar?scidkt=828438513272393078&as_sdt=2&hl=en" style="color: #660099;">No. 08-16-00234-CV.</a></center>
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<b>Court of Appeals of Texas, Eighth District, El Paso.</b></div>
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December 19, 2018.</center>
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Appeal from County Court at Law No. 5, of El Paso County, Texas, (TC No. 2015-CCV01442).</div>
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Before McClure, C.J., Rodriguez, and Palafox, JJ.</div>
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OPINION</h2>
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ANN CRAWFORD McCLURE, Chief Justice.</div>
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We withdraw our Opinion of September 28, 2018, and substitute this opinion in its place. We deny Appellant's motion for rehearing.</div>
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This is a traditional summary judgment case arising from alleged non-payment of a credit card account. Appellant Robert G. Houle appeals the trial court's grant of summary judgment in favor of Appellee, Capital One Bank (USA), N.A. ("Capital One"). We affirm the trial court's judgment.</div>
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PROCEDURAL BACKGROUND</h2>
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Houle entered into a credit card account agreement with Capital One in 1998. In 2014, Capital One filed its original petition in Justice Court, Precinct 3, Place 1 of El Paso County, and therein asserted causes of action against Houle for breach of contract and account stated. Capital One sought to recover $4007.72 from Houle on his account, which Capital One identified in its petition as "XXXXXXXXXXXXXXXX." Capital One also noted in its petition that Houle's account number had been redacted pursuant to Rule 21c(a)(2) and 508.2(a)(1)(B) of the Texas Rules of Civil Procedure. TEX.R.CIV.P. 21c(a)(2)(Privacy Protection for Filed Documents), 508.2(a)(1)(B)(Debt Claim Cases, Petition, Contents, Credit Accounts). On July 31, 2015, the Justice Court entered final judgment in favor of Capital One and awarded it the principal sum of $4,007.72, without interest, and costs of court.</div>
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Houle appealed the Justice Court's judgment to County Court at Law Number 5 (the trial court), and Capital One filed a motion for summary judgment accompanied by a supporting brief. In support of its motion for summary judgment, Capital One presented evidence in the form of an affidavit executed by Diane Trittipoe, who averred that she is an employee of Capital One Services, LLC, an agent and affiliate of Plaintiff Capital One Bank that provides services to Capital One in relation to its credit card and banking practices. Trittipoe's responsibilities as a Litigation Support Representative provide her access to relevant Capital One systems and documents necessary for validation of the information and statements made in her affidavit. In her affidavit, Trittipoe states she has personal knowledge of the manner and method by which Capital One creates and maintains certain business books and records, including computer records of customer accounts.</div>
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Trittipoe attached 183 pages of records to her affidavit as evidence of the applicable terms, conditions, and activity related to the credit card account "ending in XXXXXXXXXXXXXXXX issued to [Robert G. Houle] by [Capital One.]" Trittipoe does not represent that all records on the account are attached to her affidavit nor represents that the records she has produced include all records for a particular period of time. Although the account number on the statements has been redacted, Trittipoe states that the records are originals or are exact duplicates of the originals.</div>
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The records include some, but not all, credit card account statements due in and between the months of February 2008 and June 2013. The records show that the annual percentage rate assessed on the account balance varied each month from a low of 13.43% to a high of 25.15%. The rate often changed from month to month, and rarely remained constant for more than two or more consecutive months. After Houle's account became delinquent, the annual percentage rate of 29.40% was applied to the account balance. The last account statement for the period of May 11, 2013 to June 10, 2013, shows a previous balance of $3,832.72, payment and credits of $0.00, fees and interest charged in the sum of $175.00, and a new balance of $4,007.72, the sum which Capital One sought to recover in its suit. That statement also includes contact information for Capital One, a statement that Houle's account has been "charged off," which is described as a status change from "past due," as well as a notification that although Houle would remain responsible for paying the balance on the account, Capital One would no longer charge Houle past due, over limit, or membership fees.</div>
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In response, Houle asserted that Capital One's motion for summary judgment should be denied because a genuine issue of material fact exists regarding "the amount claimed by [Capital One]," in part because the records attached to Trittipoe's affidavit did not contain a statement for the month of July 2010, and the interest rate on the account in June 2010 was shown to be 13.47% but had increased to 29.40% in August 2010. Houle also complained of Trittipoe's alleged lack of personal knowledge to support the affidavit as well as the state of the records attached to the affidavit.</div>
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The trial court granted final summary judgment in favor of Capital One. Houle appeals the trial court's judgment.</div>
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DISCUSSION</h2>
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In his sole issue on appeal, Houle contends the trial court erred in granting Appellee's motion for summary judgment. This contention is based on Houle's assertions that Capital One failed to properly authenticate its business records through Trittipoe, that the records were incomplete and contained conflicting inconsistencies, and that genuine issues of material fact exist in relation to the interest rate assessed and changes thereto as well as the amount owed on his Capital One account.</div>
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<i>Standard of Review</i></h2>
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We review a summary judgment <i>de novo. </i><a href="https://scholar.google.com/scholar_case?case=4321349621179920395&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Valence Operating Company v. Dorsett,</i>164 S.W.3d 656, 661 (Tex. 2005)</a>; <a href="https://scholar.google.com/scholar_case?case=2957132959345040595&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Roth v. JPMorgan Chase Bank, N.A.,</i> 439 S.W.3d 508, 511-12 (Tex.App.-El Paso 2014, no pet.)</a>. To prevail on a summary judgment motion, the movant must demonstrate that no genuine issues of material fact exist and that it is entitled to judgment as a matter of law. TEX.R.CIV.P. 166a(c); <a href="https://scholar.google.com/scholar_case?case=6936701091571468222&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Provident Life and Acc. Ins. Co. v. Knott,</i> 128 S.W.3d 211, 215-16 (Tex. 2003)</a>; <a href="https://scholar.google.com/scholar_case?case=1299273196667953801&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Nixon v. Mr. Property Management Company, Inc.,</i> 690 S.W.2d 546, 548 (Tex. 1985)</a>.</div>
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A movant for summary judgment must conclusively prove all elements of its cause of action as a matter of law. TEX.R.CIV.P. 166a(c); <i>see </i><a href="https://scholar.google.com/scholar_case?case=2831208064673990284&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Rockwall Commons Associates, Ltd. v. MRC Mortg. Grantor Trust I,</i> 331 S.W.3d 500, 505-06 (Tex.App.-El Paso 2010, no pet.)</a>. If ordinary minds could not differ as to the conclusion to be drawn from the evidence, a matter is conclusively proven. <i>Id.</i> at 505. If the movant conclusively proves its right to summary judgment as a matter of law, the burden then shifts to the non-movant to present evidence that raises a genuine issue of material fact, precluding the summary judgment. <i>Id.</i><br />
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When determining whether a disputed issue of material fact exists that would preclude summary judgment, we regard all evidence in the summary judgment record in the light most favorable to the non-movant, and indulge every reasonable inference and resolve any doubts in favor of the non-movant. <a href="https://scholar.google.com/scholar_case?case=8882311973002060208&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Walters v. Cleveland Regional Medical Center,</i> 307 S.W.3d 292, 296 (Tex. 2010)</a>; <a href="https://scholar.google.com/scholar_case?case=6936701091571468222&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Provident,</i> 128 S.W.3d at 215-16</a>. When a trial court's summary judgment order does not state the specific grounds for its ruling, we must affirm the judgment if any of the theories advanced by Appellee's motion are meritorious. <a href="https://scholar.google.com/scholar_case?case=6077988343257424760&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Western Investments, Inc. v. Urena,</i> 162 S.W.3d 547, 550 (Tex. 2005)</a>.<br />
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The standards for determining the admissibility of evidence is the same in a summary judgment proceeding as at trial. <i>See </i><a href="https://scholar.google.com/scholar_case?case=18263086354444588818&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Seim v. Allstate Texas Lloyds,</i> 551 S.W.3d 161, 163-64 (Tex. 2018)(per curiam)</a>, <i>citing </i><a href="https://scholar.google.com/scholar_case?case=698007975688280962&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>United Blood Servs. v. Longoria,</i> 938 S.W.2d 29, 30 (Tex. 1997)(per curiam)</a>; <a href="https://scholar.google.com/scholar_case?case=2831208064673990284&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Rockwall Commons Associates, Ltd.,</i> 331 S.W.3d at 505-06</a>. The admission or exclusion of evidence rests in the sound discretion of the trial court. <i>See </i><a href="https://scholar.google.com/scholar_case?case=3598008827870221351&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Interstate Northborough Partnership v. State,</i> 66 S.W.3d 213, 220 (Tex. 2001),</a> <i>citing </i><a href="https://scholar.google.com/scholar_case?case=15334927464296165490&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>City of Brownsville v. Alvarado,</i> 897 S.W.2d 750, 753 (Tex. 1995)</a>. Evidence presented in support of a summary judgment must be in a form that would render the evidence admissible in a conventional trial. TEX.R.CIV.P. 166a(f); <i>see </i><a href="https://scholar.google.com/scholar_case?case=698007975688280962&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>United Blood Services v. Longoria,</i>938 S.W.2d 29, 30 (Tex. 1997)</a>.<br />
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We apply an abuse of discretion standard when reviewing a trial court's decision to admit or exclude summary judgment evidence. <a href="https://scholar.google.com/scholar_case?case=6904065941748447778&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Harris v. Showcase Chevrolet,</i> 231 S.W.3d 559, 561 (Tex.App.-Dallas 2007, no pet.)</a>. The test for abuse of discretion is not whether, in our opinion, the facts present an appropriate case for the trial court's actions. <a href="https://scholar.google.com/scholar_case?case=12502112615452269980&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Downer v. Aquamarine Operators, Inc.,</i> 701 S.W.2d 238, 241-42 (Tex. 1985)</a>. Rather, it is a question of whether the trial court acted without reference to any guiding rules and principles. <i>Id.</i> In other words, we must determine whether the court's rulings were arbitrary or unreasonable. <i>Id.</i> at 242. The mere fact that a trial court may decide a matter within its discretionary authority in a different manner than an appellate judge in a similar circumstance does not demonstrate that an abuse of discretion has occurred. <i>Id.</i></div>
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<i>Preservation of Error</i></h2>
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We first address Capital One's assertion that Houle has failed to preserve this issue for our review. The rules of error preservation applicable during trial also apply in summary-judgment proceedings. TEX.R.APP.P. 33.1(a); <i>see </i><a href="https://scholar.google.com/scholar_case?case=18263086354444588818&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Seim,</i> 551 S.W.3d at 164,</a> <i>citing </i><a href="https://scholar.google.com/scholar_case?case=16396646560525050729&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Mansions in the Forest, L.P. v. Montgomery Cty.,</i> 365 S.W.3d 314, 317-18 (Tex. 2012)(per curiam)</a>. Consequently, to preserve a complaint for appellate review: (1) a party must complain to the trial court by way of a timely request, objection, or motion; and (2) the trial court must rule or refuse to rule on the request, objection, or motion. TEX.R.APP.P. 33.1(a); <a href="https://scholar.google.com/scholar_case?case=16396646560525050729&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Mansions in the Forest, L.P.,</i> 365 S.W.3d at 317</a>. The party asserting objections should obtain a written ruling at, before, or very near the time the trial court rules on the motion for summary judgment or risk waiver. <i>See</i> TEX.R.APP.P. 33.1(a); <a href="https://scholar.google.com/scholar_case?case=2710194757052093803&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Dolcefino v. Randolph,</i> 19 S.W.3d 906, 926 (Tex.App.-Houston [14th Dist.] 2000, pet. denied)</a>.<br />
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If the factual statements in an affidavit are "not obviously based on hearsay[,]" a defect is purely formal. <i>See </i><a href="https://scholar.google.com/scholar_case?case=2856816356202920396&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Youngstown Sheet & Tube Co. v. Penn,</i> 363 S.W.2d 230, 234 (Tex. 1962)</a>; <i>see also </i><a href="https://scholar.google.com/scholar_case?case=16615022197078027401&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Ford Motor Co. v. Leggat,</i> 904 S.W.2d 643, 645 (Tex. 1995)</a>(affidavit not defective where affiant swore before officer authorized to administer oaths that facts attested to were based on personal knowledge; in absence of challenge to authenticity of affidavit, submission of a copy provides no ground for rejection); <a href="https://scholar.google.com/scholar_case?case=2710194757052093803&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Dolcefino v. Randolph,</i> 19 S.W.3d 906, 927 (Tex.App.-Houston [14th Dist.] 2000, pet. denied)</a>(trial court may not consider hearsay evidence in ruling on motion for summary judgment). When an affidavit suffers from a mere formal defect in form, a party must object to the formal defect and secure a ruling from the trial court to preserve error. TEX.R.CIV.P. 166a(f); <i>see </i><a href="https://scholar.google.com/scholar_case?case=18263086354444588818&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Seim,</i> 551 S.W.3d at 166,</a> <i>citing </i><a href="https://scholar.google.com/scholar_case?case=1529728328269946419&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Well Sols., Inc.,</i> 32 S.W.3d at 317</a>. Defects that are purely formal may not be raised for the first time on appeal. <a href="https://scholar.google.com/scholar_case?case=1529728328269946419&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Well Sols., Inc. v. Stafford,</i> 32 S.W.3d 313, 317 (Tex.App.-San Antonio 2000, no pet.)</a>. Conversely, a party may first complain on appeal about a purely substantive defect present in an affidavit. <i>See </i><a href="https://scholar.google.com/scholar_case?case=18263086354444588818&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Seim,</i> 551 S.W.3d at 166,</a> <i>citing </i><a href="https://scholar.google.com/scholar_case?case=1529728328269946419&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Well Sols., Inc.,</i> 32 S.W.3d at 317</a>; <a href="https://scholar.google.com/scholar_case?case=13673524245672604913&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Dailey v. Albertson's, Inc.,</i> 83 S.W.3d 222, 225 (Tex.App.-El Paso 2002, no pet.)</a>. Unless an order sustaining the objection to summary-judgment evidence is reduced to writing, signed, and entered of record, the evidence remains part of the summary-judgment proof even if a party has objected to an opponent's summary-judgment evidence. <i>See </i><a href="https://scholar.google.com/scholar_case?case=18263086354444588818&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Seim,</i> 551 S.W.3d at 166,</a> <i>citing </i><a href="https://scholar.google.com/scholar_case?case=10435374438553486771&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Mitchell v. Baylor Univ. Med. Ctr.,</i> 109 S.W.3d 838, 842 (Tex.App.-Dallas 2003, no pet.)</a>.</div>
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<i>Analysis</i></h2>
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Houle asserts that he specifically objected in the trial court to information missing from Diana Trittipoe's affidavit when he observed that the affidavit "does not advise the court as to how [Trittipoe] comes by that `personal knowledge.'" Houle also candidly acknowledges that the trial court "did not comment on the objection." Capital One counters that Houle not only failed to secure the trial court's ruling on this specific objection but also failed to obtain the trial court's ruling regarding his objection that Trittipoe failed to address the redaction of information in account statements which she averred in her affidavit to be true and correct copies of original documents. For these reasons, Capital One contends Houle has failed to preserve for our review his trial court objections to Capital One's summary judgment evidence. In reply, Houle asserts that because the business records failed to satisfy the standard for summary judgment on the bases that they were not properly authenticated, were incomplete, and contained conflicting inconsistencies, "an actual objection was not necessary to preserve error."<br />
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The record before us does not include a reporter's record of any proceedings in the trial court nor does it contain an express ruling by the trial court on Houle's objections to Capital One's summary-judgment evidence. The trial court's final summary judgment does include a Mother Hubbard clause that declares "[a]ll relief not expressly granted is denied." We look to Houle's response to Capital One's motion for summary judgment to determine whether Houle preserved error.</div>
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<i>Conflicting Inconsistencies</i></h2>
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On appeal, Houle complains in part that the business records used to support the summary judgment "contained conflicting inconsistencies." Houle's brief includes a heading titled, "Inconsistent Records," in which he notes that the Capital One records attached to Trittipoe's affidavit are missing a record for July 2010, reflect an increased interest rate, and despite being declared true and correct copies, have had the account number redacted. Unlike his appellate complaint, in his response to Capital One's motion for summary judgment, Houle did not globally complain that the business records contain "conflicting inconsistencies." To the extent that Houle's "conflicting inconsistencies" complaint may be deemed to stand independently of the complaints set out under the "Inconsistent Records" portion of his brief, we find it is not preserved for our consideration. TEX.R.APP.P. 33.1.</div>
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<i>Defects of Form</i></h2>
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In his response to the summary-judgment motion, Houle specifically complained in the trial court:</div>
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Diana Trittipoe is not an employee of the Plaintiff, nor is she the custodian of records for the Plaintiff. She is an employee of another company and simply claims to have `personal knowledge of the manner and method by which Capital One created and maintains certain business book and record, including computer records of customer accounts.' She does not advise the court as to how she comes by that `personal knowledge.' The Court should be suspicious of her affidavit because she claims: `The attached records are the originals or exact duplicates of the originals.' She identifies the account as consisting of 16 `Xs.' According to the Defendant's Affidavit, his account number did not consist of 16 `Xs' but contained a series of arabic numerals. It is apparent from examining the documents attached as Plaintiff's Exhibit A-1 that information has been redacted from the original document and that these copies are not `exact duplicates' which is the express language of Rule 902 (10), Texas Rules of Evidence for authentication by affidavit. The information set forth in the paragraph above has already noted that the records are not complete, and now there are not the originals or exact duplicates. The summary judgment evidence produced by Plaintiff will not support a summary judgment.</blockquote>
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On appeal, Houle complains that the records attached to Trittipoe's affidavit were not properly authenticated, were incomplete, and were not true and complete copies of the originals because they bore redaction of Houle's specific account number with Capital One.<br />
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These purported defects are purely formal. <i>See </i><a href="https://scholar.google.com/scholar_case?case=1529728328269946419&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Well Sols., Inc. v. Stafford,</i> 32 S.W.3d 313, 317 (Tex.App.-San Antonio 2000, no pet.)</a>(objection to deposition or affidavit, that is, statement in writing of a fact or facts signed by party making statement, sworn to before officer authorized to administer oaths, and officially certified to by officer under his seal of office, on basis that statement does not establish foundation for statement is purely formal defect), <i>citing </i><a href="https://scholar.google.com/scholar_case?case=16615022197078027401&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Leggat,</i> 904 S.W.2d at 645-46</a>. Because Houle failed to object to the purported formal defects and secure a ruling from the trial court in order to preserve error, he may not raise these complaints for the first time on appeal. TEX.R.CIV.P. 166a(f); <i>see </i><a href="https://scholar.google.com/scholar_case?case=18263086354444588818&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Seim,</i> 551 S.W.3d at 166,</a> <i>citing </i><a href="https://scholar.google.com/scholar_case?case=1529728328269946419&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Well Sols., Inc.,</i> 32 S.W.3d at 317</a>.<br />
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Although the Texas Supreme Court has recognized that an implicit ruling may be sufficient to preserve an issue for appellate review, it has clarified that the trial court's ruling must be clearly implied by the record. <i>See </i><a href="https://scholar.google.com/scholar_case?case=18263086354444588818&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Seim,</i> 551 S.W.3d at 166,</a><i>citing </i><a href="https://scholar.google.com/scholar_case?case=15815251254687071752&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>In the Interest of Z.L.T., J.K.H.T., and Z.N.T.,</i> 124 S.W.3d 163, 165 (Tex. 2003)</a>. In <i>Seim,</i> the Court acknowledged the correct reasoning of the San Antonio Court of Appeals in <a href="https://scholar.google.com/scholar_case?case=1529728328269946419&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Well Sols., Inc. v. Stafford,</i> 32 S.W.3d 313, 317 (Tex.App.-San Antonio 2000, no pet.)</a> when that court declared:</div>
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[R]ulings on a motion for summary judgment and objections to summary judgment evidence are not alternatives; nor are they concomitants. Neither implies a ruling—or any particular ruling—on the other. In short, a trial court's ruling on an objection to summary judgment evidence is not implicit in its ruling on the motion for summary judgment; a ruling on the objection is simply not `capable of being understood' from the ruling on the motion for summary judgment.</blockquote>
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<i>See </i><a href="https://scholar.google.com/scholar_case?case=18263086354444588818&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Seim,</i> 551 S.W.3d at 165</a>.<br />
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We agree that a trial court's ruling on an objection to summary judgment evidence is not implicit in its ruling on the motion for summary judgment. <i>See </i><a href="https://scholar.google.com/scholar_case?case=18263086354444588818&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Seim,</i> 551 S.W.3d at 166,</a> <i>citing </i><a href="https://scholar.google.com/scholar_case?case=1529728328269946419&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Well Sols., Inc.,</i> 32 S.W.3d at 317</a>. Moreover, that the trial court's judgment in this case includes a Mother Hubbard clause stating that "[a]ll other relief not expressly granted is denied[,]" does not constitute a showing that the trial court ruled on Houle's objections to Capital One's summary judgment evidence. <i>See </i><a href="https://scholar.google.com/scholar_case?case=2777067290705336543&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Lissiak v. SW Loan OO, L.P.,</i> 499 S.W.3d 481, 488 (Tex.App.-Tyler 2016, no pet.)</a>.<br />
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We conclude the trial court did not implicitly rule on Houle's objections to Capital One's summary-judgment evidence. <i>See </i><a href="https://scholar.google.com/scholar_case?case=18263086354444588818&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Seim,</i> 551 S.W.3d at 166</a>. As these complaints have not been preserved, they are waived. TEX.R.APP.P. 33.1.</div>
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<i>Personal Knowledge</i></h2>
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Affidavits supporting a summary-judgment motion must be made on personal knowledge, not supposition, and "shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein." TEX.R.CIV.P. 166a(f); TEX.R.EVID. 602 ("A witness may testify to a matter only if . . . the witness has personal knowledge of the matter."); <a href="https://scholar.google.com/scholar_case?case=11681144192612755338&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Marks v. St. Luke's Episcopal Hosp.,</i> 319 S.W.3d 658, 666 (Tex. 2010)</a>. An affidavit not based on personal knowledge is not legally sufficient. <i>Id.,</i> <a href="https://scholar.google.com/scholar_case?case=11681144192612755338&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;">319 S.W.3d at 666,</a> <i>citing </i><a href="https://scholar.google.com/scholar_case?case=16106320265311165157&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Kerlin v. Arias,</i> 274 S.W.3d 666, 668 (Tex. 2008)(per curiam)</a>.<br />
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Houle contends on appeal as he did in the trial court that Trittipoe failed to demonstrate adequate personal knowledge underlying her testimony for proving up the attached Capital One business records. We have previously held that a lack of personal knowledge, reflected in the affiant's testimony itself and not just as the lack of a formal recitation, is a defect of substance that may be raised for the first time on appeal. <a href="https://scholar.google.com/scholar_case?case=13673524245672604913&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Dailey v. Albertson's, Inc.,</i> 83 S.W.3d 222, 226 (Tex.App.-El Paso 2002, no pet.)</a>.<br />
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To the extent Houle's complaint may be said to constitute a defect of substance and may be raised for the first time on appeal, we conclude it is without merit. The essence of his complaint is that there is some reason to doubt whether Trittipoe's testimony regarding Capital One's record-keeping procedures was based on her personal knowledge because she is employed by a Capital One agent and affiliate rather than Capital One itself.<br />
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Trittipoe adequately demonstrates her competence to give the testimony she provided. She testified that her responsibilities as a Litigation Support Representative provide her access to all relevant systems and documents needed to validate the information she has supplied. Trittipoe also explained that her personal knowledge of the manner and method by which Capital One creates and maintains certain books and records, including computer records of customer accounts, arises from the scope of her responsibilities as a Litigation Support Representative. In that role, Trittipoe also declared that records of Houle's credit card account ending in "XXXXXXXXXXXXXXXX" were kept in the regular course of its business and that the account is the subject of this suit.<br />
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The records are comprised of over 180 pages of documents that Trittipoe identifies as related to Houle's account with Capital One. Trittipoe identified the records as originals or exact duplicates of the originals and established them to be Capital One's business records containing statements of activity on Houle's account. The records reflect extensions of credit requested by Houle and extended by Capital One, payments made by Houle and other credits, fees and interest assessed on the account, installments due and owing, and account balances owed. Trittipoe explained that the records contain the terms and conditions applicable to Houle's account, and also include the application Houle signed as well as copies of Houle's payments on the account. Trittipoe concludes her affidavit by stating, "As of the date of this affidavit, the amount due and owing on the account is $4,007.72."<br />
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Contrary to Houle's suggestion, the rules of evidence do not require that the qualified witness who lays the predicate for the admission of business records be their creator or have personal knowledge of the contents of the record. <i>See</i>TEX.R.EVID. 803(6), 902(10)<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=2797524786636438621&q=Houle+v+Capital+One&hl=en&as_sdt=4,44#[1]" name="r[1]" style="color: #660099;">[1]</a></sup>; <i>see also </i><a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=15715644234487091583&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Bridges v. Citibank (S.D.) N.A.,</i> No. 02-06-00081-CV, 2006 WL 3751404, at *2 (Tex.App.-Fort Worth Dec. 21, 2006, no pet.)</a>(mem.op.), <i>citing </i><a href="https://scholar.google.com/scholar_case?case=5956209673670957127&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>In re K.C.P.,</i> 142 S.W.3d. 574, 578 (Tex.App.-Texarkana 2004, no pet.)</a>. The witness is required only to have personal knowledge of the manner in which the records were kept. <i>See</i> TEX.R.EVID. 803(6), 902(10); <i>see also </i><a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=15715644234487091583&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Bridges,</i> 2006 WL 3751404, at *2</a>.</div>
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We conclude that Trittipoe's testimony adequately demonstrates the basis for her personal knowledge of the manner and method by which Capital One kept its records and the other facts to which she testified. Other Texas courts have considered similar affidavit testimony by such personnel as adequate to establish the basis for the affiants' personal knowledge and competence. <i>See, e.g., </i><a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=15979837668184732952&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Damron v. Citibank (S. Dakota) N.A.,</i> 03-09-00438-CV, 2010 WL 3377777, at *3-4 (Tex.App.-Austin Aug. 25, 2010, pet. denied)</a>(mem. op.); <a href="https://scholar.google.com/scholar_case?case=6999368687494981910&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>McFarland v. Citibank (S. Dakota), N.A.,</i> 293 S.W.3d 759, 762 (Tex.App.-Waco 2009, no pet.)</a>(affiant's affidavit based on personal knowledge derived from her work as a litigation analyst was not conclusory as it provided proper basis for admitting business records); <a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=3681538618769078514&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Wynne v. Citibank (S.D.) N.A.,</i> No. 07-06-000162-CV, 2008 WL 1848286, at *2 (Tex.App.-Amarillo Apr. 25, 2008, pet. denied)</a>(mem.op.); <a href="https://scholar.google.com/scholar_case?case=3301627035615021837&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Jones v. Citibank (S.D.), N.A.,</i> 235 S.W.3d 333, 337 (Tex.App.-Fort Worth 2007, no pet.)</a>; <a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=7935792126546398801&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Hay v. Citibank (S.D.) N.A.,</i> No. 14-04-01131-CV, 2006 WL 2620089, at *3 (Tex.App.-Houston [14th Dist.] Sept. 14, 2006, no pet.)</a>(substitute op.).</div>
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<i>Genuine Issue of Material Fact</i></h2>
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The four elements of a breach of contract claim are: (1) the existence of a valid contract; (2) performance, or tendered performance, by the plaintiff; (3) breach of the contract by the defendant; and (4) damages to the plaintiff resulting from that breach. <i>Restrepo v. All. Riggers & Constructors, Ltd.,</i> 538 S.W.3d 724, 740 (Tex.App.-El Paso 2017, no pet.), <i>citing </i><a href="https://scholar.google.com/scholar_case?case=13813695692056811438&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Velvet Snout,</i> <i>LLC v. Sharp,</i> 441 S.W.3d 448, 451 (Tex.App.-El Paso 2014, no pet.)</a>. A party is entitled to relief for a stated account where: (1) transactions between the parties give rise to indebtedness of one to the other; (2) an agreement, express or implied, between the parties fixes an amount due, and (3) the one to be charged makes a promise, express or implied, to pay the indebtedness. <a href="https://scholar.google.com/scholar_case?case=11122789088373953734&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Eaves v. Unifund CCR Partners,</i> 301 S.W.3d 402, 407-08 (Tex.App.-El Paso 2009, no pet.)</a>; <a href="https://scholar.google.com/scholar_case?case=6999368687494981910&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>McFarland v. Citibank (South Dakota), N.A.,</i> 293 S.W.3d 759, 763 (Tex.App.-Waco 2009, no pet.)</a>; <a href="https://scholar.google.com/scholar_case?case=10262643112845153830&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Dulong v. Citibank (South Dakota), N.A.,</i> 261 S.W.3d 890, 893 (Tex.App.-Dallas 2008, no pet.)</a>. Because an agreement on which an account stated claim is based can be express or implied, a creditor need not produce a written contract to establish the agreement between the parties; an implied agreement can arise from the acts and conduct of the parties. <i>See </i><a href="https://scholar.google.com/scholar_case?case=18183153331244650038&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Walker v. Citibank, N.A.,</i> 458 S.W.3d 689, 692-93 (Tex.App.-Eastland 2015, no pet.),</a> <i>citing </i><a href="https://scholar.google.com/scholar_case?case=6999368687494981910&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>McFarland,</i> 293 S.W.3d at 763</a>.<br />
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In response to Capital One's motion for summary judgment, Houle filed an affidavit in which he complained that Capital One's documents were not original or exact duplicates of account statements he had received, and noted both that his statements did not contain solid black lines and his account number had numeric digits rather than the "Xs" contained in Capital One's summary judgment evidence. Houle acknowledged that although he had disputes with Capital One regarding charges and credits to his account, Capital One later credited payment and refunded a late penalty. Houle also complained that Capital One had increased its interest rate in an arbitrary manner, specifically in July 2010 when he made a payment and Capital One purportedly doubled the "interest rate," and without specifying, he asserted in a conclusory manner that the account is not true and correct and that he does not owe the amount Capital One claims is due. There is no evidence in the record from Houle or Capital One regarding payments made in July 2010.<br />
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The evidence showed that Capital One and Houle entered into a credit card agreement, that Capital One issued a credit card to Houle, that Houle used the credit card to make purchases, and that Houle made payments on the account. Evidence of the card-member agreement was presented to the trial court through Trittipoe's affidavit. The agreement provides that Capital One would allow Houle to purchase goods and services with credit in exchange for payment. According to the terms of the agreement, Capital One would assess interest charges based on the application of the annual percentage rate, which varies as the index for the rate increases or decreases, and in the event of two late payments, the variable annual percentage rate would increase to an unspecified "penalty annual percentage rate." The June 2010 statement having a July 2010 due date shows an annual percentage rate of 13.52%. Further, the record showed that Houle's account was past due for six consecutive months, from January 2013-June 2013, with an annual percentage rate of 29.40%, incurred past due and over limit fees, and was thereafter "charged off," with a final balance of $4007.72.<br />
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Based on the card-member agreement, Capital One's extension of credit on Houle's account, Houle's usage of the credit card and failure to pay on the account in accordance with the terms of the agreement, and Capital One's resulting damages, we conclude that Capital One satisfied each element of its breach of contract cause of action and, if necessary for the account-stated cause of action, conclude or reasonably infer that Houle agreed to pay a fixed amount equal to the purchases and cash advances he made, plus interest. <i>See </i><a href="https://scholar.google.com/scholar_case?case=10262643112845153830&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Dulong,</i> 261 S.W.3d at 894</a>; <a href="https://scholar.google.com/scholar_case?case=6999368687494981910&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>McFarland,</i> 293 S.W.3d at 763-64</a> (cases holding creditor could collect debt on account stated where, based on series of transactions reflected on account statements, creditor established that card holder agreed to full amount shown on statements and impliedly promised to pay indebtedness). We conclude that no genuine issue of material fact exists as a matter of law as to any element of Capital One's causes of action against Houle. Taking Houle's affidavit as true, and indulging every reasonable inference and resolving any doubts in his favor, we conclude that Houle failed to satisfy his burden of presenting evidence that raises a genuine issue of material fact. <i>See </i><a href="https://scholar.google.com/scholar_case?case=1299273196667953801&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099;"><i>Nixon,</i> 690 S.W.2d at 548-49</a>.<br />
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Moreover, with limited exceptions, Rule 21c requires that unless the inclusion of sensitive data is required by statute, court rule, or administrative regulation, a document containing sensitive data, including credit card numbers, may not be filed with the court unless that data is redacted. <i>See</i> TEX.R.CIV.P. 21c(a)(2), (b). The rule requires that sensitive data be redacted by using the letter "X" in place of each omitted digit or character or by other means specified therein. <i>See</i>TEX.R.CIV.P. 21c(c). The redaction of Houle's credit cards account data from the records attached to Trittipoe's affidavit in compliance with Rule 21c does not raise a genuine issue of material fact as to any element of Capital One's breach of contract and account stated claims.</div>
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The trial court did not err in granting summary judgment in favor of Capital One. Houle's sole issue on appeal is overruled.</div>
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CONCLUSION</h2>
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The trial court's judgment is affirmed.</div>
<o:p><small style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 12px;"></small></o:p><br />
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<a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=2797524786636438621&q=Houle+v+Capital+One&hl=en&as_sdt=4,44#r[1]" name="[1]" style="color: #660099; text-decoration: underline;">[1]</a> Rule 902(10)(b) sets out a form affidavit to be used when introducing business records under Rule 803(6). TEX.R.EVID. 902(10)(b), 803(6). Rule 902(10)(b) provides, however, that the form set out in the rule is not exclusive. An affidavit that substantially complies with the affidavit set out in the rule will suffice. TEX.R.EVID. 902(10)(b); <i>see also </i><a href="https://scholar.google.com/scholar_case?case=17777424385749559339&q=Houle+v+Capital+One&hl=en&as_sdt=4,44" style="color: #660099; text-decoration: underline;"><i>Fullick v. City of Baytown,</i> 820 S.W.2d 943, 944 (Tex.App.-Houston [1st Dist.] 1991, no writ)</a>.</div>
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MOTPhttp://www.blogger.com/profile/15883011307129083993noreply@blogger.com0tag:blogger.com,1999:blog-9105536336033560224.post-36515324759146861442019-05-10T12:59:00.001-07:002019-05-17T11:23:55.079-07:00Variation on the arbitration theme: Amegy Bank sues customer to block arbitration <div style="text-align: center;">
<b><span style="color: #cc0000;">WHEN THE LITTLE GUY WANTS TO TAKE THE BIG GUY TO ARBITRATION </span></b></div>
<br />
Here is another rare case where an individual wanted to arbitrate a dispute with a business -- rather than the reverse -- and was thwarted in his quest: <a href="https://scholar.google.co.uk/scholar_case?case=5570336551335813780&hl=en&as_sdt=6,44" target="_blank"><i>Carter v. ZB National Association d/b/a Amegy Bank</i></a>, No. 14-17-00900-CV (Tex.App.- Houston [14th Dist.] May 7, 2019) (concluding that the trial court did not err in declaring as a matter of law that Carter cannot force Amegy Bank to arbitrate his dispute with the bank).<br />
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Affirmed as Modified and Opinion filed May 7, 2019.</div>
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In The</div>
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Fourteenth Court of Appeals</div>
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NO. 14-17-00900-CV</div>
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STANWYN JAY CARTER, Appellant</div>
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V.</div>
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ZB, NATIONAL ASSOCIATION D/B/A AMEGY BANK, Appellee</div>
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On Appeal from the 55th District Court</div>
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Harris County, Texas</div>
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Trial Court Cause No. 2017-56775</div>
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<b><span style="color: #3d85c6;">O P I N I O N</span></b></div>
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Opinion filed May 7, 2019.<br />
<br />
Amy Wolfshohl, Jonna Summers, for ZB, National Association d/b/a Amegy Bank, Appellee.<br />
<br />
Stanwyn Jay Carter, for Appellant, Pro Se.<br />
<br />
On Appeal from the 55th District Court, Harris County, Texas, Trial Court Cause No. 2017-56775.<br />
<br />
Affirmed as Modified.<br />
<br />
Panel consists of Chief Justice Frost and Justices Wise and Jewell.<br />
<br />
OPINION BY KEM THOMPSON FROST, Chief Justice.<br />
<br />
Appellant Stanwyn Jay Carter, pro se, appeals the trial court's order granting appellee ZB, National Association d/b/a Amegy Bank ("Amegy Bank") summary judgment on its claim for declaratory relief that Carter cannot force Amegy Bank to arbitrate the dispute in an arbitration that Carter had commenced.<br />
<br />
We modify the trial court's judgment to delete two declarations and affirm the judgment as modified.<br />
<br />
<b>I. FACTUAL AND PROCEDURAL BACKGROUND</b><br />
<br />
Contours Community Development Corporation executed a promissory note dated September 1, 2010, in the principal amount of $544,000 (the "Note") payable to Amegy Bank. Carter signed the Note as Executive Director of Contours. Contours and Amegy Bank executed a "First Modification and Extension to Note and Deed of Trust," dated December 31, 2010 ("First Modification"). Carter signed the First Modification as Executive Director of Contours.<br />
<br />
Paragraph 43 of the Note and paragraph 13 of the First Modification address dispute resolution and are substantially similar in all material respects. Each paragraph has a section entitled "JURY TRIAL WAIVER," and a section entitled "ARBITRATION."<br />
<br />
In the first section, Contours and Amegy Bank waive their right to a jury trial in connection with a claim, dispute, or controversy that arises between them with respect to the Note, related agreements, or any other agreement or business relationship between them, whether or not related to the subject matter of the Note (hereinafter a "Dispute"). In the first paragraph, Contours and Amegy Bank agree that any Dispute will be resolved "BY A JUDGE SITTING WITHOUT A JURY." Contours and Amegy Bank agree that if a court determines that the jury-trial-waiver provision is not enforceable, then before trial of a Dispute but not later than thirty days after entry of the order determining the provision to be unenforceable, either party may move the court for an order compelling arbitration and staying or dismissing such litigation pending arbitration (an "Arbitration Order.").<br />
<br />
In the second paragraph regarding arbitration, Contours and Amegy Bank agree that if a Dispute arises and only if a jury-trial waiver is not permitted by applicable law or by a court ruling, then either party may require that the Dispute be resolved by binding arbitration before a single arbitrator at the request of any party.<br />
<br />
Carter, pro se, filed a demand for arbitration with JAMS, seeking to arbitrate claims against Amegy Bank under the arbitration provision in Paragraph 43 of the Note. When JAMS refused to dismiss the arbitration, Amegy Bank filed suit in the trial court below seeking declaratory relief, including a declaration that Carter cannot force Amegy Bank to arbitrate, and seeking to stay the arbitration proceedings. Instead of filing an answer, Carter filed a motion to compel arbitration.<br />
<br />
Following a temporary restraining order and a temporary injunction enjoining Carter from continuing to prosecute the arbitration, Amegy Bank filed a motion for traditional summary judgment. In the motion, Amegy Bank sought various declarations as a matter of law, including a declaration that Carter cannot force Amegy Bank to arbitrate the dispute in the commenced JAMS arbitration styled Carter, Stanwyn Jay v. Amegy Bank National Association (hereinafter the "Carter Dispute"). Amegy Bank maintains that Carter improperly commenced arbitration predicated on an arbitration provision that does not authorize arbitration at this juncture. Amegy Bank attached to its motion authenticated copies of the Note and the First Modification. Carter filed a summary-judgment response, asserting various points and arguing that he raised genuine issues of material fact.<br />
<br />
The trial court granted Amegy Bank's summary-judgment motion, making seven declarations as a matter of law. The trial court later rendered a final judgment ordering that the Carter Dispute remain stayed. In the final judgment the trial court reiterated the same seven declarations:<br />
<br />
1. Pursuant to Paragraph 43 of the Promissory Note and Paragraph 13 of the First Modification and Extension to Note and Deed of Trust ("First Modification"), only a court may determine the validity, enforceability, meaning, and scope of the Promissory Note and First Modification's arbitration provisions.<br />
2. Pursuant to Paragraph 43 of the Promissory Note and Paragraph 13 of the First Modification, arbitration cannot be commenced unless a court determines that the jury trial waiver is not enforceable.<br />
3. Pursuant to Paragraph 43 of the Promissory Note and Paragraph 13 of the First Modification, arbitration cannot be commenced until there is an Arbitration Order as defined in the Promissory Note and First Modification.<br />
4. Pursuant to Paragraph 43 of the Promissory Note and Paragraph 13 of the First Modification, an Arbitration Order cannot issue unless a court determines that the jury trial waiver is not enforceable.<br />
5. An Arbitration Order has not issued.<br />
6. There has been no determination that the jury trial waiver is unenforceable.<br />
7. Defendant Stanwyn Jay Carter cannot force ZB, National Association d/b/a Amegy Bank to arbitrate the dispute in the commenced JAMS arbitration styled Carter, Stanwyn Jay vs. Amegy Bank National Association.<br />
On appeal Carter argues that the trial court reversibly erred in granting summary judgment.<br />
<br />
<b>II. Analysis</b><br />
<br />
Liberally construing Carter's brief, we interpret Carter to assert the following points:<br />
<br />
(1) The agreement does not require an arbitration order to issue before an arbitration may be initiated under the arbitration clause.<br />
(2) Under their plain texts, the agreements provide for arbitration if a jury-trial waiver is not permitted by applicable law or by court ruling, and thus there is no requirement that a court determine the jury-trial waiver to be unenforceable.<br />
(3) The jury-trial-waiver provision applies if permitted by applicable law or by a court ruling, but no summary-judgment evidence proves either proposition.<br />
(4) Even though Carter did not sign the Note or First Modification in his individual capacity, Carter may arbitrate the Carter Dispute because he is an obligated party to an arbitration agreement that encompasses the Carter Dispute and because Amegy Bank refuses to arbitrate.<br />
(5) The trial court erred in declaring that Carter cannot force Amegy Bank to arbitrate the Carter Dispute because the arbitration clause provides that "Arbitration shall be commenced by filing a petition with, and in accordance with the applicable arbitration rules of, JAMS or National Arbitration Forum . . . as selected by the initiating party."<br />
(6) The trial court's first declaration is contrary to precedent under which attacks on the validity of the contract, as opposed to attacks on the validity of the arbitration clause, are to be resolved by the arbitrator in the first instance.<br />
(7) Under the contracts, either the jury-trial waiver is enforceable or the arbitration clause is enforceable, and because the arbitration clause is valid, irrevocable and enforceable, the jury-trial waiver necessarily is unenforceable.<br />
<b><br /></b>
<b>A. Standard of review</b><br />
<br />
We review declaratory judgments decided by summary judgment under the same standards that govern summary judgments generally. See Tex. Civ. Prac. & Rem. Code § 37.010 (West, Westlaw through 2017 1st C.S.); Wolf Hollow I, L.P. v. El Paso Mktg., L.P., 472 S.W.3d 325, 332 (Tex. App.-Houston [14th Dist.] 2015, pet. denied). We review the trial court's grant of a summary judgment de novo. See Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). In a traditional motion for summary judgment, if the movant's motion and summary-judgment evidence facially establish its right to judgment as a matter of law, the burden shifts to the nonmovant to raise a genuine, material fact issue sufficient to defeat summary judgment. M.D. Anderson Hosp. & Tumor Inst. v. Willrich, 28 S.W.3d 22, 23 (Tex. 2000). In our de novo review of a trial court's summary judgment, we consider all the evidence in the light most favorable to the nonmovant, crediting evidence favorable to the nonmovant if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not. Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex. 2006). The evidence raises a genuine issue of fact if reasonable and fair-minded jurors could differ in their conclusions in light of all of the summary-judgment evidence. Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d 754, 755 (Tex. 2007).<br />
<br />
In this case, the trial court was asked to render a declaratory judgment based on the Note and the First Modification, instruments subject to the general rules of contract construction. See Marzo Club, LLC v. Columbia Lakes Homeowners Ass'n, 325 S.W.3d 791, 798 (Tex. App.-Houston [14th Dist.] 2010, no pet.). In construing a contract, our primary concern is to ascertain and give effect to the intentions of the parties as expressed in the contract. Kelley-Coppedge, Inc. v. Highlands Ins. Co., 980 S.W.2d 462, 464 (Tex. 1998). To ascertain the parties' true intentions, we examine the entire agreement in an effort to harmonize and give effect to all provisions of the contract so that none will be rendered meaningless. MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 652 (Tex. 1999). Whether a contract is ambiguous is a question of law for the court. Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996). A contract is ambiguous when its meaning is uncertain and doubtful or is reasonably susceptible to more than one interpretation. Id. But, when a written contract is worded so that it can be given a certain or definite legal meaning or interpretation, it is unambiguous, and the court construes it as a matter of law. Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 157 (Tex. 2003). We cannot rewrite the contract or add to its language under the guise of interpretation. See American Mfrs. Mut. Ins. Co., 124 S.W.3d at 162. Rather, we must enforce the contract as written. See Don's Bldg. Supply, Inc. v. OneBeacon Ins. Co., 267 S.W.3d 20, 23 (Tex. 2008).<br />
<br />
<b>B. Law on arbitration</b><br />
<br />
A party seeking to force another party to arbitrate certain claims must establish that (1) a valid arbitration agreement exists[1] and (2) the claims at issue are within the scope of the agreement. See In re D. Wilson Const. Co., 196 S.W.3d 774, 780-81 (Tex. 2006) (orig. proceeding); In re Igloo Prods. Corp., 238 S.W.3d 574, 577 (Tex. App.-Houston [14th Dist.] 2007, orig. proceeding [mand. denied]). If the party seeking arbitration proves a valid arbitration agreement, any doubts as to whether the claims fall within the scope of the arbitration clause must be resolved in favor of arbitration. See Prudential Sec. Inc. v. Marshall, 909 S.W.2d 896, 899 (Tex. 1995); Osornia v. AmeriMex Motor & Controls, Inc., 367 S.W.3d 707, 712 (Tex. App.-Houston [14th Dist.] 2012, no pet.). A court should not deny arbitration unless the court can say with positive assurance that an arbitration clause is not susceptible of an interpretation that would cover the claims at issue. See Prudential Sec. Inc., 909 S.W.2d at 899; Osornia, 367 S.W.3d at 712.<br />
<br />
We presume for the purposes of our analysis that the arbitration clauses in the Note and First Modification are broad, making the presumption of arbitrability particularly applicable. See Osornia, 367 S.W.3d at 712. In such instances, absent any express provision excluding a particular grievance from arbitration, only the most forceful evidence of purpose to exclude the claim from arbitration can prevail, and Amegy Bank has the burden of showing that the claims fall outside the scope of the arbitration clauses. See id. Nonetheless, the strong policy favoring arbitration cannot serve to stretch a contractual clause beyond the scope intended by the parties or to allow the court to modify the unambiguous meaning of the arbitration clause. See id.<br />
<br />
<b>C. Applicable language from the Note and the First Modification</b><br />
<br />
The First Modification provides in pertinent part as follows:<br />
<blockquote class="tr_bq">
<br />
13. Dispute Resolution. This paragraph contains a jury waiver, arbitration clause[,] and a class action waiver. This paragraph should be carefully read.</blockquote>
<br />
<blockquote class="tr_bq">
(a) JURY TRIAL WAIVER. AS PERMITTED BY APPLICABLE LAW, EACH PARTY WAIVES ITS RESPECTIVE RIGHTS TO A TRIAL BEFORE A JURY IN CONNECTION WITH ANY DISPUTE (HEREINAFTER DEFINED), AND DISPUTES SHALL BE RESOLVED BY A JUDGE SITTING WITHOUT A JURY.[2] IF A COURT DETERMINES THAT THIS PROVISION IS NOT ENFORCEABLE FOR ANY REASON, THEN AT ANY TIME PRIOR TO TRIAL OF THE DISPUTE, BUT NOT LATER THAN THIRTY (30) DAYS AFTER ENTRY OF THE ORDER DETERMINING THIS PROVISION IS UNENFORCEABLE, EITHER PARTY SHALL BE ENTITLED TO MOVE THE COURT FOR AN ORDER COMPELLING ARBITRATION AND STAYING OR DISMISSING SUCH LITIGATION PENDING ARBITRATION ("ARBITRATION ORDER").</blockquote>
<blockquote class="tr_bq">
(b) ARBITRATION. If a claim, dispute, or controversy arises between the parties hereto with respect to [the First Modification] or the Note, related agreements, or any other agreement or business relationship between the parties hereto whether or not related to the subject matter of [the First Modification] or the Note (all of the foregoing, a "Dispute"), and only if a jury trial waiver is not permitted by applicable law or ruling by a court,[3] either party may require that the Dispute be resolved by binding arbitration before a single arbitrator at the request of any party. By agreeing to arbitrate a Dispute, each party gives up any right such party may have to a jury trial, as well as other rights such party would have in court that are not available or are more limited in arbitration, such as the rights to discovery and to appeal.</blockquote>
<blockquote class="tr_bq">
Arbitration shall be commenced by filing a petition with, and in accordance with the applicable arbitration rules of, JAMS or National Arbitration Forum ("Administrator") as selected by the Initiating party. If the parties agree, arbitration may be commenced by appointment of a licensed attorney who is selected by the parties and who agrees to conduct the arbitration without an Administrator. Disputes include matters [stating several matters]. However, Disputes do not include the validity, enforceability, meaning, or scope of this arbitration provision and such matters may be determined only by a court. If a third party is a party to a Dispute, each party will consent to including the third party in the arbitration proceeding for resolving the Dispute with the third party. Venue for the arbitration proceeding shall be at a location determined by mutual agreement of the parties or, if no agreement, in the city and state where lender or bank is headquartered. </blockquote>
<blockquote class="tr_bq">
After entry of an Arbitration Order, the non-moving party shall commence arbitration. The moving party shall, at its discretion, also be entitled to commence arbitration but is under no obligation to do so, and the moving party shall not in any way be adversely prejudiced by electing not to commence arbitration. The arbitrator . . . [listing tasks that arbitrator will perform]. Filing of a petition for arbitration shall not prevent any party from [listing various actions a party may take]. The exercise of such rights shall not constitute a waiver of the right to submit any Dispute to arbitration.<br />
Judgment upon an arbitration award may be entered in any court having jurisdiction except that, if the arbitration award exceeds $4,000,000.00, any party shall be entitled to a de novo appeal of the award before a panel of three arbitrators. To allow for such appeal, [setting forth provisions regarding the procedure for a party to exercise its right to appeal an arbitration award in excess of $4,000,000.00 to a panel of three arbitrators].<br />
Arbitration under this provision concerns a transaction involving interstate commerce and shall be governed by the Federal Arbitration Act, 9 U.S.C. § 1 et seq. This arbitration provision shall survive any termination, amendment, or expiration of [the First Modification] and the Note. If the terms of this provision vary from the Administrator's rules, this arbitration provision shall control.</blockquote>
<br />
The correlative parts of the Note are substantially similar in all material respects to the above-quoted text. Both the Note and the First Modification contain a provision stating that the instrument shall be governed by and construed in accordance with Texas law.<br />
<br />
<b>D. Trial court's determination that no party can start an arbitration unless a court has determined that the jury-trial waiver is not enforceable</b><br />
<br />
In its second declaration, the trial court ruled that under Paragraph 43 of the<br />
<br />
Note and Paragraph 13 of the First Modification, "arbitration cannot be commenced unless a court determines that the jury trial waiver is not enforceable." On appeal, Carter asserts that under the plain text of the Note and First Modification, there is no such requirement. Amegy Bank asserts that Carter waived this argument by not presenting it in his summary-judgment response in the trial court. Even if Carter did not raise this argument in his summary-judgment response, the law does not require that he have done so because his challenge constitutes a complaint that Amegy Bank's summary-judgment evidence does not prove as a matter of law Amegy Bank's entitlement to summary judgment on a traditional ground. See M.D. Anderson Hosp. & Tumor Institute v. Willrich, 28 S.W.3d 22, 23 (Tex. 2000). Thus, Carter still can raise this complaint. See id.<br />
<br />
Under the unambiguous wording of each instrument, the parties agree to arbitrate any Dispute, but "only if a jury trial waiver is not permitted by applicable law or ruling by a court." Thus, the arbitration agreement is triggered only if: (1) a jury-trial waiver is not permitted by applicable law, or (2) a court rules that a jury-trial waiver is not permitted. See Morgan v. Bronze Queen Mngmt. Co., LLC, 474 S.W.3d 701, 710 (Tex. App.-Houston [14th Dist.] 2014, no pet.) (construing similar language). Though such a court order does trigger the arbitration clause, it is not the exclusive trigger. See id.<br />
<br />
In the jury-trial-waiver paragraph, the parties agree that, if a court determines that the jury-trial waiver is not enforceable for any reason, then before trial and no later than thirty days after entry of the order, either party is entitled to ask the court for an order compelling arbitration and staying or dismissing the litigation pending arbitration. This language is consistent with the language in the arbitration provision, in which the parties agree that one of two situations in which their arbitration agreement is triggered is when a court rules that a jury-trial waiver is not permitted. Yet, neither in the jury-trial-waiver provision nor in the remainder of either instrument do the parties agree that such a court ruling is the only situation in which the parties agree to arbitrate a Dispute. See id.<br />
<br />
Under the unambiguous language of the two instruments, the arbitration clause may be triggered without any court order if a jury-trial waiver is not permitted by applicable law. See id. Therefore, the trial court erred in declaring that under Paragraph 43 of the Note and Paragraph 13 of the First Modification, "arbitration cannot be commenced unless a court determines that the jury trial waiver is not enforceable." See id.; Marzo Club, LLC, 325 S.W.3d at 799-800.<br />
<br />
<b>E. Trial court's determination that no party can start an arbitration until there is an order compelling arbitration</b><br />
<br />
In its second declaration, the trial court ruled that under Paragraph 43 of the Note and Paragraph 13 of the First Modification, "arbitration cannot be commenced until there is an Arbitration Order." On appeal, Carter asserts that under the plain text of the Note and First Modification, there is no such requirement. Amegy Bank asserts that Carter waived this argument by not presenting it in his summary-judgment response in the trial court. Even if Carter did not raise this argument in his summary-judgment response, the law does not require that he have done so because he is asserting that Amegy Bank's summary-judgment evidence does not prove as a matter of law Amegy Bank's entitlement to summary judgment on a traditional ground. See M.D. Anderson Hosp. & Tumor Institute, 28 S.W.3d at 23. Thus, Carter can raise this complaint for the first time on appeal. See id.<br />
<br />
In the jury-trial-waiver provision, the parties agree that if a court determines that the jury-trial waiver is not enforceable for any reason then before trial and no later than thirty days after the order's entry, either party may ask the court for an order compelling arbitration and staying or dismissing the litigation pending arbitration. Under the clear text of each instrument, if a court determines that the jury-trial waiver is not enforceable, then within a certain time period either party may ask the court for an order compelling arbitration, but the parties do not make an Arbitration Order mandatory.<br />
<br />
Nothing in the Federal Arbitration Act or Texas Arbitration Act requires that parties get an order compelling arbitration, and unless the parties agree that an order compelling arbitration is a necessary prerequisite to arbitration, an arbitration may be conducted and an arbitration award may be rendered and enforced without any order compelling arbitration. See Ewing v. Act-Catastrophe Texas, L.C., 375 S.W.3d 545, 550-51 (Tex. App.-Houston [14th Dist.] 2012, pet. denied).<br />
<br />
The parties do not state in either instrument that an order compelling arbitration must be obtained before the parties may arbitrate a Dispute. On the contrary, under the permissive language of the jury-trial-waiver section, either party may ask the court for an order compelling arbitration if a court determines that the jury-trial waiver is not enforceable, as long as the party does so before trial and within thirty days of the trial court's order determining that the jury-trial waiver is not enforceable. To construe the instruments as requiring a party to obtain an order compelling arbitration would conflict with the parties' agreement that "EITHER PARTY SHALL BE ENTITLED TO MOVE THE COURT FOR AN ORDER COMPELLING ARBITRATION."[4] Though the parties agree that "[a]fter entry of an Arbitration Order, the non-moving party shall commence arbitration," the parties do not stipulate that arbitration may be commenced only after an Arbitration Order.<br />
<br />
Amegy Bank argues that construing the instruments as not requiring an Arbitration Order before a Dispute may be arbitrated would render superfluous the requirement that a party seek an order compelling arbitration within thirty days of the trial court's order determining that the jury-trial waiver is not enforceable. According to Amegy Bank, there would be no need for a thirty-day deadline to seek an order compelling arbitration if the parties could proceed to arbitrate a Dispute after the thirty-day deadline expired. We disagree.<br />
<br />
A deadline for seeking an Arbitration Order after a court's order that the jury-trial waiver is not enforceable still has meaning even if parties are free to arbitrate without an Arbitration Order. If a party fails to seek an Arbitration Order within this thirty-day period and then files an arbitration demand, one of the respondents may refuse to arbitrate. In addition, if a jury-trial waiver is not permitted by applicable law, then a court order that the jury-trial waiver is not enforceable is not required, and a party may want to file an arbitration demand without seeking an order compelling arbitration.<br />
<br />
Under the unambiguous language of the two instruments, arbitration may be started without an Arbitration Order in some circumstances. Therefore, the trial court erred in declaring as a matter of law that under Paragraph 43 of the Note and Paragraph 13 of the First Modification, "arbitration cannot be commenced until there is an Arbitration Order."<br />
<br />
<b>F. The trial court's declaration as to who may determine arbitrability</b><br />
<br />
Carter also asserts that the trial court erred in declaring that under Paragraph 43 of the Note and Paragraph 13 of the First Modification, "only a court may determine the validity, enforceability, meaning, and scope of the [arbitration provisions in the Note and First Modification]." The parties agreed that "Disputes do not include the validity, enforceability, meaning, or scope of this arbitration provision and such matters may be determined only by a court." Under the Federal Arbitration Act, courts presume that parties to an arbitration agreement intend that courts rather than arbitrators decide issues as to the validity, scope, and enforceability of the arbitration clause. See Jody James Farms, JV v. Altman Group, Inc., 547 S.W.3d 624, 631-33 (Tex. 2018). Though Carter argues otherwise, this agreement does not contradict precedent under which attacks on the validity of the contract as a whole, as opposed to attacks on the validity of the arbitration clause, are to be resolved by the arbitrator in the first instance. Under the plain text of the instruments, the parties agreed that "only a court may determine the validity, enforceability, meaning, and scope of the [arbitration provisions in the Note and First Modification]." Therefore, the trial court did not err in making the first declaration in the final judgment. See Marzo Club, LLC, 325 S.W.3d at 799-800.<br />
<br />
<b>G. The declaration that Carter cannot force Amegy Bank to arbitrate the Carter Dispute</b><br />
<br />
Carter asserts that the trial court erred in declaring that Carter cannot force Amegy Bank to arbitrate the Carter Dispute because the arbitration clause provides that "Arbitration shall be commenced by filing a petition with, and in accordance with the applicable arbitration rules of, JAMS or National Arbitration Forum . . . as selected by the initiating party." But, this sentence does not address the circumstances under which the parties have agreed to arbitrate or the scope of the arbitration agreement. As discussed above, under the plain text of the instruments, the parties' agreement to arbitrate turns on either (1) a jury-trial waiver not being permitted by applicable law, or (2) a court ruling that a jury-trial waiver is not permitted. In its summary-judgment motion Amegy Bank asserted that the jury-trial waiver provision is enforceable under applicable law, and Amegy cited legal authorities showing that applicable law permits a jury-trial waiver. Indeed, Texas and federal law allow jury-trial waivers. See In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 132-33 (Tex. 2004); Morgan, 474 S.W.3d at 710. In addition, the undisputed summary-judgment evidence shows that no court has ruled that a jury-trial waiver is not permitted.<br />
<br />
Even indulging the presumption that the Carter Dispute should be arbitrated and resolving any doubts as to whether the arbitration clause requires arbitration of the Carter Dispute in favor of arbitration, we can say with positive assurance that the arbitration clauses are not susceptible of an interpretation that would require arbitration of the Carter Dispute at this juncture. See Osornia, 367 S.W.3d at 712.<br />
<br />
Under the express language of the arbitration clauses, the parties' agreement to arbitrate is conditioned on either (1) a jury-trial waiver not being permitted by applicable law, or (2) a court ruling that a jury-trial waiver is not permitted. Amegy Bank's motion and summary-judgment evidence prove as a matter of law that neither condition has occurred, so there is no agreement to arbitrate the Carter Dispute at this time. The strong policy in favor of arbitration cannot push the boundaries of a contractual provision beyond the scope intended by the parties or allow a court to modify the unambiguous meaning of the arbitration clause. See id.<br />
<br />
Carter also asserts that under the contracts, either the jury-trial waiver is enforceable or the arbitration clause is enforceable, and because the arbitration clause is valid, irrevocable, and enforceable, the jury-trial waiver necessarily is not enforceable. This argument conflicts with the plain text of the instruments, under which the parties have not agreed to arbitrate the Carter Dispute unless (1) a jury-trial waiver is not permitted by applicable law, or (2) a court rules that a jury-trial waiver is not permitted.<br />
<br />
Carter claims that the jury-trial-waiver provision applies if permitted by applicable law or by a court ruling, but that no summary-judgment evidence proves either proposition. In this argument, Carter does not correctly state the two conditions, which are (1) a jury-trial waiver not being permitted by applicable law, or (2) a court ruling that a jury-trial waiver is not permitted.<br />
<br />
Under the applicable standard of review, we conclude the trial court did not err in declaring as a matter of law that Carter cannot force Amegy Bank to arbitrate the Carter Dispute. See In re Prudential Ins. Co. of Am., 148 S.W.3d at 132-33; Morgan, 474 S.W.3d at 710; Osornia, 367 S.W.3d at 712.<br />
<br />
<b>III. Conclusion</b><br />
<br />
Under the express language of the arbitration clauses, the parties conditioned their agreement to arbitrate on either (1) a jury-trial waiver not being permitted by applicable law, or (2) a court ruling that a jury-trial waiver is not permitted. Amegy Bank's motion and summary-judgment evidence prove as a matter of law that neither condition has occurred, and therefore that there is no agreement to arbitrate the Carter Dispute at this time.<br />
<br />
We conclude the trial court did not err in declaring as a matter of law that Carter cannot force Amegy Bank to arbitrate the Carter Dispute. Because the trial court's second and third declarations conflict with the unambiguous language of the instruments, we modify the trial court's judgment to delete these two declarations, and we affirm the judgment as modified.<br />
<br />
[1] If all relevant parties did not sign the contract containing the arbitration agreement, this first prong may include issues as to whether a non-signatory is bound by or may enforce the arbitration agreement. See In re Rubiola, 334 S.W.3d 220, 223-24 (Tex. 2011). Though Carter, in his individual capacity, is a non-signatory, we presume, without deciding, that Carter may enforce arbitration of the Carter Dispute under the arbitration provisions of the Note and First Modification.<br />
[2] boldface added<br />
[3] emphasis added<br />
[4] emphasis added<br />
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<b><span style="color: #3d85c6;">STATEMENT OF THE CASE, PER APPELLANT</span></b></div>
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<span style="background-color: white;"><span style="color: #3d85c6;"><b>PRAYER FOR RELIEF REJECTED </b></span></span></div>
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<br />MOTPhttp://www.blogger.com/profile/15883011307129083993noreply@blogger.com0tag:blogger.com,1999:blog-9105536336033560224.post-64798055189894860662019-05-08T13:21:00.002-07:002019-05-24T18:04:14.086-07:00Proof of Contract-Formation for Arbitration vs. Credit Card Agreements: Inconsistent Case Law<div style="text-align: center;">
<b style="mso-bidi-font-weight: normal;"><span style="color: red;">FORMATION-PROOF DISPARITY: ARBITRATION AGREEMENTS AND CREDIT CARD AGREEMENTS TREATED DIFFERENTLY </span></b><br />
<b style="mso-bidi-font-weight: normal;"><span style="color: red;">FOR NO READILY APPARENT </span></b><b style="mso-bidi-font-weight: normal;"><span style="color: red;">LEGAL REASONS</span></b></div>
<div class="MsoNormal">
<br />
In several recent cases, Texas courts have denied motions to
compel arbitration in the employment context, and appellate courts have
affirmed the denial, where the employer failed to establish the requisite contract-formation facts: that the employee
was given notice of the arbitration agreement and continued to work, thereby
accepting the agreement by conduct rather than with a wet-ink signature or
formal acknowledgment.<br />
<br />
<i>See</i> <u><a href="https://scholar.google.com/scholar_case?case=9233750198765403589&hl=en&as_sdt=6,44" target="_blank"><i>Stagg Restaurants, LLC v.. Serra</i></a></u>, No. 04-18-00527-CV (Tex.App.- San Antonio, Feb. 13, 2019, no pet.) (trial court's denial of motion to compel arbitration affirmed in interlocutory appeal where employer failed to prove notice of arbitration provision in occupational injury plan document to employee who later brought work-related injury suit); <i><a href="https://scholar.google.co.uk/scholar_case?case=1982315515507374841&q=08-18-00008-CV&hl=en&as_sdt=4,44" target="_blank">Alorica, Inc. v. Tovar</a></i>, No. 08-18-00008-CV (Tex.App.- El Paso, Nov. 26, 2018)(trial court's denial of former employer's motion to compel arbitration affirmed where trial court resolved conflicting evidence on whether terminated employee had notice of mandatory arb agreement); <i style="mso-bidi-font-style: normal;"><a href="https://scholar.google.co.uk/scholar_case?case=16631601551596888814&q=Kmart+Stores+of+Tex.,+L.L.C.+v.+Ramirez&hl=en&as_sdt=6,44" target="_blank">Kmart Stores of Tex., L.L.C. v. Ramirez</a></i>, 510 S.W.3d 559, 565 (Tex.App.-El Paso 2016, pet. denied) (where employer provided evidence that employee had logged on to computer and received notice of arbitration agreement, employee bore burden of raising a fact issue contesting formation, which she met by filing a sworn denial of notice). </div>
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<blockquote class="tr_bq">
<span style="color: #222222; font-family: "arial" , "helvetica" , sans-serif; font-size: x-small;"><span style="background-color: white;">"An employer may enforce an arbitration agreement entered into during an at-will employment relationship if the employee received notice of the employer's arbitration policy and accepted it." <i>In re Dallas Peterbilt, Ltd., L.L.P</i>., 196 S.W.3d 161, 162 (Tex. 2006) (per curiam) (orig. proceeding). "An at-will employee who receives notice of an employer's arbitration policy and continues working with knowledge of the policy accepts the terms as a matter of law." Id. at 163.</span></span></blockquote>
The holdings regarding the evidence needed to prove an agreement to arbitrate was formed in the employment context stand in marked
contrast to Texas courts’ sloppy handling of contract-formation in consumer
debt cases. In the latter category of civil suits, Texas courts routinely
ignore the several elements of contract formation (or merely pay lip service to them
when reciting the caselaw) and take an affiant’s averment that the attached form
contract is the applicable contract as sufficient.<br />
<blockquote class="tr_bq">
<span style="font-family: "arial" , "helvetica" , sans-serif; font-size: x-small;">The elements necessary for formation of a valid contract are (1) an offer, (2) acceptance in strict compliance with the terms of the offer, (3) a meeting of the minds, (4) each party's consent to the terms, and (5) execution and delivery of the contract with the intent that it be mutual and binding. <i>Thornton v. AT& T Advert., L.P.</i>, 390 S.W.3d 702, 705 (Tex. App.-Dallas 2012, no pet.). For a contract to be enforceable, it must be supported by consideration. <i>In re OSG Ship Mgmt., Inc.,</i> 514 S.W.3d 331, 338 (Tex. App.-Houston [14th Dist.] 2016, no pet.) (orig. proceeding). </span></blockquote>
In credit card collection cases, evidence of card use (shown with billing statements) is
deemed to constitute acceptance of whatever the contract terms were, rather than the creditor
being required to show (in addition to card use) that the specific version of a boilerplate agreement
attached as an exhibit to a motion for summary judgment (or a business
records affidavit) was furnished to the cardholder prior to use of the account
by that cardholder, so as to satisfy the elements of offer and acceptance, based
on a <a href="https://debt-suit-litigation-in-texas.blogspot.com/2019/05/texas-contract-law-was-there-meeting-of.html" target="_blank">meeting of the minds</a> on the terms and conditions stated in the offer.<br />
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<o:p></o:p></div>
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The same lax judicial treatment often extends to the issue
of whether there is sufficient proof that the consumer agreed to the <b>account-specific
finance charge terms</b> (interest rates and penalty charges such as late fees and overlimit fees), which are often not set forth in generic credit card agreements,
but are in are shown on a separate Truth-in-Lending disclosure document, which may be
denominated in various ways (Pricing Schedule, Terms & Conditions, Important Terms of Your Account, etc.), depending on the identity of the creditor. The additional document is often absent from creditor's or debt buyers' summary judgment proof and trial exhibits, depriving the interest-rate component of the plaintiff's claim of its contractual foundation. <o:p></o:p><br />
<br /></div>
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</div>
<div class="MsoNormal">
Incidentally, many boilerplate cardmember agreements also
contain <b>arbitration agreements</b>, but those rarely become an issue in collection litigation
because neither party moves to compel arbitration. In theory, however, and
under general common-law principles of contract-formation, there is no
distinction between formation of an agreement to arbitrate and other agreements
because even under the Federal Arbitration Act, the formation question is one
of ordinary state contract law, rather than one governed by the FAA itself.<br />
<br />
For
the same reason, the FAA’s public policy preference in favor of arbitration
does not come into play unless and until the existence of valid agreement to
arbitrate has been established either by virtue of signatures of the agreement or
by other competent contract-formation proof, such as evidence supporting the theory of implied consent by
conduct. <i>See Huckaba v. Ref-Chem, L.P.</i>, 892 F.3d 686, 688-89 (5th Cir. 2018). <o:p></o:p></div>
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Also see, relatedly, <i>Hi Tech Luxury Imports, LLC v. Morgan</i>,
No. <a href="http://www.search.txcourts.gov/Case.aspx?cn=03-19-00021-CV&coa=coa03" target="_blank">03-19-00021-CV</a> (Tex.App.-Austin, Apr. 30, 2019), in which the Third Court of
Appeals last month affirmed an order denying arbitration because the employer
had not also signed the arbitration agreement at issue, which provided for both
parties to sign it.)</div>
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Hi Tech Luxury Imports, LLC, Appellant,<br />v.<br />Townsend L. Morgan, Jr., Appellee.</span></h3>
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<a href="https://scholar.google.com/scholar?scidkt=14322543443505440550&as_sdt=2&hl=en" style="color: #660099;">No. 03-19-00021-CV.</a></center>
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<b>Court of Appeals of Texas, Third District, Austin.</b></div>
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Filed: April 30, 2019.</center>
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Appeal from the 345th District Court of Travis County, No. D-1-GN-18-002579, The Honorable Dustin M. Howell, Judge Presiding.</div>
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Affirmed.</div>
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Before Justices Goodwin, Baker, and Triana.</div>
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MEMORANDUM OPINION</h2>
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GISELA D. TRIANA, Justice.</div>
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Appellant Hi Tech Luxury Imports, LLC (Hi Tech), appeals from the district court's order denying its motion to compel arbitration under the Federal Arbitration Act (FAA). We will affirm the district court's order.</div>
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BACKGROUND</h2>
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Appellee Townsend L. Morgan, Jr., filed suit against Hi Tech, his former employer, alleging wrongful termination and age discrimination in violation of Chapter 21 of the Texas Labor Code. <i>See</i> Tex. Lab. Code § 21.051. After the case had been set for a jury trial, Hi Tech filed a motion to compel arbitration. In the motion, Hi Tech asserted that the parties had executed an agreement to arbitrate, and that Morgan's claims fell within the scope of that agreement. Morgan filed a response in opposition, arguing that the arbitration agreement was invalid because Hi Tech had failed to sign it. Following a hearing on the matter, the district court denied the motion to compel arbitration. This interlocutory appeal followed. <i>See</i> Tex. Civ. Prac. & Rem. Code § 51.016.</div>
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STANDARD OF REVIEW</h2>
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"We review a trial court's order denying a motion to compel arbitration for abuse of discretion." <a href="https://scholar.google.com/scholar_case?case=5513412576169180013&q=03-19-00021-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Henry v. Cash Biz, LP,</i> 551 S.W.3d 111, 115 (Tex. 2018)</a> (citing <a href="https://scholar.google.com/scholar_case?case=11064332715902942515&q=03-19-00021-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>In re Labatt Food Serv., L.P.,</i> 279 S.W.3d 640, 642-43 (Tex. 2009)</a>). "We defer to the trial court's factual determinations if they are supported by evidence but review its legal determinations de novo." <i>Id.</i> A party seeking to compel arbitration under the FAA must establish that (1) there is a valid arbitration agreement, and (2) the claims in dispute fall within that agreement's scope. <a href="https://scholar.google.com/scholar_case?case=7799522967503682695&q=03-19-00021-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>In re Rubiola,</i> 334 S.W.3d 220, 223 (Tex. 2011)</a>. "Whether parties have agreed to arbitrate is a gateway matter ordinarily committed to the trial court and controlled by state law governing `the validity, revocability, and enforceability of contracts generally.'" <a href="https://scholar.google.com/scholar_case?case=2982868234861987077&q=03-19-00021-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Jody James Farms, JV v. Altman Grp., Inc.,</i> 547 S.W.3d 624, 631 (Tex. 2018)</a> (quoting <a href="https://scholar.google.com/scholar_case?case=6642036380278910703&q=03-19-00021-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Arthur Andersen LLP v. Carlisle,</i> 556 U.S. 624, 631 (2009)</a>). No presumption of arbitration exists until "after the party seeking to compel arbitration proves that a valid arbitration agreement exists." <a href="https://scholar.google.com/scholar_case?case=12596166907904856385&q=03-19-00021-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>J.M. Davidson, Inc. v. Webster,</i> 128 S.W.3d 223, 227 (Tex. 2003)</a>. "The burden of establishing the existence of an arbitration agreement is evidentiary and runs with the party seeking to compel arbitration." <a href="https://scholar.google.com/scholar_case?case=6587767554950308244&q=03-19-00021-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Fitness Entm't Ltd v. Hurst,</i> 527 S.W.3d 699, 703 (Tex. App.—El Paso 2017, pet. denied)</a>.</div>
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DISCUSSION</h2>
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"Under Texas law, a binding contract requires: `(1) an offer; (2) an acceptance in strict compliance with the terms of the offer; (3) a meeting of the minds; (4) each party's consent to the terms; and (5) execution and delivery of the contract with intent that it be mutual and binding.'" <a href="https://scholar.google.com/scholar_case?case=6594817614375939958&q=03-19-00021-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Huckaba v. Ref-Chem, L.P.,</i> 892 F.3d 686, 689 (5th Cir. 2018)</a> (quoting <a href="https://scholar.google.com/scholar_case?case=4180864839510938697&q=03-19-00021-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>In re Capco Energy, Inc.,</i> 669 F.3d 274, 279-80 (5th Cir. 2012)</a>). The only question in this case is whether the parties intended that the arbitration agreement be mutual and binding, despite Hi Tech's failure to sign the agreement.</div>
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"Contracts require mutual assent to be enforceable." <a href="https://scholar.google.com/scholar_case?case=8341870490878028706&q=03-19-00021-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Baylor Univ. v. Sonnichsen,</i>221 S.W.3d 632, 635 (Tex. 2007)</a>. "Evidence of mutual assent in written contracts generally consists of signatures of the parties and delivery with the intent to bind." <i>Id.</i>; <a href="https://scholar.google.com/scholar_case?case=15251284915607846901&q=03-19-00021-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>New York Party Shuttle, LLC v. Bilello,</i> 414 S.W.3d 206, 214 (Tex. App.-Houston [1st Dist.] 2013, pet. denied)</a>. However, "while signature and delivery are often evidence of the mutual assent required for a contract, they are not essential." <a href="https://scholar.google.com/scholar_case?case=966152026322459500&q=03-19-00021-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Phillips v. Carlton Energy Grp., LLC,</i> 475 S.W.3d 265, 277 (Tex. 2015)</a>; <i>see also </i><a href="https://scholar.google.com/scholar_case?case=12561495874263135128&q=03-19-00021-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Perez v. Lemarroy,</i> 592 F. Supp. 2d 924, 931 (S.D. Tex. 2008)</a> ("The Federal Arbitration Act (`FAA') only requires that an arbitration clause be in writing, without any requirement that an arbitration clause must be signed, thus, no signatures are necessary to bind parties to an arbitration agreement."). "Signatures are not required `[a]s long as the parties give their consent to the terms of the contract, and there is no evidence of an intent to require both signatures as a condition precedent to it becoming effective as a contract.'" <a href="https://scholar.google.com/scholar_case?case=6594817614375939958&q=03-19-00021-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Huckaba,</i> 892 F.3d at 689</a>(quoting <a href="https://scholar.google.com/scholar_case?case=12561495874263135128&q=03-19-00021-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Perez,</i> 592 F. Supp. 2d at 930-31</a>).</div>
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"A court can decide intent as a matter of law." <i>Id.</i> (citing <a href="https://scholar.google.com/scholar_case?case=16972303785845870306&q=03-19-00021-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Tricon Energy Ltd. v. Vinmar Int'l, Ltd.,</i> 718 F.3d 448, 454 (5th Cir. 2013)</a>). "In construing a contract, a court must ascertain the true intentions of the parties as expressed in the writing itself." <a href="https://scholar.google.com/scholar_case?case=11381898603191801741&q=03-19-00021-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am.,</i> 341 S.W.3d 323, 333 (Tex. 2011)</a>. "We begin this analysis with the contract's express language." <i>Id.</i>Unless that language is ambiguous, <i>see id.,</i> "we end it there too," <a href="https://scholar.google.com/scholar_case?case=6594817614375939958&q=03-19-00021-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Huckaba,</i> 892 F.3d at 689</a>.</div>
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Here, the language of the contract provides unambiguous evidence of the parties' intent to require both signatures as a condition precedent to enforcement of the agreement. Although it is true, as Hi Tech observes, that the agreement is written primarily from the employee's perspective, the document repeatedly refers to <i>both</i>parties agreeing to the terms of the contract. The agreement discusses the "mutual benefits" that arbitration can provide to "both the Company and [Morgan]," and the agreement requires that "[Morgan] and the Company both agree" that any disputes "between [Morgan] and the Company" shall be submitted to arbitration. The agreement further provides that "[b]oth the Company and [Morgan] agree that any arbitration proceeding must move forward under the Federal Arbitration Act" and that "[t]his is the entire agreement between the Company and the employee." </div>
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The agreement also contains the following statement, "I UNDERSTAND BY AGREEING TO THIS BINDING ARBITRATION PROVISION, BOTH I AND THE COMPANY GIVE UP OUR RIGHTS TO TRIAL BY JURY." </div>
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This language indicates that, by agreeing to arbitrate, <i>both</i> parties would be giving up their rights to a jury trial, which suggests that the signatures of both parties would be required for the agreement to be enforceable. Additionally, in the signature block at the bottom of the agreement, there are lines for two signatures, one for the "Employee" and one for the "Manager" of Hi Tech. </div>
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There is also a line next to the Manager's signature for the Manager to print his name. Moreover, both signature lines appear below the following statement, "MY SIGNATURE BELOW ATTESTS TO THE FACT THAT I HAVE READ, UNDERSTAND, AND AGREE TO BE LEGALLY BOUND TO ALL OF THE ABOVE TERMS." Thus, both parties were to indicate their mutual assent to the terms of the arbitration agreement by signing the document.</div>
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Hi Tech did not sign the arbitration agreement, and the above language indicates that the signatures of both Hi Tech and Townsend were required for the agreement to be enforceable. The burden was on Hi Tech to prove the validity of the agreement, <i>see </i><a href="https://scholar.google.com/scholar_case?case=5513412576169180013&q=03-19-00021-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Henry,</i> 551 S.W.3d at 115</a>; <a href="https://scholar.google.com/scholar_case?case=6587767554950308244&q=03-19-00021-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Fitness Entm't Ltd.,</i> 527 S.W.3d at 703-04,</a> and it failed to satisfy that burden here. Accordingly, we cannot conclude that the district court abused its discretion in denying Hi Tech's motion to compel arbitration. <i>See </i><a href="https://scholar.google.com/scholar_case?case=6594817614375939958&q=03-19-00021-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Huckaba,</i> 892 F.3d at 691</a> (refusing to enforce arbitration agreement in wrongful-termination case when employer failed to sign agreement and concluding that enforcement would allow employer to "have it both ways—argue that it did not intend to be bound because it did not sign the agreement or it did because it kept the agreement and sought to compel arbitration"); <i>see also </i><a href="https://scholar.google.com/scholar_case?case=4954393324193306479&q=03-19-00021-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Simmons & Simmons Constr. Co. v. Rea,</i> 286 S.W.2d 415, 416-17 (Tex. 1955)</a>(concluding that signature block on contract and other language in agreement was evidence that signatures of both parties were required); <a href="https://scholar.google.com/scholar_case?case=15286531829602173485&q=03-19-00021-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>In re Bunzl USA, Inc.,</i> 155 S.W.3d 202, 210-11 (Tex. App.—El Paso 2004, orig. proceeding)</a> (same).</div>
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CONCLUSION</h2>
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We affirm the district court's order.</div>
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<span style="color: #cc0000;">ALEXANDER CONSTANTINE, Plaintiff,<br />v.<br />AHMAD ADAS and SWIFT AUTO HAULING, LLC, Defendants.</span></h3>
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<a href="https://scholar.google.co.uk/scholar?scidkt=8436272228643570179&as_sdt=2&hl=en" style="color: #660099;">Civil Action No. H-18-1273.</a></center>
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<b><span style="font-size: large;">MEMORANDUM AND ORDER</span></b></div>
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NANCY F. ATLAS, District Judge. </div>
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Plaintiff Alexander Constantine filed this lawsuit under the Fair Labor Standards Act ("FLSA"). Defendant Swift Auto Hauling, LLC ("Swift") filed a Motion to Dismiss and Compel Arbitration or Stay Case ("Motion") [Doc. # 5], asserting that Plaintiff's claims were subject to a written arbitration agreement. Plaintiff filed a Response [Doc. # 6], noting that Swift did not sign the arbitration agreement on which it bases its Motion. Swift neither filed a reply nor requested an extension of the reply deadline. Having reviewed the record and governing legal authorities, the Court denies the Motion.</div>
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I. BACKGROUND</h2>
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Swift operates a tow truck business, and Plaintiff was employed by Swift from June 2016 to October 2017. Plaintiff alleges that Swift failed to pay him in full for his work, and failed to pay him overtime wages for hours he worked in excess of forty (40) per week.</div>
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Swift has presented a contract signed by Plaintiff that includes an arbitration provision. The contract on which Swift relies, however, was not signed by Swift.</div>
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II. ARBITRATION AGREEMENTS</h2>
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Enforcement of an arbitration agreement requires proof that (1) there is a valid agreement to arbitrate; and (2) the dispute falls within the scope of that agreement. <i>See </i><a href="https://scholar.google.co.uk/scholar_case?case=6594817614375939958&q=Huckaba+v+ref-chem&hl=en&as_sdt=3,44" style="color: #660099;"><i>Huckaba v. Ref-Chem, L.P.,</i> 892 F.3d 686, 688 (5th Cir. 2018)</a>. Determining whether there is a valid arbitration agreement is a question for the Court based on state contract law. <i>See id.</i> The party seeking to enforce an arbitration agreement must show that the agreement meets all of the requisite elements of a contract. <i>See id.</i> Additionally, "because the validity of the agreement is a matter of contract, at this stage, the strong federal policy favoring arbitration does not apply." <i>Id.</i> at 688-89.</div>
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Under Texas law, a binding contract requires: "(1) an offer; (2) an acceptance in strict compliance with the terms of the offer; (3) a meeting of the minds; (4) each party's consent to the terms; and (5) execution and delivery of the contract with intent that it be mutual and binding." <i>Id.</i> at 689 (citations omitted). As to the fifth element, whether a signature is required to bind a party is a question of the parties' intent. <i>Id.</i> (citing <a href="https://scholar.google.co.uk/scholar_case?case=16972303785845870306&q=Huckaba+v+ref-chem&hl=en&as_sdt=3,44" style="color: #660099;"><i>Tricon Energy Ltd. v. Vinmar Int'l, Ltd.,</i> 718 F.3d 448, 454 (5th Cir. 2013)</a>). "Signatures are not required as long as the parties give their consent to the terms of the contract, and there is no evidence of an intent to require both signatures as a condition precedent to it becoming effective as a contract." <a href="https://scholar.google.co.uk/scholar_case?case=6594817614375939958&q=Huckaba+v+ref-chem&hl=en&as_sdt=3,44" style="color: #660099;"><i>Huckaba,</i> 892 F.3d at 689</a>. </div>
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In determining the parties' intent, the Court "must examine and consider the entire writing in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless." <i>Id.</i></div>
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In this case, the arbitration provision in the contract at issue refers to the "Signor's successors, assigns, executors, administrators, beneficiaries, and representatives." <i>See</i> Subcontractor Agreement, Exh. 1 to Motion, ¶ 18.6. This reference to a "Signor" indicates the parties' intent that the contract will become binding when signed. Additionally, the contract contains a signature line for "Swift Auto Hauling, LLC" that is unsigned. The language in the Subcontractor Agreement reflects the parties' intent that a signature was required for each party to be bound to the terms of the contract, including the arbitration provision. Because Swift did not sign the agreement, neither party is bound to its terms. <i>See </i><a href="https://scholar.google.co.uk/scholar_case?case=6594817614375939958&q=Huckaba+v+ref-chem&hl=en&as_sdt=3,44" style="color: #660099;"><i>Huckaba,</i> 892 F.3d at 691</a>.</div>
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Plaintiff argued in opposition to Swift's Motion that there was no evidence that the arbitration agreement became a binding contract absent the signature of all parties. <i>See</i> Response, p. 3. Swift failed to file a reply presenting such evidence. As a result, the record demonstrates, and the Court concludes, that the parties did not enter into a valid arbitration agreement.</div>
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III. CONCLUSION AND ORDER</h2>
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Swift did not sign the contract that contains the arbitration provision. Moreover, Swift has not presented evidence that the parties intended Swift to be bound by the arbitration provision in the contract notwithstanding its failure to sign. As a result, it is hereby</div>
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ORDERED that Swift's Motion to Dismiss and Compel Arbitration or Stay Case [Doc # 5] is DENIED.</div>
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MOTPhttp://www.blogger.com/profile/15883011307129083993noreply@blogger.com0tag:blogger.com,1999:blog-9105536336033560224.post-60347909536821591642019-05-04T12:39:00.000-07:002019-05-11T13:30:26.809-07:00Does Sub-Prime Student Loan Debt Deserve Sub-Prime Jurisprudence? Sheila Kirk v. National Collegiate Student Loan Trust 2003-1 <div style="text-align: center;">
<b><span style="color: #0b5394;">GIVING CREDIT WHERE CREDIT IS DUE</span><span style="color: blue;"> </span></b></div>
<b style="mso-bidi-font-weight: normal;"><span style="color: red;"><br /></span></b>
<b style="mso-bidi-font-weight: normal;"><span style="color: red;">Democrat Richard Hightower botches his first National Collegiate Student Loan Trust case after taking office as a member of Houston Court of Appeals </span></b><br />
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<span style="background-color: white; color: #222222; font-size: 13.2px;"><span style="font-family: "arial" , "helvetica" , sans-serif;">Sheila Kirk v. National Collegiate Student Loan Trust 2003-1, </span></span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="background-color: white; color: #222222; font-size: 13.2px;">No. </span><a href="http://search.txcourts.gov/Case.aspx?cn=01-17-00722-CV&coa=coa01" style="background-color: white; color: #888888; font-size: 13.2px; text-decoration-line: none;" target="_blank">01-17-00722-CV</a><span style="background-color: white; color: #222222; font-size: 13.2px;"> (Tex.App. - Houston [1st Dist.] Feb. 28, 2019, no pet.).</span></span><span style="background-color: white; color: #222222; font-family: "arial" , "tahoma" , "helvetica" , "freesans" , sans-serif; font-size: 13.2px;"> </span></div>
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Following affirmance of a <a href="http://search.txcourts.gov/SearchMedia.aspx?MediaVersionID=9dda155c-6344-4518-a5f5-4ce8b79a35bc&coa=coa02&DT=Opinion&MediaID=1111fb3b-5c87-4ba0-8768-f6023c89406f" target="_blank">take-nothing judgment against one of the National Collegiate Student Loan Trusts</a> by the Fort Worth Court of Appeals and <a href="http://search.txcourts.gov/SearchMedia.aspx?MediaVersionID=70d1bc20-816c-4d5d-bb81-599b65402547&coa=coa02&DT=Opinion&MediaID=497b485e-e612-487f-85aa-f49016ce27cc" target="_blank">reversal of a judgment in favor of another Trust</a> -- both decided in 2017 <b>based on insufficient proof of assignment</b>* -- another Texas appellate court in 2018 took a different approach to such private student loan cases. In three appeals decided that year, the First Court of Appeals pared down the amount of the damages awarded by the trial courts, and affirmed the judgments for the reduced amount after the Trust accepted the court's suggestion of remittitur, thereby avoiding reversal and remand. The Houston-based appellate court did what it did based on <b>absence of evidence of a valid acceleration of maturity</b> of the loans--each with a 20-year amortization period.<br />
<blockquote class="tr_bq">
<span style="font-size: x-small;">* <a href="https://scholar.google.com/scholar_case?case=12144429799966825431&q=02-16-00059-CV&hl=en&as_sdt=4,44" target="_blank">Nat'l Collegiate Student Loan Trust 2006-2 v. Ramirez</a>, No. <a href="http://search.txcourts.gov/Case.aspx?cn=02-16-00059-CV&coa=coa02" target="_blank">02-16-00059-CV</a>, 2017 WL 929527, (Tex. App.-Fort Worth Mar. 9, 2017, no pet.) (mem. op.); <a href="https://scholar.google.com/scholar_case?case=5275338011850573456&q=02-16-00059-CV&hl=en&as_sdt=4,44" target="_blank">Gillespie v. National Collegiate Student Loan Trust 2005-3</a>, No. <a href="http://search.txcourts.gov/Case.aspx?cn=02-16-00124-CV&coa=coa02" target="_blank">02-16-00124-CV</a>, 2017 WL 2806780 (Tex. App.-Fort Worth June 29, 2017, no pet.) (mem. op.)</span></blockquote>
<div>
In the latest chapter of the ongoing saga involving the use of the court system to improve yields on these troubled private student loans originated and securitized before the financial crisis under the National Collegiate moniker, a panel of the same court in February 2019 ignored its own prior holdings and affirmed a judgment for the Trust. It did so based on mistaken facts and extemporized legal grounds that do not hold up upon closer scrutiny.</div>
<br />
Here is a litany of what went wrong in the case culminating in a memorandum opinion by Richard Hightower in Sheila Kirk v. National Collegiate Student Loan Trust 2003-1, No. <a href="http://search.txcourts.gov/Case.aspx?cn=01-17-00722-CV&coa=coa01" target="_blank">01-17-00722-CV</a> (Tex.App. - Houston [1st Dist.] Feb. 28, 2019, no pet.). </div>
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<b><span style="color: red;">FACTS SHOULD NOT BE CUT & PASTED FROM ONE CASE TO THE NEXT </span></b><br />
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As an initial matter, and leaving aside the numerous errors in spelling and
grammar, which betray serious copy-editing failures prior to release, the opinion got
the facts wrong as they appear in the record for this case. Apparently because the facts were
taken from the first student loan trust case, rather than the case-specific appellate
record for the most recent one that made it to the appellate level. The first one was <i>Foster v. Nat'l Collegiate Student Loan Tr. 2007-4</i>, No. 01-17-00253-CV, 2018 WL 1095760 (Tex. App.-Houston [1st Dist.] Mar. 1, 2018, no pet.) (mem. op.). </div>
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<o:p></o:p></div>
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<br /></div>
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But the opinion in <i style="mso-bidi-font-style: normal;">Kirk</i>
does not follow <i style="mso-bidi-font-style: normal;">Foster </i>in the
analysis and resolution of the acceleration-of-the-outstanding-balance issues;
nor does it even acknowledge the existence of two opinions in other NCSLT cases
that the same court had handed down in the interim: <i>Mock v. Nat'l Collegiate Student Loan Tr. 2007-4</i>, No. 01-17-00216-CV, 2018 WL 3352913 (Tex. App. — Houston [1st Dist.] July 10, 2018, no pet. h.) (mem. op.), and <i>Savoy v. National Coll. Student Loan Trust 2005-3</i>, 557 S.W.3d 825 (Tex.App. - Houston [1st Dist.] 2018).<br />
<br /></div>
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</div>
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All four cases involved a core set of proof and legal sufficiency issues. The fourth one has now become an aberration in light of the three opinions that preceded it. <i>Kirk </i>stands in stark contrast to the three cases decided consistently last year, with the final one in the trilogy having precedental value as a published case.<br />
<br />
<b><span style="color: red;">APPELLATE COURT MUST BE FAMILIAR WITH ITS OWN PRECEDENTS BECAUSE THEY ARE BINDING ON SUBSEQUENT CASES INVOLVING THE SAME LEGAL ISSUE </span></b></div>
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<br /></div>
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As for the reference to the first case, <i style="mso-bidi-font-style: normal;">Kirk</i> cites <i>Foster</i> for a non-doctrinal point; a supposed briefing deficiency by the same lawfirm
that also handled all of the other cases for the respective appellants. The Panel opinion faults the appellant for failing to cite sufficient caselaw on the matter of the creditor's burden to substantiate the interest component of its claim with competent evidence. </div>
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<blockquote class="tr_bq">
<span style="font-family: "arial" , "helvetica" , sans-serif; font-size: x-small;"><span style="background: white; color: #222222; line-height: 107%;">Kirk contends that the evidence is insufficient
because the Trust did not provide evidence of what the LIBOR rate was for each
month. In </span><i style="-webkit-text-stroke-width: 0px; font-variant-caps: normal; font-variant-ligatures: normal; orphans: 2; text-align: start; text-decoration-color: initial; text-decoration-style: initial; widows: 2; word-spacing: 0px;">Foster v. National Collegiate Student Loan Trust 2007-4,</i><span style="-webkit-text-stroke-width: 0px; float: none; font-variant-caps: normal; font-variant-ligatures: normal; orphans: 2; text-align: start; text-decoration-color: initial; text-decoration-style: initial; widows: 2; word-spacing: 0px;"> No.
01-17-00253-CV, 2018 WL 1095760 at *11 (Tex. App.-Houston [1st Dist.] 2018, no
pet.), we rejected an argument identical to Kirk's. We noted that that the
appellant "provide[d] no authority for her assertion that the Trust was
required to support its claim with calculations supporting each month's
interest computation over the life of the loan." </span><i style="-webkit-text-stroke-width: 0px; font-variant-caps: normal; font-variant-ligatures: normal; orphans: 2; text-align: start; text-decoration-color: initial; text-decoration-style: initial; widows: 2; word-spacing: 0px;">Id.</i><span style="-webkit-text-stroke-width: 0px; float: none; font-variant-caps: normal; font-variant-ligatures: normal; orphans: 2; text-align: start; text-decoration-color: initial; text-decoration-style: initial; widows: 2; word-spacing: 0px;"> at *11. The same is true here. Accordingly, we overrule
Kirk's argument that the Trust failed to provide legally and factually
sufficient evidence indicating how her loan was calculated.</span></span></blockquote>
</div>
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Note that the opinion does not say that the court couldn’t
find any authority for the proposition, based on its own research, as appellate
courts sometimes do when presented with novel issues or unusual factual scenarios. There is good reason for the coyness here:
There actually happens to be such caselaw, including caselaw from the Houston
courts of appeal, but the Panel chose to ignore it, apparently because it would
have helped the Appellant, rather than the Trust. <span style="mso-spacerun: yes;"> </span><o:p></o:p></div>
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<span style="mso-spacerun: yes;"><br /></span></div>
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In <i>Hay v. Citibank</i>, the Fourteenth Court of Appeals, which
also sits in Houston and lords over the same trial courts in ten surrounding counties, did not merely hold that use of credit card and payments
to account demonstrated existence of contract (thus ruling against the
Defendant on that issue), but also reversed the judgment in part because the
bank had not adduced any evidence of what the variable interest rate was at the
relevant time (thereby sustaining one of the Defendant’s complaints of error
raised on appeal). <i>See Hay v. Citibank (South Dakota) N.A.</i>, No. 14-04-01131-CV,
2006 WL 2620089, at *3 (Tex.App.-Houston [14th Dist.] Sept. 14, 2006, no pet.).
<o:p></o:p></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif; font-size: 10.0pt; line-height: 107%;">In
addition to purchases, the Citibank statements contain charges for late fees
and over credit limit fees, the amounts of which are flat fees plainly
specified in the terms and conditions in exhibit C.<span style="mso-spacerun: yes;"> </span>However, the statements also impose finance
charges, which are generally described in the terms and conditions, but neither
the statements nor Citibank’s other summary judgment evidence provides an
explanation showing how these amounts were calculated.<span style="mso-spacerun: yes;"> </span>In addition, although the card agreement
states that Citibank may increase the annual percentage rates on all balances
to a default rate of up to 19.99% plus the applicable prime rate, <span style="background: yellow; mso-highlight: yellow;">nothing in the evidence
establishes what the applicable prime rate was for the relevant time periods on
the statements</span>.<span style="mso-spacerun: yes;"> </span>Citibank argues
that the default rate of 24.24% reflected on some of the statements minus the
19.99% factor provided in the card agreement indicates that the applicable
prime rate was 4.25%.<span style="mso-spacerun: yes;"> </span>Although this
reflects what prime rate was used, it provides no evidence of what the
applicable prime rate for any date or time period actually was, such as by
reference to a source of that information.<span style="mso-spacerun: yes;">
</span>Because Citibank’s summary judgment materials are therefore insufficient
to prove that Hay owed the amounts claimed for finance charges, we sustain her
fifth issue as to those amounts, and we need not address her other challenges
to those amounts.<o:p></o:p></span></div>
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<span style="font-size: 10.0pt; line-height: 107%;"><span style="font-family: "arial" , "helvetica" , sans-serif;">Accordingly,
the summary judgment is: (1) reversed as to the finance charges and remanded to
the trial court for further proceedings thereon; and (2) affirmed as to the
remainder of the judgment.</span><span style="font-family: "calibri light" , sans-serif;"><o:p></o:p></span></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 10.0pt; line-height: 107%;"><br /></span></div>
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The First Court of Appeals itself cited <i style="mso-bidi-font-style: normal;">Hay v. Citibank</i> in one of the most-often cited opinions involving
collection of credit card debt: <i style="mso-bidi-font-style: normal;">Winchek
v. Am. Exp. Travel Related Servs. Co</i>., 232 S.W.3d 197, 204 (Tex.
App.-Houston [1st Dist.] 2007, no pet.), but left unmentioned the partial reversal
of the summary judgment in <i style="mso-bidi-font-style: normal;">Hay</i> for
insufficient proof of the interest rate. There are several other cases from the
Houston courts of appeals and elsewhere, that resulted in reversal for insufficient
proof of the interest rate likewise. </div>
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<br /></div>
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It appears that the Panel in <i style="mso-bidi-font-style: normal;">Kirk</i> was so committed to thwarting the appeal of the student loan
debtor that it ignored its own existing jurisprudence in consumer debt cases to the
extent it would favor the student loan defendant's arguments in the case before it. <o:p></o:p></div>
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<br /></div>
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But that was not all. The Panel additionally rephrased—without
offering any reason or justification--the quoted portions from the Trust’s business records
affidavit. The affidavit was signed by a self-described employee of Transworld Systems, Inc., whom the Panel elevated to the status of a custodian of records for the occasion. The Panel then modified the quoted portions of the affidavit to make them refer to only
one defendant--the appellant--even though there were two defendants in the trial court, and even though the affidavit referred to both of them. <o:p></o:p></div>
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<b><span style="color: red;">APPELLATE COURT SHOULD NOT REWRITE THE RECORD, WHICH IS WHAT HAPPENED HERE WHEN TWO DEFENDANTS WERE REDUCED TO ONE </span></b><br />
<br /></div>
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Does it matter? Or is it merely another instance of sloppy
treatment of a consumer debt case that is considered a low priority given the
small amount in controversy, compared to tort and business-vs-business cases? <o:p></o:p></div>
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<br /></div>
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There is good reason to conclude that the alteration does
matter here. For it changed the nature of the case and its procedural posture on
appeal. There was a second defendant (Merle Kirk), whose signature appears on the loan
application as a co-signer. He was sued along with the student-borrower (Sheila Kirk), but he
did not file an answer in the court below, and he did not appear for trial. After
judgment was entered following a truncated trial in which the judge cut off the Sheila Kirk's attorney, who attempted to press evidentiary issues, only the student-borrower (as primary obligor) pursued an appeal.<br />
<br />
The
problem is with the wording of the judgment that is the subject of Sheila Kirk’s
appeal: it grants judgment for the Trust as Plaintiff, but only
against one defendant, and it does not identify that single defendant by name
as required by the rules. What happened to Merle Kirk? The co-defendant against who a judgment by default would normally have been entered?<br />
<br />
<o:p></o:p>
<b><span style="color: red;">THE TRIAL COURT'S JUDGMENT WAS AND REMAINS DEFECTIVE ON ITS FACE </span></b></div>
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<br /></div>
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When a purportedly final judgment is not clear, the court of appeals would normally request clarification from the trial court or advise the
parties of a possible defect affecting the court’s jurisdiction, and ask for briefing, and supplementation of the record, if appropriate. Sometimes the defect involving non-finality is cured with a nonsuit, or with an order of severance.<br />
<br />
This did not
happen here. While the Panel went out of its way to affirm the judgment for the Trust, and even endeavored to extemporize a novel construction of rule 93(12)--a pleading rule--for that purpose, it is questionable whether the Houston appellate court, and therefore the three-member panel to which the case was assigned, ever even acquired jurisdiction to reach the merits to begin with. </div>
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<b><span style="color: red;">GOTCHA JURISPRUDENCE </span></b><o:p></o:p></div>
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<span style="font-family: inherit;">When
litigants appeal without a lawyer, they are routinely rebuffed for a variety of
procedural failures and blamed for not producing a brief as would be expected of appellate
attorneys. They are told that they failed to preserve error in the trial court,
and that they cannot raise objections and new arguments for the first time on
appeal. If they did raise objection in the trial court, they are blamed for not
obtaining a ruling, or for not obtaining a ruling in writing, or for not making
an objection specifically enough, or for not obtaining a specific-enough written order disposing of it. <o:p></o:p></span></div>
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<span style="font-family: inherit;"><br /></span></div>
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<span style="font-family: inherit;">The <i>pro-se-and-doomed-to-lose</i> scenario did not apply to Sheila Kirk, however, who had attorney representation
both at trial and on appeal. But she did not fare much better. <o:p></o:p></span></div>
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<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: inherit;">In the
trial court, her attorney was cut off by the judge when she objected to the
Trust’s business records affidavit and started to argue that the Trust had
failed to establish its status as assignee with proper evidence of assignment. <o:p></o:p></span></div>
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<span style="font-family: inherit;"><br /></span></div>
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<span style="font-family: inherit;">On appeal,
the Panel overruled her argument regarding the proffered assignment proof by
distinguishing the case the Second Court of Appeals had cited when it revered a
judgment in the trust’s favor.* It then refused to address Kirk’s objections to
other pieces of documentary evidence on the basis that she had not first presented them to the trial
court. </span><br />
<blockquote class="tr_bq">
<span style="font-family: inherit; font-size: x-small;"><i>* See Gillespie v. National
Collegiate Student Loan Trust 2005-3</i>, No. 02-16-00124-CV, 2017 WL 2806780
(Tex. App.-Fort Worth June 29, 2017, no pet.) (mem. op.), <i>citing Jenkins v. CACH, LLC</i>, No. 14-13-00750-CV, 2014 WL 4202518,
at *6-7 (Tex. App.-Houston [14th Dist.] Aug. 26, 2014, no pet.) (mem. op.)</span></blockquote>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: inherit;">How could Kirk
be at fault for not asserting objections in the trial court when the judge of that
court prevented her from making them, cut the trial short, and granted judgment for
the Trust instanter?</span></div>
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<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: inherit;">Worse, the
Panel made short shrift of the Trust’s failure to plead that it was suing as an
assignee (as opposed to original creditor), but manufactured a pleading defect for the defendant instead. It did
so by re-purposing rule 93(12), which addresses notice of loss/claim in the
insurance and indemnity context, and applying it for the first time to a consumer debt collection
case. Unsurprisingly, the Panel cited no existing caselaw to support this <i>deus-ex-machina </i>stratagem to save the Trust from suffering reversal or reduction of damages as in the previous cases. </span></div>
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<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: inherit;">Rejecting Kirk’s
contention that the Trust had failed to meet the requirements for acceleration of loan
maturity under Texas law--the same contention that had resulted in the downward
adjustment of damages in the other three NCSLT cases decided in 2018—the Panel transmuted
the same deficiency in the Trust’s proof into a supposed pleading deficiency on the part of the Defendant instead.</span></div>
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<blockquote class="tr_bq">
<span style="background: white; color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;">Lastly, Kirk contends that because the Trust did not produce
any documents establishing that it notified Kirk that it was accelerating her
loan following her failure to maintain the monthly payments, the Trust was
entitled to recover past-due payments only and not the full amount. Again, Kirk
waived this issue by not filing a verified denial that raised it. <i>See</i> TEX.
R. CIV. P. 93(12) (stating that party's failure to file verified denial
"[t]hat notice and proof of loss or claim for damage has not been given as
alleged" results in "notice and proof . . . be[ing] presumed"); <i>see
also </i></span><a href="https://scholar.google.com/scholar_case?case=2362894279146639948&q=Kirk+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44"><i><span style="background: white; color: #660099; font-family: "arial" , sans-serif; font-size: 11.5pt;">Brown,</span></i><span style="background: white; color: #660099; font-family: "arial" , sans-serif; font-size: 11.5pt;"> 414 S.W.3d at 285-86</span></a><span style="background: white; color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;">. We therefore reject Kirk's notice-of-acceleration argument.</span></blockquote>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: inherit;">What the Panel stooped to here is to fault Kirk for failing to follow a pleading rule that did
not exist until the Panel made it up for the purpose of denying Kirk the relief
that the other student loan debtors had obtained in three similar cases decided
by the very same court less than a year earlier.</span></div>
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<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: inherit;"><span style="font-family: inherit;">In all
three opinions handed down in 2018, the First Court had treated proper acceleration of loan maturity
under Texas law as an issue on which the Trust had the burden of proof as
plaintiff suing for the full amount alleged outstanding on loans which had not yet matured by
their own terms. <i>See Savoy v. Nat. Coll. Student Loan Tr.</i>, 557 SW 3d 825 (Tex.App. – Houston [1st Dist.] 2018) (excerpt below).</span><span style="font-size: 12pt;"> </span></span></div>
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<b><span style="font-family: "arial" , sans-serif;"><span style="color: #3d85c6;">E. Insufficient evidence of acceleration</span><span style="color: #222222; font-size: 18pt;"><o:p></o:p></span></span></b></div>
<div class="MsoNormal" style="background: white; line-height: normal; margin-left: .5in; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;">
<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;">The Savoys contend that there is insufficient evidence that the
maturity of the loan was accelerated.<o:p></o:p></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;"><br /></span></div>
<div class="MsoNormal" style="background: white; line-height: normal; margin-left: .5in; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;">
<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;">The Disclosure Statement reflects that the Savoys agreed to pay
the loan over a period of 20 years, with payments beginning in July 2007. The
Credit Agreement states that, to the extent permitted by law, in the event of a
default on the loan, the Trust "will have the right to give [the Savoys]
notice that the whole outstanding principal balance, accrued interest, and all
other amounts payable to [the Trust] under the terms of this Credit Agreement
are due and payable at once."<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: normal; margin-left: .5in; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;">
<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;"><br /></span></div>
<div class="MsoNormal" style="background: white; line-height: normal; margin-left: .5in; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;">
<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;">"Where the holder of a promissory note has the option to
accelerate maturity of the note upon the maker's default, equity demands notice
be given of the intent to exercise the option." <a href="https://scholar.google.com/scholar_case?case=8582604229250253679&q=Savoy+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44"><i><span style="color: #660099;">Ogden v. Gibraltar Sav. Ass'n,</span></i><span style="color: #660099;"> 640 S.W.2d 232, 233 (Tex. 1982)</span></a>.
"The accelerated maturity of a note, which is initially contemplated to
extend over a period of months or years, is an extremely harsh remedy." <a href="https://scholar.google.com/scholar_case?case=3046504035443633953&q=Savoy+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44"><i><span style="color: #660099;">Allen Sales & Servicenter, Inc. v. Ryan,</span></i><span style="color: #660099;"> 525 S.W.2d 863, 866 (Tex. 1975)</span></a>. A
creditor "must give the debtor an opportunity to pay the past due
installments before acceleration of the entire indebtedness; therefore, demand
for payment of past due installments must be made before exercising the option
to accelerate." <a href="https://scholar.google.com/scholar_case?case=3432528041617508328&q=Savoy+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44"><i><span style="color: #660099;">Williamson v. Dunlap,</span></i><span style="color: #660099;"> 693
S.W.2d 373, 374 (Tex. 1985)</span></a> (emphasis omitted). The note holder
must also notify the maker both of its intent to accelerate and of the
acceleration. <a href="https://scholar.google.com/scholar_case?case=8582604229250253679&q=Savoy+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44"><i><span style="color: #660099;">Ogden,</span></i><span style="color: #660099;"> 640
S.W.2d at 233-34</span></a>.<o:p></o:p></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;"><br /></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;">There is no evidence in the record before us that the Trust
provided the Savoys with either of the required notices. The Trust alleged in
its petition that, as a prerequisite to acceleration, it served the Savoys with
a letter demanding payment in full. However, the demand letter is not part of
the record, and pleadings are not evidence.<o:p></o:p></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;"><br /></span></div>
<div class="MsoNormal" style="background: white; line-height: normal; margin-left: .5in; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;">
<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;">We hold that the evidence is legally and factually insufficient
to support the full amount of actual damages awarded. <i>See Mock,</i> 2018
WL 3352913, at *8 (holding that evidence was insufficient to show acceleration
when trust presented no evidence that it provided debtor with notice <a href="https://scholar.google.com/scholar_case?case=6002885628857614821&q=Savoy+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44#p840"><span style="color: #aaaaaa; font-size: 10pt;">840</span></a><a href="https://scholar.google.com/scholar_case?case=6002885628857614821&q=Savoy+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44#p840"><span style="color: #aaaaaa; font-size: 10.0pt;">*840</span></a> of
acceleration); <i>Foster,</i> 2018 WL 1095760, at *11-12 (same).<o:p></o:p></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;">When acceleration is invalid, the plaintiff is entitled to
judgment against the defendant only "for past due installments plus
accumulated interest as provided in the note." <a href="https://scholar.google.com/scholar_case?case=3432528041617508328&q=Savoy+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44"><i><span style="color: #660099;">Williamson,</span></i><span style="color: #660099;"> 693
S.W.2d at 374</span></a>.<o:p></o:p></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;"><br /></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;">The Savoys request that we "reform the judgment to an
amount commensurate with the sum of missed installment payments through the
date the petition was filed" or, alternatively, "suggest a remittitur
to accomplish a proper adjustment of the amount of contract damages proven by
the admissible evidence as having been caused by breach of contractual
duties." The evidence shows that, the sum of all monthly payments due,
beginning on July 1, 2007, as stated in the Disclosure Statement, through the
date of the filing of suit, April 15, 2016, is $15,894.70.<o:p></o:p></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;"><sup><br /></sup></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;">A court of appeals may suggest a remittitur when there is
insufficient evidence to support the full amount of damages awarded but
sufficient evidence to support a lesser award. <a href="https://scholar.google.com/scholar_case?case=9943111657811101968&q=Savoy+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44"><i><span lang="DE-AT" style="color: #660099; mso-ansi-language: DE-AT;">Akin, Gump, Strauss,
Hauer & Feld, L.L.P. v. Nat'l Dev. </span></i><i><span style="color: #660099;">&
Research Corp.,</span></i><span style="color: #660099;"> 299 S.W.3d 106, 124
(Tex. 2009)</span></a>; <i>see</i> TEX. R. APP. P. 46.3. If part of a
damage verdict lacks sufficient evidentiary support, the proper course is to
suggest a remittitur of that part of the verdict, giving the party prevailing
in the trial court the option of accepting the remittitur or having the case
remanded for a new trial. <a href="https://scholar.google.com/scholar_case?case=9943111657811101968&q=Savoy+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44"><i><span style="color: #660099;">Akin, Gump,</span></i><span style="color: #660099;"> 299
S.W.3d at 124</span></a>.<o:p></o:p></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;">As set out above, the record contains some evidence that
breach-of-contract damages exist, but, without evidence of notice of
acceleration, the evidence does not support the full amount awarded by the
trial court. The evidence does, however, allow us to determine a lesser
award. <i>See </i><a href="https://scholar.google.com/scholar_case?case=12997639159551421875&q=Savoy+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44"><i><span style="color: #660099;">ERI Consulting Eng'rs, Inc. v. Swinnea,</span></i><span style="color: #660099;"> 318 S.W.3d 867, 877-78, 880 (Tex. 2010)</span></a> (holding
there was "legally sufficient evidence to prove a lesser, ascertainable
amount of lost profits with reasonable certainty," and remanding case to
court of appeals to consider suggestion of remittitur).<o:p></o:p></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;"><br /></span></div>
<div class="MsoNormal" style="background: white; line-height: normal; margin-left: .5in; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;">
<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;">Based on the record, the evidence is legally and factually
sufficient to support a lesser damages finding of $15,894.70, which represents
the sum of all monthly payments due, beginning on July 1, 2007, as stated in
the Disclosure Statement, through the filing of suit on April 15, 2016. <i>See
Mock,</i> 2018 WL 3352913, at *9 (suggesting remittitur when
plaintiff-trust failed to prove acceleration of loan's maturity); <i>Foster,</i> 2018
WL 1095760, at *12 (same); <i>see also </i><a href="https://scholar.google.com/scholar_case?case=6168575054993032666&q=Savoy+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44"><i><span style="color: #660099;">PNS Stores, Inc. v. Munguia,</span></i><span style="color: #660099;"> 484 S.W.3d 503, 513 (Tex. App. — Houston [14th
Dist.] 2016, no pet.)</span></a>(suggesting remittitur to "the highest
amount of actual damages supported by the evidence").<o:p></o:p></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;"><br /></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt;">We sustain in part and overrule in part the Savoys' second
issue.<o:p></o:p></span></div>
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<span style="font-family: "times new roman" , serif; font-size: 12.0pt;"><span style="color: #0b5394;"><br /></span></span></div>
<div style="text-align: center;">
<span style="font-family: "times new roman" , serif; font-size: 12.0pt;"><span style="color: #0b5394;">[…]</span><o:p></o:p></span></div>
</div>
<blockquote class="tr_bq" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "times new roman" , serif; font-size: 12.0pt;"> </span><b><span style="font-family: "arial" , sans-serif;"><span style="color: #3d85c6;">Conclusion</span></span></b></blockquote>
<blockquote class="tr_bq">
<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 11.5pt; line-height: 107%;">We conclude that the
evidence is insufficient to support the trial court's award of actual damages
in the amount of $20,492.05 but is sufficient to support an award of actual
damages in the amount of $15,894.70. Thus, we suggest a remittitur of the
actual damages award to $15,894.70. In accordance with Rule 46.3 of the Texas
Rules of Appellate Procedure, if the Trust files with this Court, within
fifteen days of the date of this opinion, a remittitur to that amount, the
trial court's judgment on damages will be modified and affirmed. <i>See</i> TEX.
R. APP. P. 46.3. If the suggested remittitur is not timely filed, the trial
court's judgment will be reversed and the cause will be remanded for a new
trial on liability and damages. <i>See </i><a href="https://scholar.google.com/scholar_case?case=7859670584286910128&q=Savoy+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44"><i><span style="color: #660099;">Rancho La Valencia, Inc. v. Aquaplex, Inc.,</span></i><span style="color: #660099;"> 383 S.W.3d 150, 152 (Tex. 2012)</span></a>(holding
that if party rejects remittitur, court of appeals must remand for new trial on
liability and damages</span></blockquote>
</div>
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<span style="color: #3d85c6;">SHEILA C. KIRK AKA SHEILA MOON AKA CHRISTINE S. ALLEN, Appellant,<br />v.<br />NATIONAL COLLEGIATE STUDENT LOAN TRUST 2003-1, Appellee.</span></h3>
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<span style="color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: 15px;">No. <a href="http://search.txcourts.gov/Case.aspx?cn=01-17-00722-CV&coa=coa01" target="_blank">01-17-00722-CV</a> </span></span></center>
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<b>Court of Appeals of Texas, First District, Houston.</b></div>
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Opinion issued February 28, 2019.</center>
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On Appeal from the County Civil Court at Law No. 4, Harris County, Texas, Trial Court Case No. 1087683.</div>
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<br /></div>
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Panel consists of Justices Lloyd, Kelly, and Hightower.</div>
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<span style="color: #3d85c6;">MEMORANDUM OPINION</span></h2>
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RICHARD HIGHTOWER, Justice.</div>
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<br /></div>
<div style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; position: relative;">
Appellee National Collegiate Student Loan Trust 2003-1 sued appellant Shelia Kirk for breach of contract following her failure to make payments on the student loan that the Trust claimed it was assigned.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=15983380027563633939&q=Kirk+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44#[1]" name="r[1]" style="color: #660099;">[1]</a></sup> After a short bench trial, the trial court entered judgment in favor of the Trust. On appeal, Kirk contends that the Trust lacked standing to sue because it failed to prove that it was in fact assigned her loan, that the trial court improperly admitted the Trust's business-records affidavit and the exhibits that accompanied it, that the breach-of-contract evidence was legally and factually insufficient to support the judgment, and that the Trust's pleadings did not support the judgment.<br />
<br />
We conclude that the Trust did submit evidence of the loan's assignment to it; that the trial court reasonably could have concluded that the business-records affidavit and its exhibits satisfied Rule of Evidence 803(6)'s requirements; that the breach-of-contract evidence was legally and factually sufficient; and that Kirk failed to adequately brief her argument that the Trust's pleadings did not support the judgment.<br />
<br />
Accordingly, we affirm.</div>
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Background</h2>
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</div>
<a name='more'></a>In 2003, appellant Shelia Kirk signed a non-negotiable credit agreement to secure a $20,000 student loan from Bank One. The loan was disbursed less than a month later. Bank One later assigned Kirk's loan to appellee National Collegiate Student Loan Trust 2003-1. Kirk defaulted on the loan in 2013, and the Trust demanded payment in full, but Kirk did not comply. The Trust then brought a breach-of-contract claim against Kirk, seeking $24,028.94 in damages. Kirk answered, generally denied the allegations, and asserted the statute of limitations as her sole defense.<br />
<div style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; position: relative;">
At trial, the Trust offered into evidence the business-records affidavit of Alicia Holiday, the custodian of records at Transworld Systems Inc., the subservicer for the Trust. In her affidavit, Holiday averred:</div>
<blockquote style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; margin: 1em 0px; padding: 0px 40px; position: relative;">
2. TSI has been contracted to perform the duties of the Subservicer for Plaintiff by U.S. Bank, National Association, the Special Servicer of Plaintiff. TSI, as the Subservicer of the [Trust], is the designated custodian of records for [Kirk's] educational loan. Additionally, TSI maintains the dedicated system of record for electronic transactions pertaining to [Kirk's] educational loan, including, but not necessarily limited to, payments, credits, interest accrual and any other transactions that could impact the Defendants' educational loan.</blockquote>
<blockquote style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; margin: 1em 0px; padding: 0px 40px; position: relative;">
3. . . . . As an employee of TSI, I am duly authorized by [the Trust] . . . to make representations contained in this Affidavit.</blockquote>
<blockquote style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; margin: 1em 0px; padding: 0px 40px; position: relative;">
4. I have access and training on the system of record utilized by TSI to enter and maintain loan account records and documentation concerning [Kirk's] education loan for the [Trust].</blockquote>
<blockquote style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; margin: 1em 0px; padding: 0px 40px; position: relative;">
5. I am familiar with the process by which TSI receives prior account records, including origination records from the time the loan was requested and/or disbursed to [Kirk] and/or the student's school on their behalf.</blockquote>
<blockquote style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; margin: 1em 0px; padding: 0px 40px; position: relative;">
6. As custodian of records it is TSI's regularly-conducted business practice to incorporate prior loan records and/or documentation into TSI's business records.</blockquote>
<blockquote style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; margin: 1em 0px; padding: 0px 40px; position: relative;">
7. I am further competent and authorized to testify regarding this educational loan through personal knowledge of the business records maintained by TSI as custodian of records, including electronic data provided to TSI related to the Defendants' educational loan, and the business records attached to this Affidavit.</blockquote>
<blockquote style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; margin: 1em 0px; padding: 0px 40px; position: relative;">
8. This lawsuit concerns an unpaid loan owed by [Kirk] to [the Trust]. Specifically, [Kirk] entered into an educational loan agreement at [her] special instance and request. A loan was extended for [Kirk] to use pursuant to the terms of the loan agreements. [Kirk has] failed, refused, and/or neglected to pay the balance pursuant to the agreed terms.</blockquote>
<blockquote style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; margin: 1em 0px; padding: 0px 40px; position: relative;">
9. Educational loan records are created, compiled and recorded as part of regularly conducted business activity at or near the time of the event and from information transmitted from a person with personal knowledge of said event and a business duty to report it, or from information transmitted by a person with personal knowledge of the accounts or events described within the business record. Such records are created, kept, maintained, and relied upon in the course of ordinary and regularly conducted business activity.</blockquote>
<blockquote style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; margin: 1em 0px; padding: 0px 40px; position: relative;">
10. I have reviewed the educational loan records described in this affidavit regarding account number xxxxxl080-001-PHEA. No payment has been made since 11/4/2013. After all payments, credits and offsets have been applied, [Kirk] owe[s] the principal sum of $21,867.96, together with accrued interest in the amount of $2,160.98, totaling the sum of $24,028.94 as of 4/12/2017. Attached hereto and incorporated . . . is a true copy of the underlying Credit Agreement/Promissory Note and Note Disclosure Statement. . . .</blockquote>
<blockquote style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; margin: 1em 0px; padding: 0px 40px; position: relative;">
11. [Kirk] opened an educational loan with [Bank One] and funds were disbursed on 9/25/2003. [Kirk's] educational loan was then transferred, sold and assigned to [the Trust] on 12/11/2003 for valuable consideration, in the course of the securitization process. [Kirk's] educational loan was in good standing and not in default on 12/11/2003. Attached hereto and incorporated . . . is a true and correct copy of the Pool Supplement Agreement. [This document] contains a redacted copy of the Schedule of transferred loans referenced within the Pool Supplement.</blockquote>
<div style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; position: relative;">
Holiday attached exhibits to her affidavit. Exhibit A is a November 3, 2013 letter from U.S. Bank, as special servicer for the Trust, confirming that TSI is the "dedicated record custodian with respect to all student loan accounts owned by [the Trust]" and is "fully authorized to execute affidavits regarding account documents, verify responses to discovery and provide testimony on behalf of [the Trust]." Exhibit B is a non-negotiable Credit Agreement signed by Kirk and a Note Disclosure Statement. The Credit Agreement, dated September 18, 2003, states that Kirk applied for an education loan of $20,000 from Bank One. The Note Disclosure Statement reflects that a loan amount of $20,000 was disbursed to Kirk, or on her behalf, and that she agreed to make 240 monthly payments of $174.44 beginning on December 15, 2005. Exhibit C contains a Pool Supplement that details Bank One's assignment of loans through an intermediary to the Trust. The Pool Supplement references a schedule that lists the loans assigned to the Trust. Following the Pool Supplement are two pages that lists Kirk's loan. Holiday's affidavit identifies these latter two pages as a redacted version of the exhibit referenced in the Pool Supplement. Exhibit D is a Loan Financial Activity Report that reflects the monthly balance and interest accrued on Kirk's loan and that she did not make any payments. Exhibit E is a document noting that Kirk had no existing loans that would have resulted in her repayment of the loan at issue being deferred. Exhibit F is a document reflecting the repayment schedules associated with Kirk's loan. Exhibit G is a document reflecting a month-to-month breakdown of the interest accrual on Kirk's loan.<br />
<br /></div>
<div style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; position: relative;">
When the Trust offered into evidence Holiday's affidavit and the attached exhibits, Kirk objected, and the following exchange occurred:</div>
<blockquote style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; margin: 1em 0px; padding: 0px 40px; position: relative;">
[Kirk]: Okay. Now I want to go to the attached exhibits. You can't tell on these that — where the originator is, where the originator —</blockquote>
<blockquote style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; margin: 1em 0px; padding: 0px 40px; position: relative;">
The Court: I mean, did you file — did you file an objection to the affidavit? Then I think your time for — I don't think now is the time. No ma'am, I don't think that — I think it has to be brought up at the time. You have to file some type of controverting affidavit. It's been on file.</blockquote>
<blockquote style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; margin: 1em 0px; padding: 0px 40px; position: relative;">
[Kirk]: Objections to it — I can't make objections at trial?</blockquote>
<blockquote style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; margin: 1em 0px; padding: 0px 40px; position: relative;">
The Court: No, I don't think so. Show me in the Texas Rules of Civil Procedure where it says you can.</blockquote>
<blockquote style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; margin: 1em 0px; padding: 0px 40px; position: relative;">
[Kirk]: I was just going to argue <i>Jenkins,</i> Your Honor. So, what you're saying —</blockquote>
<blockquote style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; margin: 1em 0px; padding: 0px 40px; position: relative;">
The Court: I mean, it's been on file since —</blockquote>
<blockquote style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; margin: 1em 0px; padding: 0px 40px; position: relative;">
Kirk: A dollar short and a day late.</blockquote>
<blockquote style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; margin: 1em 0px; padding: 0px 40px; position: relative;">
The Court: Well, I don't know. Yeah, I don't know that, you know, it's your doing. But I mean, this has been on file since May 25th, 2017. And I assume you were just recently —</blockquote>
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[Kirk]: Right. This is my first appearance. The Court: Right, right. And I assume that you met — well, I won't assume that, but I assume that you haven't been on this case since May of 2017.</blockquote>
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[Kirk]: I've been on this case since about last Friday.</blockquote>
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The Court: Yes, ma'am. And so —</blockquote>
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[Kirk]: That's what you're saying.</blockquote>
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The Court: Yes, ma'am. I mean, I think that when these are on file, you can controvert it.</blockquote>
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After a discussion off the record, the trial court entered a judgment in favor of the Trust on its breach-of-contract claim, and awarded the Trust damages in the amount of $24,028.94, plus interest and costs. Kirk appeals.</div>
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Analysis</h2>
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Kirk raises four issues. She argues that the Trust lacked standing to sue, the trial court erroneously admitted the Trust's business-records affidavit, the evidence was legally and factually insufficient to sustain the Trust's breach-of-contract claim, and the judgment was not supported by proper pleadings. We overrule each issue.</div>
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I. The Trust's standing and business-records evidence</h2>
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Kirk contends that the Trust lacked standing to bring this suit. Plaintiffs must have standing to sue. <a href="https://scholar.google.com/scholar_case?case=6657464349540510451&q=Kirk+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44" style="color: #660099;"><i>Austin Nursing Ctr., Inc. v. Lovato,</i> 171 S.W.3d 845, 848 (Tex. 2005)</a>. Standing is a component of subject-matter jurisdiction and may therefore be raised for the first time on appeal. <i>Id.</i> at 849. The "standing doctrine requires that there be (1) `a real controversy between the parties' that (2) `will be actually determined by the judicial declaration sought.'" <i>Id.</i> (quoting <a href="https://scholar.google.com/scholar_case?case=13452881054325887765&q=Kirk+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44" style="color: #660099;"><i>Nootsie, Ltd. v. Williamson Cty. Appraisal Dist.,</i> 925 S.W.2d 659, 661 (Tex. 1996)</a>). Whether a plaintiff has standing is a legal question that we review de novo. <i>See Tex. Dep't. of </i><a href="https://scholar.google.com/scholar_case?case=6623529206752508396&q=Kirk+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44" style="color: #660099;"><i>Transp. v. City of Sunset Valley,</i> 146 S.W.3d 637, 646 (Tex. 2004)</a>.</div>
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According to Kirk, had the trial court properly excluded the Trust's business-records affidavit and its accompanying exhibits, the Trust would have been incapable of establishing that it was assigned the loan and therefore could not have established its standing to sue. Because Kirk's standing issue encompasses her issue concerning the admission of the business-record affidavit, we address both issues here.</div>
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We review a trial court's evidentiary ruling for an abuse of discretion. <a href="https://scholar.google.com/scholar_case?case=9456963118000736416&q=Kirk+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44" style="color: #660099;"><i>Owens-Corning Fiberglas Corp. v. Malone,</i> 972 S.W.2d 35, 43 (Tex. 1998)</a>. A trial court abuses its discretion by ruling without reference to guiding rules or principles. <i>Id.</i>The trial court overruled Kirk's objection to the business-record affidavit and its attached exhibits after concluding that Kirk waived her evidentiary challenge by failing to file a written objection to the documents before trial began. </div>
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We agree with Kirk that the trial court's rationale was erroneous. It is possible, as Kirk suggests, that the trial court inadvertently applied a summary-judgment evidentiary rule. <i>See, e.g., Scott v. Hunt,</i> No. 01-11-00042-CV, 2012 WL 983339, at *5 (Tex. App.-Houston [1st Dist.] Mar. 22, 2012, no pet.) (mem. op.) ("A party must object in writing and obtain an express or implied ruling from the trial court to preserve a complaint about the form of summary judgment evidence.") (citing TEX. R. CIV. P. 166a(f); TEX. R. APP. P. 33.1(a)(2)(A); <a href="https://scholar.google.com/scholar_case?case=9889444733987209964&q=Kirk+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44" style="color: #660099;"><i>Grand Prairie I.S.D. v. Vaughan,</i> 792 S.W.2d 944, 945 (Tex. 1990)</a>). But outside the summary-judgment context, we are aware of no rule that requires parties to file written objections to a business-record affidavit before trial. Nevertheless, we "must uphold the trial court's evidentiary ruling if there is any legitimate basis for the ruling." <a href="https://scholar.google.com/scholar_case?case=9456963118000736416&q=Kirk+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44" style="color: #660099;"><i>Malone,</i> 972 S.W.2d at 43</a>. Accordingly, we address the merits of Kirk's evidentiary argument.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=15983380027563633939&q=Kirk+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44#[2]" name="r[2]" style="color: #660099;">[2]</a></sup></div>
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Certain business records are excepted from the general rule prohibiting the admission of hearsay—out-of-court statements offered to prove the truth of the matter asserted. TEX. R. EVID. 802, 803, 901(d). The business-records exception states that a record of an act, event, condition, or opinion is not excluded as hearsay if:</div>
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(A) the record was made at or near the time by—or from information transmitted by—someone with knowledge;</blockquote>
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(B) the record was kept in the course of a regularly conducted business activity;</blockquote>
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(C) making the record was a regular practice of that activity;</blockquote>
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(D) all these conditions are shown by the testimony of the custodian or another qualified witness, or by an affidavit or unsworn declaration that complies with Rule 902(10); and</blockquote>
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(E) the opponent fails to demonstrate that the source of the information or the method or circumstances of preparation indicate a lack of trustworthiness.</blockquote>
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TEX. R. EVID. 803(6). Documents created or authored by third parties are admissible as the business records of another business if: "(a) the document is incorporated and kept in the course of the testifying witness's business; (b) that business typically relies upon the accuracy of the contents of the document; and (c) the circumstances otherwise indicate the trustworthiness of the document." <a href="https://scholar.google.com/scholar_case?case=17235607577377111113&q=Kirk+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44" style="color: #660099;"><i>Simien v. Unifund CCR Partners,</i> 321 S.W.3d 235, 240-41 (Tex. App.-Houston [1st Dist.] 2010, no pet.)</a>.</div>
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Holiday, the Trust's business-records affiant, provided sufficient testimony demonstrating that the exhibits attached to her affidavit complied with Rule 803(6). In her affidavit, Holiday averred that TSI is the Trust's loan subservicer and the designated custodian of records for the Kirk loan; that she is employed by TSI and authorized by the Trust to make representations in her affidavit and to testify about the Kirk loan; and that she has personal knowledge of the business records maintained by TSI as the custodian of records, including the business records attached to her affidavit. <i>See</i> TEX. R. EVID. 803(6)(D). She stated that the records are created, compiled, and recorded as part of regularly conducted business activity at or near the time of the event and from information transmitted by a person with knowledge of the event and a business duty to report it, or from information transmitted by a person with personal knowledge of the accounts or events described within the business records. <i>See id.</i> at (6)(A). She further stated that the records are created, kept, maintained, and relied upon in the course of regularly conducted business activity. <i>See id.</i> at (6)(B). And she stated that it is TSI's regularly conducted business practice to incorporate prior loan records and documentation into TSI's business records and that she is familiar with the process by which TSI receives prior account records, including origination records. <i>See </i><a href="https://scholar.google.com/scholar_case?case=17235607577377111113&q=Kirk+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44" style="color: #660099;"><i>Simien,</i> 321 S.W.3d at 240-41</a> (stating circumstances under which document authored or created by third party may be admissible as business record of different business). With these statements, the trial court reasonably could have concluded that Rule 803(6)'s requirements were satisfied. We therefore reject Kirk's contention that the trial court abused its discretion.</div>
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Kirk also contends, however, that some of the exhibits attached to Holiday's affidavit were improperly admitted, namely, the heavily redacted schedule referenced by the Pool Supplement and other numerical data exhibits. According to Kirk, these documents failed to qualify as business records because they were untrustworthy. We analyze each of the exhibits separately.<br />
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In making her argument that the trial court should have excluded the heavily redacted schedule referenced by the Pool Supplement, Kirk primarily relies on <i>Jenkins v. CACH, LLC,</i> No. 14-13-00750-CV, 2014 WL 420518 (Tex. App.-Houston [14th Dist.] 2014, no pet.) (mem. op.). <i>Jenkins</i> is inapplicable.</div>
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<i>Jenkins,</i> similar to this case, involved a breach-of-contract action brought by an alleged assignee of the defendant's credit-card debt. <i>Id.</i> at *1. At trial, the plaintiff offered into evidence a business-record affidavit that was accompanied by exhibits. With those exhibits, the plaintiff sought to prove that the defendant had a debt with Bank of America, that Bank of America assigned the defendant's debt to the plaintiff, and that the defendant defaulted on the debt. The trial court admitted the business-record affidavit and the attachments over the defendant's objections that the proffered evidence did not qualify for the business-records exception, that the documents were unreliable, and that none of the documents showed that the defendant's account was in fact assigned to the plaintiff.</div>
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The Fourteenth Court of Appeals reversed the trial court's judgment, concluding that the documents lacked sufficient indicia of trustworthiness and reliability to qualify for admission as business records under Rule 803(6). In reaching this conclusion, the court stressed that the business-records affidavit relied in large part on a separate affidavit created by Bank of America that was allegedly a record of Bank of America's sale of the defendant's debt to the plaintiff. The problem with that affidavit, the court noted, was that it was not actually created "at or near the time of the event" that it purported to record. <i>Id.</i> at *6. Rather, the affidavit was created about a year after the alleged sale occurred and three months before the plaintiff filed its suit. Additionally, the Bank of America affidavit claimed that the sale of the defendant's debt to the plaintiff took place on November 9, 2011, but the actual Bill of Sale that was also submitted with the defendant's business-record affidavit was dated November 15, 2011. Further, evidence suggested that the Bank of America affidavit was created at plaintiff's request. To the court, these circumstances suggested that the Bank of America affidavit "was created in anticipation of litigation rather than in the course of a regular business activity, which casts doubt on its trustworthiness."</div>
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The court then turned to the Bill of Sale, which allegedly documented the sale of the defendant's debt to the plaintiff. Like the Pool Agreement involved in this case, the Bill of Sale noted that the loans transferred were identified in a separate "schedule." The court then stated, "immediately following the Bill of Sale . . . is a heavily redacted document in different typeface that lists the [defendant's] account. . . . However, there is no indication on the redacted document that it was meant to be the loan schedule referenced in the Bill of Sale." In concluding that the Bill of Sale and purported loan schedule were untrustworthy, the court noted "there is no evidence that the [purported loan schedule] was attached to the bill of sale, other than by its proximity to the bill of sale in the loan exhibit. It is not labeled as the loan schedule . . ., and there is no indicator of what the document purports to be." Accordingly, the court held that "there is no legitimate basis upon which the trial court's overruling of [the defendant's] hearsay objections can be supported."</div>
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Kirk contends that the factual similarities between this case and <i>Jenkins</i> demand that we reach the same result. We disagree. Unlike <i>Jenkins,</i> Holiday's affidavit explicitly notes that the Pool Agreement "Exhibit contains a redacted copy of the Schedule of transferred loans referenced within the Pool Agreement." Further, and with respect to the assignment of Kirk's loan to the Trust, Kirk has identified no evidence that suggests the Holiday's affidavit relies on or contains documents that were created in anticipation of litigation rather than during the course of regular business. There is no dubious third-party affidavit, nor are there any date discrepancies among the documents. These are material differences between the facts of <i>Jenkins</i> and this case that prevent us from concluding that the heavily redacted schedule was improperly admitted.</div>
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Kirk maintains that, under <a href="https://scholar.google.com/scholar_case?case=13697322236486907684&q=Kirk+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44" style="color: #660099;"><i>Alphaville Ventures, Inc. v. First Bank,</i> 429 S.W.3d 150 (Tex. App.-Houston [14th Dist.] 2014, no pet.),</a> the Pool Agreement should have been excluded from evidence. This argument is unavailing.<br />
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In <i>Alphaville,</i> another suit to recover a debt, the Fourteenth Court of Appeals concluded that the plaintiff failed to establish that the defendant's debt was assigned to it. The court reasoned that the documents relied on by the plaintiff as supposedly proving assignment did not contain actual language of a present transfer but instead contemplated a future transfer. Here, in contrast, the Pool Agreement acknowledges that the transfer was completed and that the Trust was assigned the loans identified in the schedule, which included Kirk's loan. We therefore reject Kirk's <i>Alphaville</i> argument. Because the trial court reasonably could have concluded that the Trust's business-records affidavit and the exhibits attached to it satisfied Rule 803, we overrule Kirk's argument that the trial court abused its discretion.<br />
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Although Kirk raises a number of other arguments challenging the trial court's admission of other exhibits attached to Holiday's affidavit, those arguments are waived. To preserve an issue for review, the complaining party must state a clear and specific objection that enables the trial court to make an informed ruling on the objection and that affords the opposing party an opportunity to remedy the defect, if possible. <a href="https://scholar.google.com/scholar_case?case=5561762488371379987&q=Kirk+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44" style="color: #660099;"><i>McKinney v. Nat'l Union Fire Ins. Co.,</i> 772 S.W.2d 72, 24 (Tex. 1989)</a>; <i>see also</i> TEX. R. APP. P. 33.1(a). As mentioned above, Kirk cited <i>Jenkins</i> in her objection to the business-records evidence. <i>Jenkins</i> did not involve the kinds of challenges that Kirk makes here, such as her objection that the Trust failed to lay a proper predicate for summary records. <i>Jenkins,</i> as discussed at length above, concerned documents related to proving that a debt was assigned to another. Kirk's objection lacked the level of clarity and specificity necessary to preserve her challenges that were unrelated to the issue of assignment. <i>See, e.g., </i><a href="https://scholar.google.com/scholar_case?case=7095626711044327086&q=Kirk+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44" style="color: #660099;"><i>Clark v. Walker-Kurth Lumber Co.,</i> 689 S.W.2d 275, 281 (Tex. App.-Houston [1st Dist.] 1985, writ ref'd)</a> (holding that objection to personal knowledge of sponsoring witness to assert business-records exception did not preserve appellate issues that invoices were not generated at or near time of transaction and that appellee failed to lay proper predicate for introduction of summary of business records); <i>see also </i><a href="https://scholar.google.com/scholar_case?case=10203126122956408861&q=Kirk+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44" style="color: #660099;"><i>In re N.C.M.,</i> 66 S.W.3d 417, 420 (Tex. App.-Tyler 2001, no pet.)</a> (holding that general hearsay objection to business records was insufficient to inform trial court of specific grounds of objection or to preserve error).</div>
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Finally, because we conclude that Holiday's affidavit and the accompanying exhibits were properly admitted—including the Pool Agreement and the schedule that follows it, both of which together establish that Kirk's loan was in fact assigned to the Trust—we reject Kirk's argument that the Trust lacked standing to sue because it failed to offer any evidence that it was assigned Kirk's loan.</div>
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II. Legal and factual sufficiency</h2>
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Kirk next argues that the Trust's evidence was legally and factually insufficient to support the trial court's judgment that she breached the contract between her and the Trust. We presume that the trial court made all fact findings that have support in the record and that are necessary to uphold the ruling. <a href="https://scholar.google.com/scholar_case?case=14031270056303391834&q=Kirk+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44" style="color: #660099;"><i>Moki-Mac River Expeditions v. Drugg,</i> 221 S.W.2d 569, 574 (Tex. 2007)</a>. Evidence is legally insufficient to support a judgment if the record lacks any evidence supporting a vital fact, the law prohibits a factfinder from giving weight to the only evidence offered to prove a vital fact, no more than mere scintilla of evidence supports a vital fact, or the evidence conclusively establishes the opposite of a vital fact. <i>JBS Carriers, Inc.</i> <i>v. Washington,</i> 564 S.W.3d 830 (Tex. 2018). Evidence is factually insufficient if the evidence supporting the finding is so weak as to be clearly wrong and manifestly unjust. <a href="https://scholar.google.com/scholar_case?case=16210486533734595971&q=Kirk+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44" style="color: #660099;"><i>Cain v. Bain,</i> 709 S.W.2d 175, 176 (Tex. 1986)</a>. Under both sufficiency standards, we are mindful that the factfinder is the sole judge of credibility of the evidence and that we may not substitute our judgment for the factfinder's. <a href="https://scholar.google.com/scholar_case?case=18303564960181757665&q=Kirk+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44" style="color: #660099;"><i>City of Keller v. Wilson,</i> 168 S.W.3d 802, 819 (Tex. 2005)</a>; <a href="https://scholar.google.com/scholar_case?case=15586796735074450095&q=Kirk+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44" style="color: #660099;"><i>Golden Eagle Archery, Inc. v. Jackson,</i> 116 S.W.3d 757, 761 (Tex. 2003)</a>.</div>
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A plaintiff alleging breach of contract must prove that a contract existed, that the contract was performed, that the defendant breached the terms of the contract, and that the defendant's breach caused the plaintiff damages. <a href="https://scholar.google.com/scholar_case?case=1328956482849360973&q=Kirk+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44" style="color: #660099;"><i>Winchek v. Am. Express Travel Related Servs. Co.,</i> 232 S.W.3d 197, 202 (Tex. App.-Houston [1st Dist.] 2007, no pet.)</a>.</div>
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Kirk first contends that the Trust failed to prove that a contract existed. To establish the existence of a valid contract, the plaintiff must prove that there was an offer, acceptance of that offer, a meeting of the minds, each party's consent to the terms, and execution of the contract with the intent that it be mutually binding. <i>Id.</i>Specifically, Kirk maintains that the Trust failed to present sufficient evidence establishing her acceptance of an offer. However, Rule of Civil Procedure 93(7) states that a party denying that she executed a written instrument must file a verified denial to that effect, otherwise the "instrument shall be received in evidence as fully proved." Kirk did not file a verified denial that denied her acceptance of the loan at issue, and therefore her acceptance argument is waived. <i>See, e.g., </i><a href="https://scholar.google.com/scholar_case?case=2362894279146639948&q=Kirk+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44" style="color: #660099;"><i>Brown v. Mesa Distribs., Inc.,</i> 414 S.W.3d 279, 285-86 (Tex. App.-Houston [1st Dist.] 2013, no pet.)</a> (holding that appellant waived issue on appeal because he failed to comply with Rule 93 by filing a verified denial).</div>
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Kirk's failure to file a verified denial does not, however, result in automatic enforcement of the contract; the Trust was still required to prove the terms of that contract. <i>See, e.g., </i><a href="https://scholar.google.com/scholar_case?case=1411577017970110966&q=Kirk+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44" style="color: #660099;"><i>Preston State Bank v. Jordan,</i> 692 S.W.2d 740, 744 (Tex. App.-Fort Worth 1985, no pet.)</a> ("The fact that appellee failed to deny under oath under [Rule] 93(7) that he had executed the contract, does not excuse appellant from having to prove the terms of the contract."). And Kirk contends that the Trust presented insufficient evidence to support the amount of damages awarded because there is no evidence of the Trust's calculation of interest on the loan nor is there evidence that the Trust provided Kirk notice of its intent to accelerate the debt or of its actual acceleration of the debt.</div>
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The material terms of a contract, such as the interest rate on a loan, must have been agreed upon before a court can enforce a contract. <a href="https://scholar.google.com/scholar_case?case=9248996430196700583&q=Kirk+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44" style="color: #660099;"><i>Williams v. Unifund CCR Partners Assignee of Citibank,</i> 264 S.W.3d 231, 235-36 (Tex. App.-Houston [1st Dist.] 2009, no pet.)</a>. In <i>Williams,</i> this court concluded that the plaintiff failed to provide sufficient evidence establishing the specific terms of the contract at issue. <i>Id.</i> at 236. The plaintiff did not produce any document "that established the agreed terms, including the applicable interest rate or the method for determining the applicability and amount of finance charges." <i>Id.</i> Further, the statements offered by the plaintiff showed that the interest rate significantly varied over time, ranging from 5% to 22.4%; yet, the plaintiff presented no evidence explaining how the interest rate changed or why it changed at all. <i>Id.</i></div>
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Here, in contrast, the Trust offered into evidence the Credit Agreement that specifically lays out how interest on Kirk's loan was to be calculated and provides for capitalization of interest during deferment. Further, the Note Disclosure Statement the Trust offered into evidence states that the loan's annual percentage rate is 6.661%. The statement then provides,</div>
<blockquote style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 15px; margin: 1em 0px; padding: 0px 40px; position: relative;">
VARIBALE RATE: The Annual Percentage Rate, which is based on an index plus a margin, may increase during the term of the loan if the index rate increases. The index is . . . LIBOR Index Adjusted Quarterly — The average of the one-month London Interbank Offered Rates published in the "Money Rates" section of The Wall Street Journal on the first business day of each of the three calendar months immediately preceding the first day of each calendar quarter.</blockquote>
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The statement then provides a more thorough explanation of how the interest rate affects the principal balance and even gives an example. Despite this description and the Trust submitting a document listing the loan's financial activity and indicating the amount of interest accrued each month on Kirk's loan, Kirk contends that the evidence is insufficient because the Trust did not provide evidence of what the LIBOR rate was for each month. In <i>Foster v. National Collegiate Student Loan Trust 2007-4,</i> No. 01-17-00253-CV, 2018 WL 1095760 at *11 (Tex. App.-Houston [1st Dist.] 2018, no pet.), we rejected an argument identical to Kirk's. We noted that that the appellant "provide[d] no authority for her assertion that the Trust was required to support its claim with calculations supporting each month's interest computation over the life of the loan." <i>Id.</i> at *11. The same is true here. Accordingly, we overrule Kirk's argument that the Trust failed to provide legally and factually sufficient evidence indicating how her loan was calculated.'</div>
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Lastly, Kirk contends that because the Trust did not produce any documents establishing that it notified Kirk that it was accelerating her loan following her failure to maintain the monthly payments, the Trust was entitled to recover past-due payments only and not the full amount. Again, Kirk waived this issue by not filing a verified denial that raised it. <i>See</i> TEX. R. CIV. P. 93(12) (stating that party's failure to file verified denial "[t]hat notice and proof of loss or claim for damage has not been given as alleged" results in "notice and proof . . . be[ing] presumed"); <i>see also </i><a href="https://scholar.google.com/scholar_case?case=2362894279146639948&q=Kirk+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44" style="color: #660099;"><i>Brown,</i> 414 S.W.3d at 285-86</a>. We therefore reject Kirk's notice-of-acceleration argument.</div>
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III. Judgment</h2>
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In her last argument, Kirk contends that the judgment was erroneous because it was not supported by proper pleadings. She cites an unpublished decision by an Ohio court of appeals that reversed a trial court order denying a motion for relief from a default judgment in part because the Ohio court concluded that the plaintiff failed to state a claim upon which relief could be granted. Kirk does not draw an analogy to the Ohio case or otherwise explain how it applies here. This is not a default-judgment case, and this is a Texas court. Kirk's argument that the judgment is not supported by proper pleadings is therefore inadequately briefed. <i>See</i> TEX. R. APP. P. 38.1(i). Accordingly, we overrule Kirk's last issue.</div>
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Conclusion</h2>
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We affirm the judgment of the trial court.</div>
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<a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=15983380027563633939&q=Kirk+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44#r[1]" name="[1]" style="color: #660099;">[1]</a> The trust also sued Merle Kirk, but the record reveals that Merle did not appear in the trial court and that there was no appeal filed on his behalf. Accordingly, any issue pertaining to Merle is not before this court.</div>
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<a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=15983380027563633939&q=Kirk+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44#r[2]" name="[2]" style="color: #660099; text-decoration: underline;">[2]</a> Kirk also maintains that the Trust's business-record affidavit was not actually admitted into evidence. As the Dallas Court of Appeals has noted, "evidence treated by the trial court and the parties as if it had been admitted is, for all practical purposes, admitted." <i>See </i><a href="https://scholar.google.com/scholar_case?case=4041102949928090064&q=Kirk+v+National+Collegiate+Student+Loan+Trust&hl=en&as_sdt=4,44" style="color: #660099; text-decoration: underline;"><i>Travelers Indem. Co. v. Starkey,</i> 157 S.W.3d 899, 904 (Tex. App.-Dallas 2005)</a> (collecting cases). Kirk does not dispute that she, the Trust, and the trial court all treated the affidavit as though it had been admitted at trial. We therefore reject Kirk's argument that the business-record affidavit and its attachments were not admitted into evidence.</div>
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MOTPhttp://www.blogger.com/profile/15883011307129083993noreply@blogger.com0tag:blogger.com,1999:blog-9105536336033560224.post-83008239550658681182019-05-02T12:31:00.000-07:002019-05-12T10:06:51.480-07:00Consumer Contracts at the Back-End: A Different Perspective on the (draft) Restatement of Consumer Law from Texas<div style="text-align: center;">
<b><span style="color: red;">CONSUMER CONTRACTS DON'T MATTER WHEN APPELLATE COURTS CREATE CASELAW TO ALLOW CIRCUMVENTION </span></b></div>
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Much of the discussion about the state of American consumer law, including the ongoing controversy over the <b>Restatement of the Law of Consumer Contracts</b>, and its reliance on quantitative surveys of caselaw of questionable quality, center on issues surrounding consumer contracts at the front end:<br />
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Questions such as <a href="https://debt-suit-litigation-in-texas.blogspot.com/2013/07/contract-formation-without-signature.html" target="_blank">the manner in which a contract is formed</a> in the first instance, and <a href="https://debt-suit-litigation-in-texas.blogspot.com/2013/11/modification-of-credit-terms-interest.html" target="_blank">how terms are later modified</a>; whether the specific terms applicable to the transaction are disclosed to the consumer in a meaningful and understandable manner; and whether they are excessively one-sided, oppressive, or unconscionable.<br />
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<b><span style="color: #3d85c6;">CONSUMERS AS CLAIMANTS (PLAINTIFFS)</span></b><br />
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One major underlying concern is that consumers’ ability to bring claims against businesses may be jeopardized, that the scope of rights a consumer has under such a contract may be unduly limited, such as through mandatory arbitration and class-action waiver clauses, and that consumers may be prevented from vindicating their rights—including statutory rights that come into play based on the nature of the transaction--in an effective manner.<br />
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A related issue is whether consumer contracts are drafted to effectively preclude relief that could otherwise be obtained through class actions. This is obviously of great importance in instances of large-scale wrongful business conduct where the value of each claim any single consumer might have is too small to make it economically feasible to bring such claim in an individual action.<br />
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<b style="mso-bidi-font-weight: normal;"><span style="color: #2f5597; mso-style-textfill-fill-alpha: 100.0%; mso-style-textfill-fill-color: #2F5597; mso-style-textfill-fill-colortransforms: lumm=75000; mso-style-textfill-fill-themecolor: accent1; mso-themecolor: accent1; mso-themeshade: 191;"><span style="color: #3d85c6;">CONSUMER CONTRACTS
AT THE BACK END – WHEN CONSUMERS BECOME LAWSUIT TARGETS </span><span style="color: #2f5597;"><o:p></o:p></span></span></b></div>
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Much more, however, is at stake for individuals at the back-end,
when the business has a claim against a consumer, and takes the consumer to court.<br />
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And that’s
where consumer contracts matter too. At least in theory. <o:p></o:p></div>
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A debt collection claim is, in essence, a breach of contract
claim because the creditor’s complaint is that the consumer has defaulted, i.e.
has not made periodic payments as promised, which takes two basic forms: (1) a failure
to make regular installment payments as they become due under the amortization
schedule of a retail installment contract or (2) a failure to make monthly
minimum payments computed based on a formula contained an agreement governing open-end
credit such as a credit card account. In the latter case, the minimum payment will
typically consist of a percentage of the revolving balance and current finance
charges, which may include other charges (such as a late fee or over-limit fee)
in addition to the newly accrued interest and any past-due amount. <o:p></o:p><br />
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To prove such a breach-of-contract claim under Texas common
law, a plaintiff must adduce sufficient evidence on a several essential
elements: (1) a valid contract, (2) performance by the plaintiff or tender of
performance, (3) breach by the defendant, and (4) damages caused by breach. <o:p></o:p><br />
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In order to obtain a judgment against a consumer, a creditor
would, under long-standing caselaw, have to produce competent evidence on each
element. If the creditor fails to do so, or if the proffered evidence is of
questionable quality and therefore subject to evidentiary objections and
exclusion, the consumer may have a viable defense to the lawsuit. <o:p></o:p></div>
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The reality, however, is different. At least in Texas, appellate
courts have made it much easier for creditors to obtain judgments against
former customers by relaxing conventional proof requirements in debt collection
cases, and by allowing creditors to avoid the proof requirements applicable to a breach-of-contract
claim altogether, thus rendering the contract, and whatever terms it may contain,
immaterial. <o:p></o:p></div>
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<b style="mso-bidi-font-weight: normal;"><span style="color: #2f5597; mso-style-textfill-fill-alpha: 100.0%; mso-style-textfill-fill-color: #2F5597; mso-style-textfill-fill-colortransforms: lumm=75000; mso-style-textfill-fill-themecolor: accent1; mso-themecolor: accent1; mso-themeshade: 191;"><span style="color: #3d85c6;">CIRCUMVENTION OF
PROOF REQUIREMENTS APPLICABLE TO BREACH OF CONTRACT </span><span style="color: #2f5597;"><o:p></o:p></span></span></b></div>
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Starting in 2008 with an opinion issued by the Dallas
Court of Appeals, Texas courts have allowed creditors to circumvent the proof
requirements of a breach-of-contract claim by bringing the collection action as
a common-law “account stated” claim instead, or in the alternative. <i>See Dulong v. Citibank (South Dakota),
N.A</i>., 261 S.W.3d 890, 893 (Tex.App.-Dallas 2008, no pet.). <o:p></o:p><br />
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<b><span style="color: #4472c4; mso-themecolor: accent1;">"ACCOUNT STATED" ADAPTED FOR CREDIT CARD
DEBT COLLECTION IN TEXAS <o:p></o:p></span></b></div>
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When a creditor proceeds on an account-stated theory, it no
longer has to provide even a copy of a boilerplate credit card agreement. Credit
card statements alone will do.<br />
See <span style="font-family: "wingdings"; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-char-type: symbol; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin; mso-symbol-font-family: Wingdings;"><span style="mso-char-type: symbol; mso-symbol-font-family: Wingdings;">à</span></span> <a href="https://debt-suit-litigation-in-texas.blogspot.com/2013/07/texas-account-stated-cases-lower-proof.html" target="_blank">The Account Stated Theory and the lowering of proof requirements in credit card debt collection cases</a>; --> <a href="https://causeofactionelements.blogspot.com/2015/04/core-v-cbna-2015-account-stated.html" target="_blank">Resurrection of account-stated for credit card debt collection in Texas</a>.<br />
<o:p></o:p><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg_cqq1pWIvYHee9wqm8Ulv8qe2efWXt43VPoHRdaOXlR22kziXCBra4J0HtaBWohULXVITR7nGbFZwb7w_AABpSX8s7F_8-oAbjBaNbIo3Abq1GtW2axFzkW1GGx0tu5nMsN3ie_wlRk0v/s1600/Account+Stated+Resurrected+%2528LR+article+snip%2529.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img alt="Emanuel J. Turnbull, Account Stated Resurrected: The Fiction of Implied Assent in Consumer Debt Collection, 38 VT. L. REV. 339, 340 (2013) " border="0" data-original-height="458" data-original-width="729" height="250" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg_cqq1pWIvYHee9wqm8Ulv8qe2efWXt43VPoHRdaOXlR22kziXCBra4J0HtaBWohULXVITR7nGbFZwb7w_AABpSX8s7F_8-oAbjBaNbIo3Abq1GtW2axFzkW1GGx0tu5nMsN3ie_wlRk0v/s400/Account+Stated+Resurrected+%2528LR+article+snip%2529.PNG" title="Emanuel J. Turnbull, Account Stated Resurrected: The Fiction of Implied Assent in Consumer Debt Collection, 38 VT. L. REV. 339, 340 (2013) " width="400" /></a></div>
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Also see: Emanuel J. Turnbull, Account Stated Resurrected: The Fiction of Implied Assent in Consumer Debt Collection, 38 VT. L. REV. 339, 340 (2013) </div>
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Several other courts of appeals have jumped on the bandwagon
without re-examining the validity of the suit-on-account theory for collection
of a bank debt that does not involve sale of goods or services, thus lowering the
proof requirements for credit card debt plaintiffs, and depriving the
defendants of any benefits that might accrue from the existence of a written
contract. <i>See, e.g., McFarland v. Citibank (S.D.), N.A.</i>, 293 S.W.3d 759, 764
(Tex. App.-Waco 2009, no pet.) ("Thus, we join our sister courts in
holding that account stated, and not a suit on a sworn account, is a proper
cause of action for a credit card collection suit because no title to personal
property or services passes from the bank to the credit card holder."); <i>Jaramillo v. Portfolio Acquisitions, LLC</i>, No. 14-08-00939-CV, 2010 WL 1197669, at *7 (Tex.App.-Houston [14th Dist.] Mar. 30, 2010, no pet. h.) (mem. op.); <i>Butler v. Hudson & Keyse, L.L.C</i>., No. 14-07-00534-CV, 2009 WL 402329, at *3 (Tex.App.-Houston [14th Dist.] Feb. 19, 2009, no pet.) (mem. op.); <i>also see Houle v. Capital One Bank (USA), NA.</i>, No. 08-16-00234-CV (Tex.App.- El Paso, 2018, pet. filed) (affirming summary judgment for credit card bank on two theories).<br />
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhT133kuHVgDjmFWtv_OOpDC4tSIQdFZWAZJgC2wGWXghZTb3BxhMiz95ztIkN7YBQAUH0p384O9jB4K2ChK9p9LUfrjir7b9GBjR09aKIxaugN0cszgqAfoSlae0W0xyCu6ktjht1KKyOQ/s1600/Account+Stated+-+McFarland+v+Citibank+-+10thCOA+%25282009%2529.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="838" data-original-width="1117" height="300" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhT133kuHVgDjmFWtv_OOpDC4tSIQdFZWAZJgC2wGWXghZTb3BxhMiz95ztIkN7YBQAUH0p384O9jB4K2ChK9p9LUfrjir7b9GBjR09aKIxaugN0cszgqAfoSlae0W0xyCu6ktjht1KKyOQ/s400/Account+Stated+-+McFarland+v+Citibank+-+10thCOA+%25282009%2529.JPG" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">McFarland v. Citibank (South Dakota), N.A., 293 S.W.3d 759 (Tex.App.-Waco 2009, no pet.) </td></tr>
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<span style="color: #3d85c6;"><b> </b></span><br />
<span style="color: #3d85c6;"><b>QUANTUM MERUIT REMEDY ALSO MIS-APPROPRIATED FOR CONSUMER DEBT COLLECTION - FOR THE BENEFIT OF A VULTURE FUND, </b></span><b style="color: #3d85c6;">NO LESS </b><br />
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One Texas court of appeals has gone so far as to bless quantum
meruit as an alternative theory for the collection of a bank debt, even
though quantum meruit is an equitable theory and is generally precluded when a
contract governs the parties’ relationship because a suit to enforce the
contract provides an adequate legal remedy.<br />
<br />
In 2008, the Fourteenth Court of Appeals jumped on quantum meruit to accommodate a debt-buyer entity that was at that time a prolific litigant in court all around Texas, but had not adduced sufficient evidence from the original creditor to prevail on its
breach-of-contract claim in the case that came before the court. <i>See McElroy v. Unifund CCR Partners</i>, No.
14-07-00661-CV, 2008 WL 4355276 (Tex. App.-Houston [14th Dist.] Aug. 26, 2008,
no pet.) (mem. op.).<br />
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Quantum meruit generally applies only to
claims based on the sale of goods or provision of services not paid for. A bank does not
sell goods or services. Instead, it makes its money by charging interest on the
extension of credit and on fees paid by merchants that accept their cards. Interest
is not compensation of services, and the goods or services charged on a credit
card are provided by third parties. These purchases are financed by the bank, rather
than the bank acting as seller. The only component of a balance on a credit
card account that arguably constitutes compensation for a service provided by
the bank to its customer would be an annual membership fee or monthly service
charge. But even that is debatable, at least under federal law governing
consumer credit, including the federal definition of what constitutes finance charges. <o:p></o:p></div>
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A memorandum opinion issued by the same Houston-based appellate court in a subsequent credit card collection case brought by a bank (rather than a debt buyer) likened the case to <i>McElroy</i> in that it was undisputed that “there was a credit-card agreement of some kind,” but did not take issue with the blessing of the quantum meruit doctrine for credit card debt collection. <i>See <a href="https://scholar.google.co.uk/scholar_case?case=12727892097299918635&hl=en&as_sdt=6,44" target="_blank">Ayers v. Target Nat'l Bank</a></i>, No. 14-11-00574-CV, 2012 WL 3043043 (Tex. App.-Houston [14th Dist.] July 26, 2012, no pet.) (mem. op.) (reversing summary judgment granted in favor of bank on breach-of-contract theory).<br />
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<i>Ayers</i>’ discussion of <i>McElroy</i> solidifies the conclusion that the quantum meruit claim had been permitted even though the breach-of-contract cause of action was available, and could have been pursued with proper evidence. By affirming the judgment for the creditor in <i>McElrod</i> despite the creditor’s failure to prove up the terms of the underlying credit card agreement, the Fourteenth Court of Appeals essentially condoned and excused the debt buyer’s failure to adduce the requisite type and amount of proof. It blessed the circumvention of those proof requirements through an alternative theory that had--at least until then--been inapposite and unavailable because quantum meruit is an equitable remedy incompatible with the existence of a contract governing the parties’ relationship.<br />
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But once a court of appeals makes an error of law, the same court can then defend and repeat the error by treating it as a prior ruling with the force of precedent.<br />
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That has not happened with <i>McElroy</i>, but it did happen with the <i>Dulong</i> precedent from Dallas, which has been cited and relied upon numerous times by appellate courts since. Account Stated is routinely pleaded by some creditors in mass litigation in the trial courts. Very few such cases reach the courts of appeals these days. Some banks have also embraced the new opportunity.<br />
Wells Fargo, for example, now pleads an account-stated count in addition to their cause of action for breach of contract.<br />
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<b style="mso-bidi-font-weight: normal;"><span style="color: #2f5597; mso-style-textfill-fill-alpha: 100.0%; mso-style-textfill-fill-color: #2F5597; mso-style-textfill-fill-colortransforms: lumm=75000; mso-style-textfill-fill-themecolor: accent1; mso-themecolor: accent1; mso-themeshade: 191;"><span style="color: #3d85c6;">RELAXATION OF PROOF
REQUIREMENTS FOR BREACH OF CONTRACT ITSELF </span></span></b></div>
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<b style="mso-bidi-font-weight: normal;"><span style="color: #2f5597; mso-style-textfill-fill-alpha: 100.0%; mso-style-textfill-fill-color: #2F5597; mso-style-textfill-fill-colortransforms: lumm=75000; mso-style-textfill-fill-themecolor: accent1; mso-themecolor: accent1; mso-themeshade: 191;"><br /></span></b></div>
<div class="MsoNormal">
In addition to providing a work-around when a creditor cannot find a contract as a predicate for a breach-of-contract claim, Texas courts have also lowered the standards that generally apply in contract cases to accommodate credit card issuers and purchasers of charged-off accounts. There is now, in effect, a special interest jurisprudence for the benefit of creditors that has carved out its custom exceptions from general rules of law and procedure.<br />
<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Many courts no longer hold plaintiffs to the burden of actually having to prove that a boilerplate agreement attached to a summary judgment affidavit
is the agreement that was provided to the customer and subsequently accepted by
card use. Instead, they consider conclusory affidavit testimony to the effect that
“Exhibit A is a true and correct copy of the applicable agreement” sufficient. <i style="mso-bidi-font-style: normal;">See, e.g., Houle v. Capital One Bank (USA)</i>,
NA. No. 08-16-00234-CV (Tex.App.- El Paso, 2018, pet. filed). <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
One court saw no problem with the fact that the date printed
on the generic agreement did not match the date referenced by the affiant as
the date of contract-formation by card use, reasoning that the bank had the
right to change the terms (as shown on the face of the challenged agreement)
and that the defendant accepted the more recent version by continued card use.
<i>See Wakefield v. Wells Fargo Bank, N.A.</i>, No. 14-12-00686-CV, 2013 Tex. App.
LEXIS 14018 (Tex. App.-Houston [14th Dist.]. Nov. 14, 2013, no pet.) (mem. op.).<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgEAHOIS04fqzkuFzEDWYS4ayZbGbanhrI_9vM4Hn9vVRqVHoC8PbVXj2J7IWecbqnIRu-fL9TWpbgA6Xs1r-Or5PCFQvMudzu08aUs-T2Pq_gSQQuNBLX3b83qAhobr4kauA91pAh77wLh/s1600/WFBNA+cc-suit+affidavit+-+excerpt+-+old+version+with+date+of+card+use+specified.PNG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="462" data-original-width="625" height="295" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgEAHOIS04fqzkuFzEDWYS4ayZbGbanhrI_9vM4Hn9vVRqVHoC8PbVXj2J7IWecbqnIRu-fL9TWpbgA6Xs1r-Or5PCFQvMudzu08aUs-T2Pq_gSQQuNBLX3b83qAhobr4kauA91pAh77wLh/s400/WFBNA+cc-suit+affidavit+-+excerpt+-+old+version+with+date+of+card+use+specified.PNG" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Affidavit excerpt from Wakefield: Approximate Contract-formation Date </td></tr>
</tbody></table>
<br />
Although, with the appellate court's help, Wells Fargo defeated the <i>pro se</i> appeal, the bank subsequently changed its affidavit template, which no longer includes
the date of card use as a relevant contract-formation fact. See excerpt from a more recent case below:<br />
<o:p></o:p></div>
<div class="MsoNormal">
<span style="mso-spacerun: yes;"><br /></span>
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgUHHNPjr-fwiWqReMAT4DB5uFKhpxCrspweomI7LDewOWEZf1oHtsdgkhTZ8rc3yZpKYzOBJxvcPQiUWKGSh7k3Vnrr2TVS-f8o4q9Yjr3BHtI5wIffTaemr6KB2RyO8z6bRqYJS7VjRgE/s1600/WFBNA+cc-suit+affidavit+-+excerpt.PNG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="290" data-original-width="735" height="157" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgUHHNPjr-fwiWqReMAT4DB5uFKhpxCrspweomI7LDewOWEZf1oHtsdgkhTZ8rc3yZpKYzOBJxvcPQiUWKGSh7k3Vnrr2TVS-f8o4q9Yjr3BHtI5wIffTaemr6KB2RyO8z6bRqYJS7VjRgE/s400/WFBNA+cc-suit+affidavit+-+excerpt.PNG" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Excerpt from Wells Fargo affidavit in a recent filing: Date of last payment reported, <br />
but no date for contract formation by card use</td></tr>
</tbody></table>
<br />
<b><span style="color: #3d85c6;">CONTRACT-FORMATION PROOF IN DISPUTES OVER ARBITRATION</span></b><br />
<br /></div>
<div class="MsoNormal">
<span style="font-family: inherit;">Interestingly, the contract-formation analysis with respect
to <b>notice of terms</b> is much more refined when it comes to acceptance of an arbitration
agreements by an employee (by continuing to work after notice) and when the <i style="mso-bidi-font-style: normal;"><u>which-version-is-the-controlling-contract</u></i>
issue surfaces in other types of litigation involving banks and their customers. </span><br />
<span style="font-family: inherit;"><br /></span>
<span style="font-family: inherit;">As for formation of an agreement to arbitrate in the employment context, <i>see</i> <i style="mso-bidi-font-style: normal;"><a href="https://scholar.google.co.uk/scholar_case?case=16631601551596888814&q=Kmart+Stores+of+Tex.,+L.L.C.+v.+Ramirez&hl=en&as_sdt=6,44" target="_blank">Kmart Stores of Tex., L.L.C. v. Ramirez</a></i>, 510
S.W.3d 559, 565 (Tex.App.-El Paso 2016, pet. denied) (where employer provided
evidence that employee had logged on to computer and received notice of
arbitration agreement, employee bore burden of raising a fact issue contesting
formation, which she met by filing a sworn denial of notice); <u><a href="https://scholar.google.com/scholar_case?case=9233750198765403589&hl=en&as_sdt=6,44" target="_blank"><i>Stagg Restaurants, LLC v.. Serra</i></a></u>, No. 04-18-00527-CV (Tex.App.- San Antonio, Feb. 13, 2019, no pet.) (trial court's denial of motion to compel arbitration affirmed in interlocutory appeal where employer failed to prove notice of arbitration provision in occupational injury plan document to employee who later brought work-related injury suit).</span><br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjl2WTQNyAiTyIHCmeS5PgFtLCzpNy1XGEWByXyqfPCddXhDJaQkBaWvzOEmDxipudB-b4gXmzhD-ClV2FS5QJszbbBNGOrj6kjGemdWa3inFs3q7yFaPNqJToJvwqRyRS8T5hJEL5V-7Wb/s1600/Staggs+Restaurants+v+Serra+%2528Tex.App.+2019%2529+-+Notice+of+Arb+Agreement+not+proven+%2528excerpt%2529%2528snip%2529.PNG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img alt="Stagg Restaurants, LLC v. Serra, No. 04-18-00527-CV (Tex.App.- San Antonio, Feb. 13, 2019, no pet.) " border="0" data-original-height="816" data-original-width="734" height="640" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjl2WTQNyAiTyIHCmeS5PgFtLCzpNy1XGEWByXyqfPCddXhDJaQkBaWvzOEmDxipudB-b4gXmzhD-ClV2FS5QJszbbBNGOrj6kjGemdWa3inFs3q7yFaPNqJToJvwqRyRS8T5hJEL5V-7Wb/s640/Staggs+Restaurants+v+Serra+%2528Tex.App.+2019%2529+-+Notice+of+Arb+Agreement+not+proven+%2528excerpt%2529%2528snip%2529.PNG" title="Stagg Restaurants, LLC v. Serra, No. 04-18-00527-CV (Tex.App.- San Antonio, Feb. 13, 2019, no pet.) " width="572" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Stagg Restaurants, LLC v. Serra, No. 04-18-00527-CV (Tex.App.- San Antonio, Feb. 13, 2019, no pet.) (holding that employer's motion to compel arbitration was properly denied because employer failed to prove that employee was given notice of arbitration provisions within occupational injury plan, and employee swore he had no notice) </td></tr>
</tbody></table>
<span style="mso-bidi-font-style: normal;">As for different sorts of bank-customer litigation,</span><i style="mso-bidi-font-style: normal;"> see </i><i style="mso-bidi-font-style: normal;"><a href="https://scholar.google.co.uk/scholar_case?case=11741096872447324447&q=14-16-00418-CV&hl=en&as_sdt=6,44" target="_blank">In Re Comerica</a></i>, No. 14-16-00418-CV (Tex.App.-
Houston [14<sup>th</sup> Dist.] <span style="mso-spacerun: yes;"> </span>Jun. 30,
2016)(concluding that “Comerica has not established that the trial court
clearly abused its discretion by ordering Comerica to withdraw its application
to arbitrate the claim against it with JAMS because the record contains <u><i>no
evidence that Comerica mailed written notice of the amended Contract and its
text to [customers]</i></u> or that [customers] by some other means agreed to the
amended Contract with the arbitration provision.”).<br />
<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhEduWjrR_q6ugm1xgnLO2e14JWS7TZAjthBmMqrNElpR66y8UUtGoJ6G2sGpiJZfIWu3yQB3qal-inEdYj8dpYm2TeKkHH51m_iG60CgkEmKWKMyQzLkESUjZZmA5nH0NZZL5W8PxhkXMF/s1600/Arb+caselaw+-+In+Re+Comerica+Bank+%2528Tex.App.-Houston+2016%2529.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img alt="In Re Comerica, No. 14-16-00418-CV. (Tex.App.- Houston [14th Dist.] Jun. 30, 2016) (agreement on arbitration not proven)" border="0" data-original-height="960" data-original-width="1082" height="353" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhEduWjrR_q6ugm1xgnLO2e14JWS7TZAjthBmMqrNElpR66y8UUtGoJ6G2sGpiJZfIWu3yQB3qal-inEdYj8dpYm2TeKkHH51m_iG60CgkEmKWKMyQzLkESUjZZmA5nH0NZZL5W8PxhkXMF/s400/Arb+caselaw+-+In+Re+Comerica+Bank+%2528Tex.App.-Houston+2016%2529.JPG" title="In Re Comerica, No. 14-16-00418-CV. (Tex.App.- Houston [14th Dist.] Jun. 30, 2016) (agreement on arbitration not proven)" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">In Re Comerica, No. 14-16-00418-CV (Tex.App.- Houston [14th Dist.] Jun. 30, 2016)<br />
(agreement on arbitration not proven)</td></tr>
</tbody></table>
<div class="MsoNormal">
<b><span style="color: #4472c4; mso-themecolor: accent1;"><span style="color: #3d85c6;">THIS IS THE CONTRACT THAT APPLIES TO THE DEFENDANT; TAKE MY WORD FOR IT</span></span></b></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="color: #4472c4; mso-themecolor: accent1;"><br /></span></b></div>
<div class="MsoNormal">
There are significant differences among major credit card
issues on whether the credit card agreement offered as evidence in a collection
suit contains any indicia that link it to a specific account or the specific account
holder. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b>American Express</b> used to rely generic agreements like other
major card issuers, but years ago switched to a practice of issuing cardholder
agreements that are dated, and also contain the name of the account holder
(including the name of the business for business cards), the account ending
digits, and the type of account. The unique identifying information is printed
in the top section of the first page of the cardmember agreement, which
consists of two parts. One part sets forth the account-specific pricing terms
while the other part contains the standard (invariant) terms that also apply to
other cardholders within the same customer segment. Those terms include a Utah
choice of law clause and regularly also encompass some form of an arbitration
agreement. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b>Discover Bank</b>’s customer agreements do not contain
information identifying accounts by numbers or customers by name, but
references the version of the agreement (called “Terms Level”) within the body
of the affidavit of its servicer, which is a variable data field in the
template along with other case-specific data such as name of cardholder and
amount of the outstanding balance for which the Bank seeks judgment. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The Customer Agreements attached by <b>Wells Fargo Bank</b>, by
contrast, do not contain any account or customer-specific particulars. Nor does
Wells Fargo even attach the “Important Terms of Your Account” document that sets
forth the account-specific cost-of-credit disclosures required under the Truth
in Lending Act. A number of appellate cases, even from otherwise creditor-friendly
courts of appeal, hold that the creditor must prove the cost terms because they
are essential contract terms, but adherence to this long-standing rule of law
is also eroding. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><span style="color: #3d85c6;">Texas court of appeals cases that found that proof of credit terms (or derivation of balance, which requires proof of interest) was lacking or insufficient: <span style="mso-spacerun: yes;"> </span></span></b><o:p></o:p></div>
<div class="MsoNormal">
<span style="mso-spacerun: yes;"><br /></span></div>
<div class="MsoNormal">
<a href="https://scholar.google.com/scholar_case?case=7647973184920389593&q=uribe+v+pharia+llc&hl=en&as_sdt=4,44" target="_blank">Uribe v. Pharia, LLC</a>, No. 13-13-00551-CV, 2014 WL 3555529 (Tex.App.-Corpus
Christi July 17, 2014) (mem. op.) (collecting cases). <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<ul>
<li><i>Williams v. Unifund CCR Partners Assignee of Citibank</i>, 264
S.W.3d 231, 236 (Tex. App.-Houston [1st Dist.] 2008, no pet.)(holding evidence
was insufficient to establish the terms of a valid contract as a matter of law
where creditor failed to produce actual credit-card agreement or any other
document that established the agreed terms, including the applicable interest
rate or method for determining finance charges); </li>
<li><i>Tully v. Citibank (S.D.),
N.A.</i>, 173 S.W.3d 212, 216-17 (Tex. App.-Texarkana 2005, no pet.) (holding
evidence insufficient to show interest rate charged was agreed on where the
only evidence was the rates specified in monthly statements); </li>
<li><i>Hooper v. Generations Community Federal Credit Union</i>, No. 04-12-00080-CV, 2013
WL 2645111, at *3 (Tex. App.-San Antonio June 12, 2013, no pet.) (mem. op.)
(reversing judgment for creditor where cardholder agreement was not offered
into evidence and there was no evidence establishing debtor's specific
obligations under an agreement); </li>
<li><i>Colvin v. Tex. Dow Employees Credit Union</i>, No.
01-11-00342-CV, 2012 WL 5544950, at *6 (Tex. App.-Houston [1st Dist.] Nov. 15,
2012, no pet.) (mem. op.) (reversing summary judgment for creditor where
creditor failed to offer the original agreement, monthly statements, or other
evidence establishing how it calculated its alleged damages); </li>
<li><i>Martin v.
Federated Capital Corp.</i>, No. 01-12-00116-CV, 2012 WL 4857835, at **2-3 (Tex.
App.-Houston [1st Dist.] Oct. 11, 2012, no pet.) (mem. op.) (reversing summary
judgment for creditor where creditor's evidence failed to explain how it
calculated its damages); </li>
<li><i>Ayers v. Target National Bank</i>, No. 14-11-00574-CV,
2012 WL 3043043, at **2-4 (Tex. App.-Houston [14th Dist.] July 26, 2012, no
pet.) (mem. op.) (reversing summary judgment for creditor where creditor failed
to present cardholder agreement and a portion of the form language on the
credit-card application was illegible and form language was in Spanish); </li>
<li><i>Wande
v. Pharia</i>, No. 01-10-00481-CV, 2011 WL 3820774, at *5 (Tex. App.-Houston [1st
Dist.] Aug. 25, 2011, no pet.) (mem. op.) (reversing summary judgment for
creditor where creditor presented the cardholder agreement but important portions
of the agreement were illegible, including a section entitled "Finance
Charges," and creditor presented no evidence regarding the calculations it
used to arrive at claimed outstanding balance); </li>
<li><i>Jaramillo v. Portfolio
Acquisitions, LLC</i>, No. 14-08-00939-CV, 2010 WL 1197669, at **5-6 (Tex.
App.-Houston [14th Dist.] March 30, 2010, no pet.) (mem. op.) (holding evidence
insufficient to establish a valid contract where card member agreement was
entered into evidence, but many of its material terms were missing; "This
court and its sister court have drawn a distinction between cases where a card
member agreement is entered into evidence and where there is no card member
agreement.") </li>
</ul>
</div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="color: #2f5597; mso-style-textfill-fill-alpha: 100.0%; mso-style-textfill-fill-color: #2F5597; mso-style-textfill-fill-colortransforms: lumm=75000; mso-style-textfill-fill-themecolor: accent1; mso-themecolor: accent1; mso-themeshade: 191;"><span style="color: #3d85c6;">FUTURE POST: THE LOWERING OF
EVIDENTIARY STANDARDS IN CONSUMER DEBT COLLECTION CASES </span><span style="color: #2f5597;"><o:p></o:p></span></span></b></div>
<br />
[ forthcoming ]<br />
<br />
<br />
<br />MOTPhttp://www.blogger.com/profile/15883011307129083993noreply@blogger.com0tag:blogger.com,1999:blog-9105536336033560224.post-60350566415430893302019-04-29T03:00:00.000-07:002019-05-24T07:41:08.762-07:00Denying requests for admissions (RFAs) vs. failing to answer them altogether: What are the consequences? <div style="text-align: center;">
<b><span style="color: #0b5394;"><br /></span></b>
<b><span style="color: #cc0000;">DEEMED ADMISSIONS CAN BE USED AS EVIDENCE </span></b></div>
<div style="text-align: center;">
<b><span style="color: #cc0000;">BUT NOT EXPRESS DENIALS OF REQUESTED ADMISSIONS </span></b></div>
<br />
In <i><a href="https://scholar.google.com/scholar_case?case=13067428230520683451&q=17-0498&hl=en&as_sdt=4,44" target="_blank">Medina v. Zuniga</a></i>, the Texas Supreme Court recently reversed sanctions imposed on a defendant for having failed to admit matters addressing liability in response to spate of requests for admissions (RFAs) served at the inception of the law suit, where the defendant later stipulated to having been at fault, and only contested <i>gross</i> negligence at trial.* The case is a fact-intensive personal injury case arising from a vehicle-pedestrian collision and has nothing to do with debt collection.<br />
<blockquote class="tr_bq">
<span style="font-size: x-small;">* See TEX. CIV. PRAC. & REM. CODE § 41.001(11) (defining gross negligence as an act or omission that (1) objectively “involves an extreme degree of risk” and (2) the actor proceeds to perform “with conscious indifference” despite an “actual, subjective awareness of the risk”).</span></blockquote>
<br />
<div style="text-align: center;">
<span style="color: #0b5394;">"REQUESTS FOR ADMISSIONS ARE NO METHOD FOR TRYING THE MERITS"</span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh4XzIemJlhkuKvmkssldvQYwo1HvirFvWddap1kFXZ7dPKfaMpGZEcHMnlM4zred7LLQW4pWPA7ZAnOqhWBM_ZcRHbyXD7dXMmJup7pyBtkJMZUT9Zfl8vzB3HqVCFU34Xn05Dl8YsfoQ8/s1600/Tex+2019+Medina+v+Zuniga+by+Brown+%2528sanctions+for+failure+to+admit+per+RFA+reversed%252C+no+gross+negligence%2529+%2528snip+of+Page+1%2529.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img alt="Medina v Zuniga, No. 17-0498 (Tex. Apr. 26, 2019) (sanctions for failure to admit per RFA reversed, no gross negligence) " border="0" data-original-height="891" data-original-width="904" height="393" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh4XzIemJlhkuKvmkssldvQYwo1HvirFvWddap1kFXZ7dPKfaMpGZEcHMnlM4zred7LLQW4pWPA7ZAnOqhWBM_ZcRHbyXD7dXMmJup7pyBtkJMZUT9Zfl8vzB3HqVCFU34Xn05Dl8YsfoQ8/s400/Tex+2019+Medina+v+Zuniga+by+Brown+%2528sanctions+for+failure+to+admit+per+RFA+reversed%252C+no+gross+negligence%2529+%2528snip+of+Page+1%2529.JPG" title="Medina v Zuniga, No. 17-0498 (Tex. Apr. 26, 2019) (sanctions for failure to admit per RFA reversed, no gross negligence) " width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: small;"><a href="https://www.txcourts.gov/media/1443995/170498.pdf" target="_blank">Medina v. Zuniga</a>, No. 17-0498 (Tex. Apr. 26, 2019)</span><br />
<span style="font-size: small;">(sanctions for failure to admit requests for admissions reversed) </span></td></tr>
</tbody></table>
That said, REQUESTS FOR ADMISSIONS are routinely served on defendants in consumer debt collection cases by certain debt collection attorneys for certain creditors, and they are designed to be merit-preclusive if they are not denied, meaning that the creditor can then rely on deemed admission to get a judgment.<br />
<br />
<b><span style="color: #0b5394;">DENY, DENY, DENY </span></b><br />
<br />
The received wisdom among consumer debt defense attorneys is that RFAs can be safely denied as a routine defensive litigation practice, lest they be used as substitutes for evidence supporting the debt claim.<br />
<br />
The <a href="https://scholar.google.com/scholar_case?case=13067428230520683451&q=17-0498&hl=en&as_sdt=4,44" target="_blank">Texas Supreme Court's opinion in Medina v. Zuniga</a> supports the proposition that an arguably insincere denial does not amount to sanctionable conduct because a defendant should be able to hold the plaintiff to its burden of proof, and should not be forced to either concede liability (by answering "Admitted" to RFAs that go to the merits) or face risk sanctions for answering "Denied".<br />
<br />
Note that the Texas Supreme Court's most recent holding on the matter is also in line with rule 92 of the Texas Rules of Civil Procedure, which authorizes a blanket "<a href="http://debt-suit-litigation-in-texas.blogspot.com/2013/12/answering-debt-collection-lawsuit.html" target="_blank">general denial</a>" rather than requiring a defendant to set forth a response denying or admitting each allegation in the plaintiff's petition one by one. (Some affirmative defenses, however, require a verified denial, and some conditions precedent, if applicable, require a <i>specific</i> denial, rather than merely an all-purpose <i>general</i> one). <br />
<br />
<b><span style="color: #0b5394;">DEEMED ADMISSIONS </span></b><br />
<br />
The problem with ignoring requests for admissions, by contrast, is a more serious one. If RFAs are not answered, the propositions requested to be admitted are deemed true without any need for other proof. If a battery of deemed admissions covers the essential elements of the plaintiff's claims, they relieve the plaintiff of the burden to prove the claim with competent evidence on the merits. In many debt collection cases, courts have upheld summary judgments granted based entirely, or in part, on deemed admissions, even on issues such as standing to sue and amount of attorney's fees sought by the creditor's attorney.<br />
<br />
<span style="color: #0b5394;"><b>BEWARE OF RFAs SERVED TOGETHER WITH SUIT PAPERS, OR EMBEDDED IN THE PETITION</b> </span><br />
<br />
Some collection law firms routinely serve a REQUEST FOR ADMISSIONS together with the CITATION and the ORIGINAL PETITION, and then rely on the executed RETURN OF CITATION (or alternative proof of service, such as a sworn declaration by a private process server) to establish that the RFAs were served on the same date the citation was served, and that the requests are deemed admitted because they went unanswered within the 50 days that followed.<br />
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This practice can create a problem for defendants even in cases where the defendant promptly hires an attorney to answer the freshly-filed collection lawsuit in response to a debt-defense attorney's solicitation letter.<br />
<br />
If the suit papers (citation, petition, and requests for admission, which are sometimes included in the petition itself rather than appearing on a separate document) are still in the hands of the process server, it is possible that the defendant may get served in person <i>after</i> her attorney has already filed an original answer. The defendant may end up ignoring the requests for admission, trusting the attorney to take care of everything. But the attorney will then likely fail to answer (deny) the RFAs by the due date if his office is unaware that the client has been served with requests for admissions in the interim, together with the citation. The Defendant's answer to the law suit will preclude a default judgment, but the creditor could still use deemed admissions to support a motion for summary judgment, or raise the matter of deemed admissions at trial.<br />
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All may not be lost, because the attorney can still file a MOTION TO STRIKE DEEMED ADMISSIONS (sometimes called a motion to un-deem), but there is no guarantee that the trial court will grant it. And a deemed admissions problem must, of course, be detected in time to take proper remedial action. When deemed admissions are brought up at trial, it may be too late.<br />
<br />
More on requests for admissions and deemed admissions:<br />
--> <a href="https://debt-suit-litigation-in-texas.blogspot.com/2013/07/deemed-admissions-how-it-happens-and.html" target="_blank">Dealing with a deemed admissions problem in a consumer debt collection case</a> | <a href="https://scholar.google.com/scholar_case?case=8131107647389034244&q=Labeau+v.+GE+Capital+Retail+Bank&hl=en&as_sdt=4,44" target="_blank">Labeau v. GE Capital Retail Bank</a>: <a href="https://debt-suit-litigation-in-texas.blogspot.com/2013/12/comment-on-labeau-v-ge-capital-retail.html" target="_blank">Deemed admissions used against bank customer</a> | <a href="https://debt-suit-litigation-in-texas.blogspot.com/2013/10/disputing-claim-of-deemed-admissions.html" target="_blank">Disputing the existence of deemed admissions</a> |<br />
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<br />MOTPhttp://www.blogger.com/profile/15883011307129083993noreply@blogger.com0tag:blogger.com,1999:blog-9105536336033560224.post-2574004966483162782019-04-23T19:53:00.000-07:002019-05-02T14:46:51.457-07:00Texas Student Loan Collection Follies: AG Ken Paxton collects grand total of $54.12 by garnishing student loan debtor’s bank account; bank gets $600.00 for its trouble, for a total haul of $654.12<div style="text-align: center;">
<b><span style="color: #cc0000;">HOW THE STATE OF TEXAS SQUEEZES A FEW ROCK-BOTTOM DOLLARS </span></b><br />
<b><span style="color: #cc0000;">FROM STUDENT LOAN DEBTORS </span></b></div>
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Texas Attorney General Ken Paxton presides over a <a href="https://debt-suit-litigation-in-texas.blogspot.com/2017/07/debt-collector-profile-john-c-adams.html" target="_blank">well-oiled litigation machine</a> optimized to extract money from people who have fallen behind on
payments on the state-sponsored <a href="https://debt-suit-litigation-in-texas.blogspot.com/2017/07/texas-student-loan-suits-filed-by-texas.html" target="_blank">student loans funded and administered by the Texas Higher Education Coordinating Board</a> (THECB). <o:p></o:p></div>
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To be sure, keeping the flow of payments coming is important
to the long-time viability of the student loan system if it is to be
self-sustaining (as opposed to being supported by general revenue). </div>
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But
consider this: <o:p></o:p></div>
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On February 1, 2019, the Attorney General went after one of the wayward
student loan borrowers with a <b>writ of garnishment</b> against two banks suspected of
holding funds owned by the judgment debtor:<o:p></o:p></div>
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One bank was nonsuited, presumably because the ex-student had no account there. The other one, JPMorgan Chase, reported that the customer/judgment debtor had the
princely sum of <b>$654.12</b> sitting in his account.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjsFrp9kIn7LBMFj4-5e6uqwtKAH1xpeeAX5XeaFpQLiMzS6CganO4JtgFFeRgd7xQLQy6KFWKYloci0Ij4ps5Hq6I1V6GBXeVJtzpQKZ6jIfxIpDxlBl4-LCMnlYS6MXAJOdqRmuEWWjob/s1600/Garnishment+by+State+-+%252454.12+-+%2524600+to+Chase+Bank+-+Bank%2527s+Answer+reporting+%2524654.12.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="885" data-original-width="963" height="367" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjsFrp9kIn7LBMFj4-5e6uqwtKAH1xpeeAX5XeaFpQLiMzS6CganO4JtgFFeRgd7xQLQy6KFWKYloci0Ij4ps5Hq6I1V6GBXeVJtzpQKZ6jIfxIpDxlBl4-LCMnlYS6MXAJOdqRmuEWWjob/s400/Garnishment+by+State+-+%252454.12+-+%2524600+to+Chase+Bank+-+Bank%2527s+Answer+reporting+%2524654.12.JPG" width="400" /></a></div>
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***</div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgbrhS5j8qq2LmkdOyqZkUvlYQapTWgPYcuDPksip9M_mPjgFUaXXOID_u1nnQYIxBpnWUy_oAf9pxaFpfwOw58qNwHanksr6DfYtzNgKHHDSAHxlCF3WUNSx92YJuCsnFOJgrLJ20UhsD9/s1600/Garnishment+by+State+-+%252454.12+-+%2524600+to+Chase+Bank+-+Bank%2527s+Answer+demanding+%2524600+in+attorney%2527s+fees.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="336" data-original-width="959" height="140" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgbrhS5j8qq2LmkdOyqZkUvlYQapTWgPYcuDPksip9M_mPjgFUaXXOID_u1nnQYIxBpnWUy_oAf9pxaFpfwOw58qNwHanksr6DfYtzNgKHHDSAHxlCF3WUNSx92YJuCsnFOJgrLJ20UhsD9/s400/Garnishment+by+State+-+%252454.12+-+%2524600+to+Chase+Bank+-+Bank%2527s+Answer+demanding+%2524600+in+attorney%2527s+fees.JPG" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">The Garnishee Bank wants $600 in attorney's fees </td></tr>
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Given the measly amount, it is reasonable
to guess that the debtor is in the habit of living paycheck to paycheck, and that the sum was what’s left from the most recent pay period.</div>
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On April 2, 2019 a <b>judgment of garnishment </b>was duly entered for the benefit
of garnishor and garnishee. The garnishee bank was awarded<b> $600 in attorney’s fees</b> and State
recovered a net of <b>$54.12 </b>to be applied to the loan balance. Based on the State's application for the writ of garnishment, the amount of the underlying judgment is <b>$45,094.00</b>. </div>
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<o:p></o:p></div>
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<i style="mso-bidi-font-style: normal;"><b><span style="color: blue;">Does this make
sense? Even if only looking at it from a cost-benefit perspective? </span></b><o:p></o:p></i></div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjnpGbyhdxwLhP9GhR2UciM5Qyd-W-6_CDXE8jno8Q55DFSSJ6nwuHDX27Xs_hbrsO2MVoH0GutMDG3O1PC41ymMDypatzqi2l9vdhIBO8wn7lnfwjBNbjC0P_T_JG1tMMpmoitP6mCw4Sf/s1600/Garnishment+by+State+-+Final+Judgment+-+%252454.12+-+%2524600+to+Chase+Bank++2019-04-02.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img alt="Judgment of Garnishment in THECB student loan case " border="0" data-original-height="921" data-original-width="1461" height="251" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjnpGbyhdxwLhP9GhR2UciM5Qyd-W-6_CDXE8jno8Q55DFSSJ6nwuHDX27Xs_hbrsO2MVoH0GutMDG3O1PC41ymMDypatzqi2l9vdhIBO8wn7lnfwjBNbjC0P_T_JG1tMMpmoitP6mCw4Sf/s400/Garnishment+by+State+-+Final+Judgment+-+%252454.12+-+%2524600+to+Chase+Bank++2019-04-02.jpg" title="Judgment of Garnishment in THECB student loan case " width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Judgment of Garnishment in THECB student loan case </td></tr>
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A private bank gets <b>$600</b> for its rather minor trouble of having to file an answer in the garnishment action and forking over its
customer’s money to a third party; the State collects <b>$54.12</b> to help assure the viability
of its student loan program. Meanwhile, the debtor, who had his account balance frozen, then seized, may not be able to buy food and pay
bills until the next paycheck amount is direct-deposited into his checking account.</div>
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<o:p></o:p></div>
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The student loan debtor is out $600 that did not go to reducing the outstanding debt on the judgment owed to the State, but went into the coffers of the bank that clean out his account per court order.<br />
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If you look up the case documents, the <i>is-this-right</i> question gets even pricklier.<br />
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Turns out the underlying judgment was signed Apr. 21, 2006. So it is more than 12 years old; it was granted for $16,232.97 plus $97.50 costs of suit with a 9% interest rate. A prior execution attempt in 2006 turned up no assets to seize.<br />
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<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjylasoemVMabvsd3uEUNGZViE09KbXki4rf3E7KLIbf8Dj6DVtL-YMvIeoHn7f6wDZL2r4neG8g0_P5gQAx9ImFaqKdmFOqnYripXB7RIhKs1Gd2emtr2penLZFMUeO133yGGHRa17PaKI/s1600/Garnishment+by+State+-+C-1-CV-98-349373+Prior+Judgment+Execution+Attempt+2006.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="669" data-original-width="1600" height="166" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjylasoemVMabvsd3uEUNGZViE09KbXki4rf3E7KLIbf8Dj6DVtL-YMvIeoHn7f6wDZL2r4neG8g0_P5gQAx9ImFaqKdmFOqnYripXB7RIhKs1Gd2emtr2penLZFMUeO133yGGHRa17PaKI/s400/Garnishment+by+State+-+C-1-CV-98-349373+Prior+Judgment+Execution+Attempt+2006.JPG" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Nulla Bona Execution Attempt in 2006 </td></tr>
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So the Attorney General is now (in 2019) trying to collect a sum that is about three times the original judgment amount. It has been augmented greatly thanks to the much higher interest rate in 2006. In recent years the judgment interest rate has been 5%.<br />
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Paxton sues hundreds of former Texas college students who defaulted on <a href="https://debt-suit-litigation-in-texas.blogspot.com/2017/07/texas-student-loan-suits-filed-by-texas.html" target="_blank">THECB student loans</a> each year at the Travis County courthouse, conveniently located a
few blocks for his headquarters in Austin, Texas. Not so convenient for the ex-collegiate
defendants around the state, and some beyond, but that does not really matter
because they all end up with default judgments or summary judgments in any
event. Even if they were to hire a private attorney to enter an appearance, it is for
naught, except that it may postpone the highly predictable outcome: but only for a few months, at best. <o:p></o:p></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiowkZ09Sd3dJPdPXkCXyhlrwsYIWJUfVX_Ck8ILe3b1U_Sm36XPIn8EZZ1CHmt6x17SMl5Io3Bax1dkXLhnUSgrpH0s-VFvtdJkwlM9YrIdpVHyH7F6gMl6boAgst41iyuZCbe_bu0kbL-/s1600/Garnishment+by+State+-+Execution+attempt+in+2006+Nulla+Bona+Return.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img alt="Writ of Execution in 2006 turned up no no-exempt assets" border="0" data-original-height="691" data-original-width="920" height="300" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiowkZ09Sd3dJPdPXkCXyhlrwsYIWJUfVX_Ck8ILe3b1U_Sm36XPIn8EZZ1CHmt6x17SMl5Io3Bax1dkXLhnUSgrpH0s-VFvtdJkwlM9YrIdpVHyH7F6gMl6boAgst41iyuZCbe_bu0kbL-/s400/Garnishment+by+State+-+Execution+attempt+in+2006+Nulla+Bona+Return.PNG" title="Writ of Execution in 2006 turned up no no-exempt assets" width="400" /></a></div>
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Writ of Execution in 2006 turned up no no-exempt assets </div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQ4RZSdYC1ZvdmgdNJL5D-zamtlvUyDfbbyHPsS5l60j0qn8t_xLkg9LzGaM5LuhCkM-8lXKwAXXdcyiP_X2GXDDHWycCycQ18pXianoUHRzH4p8xmkIkhEy9v6UO7v7aqaWKjqa0isWeZ/s1600/Garnishment+by+State+-+Exeuction+attempt+in+2006.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="960" data-original-width="908" height="640" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQ4RZSdYC1ZvdmgdNJL5D-zamtlvUyDfbbyHPsS5l60j0qn8t_xLkg9LzGaM5LuhCkM-8lXKwAXXdcyiP_X2GXDDHWycCycQ18pXianoUHRzH4p8xmkIkhEy9v6UO7v7aqaWKjqa0isWeZ/s640/Garnishment+by+State+-+Exeuction+attempt+in+2006.PNG" width="602" /></a></div>
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MOTPhttp://www.blogger.com/profile/15883011307129083993noreply@blogger.com0tag:blogger.com,1999:blog-9105536336033560224.post-23366650293045139302019-04-22T09:48:00.000-07:002019-04-23T13:33:20.449-07:00FDCPA and Suing the wrong person with the same last name: Smith v. Moss Law Firm, P.C. (USDC SD Tex. 2019) <div style="text-align: center;">
<b><span style="color: #cc0000;">INDIVIDUAL WHO IS DUNNED OR SUED BUT DOES NOT OWE THE DEBT CAN HAVE STANDING TO BRING UNFAIR COLLECTION CLAIM UNDER FAIR DEBT COLLECTION STATUTES </span></b></div>
<br />
Motion to dismiss in FDCPA action brought by non-debtor against prominent Texas debt collection attorney Michael Moss's law firm denied. Defendant collection law firm argued that plaintiff did not have standing to sue under FDCPA and its Texas state law counterpart: the Texas Debt Collection Act. A federal district court judge in Dallas found otherwise.<br />
<center style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 14px;">
<h3 id="gsl_case_name" style="border: 0px; margin: 1em 0px; padding: 0px;">
CHRISTOPHER SMITH, Plaintiff,<br />v.<br />MOSS LAW FIRM, P.C., Defendant.</h3>
</center>
<center style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 14px;">
<a href="https://scholar.google.com/scholar?scidkt=2010297738103214516&as_sdt=2&hl=en" style="color: #660099;">Civil Action No. 3:18-CV-2449-D.</a></center>
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<b>United States District Court, N.D. Texas, Dallas Division.</b></div>
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January 15, 2019.</center>
<div style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 14px; position: relative;">
Christopher Smith, Plaintiff, represented by Ramona Veronica Ladwig, Hyde & Swigart, Anthony Patrick Chester, Hyde & Swigart & Seyed Abbas Kazerounian, Kazerouni Law Group APC.</div>
<div style="background-color: white; color: #222222; font-family: Arial, sans-serif; font-size: 14px; position: relative;">
Moss Law Firm PC, Defendant, represented by Rebecca Anne Moss, Moss Law Firm PC & Michael Allen Moss, Moss Law Firm PC.</div>
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MEMORANDUM OPINION AND ORDER</h2>
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SIDNEY A. FITZWATER, Senior District Judge. </div>
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In this action asserting claims for violations of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 <i>et seq.</i> ("FDCPA"), and the Texas Debt Collection Practices Act, Tex. Fin. Code Ann. §§ 392.001-.404 (West 2006) ("TDCPA"), defendant moves to dismiss under Fed. R. Civ. P. 12(b)(6). </div>
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The principal question presented is whether plaintiff lacks statutory standing<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=12447851977073800680&q=Michael+Moss+FDCPA&hl=en&scisbd=2&as_sdt=3,44#[1]" name="r[1]" style="color: #660099;">[1]</a></sup> to maintain this action because defendant's collection activities were not "directed" at him. Concluding that plaintiff has plausibly pleaded authorization to sue under the FDCPA and the TDCPA, the court denies the motion to dismiss.</div>
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<h2 style="background-color: white; border: 0px; color: #222222; font-family: Arial, sans-serif; margin: 1em 0px; padding: 0px; position: relative;">
I</h2>
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</div>
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This action by plaintiff Christopher Smith ("Smith") relates to a suit filed in Texas justice court in October 2017. At that time, defendant Moss Law Firm, P.C. ("Moss") filed suit on behalf of Barclays Bank Delaware ("Barclays") to collect a delinquent debt.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=12447851977073800680&q=Michael+Moss+FDCPA&hl=en&scisbd=2&as_sdt=3,44#[2]" name="r[2]" style="color: #660099;">[2]</a></sup> Smith alleges, <i>inter alia,</i> that the debt in dispute does not belong to him, that the lawsuit was wrongfully initiated against him, and that he informed Moss of the error. Smith also asserts that, despite the information he provided Moss (including his social security number and date of birth), Moss nevertheless proceeded with the lawsuit. Smith avers that he retained an attorney "to defend the lawsuit to avoid liability for a judgment he could not afford being wrongfully entered in his name and causing possible damage of his credit." Compl. ¶ 24. Smith was nonsuited (the Texas term for voluntarily dismissed) from the justice-court suit approximately one month after it was filed. Smith then brought this action against Moss, alleging that Moss's conduct in connection with the justice-court lawsuit violated the FDCPA and the TDCPA and that these violations caused Smith to suffer "actual damages in the form of loss of money, time, and emotional distress." Compl. ¶ 35.</div>
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Moss moves to dismiss under Rule 12(b)(6), contending that Smith lacks statutory standing because the justice-court lawsuit was not directed at Smith, but was instead directed at his son, Christopher O. Smith II. Smith opposes the motion.</div>
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II</h2>
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Under Rule 12(b)(6), the court evaluates the pleadings by "accept[ing] `all wellpleaded facts as true, viewing them in the light most favorable to the plaintiff.'" <a href="https://scholar.google.com/scholar_case?case=6071752544114111663&q=Michael+Moss+FDCPA&hl=en&as_sdt=3,44" style="color: #660099;"><i>In re Katrina Canal Breaches Litig.,</i> 495 F.3d 191, 205 (5th Cir. 2007)</a> (quoting <a href="https://scholar.google.com/scholar_case?case=12829286466722943108&q=Michael+Moss+FDCPA&hl=en&as_sdt=3,44" style="color: #660099;"><i>Martin K. Eby</i> <i>Constr. Co. v. Dall. Area Rapid Transit,</i> 369 F.3d 464, 467 (5th Cir. 2004)</a>). To survive Moss's motion to dismiss, Smith must allege enough facts "to state a claim to relief that is plausible on its face." <a href="https://scholar.google.com/scholar_case?case=913703117340005992&q=Michael+Moss+FDCPA&hl=en&as_sdt=3,44" style="color: #660099;"><i>Bell Atl. Corp. v. Twombly,</i> 550 U.S. 544, 570 (2007)</a>. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." <a href="https://scholar.google.com/scholar_case?case=16725752296468120395&q=Michael+Moss+FDCPA&hl=en&as_sdt=3,44" style="color: #660099;"><i>Ashcroft v. Iqbal,</i> 556 U.S. 662, 678 (2009)</a>. "The plausibility standard is not akin to a `probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." <i>Id.; see also </i><a href="https://scholar.google.com/scholar_case?case=913703117340005992&q=Michael+Moss+FDCPA&hl=en&as_sdt=3,44" style="color: #660099;"><i>Twombly,</i> 550 U.S. at 555</a> ("Factual allegations must be enough to raise a right to relief above the speculative level[.]"). "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not `show[n]'—`that the pleader is entitled to relief.'" <a href="https://scholar.google.com/scholar_case?case=16725752296468120395&q=Michael+Moss+FDCPA&hl=en&as_sdt=3,44" style="color: #660099;"><i>Iqbal,</i> 556 U.S. at 679</a> (quoting Rule 8(a)(2)). Furthermore, under Rule 8(a)(2), a pleading must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Although "the pleading standard Rule 8 announces does not require `detailed factual allegations,'" it demands more than "labels and conclusions." <a href="https://scholar.google.com/scholar_case?case=16725752296468120395&q=Michael+Moss+FDCPA&hl=en&as_sdt=3,44" style="color: #660099;"><i>Iqbal,</i> 556 U.S. at 678</a> (quoting <a href="https://scholar.google.com/scholar_case?case=913703117340005992&q=Michael+Moss+FDCPA&hl=en&as_sdt=3,44" style="color: #660099;"><i>Twombly,</i> 550 U.S. at 555</a>). And "a formulaic recitation of the elements of a cause of action will not do." <i>Id.</i> (quoting <a href="https://scholar.google.com/scholar_case?case=913703117340005992&q=Michael+Moss+FDCPA&hl=en&as_sdt=3,44" style="color: #660099;"><i>Twombly,</i> 550 U.S. at 555</a>).</div>
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The Fifth Circuit has emphasized that "whether or not a particular cause of action authorizes an injured plaintiff to sue is a merits question . . . not a jurisdictional question." <a href="https://scholar.google.com/scholar_case?case=17536808924504570336&q=Michael+Moss+FDCPA&hl=en&as_sdt=3,44" style="color: #660099;"><i>Camsoft Data Sys., Inc. v. S. Elecs. Supply, Inc.,</i> 756 F.3d 327, 332 (5th Cir. 2014)</a>(quoting <a href="https://scholar.google.com/scholar_case?case=7209421157764906765&q=Michael+Moss+FDCPA&hl=en&as_sdt=3,44" style="color: #660099;"><i>Blanchard 1986, Ltd. v. Park Plantation, LLC,</i> 553 F.3d 405, 409 (5th Cir. 2008)</a>). Accordingly, if statutory standing is lacking, the claims should be dismissed under Rule 12(b)(6). <i>See id.</i>; <a href="https://scholar.google.com/scholar_case?case=9248892174965926971&q=Michael+Moss+FDCPA&hl=en&as_sdt=3,44" style="color: #660099;"><i>Harold H. Huggins Realty, Inc. v. FNC, Inc.,</i> 634 F.3d 787, 795 n.2 (5th Cir. 2011)</a> ("Unlike a dismissal for lack of constitutional standing, which should be granted under Rule 12(b)(1), a dismissal for lack of prudential or statutory standing is properly granted under Rule 12(b)(6)."). The inquiry that is important in determining whether Smith has statutory standing is, in effect, "whether [Smith] has a cause of action under the statute[s]." <a href="https://scholar.google.com/scholar_case?case=15893625337682750840&q=Michael+Moss+FDCPA&hl=en&as_sdt=3,44" style="color: #660099;"><i>Lexmark Int'l, Inc. v. Static Control Components, Inc.,</i> 572 U.S. 118, 128 (2014)</a>.</div>
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III</h2>
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The court first considers whether Smith was required to submit evidence to show that he has statutory standing. Moss contends that Smith has the burden to establish that he has statutory standing. The court agrees that Smith must allege an adequate basis to proceed with his case and must ultimately adduce evidence that he is entitled to relief. Moss also appears to contend, however, that it has made a <i>factual</i> attack on Smith's standing, thus requiring Smith to prove at this stage of the case—with evidence—that he has statutory standing to bring his claims.<sup><a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=12447851977073800680&q=Michael+Moss+FDCPA&hl=en&scisbd=2&as_sdt=3,44#[3]" name="r[3]" style="color: #660099;">[3]</a></sup> <i>See</i> D. Reply 3 n.2 ("[A] party may submit evidence outside the pleadings when making a <i>factual</i> attack on a party's prudential or statutory standing."); <i>id.</i> at 2 ("Plaintiff contends, without support other than his own belief, that the suit was filed against him[.]"). To the extent this is Moss's contention, the court disagrees that Moss has made (or is able to make) a <i>factual</i> attack that requires Smith to prove the existence of statutory standing by a preponderance of the evidence and to submit facts through some evidentiary method to sustain his burden of proof. <i>See Gonzalez v. Gen. Motors, LLC,</i> 2017 WL 9324466, at *4 (W.D. Tex. Nov. 7, 2017) (explaining that it would be improper to consider matters outside the pleadings in deciding a Rule 12(b)(6) motion attacking statutory standing); <i>but see Myles v. Domino's Pizza, LLC,</i> 2017 WL 238436, at *4, 8 (N.D. Miss. Jan. 19, 2017) (considering matters outside the pleadings in ruling on a Rule 12(b)(6) motion attacking statutory standing).</div>
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Indeed, to accept Moss's contention would be to confuse a Rule 12(b)(6) motion to dismiss with a Rule 12(b)(1) motion to dismiss. When moving to dismiss under Rule 12(b)(1) for lack of subject matter jurisdiction, a defendant can make a facial or factual challenge. <i>See </i><a href="https://scholar.google.com/scholar_case?case=9953148770110824125&q=Michael+Moss+FDCPA&hl=en&as_sdt=3,44" style="color: #660099;"><i>Paterson v. Weinberger,</i> 644 F.2d 521, 523 (5th Cir. 1981)</a>. An attack is "factual" rather than "facial" if the defendant "submits affidavits, testimony, or other evidentiary materials." <i>Id.</i> For a plaintiff to defeat a factual attack, he must submit facts through some evidentiary method to prove the existence of subject-matter jurisdiction by a preponderance of the evidence. <i>See id.</i> In its reply, Moss contends that Smith "fails to meet his burden of proving statutory standing," D. Reply 3, suggesting that Moss is making a factual attack and that Smith is required to adduce evidence to meet his burden. But the court declines to impose the Rule 12(b)(1) factual challenge framework where Moss seeks dismissal for lack of statutory standing, which is properly evaluated under Rule 12(b)(6). <i>See, e.g., </i><a href="https://scholar.google.com/scholar_case?case=17536808924504570336&q=Michael+Moss+FDCPA&hl=en&as_sdt=3,44" style="color: #660099;"><i>Camsoft Data Sys.,</i> 756 F.3d at 332</a>. And under Rule 12(b)(6), the court must limit its inquiry "to the complaint, its proper attachments, documents incorporated into the complaint by reference, and matters of which a court may take judicial notice." <i>Gonzalez,</i> 2017 WL 9324466, at *4. Thus Smith is not required to submit—nor would the court have considered—additional evidence in support of his statutory standing.</div>
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That said, "[d]ocuments that a defendant attaches to a motion to dismiss are considered part of the pleadings if they are referred to in the plaintiff's complaint and are central to [his] claim." <a href="https://scholar.google.com/scholar_case?case=17745963757417907386&q=Michael+Moss+FDCPA&hl=en&as_sdt=3,44" style="color: #660099;"><i>Causey v. Sewell Cadillac-Chevrolet, Inc.,</i> 394 F.3d 285, 288 (5th Cir. 2004)</a>(citing <a href="https://scholar.google.com/scholar_case?case=12568689459818059166&q=Michael+Moss+FDCPA&hl=en&as_sdt=3,44" style="color: #660099;"><i>Collins v. Morgan Stanley Dean Witter,</i> 224 F.3d 496, 498-99 (5th Cir. 2000)</a>). In this case, Moss has attached Barclay's justice-court petition to its motion to dismiss. "In so attaching, [Moss] merely assists [Smith] in establishing the basis of the suit, and the court in making the elementary determination of whether a claim has been stated." <a href="https://scholar.google.com/scholar_case?case=12568689459818059166&q=Michael+Moss+FDCPA&hl=en&as_sdt=3,44" style="color: #660099;"><i>Collins,</i> 224 F.3d at 499</a>. The justice-court case is referred to in Smith's complaint and is central to Smith's claims, and the original petition aids the court in making a determination of whether Smith has a cause of action under the FDCPA or the TDCPA. The court's Rule 12(b)(6) inquiry thus includes the complaint in this case and the justice-court petition.</div>
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The court next considers whether Smith lacks statutory standing under the FDCPA or the TDCPA. Moss challenges Smith's statutory standing based on its contention that its collection activities were not directed at Smith.</div>
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Although a primary purpose of the FDCPA is "to promote consistent State action to protect consumers against debt collection abuses," the FDCPA does not limit recovery to debtors. <i>See</i> 15 U.S.C. § 1692(e). Indeed, 15 U.S.C. § 1692k, which defines civil liability for FDCPA violations, provides that "any debt collector who fails to comply with any provision of [the FDCPA] with respect to any person is liable to such person[.]" <i>Id.</i> § 1692k(a). District courts in this circuit and others have recognized that "under certain circumstances, third-party, non-debtors have standing to bring claims under the FDCPA." <i>See </i><a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=6187112514733391731&q=Michael+Moss+FDCPA&hl=en&as_sdt=3,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Prophet v. Myers,</i> 2009 WL 1437799, at *3 (S.D. Tex. May 21, 2009)</a> (compiling cases).</div>
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Similarly, the TDCPA is intended to protect consumers, but does not limit recovery to consumers. Tex. Fin. Code Ann. § 392.403 creates a private right of action for TDCPA violations and provides: "A person may sue for: actual damages sustained as a result of a violation of this chapter." Tex. Fin. Code Ann. § 392.403(a)(2). According to the Fifth Circuit, "persons who have sustained actual damages from a [TDCPA] violation have standing to sue." <a href="https://scholar.google.com/scholar_case?case=8963346135090500734&q=Michael+Moss+FDCPA&hl=en&as_sdt=3,44" style="color: #660099;"><i>McCaig v. Wells Fargo Bank (Tex.), N.A.,</i> 788 F.3d 463, 473 (5th Cir. 2015)</a> (citing Tex. Fin. Code Ann. § 392.403(a)(2)).</div>
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Moss does not assert that non-debtor plaintiffs can never state a claim under the FDCPA and the TDCPA. But it contends that courts allow non-debtor actions "only when conduct is abusive, directed at the non-debtor, and results in actual damages." D. Mot. 6. Moss maintains that it "did not direct any debt collection efforts at [Smith]," and it points to the account statement attached to the justice-court petition, which bears the name "Christopher O[.] Smith II," not "Christopher O. Smith." <i>Id.</i> at 6-7. Smith responds that Moss's collection activities were directed against him because, <i>inter alia,</i> the justice-court petition alleged that Smith owed the debt, and Moss proceeded with the lawsuit despite being told that Smith was the wrong party. Without suggesting a view on how the court would decide a motion for summary judgment or how a jury would evaluate the merits of Smith's claims, the court concludes that Smith's case should not be dismissed for lack of statutory standing, as Moss contends.</div>
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At this stage of the case, the court accepts Smith's well-pleaded facts as true and evaluates "whether [Smith] has a cause of action under the statute[s]." <a href="https://scholar.google.com/scholar_case?case=15893625337682750840&q=Michael+Moss+FDCPA&hl=en&as_sdt=3,44" style="color: #660099;"><i>Lexmark Int'l, Inc.,</i> 572 U.S. at 128</a>. To state a claim under the FDCPA, Smith must plausibly plead that a debt collector has failed to comply with a provision of the FDCPA <i>with respect to</i> him. <i>See</i> 15 U.S.C. § 1692k(a). Smith alleges that Moss sought to collect a debt that Smith did not owe to Barclays; that Moss initiated a lawsuit against Smith to collect this alleged debt; that Smith informed Moss of the error; and that Moss nevertheless continued to pursue the lawsuit against Smith. Moss is correct that the account statement attached to the justice-court petition bears the name "Christopher O[.] Smith II." But that fact does not undermine Smith's allegations of collection activity directed at him—especially considering that the caption and party description within the justice-court petition bear the name "CHRISTOPHER O SMITH," without the "II" addition. Reading Smith's complaint and the justice-court petition under the proper standard, Smith has adequately pleaded that Moss's actions were directed toward him.</div>
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Turning to the TDCPA, the Fifth Circuit has rejected a requirement that debt collection efforts be "directed" or "targeted" at a particular individual for the individual to have standing to sue under the TDCPA. <i>See </i><a href="https://scholar.google.com/scholar_case?case=8963346135090500734&q=Michael+Moss+FDCPA&hl=en&as_sdt=3,44" style="color: #660099;"><i>McCaig,</i> 788 F.3d at 474</a>. Moss cites several district court cases, such as <a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=6187112514733391731&q=Michael+Moss+FDCPA&hl=en&as_sdt=3,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Prophet,</i> 2009 WL 1437799,</a> and <i>Ledezma v. Wells Fargo Bank, N.A.,</i> 2014 WL 6674285 (S.D. Tex. Nov. 24, 2014), that impose a targeting requirement, but these cases predate <i>McCaig</i> and, more important, <i>McCaig</i> expressly rejects the targeting rule applied in <i>Prophet. See </i><a href="https://scholar.google.com/scholar_case?case=8963346135090500734&q=Michael+Moss+FDCPA&hl=en&as_sdt=3,44" style="color: #660099;"><i>McCaig,</i> 788 F.3d at 474 & n.3</a>. The Fifth Circuit explained that, "[i]n rejecting this rule, it is sufficient to observe that Section 392.403(a)(2) contains no targeting requirement and that the district courts that have adopted the rule did not base their standing analyses on the text of Section 392.403(a)(2)." <i>Id.</i> at 474. Thus, as instructed by the Fifth Circuit, this court's duty is to apply existing state law, which suggests that the rule is that "persons who have sustained actual damages from a [TDCPA] violation have standing to sue." <i>Id.</i> at 473 (citing Tex. Fin. Ann. Code § 392.403(a)(2)). Smith alleges that Moss violated Tex. Fin. Code Ann. § 392.304(a)(19), and that, as a result of Moss's actions, he has "suffered actual damages in the form of loss of money, time, and emotional distress." Compl. ¶ 35. These allegations are sufficient to plausibly plead Smith's authorization to sue pursuant to the TDCPA.</div>
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Accordingly, Smith has alleged a plausible basis to proceed under the FDCPA and the TDCPA; his claims do not fail at the motion to dismiss stage for want of collection activities directed at him.</div>
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For the reasons explained, the court denies Moss's motion to dismiss.</div>
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SO ORDERED.</div>
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<a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=12447851977073800680&q=Michael+Moss+FDCPA&hl=en&scisbd=2&as_sdt=3,44#r[1]" name="[1]" style="color: #660099;">[1]</a> Although "statutory standing" is an imperfect label that can be misused because it is not truly a "standing" doctrine, the term is used by the parties throughout their briefing, and the court is satisfied that, in this case, it is being used to refer to the correct inquiry: whether the plaintiff has pleaded a plausible cause of action under the statutes. <i>See </i><a href="https://scholar.google.com/scholar_case?case=15893625337682750840&q=Michael+Moss+FDCPA&hl=en&as_sdt=3,44" style="color: #660099;"><i>Lexmark Int'l, Inc. v. Static Control Components, Inc.,</i> 572 U.S. 118, 128 & n.4 (2014)</a>.</div>
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<a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=12447851977073800680&q=Michael+Moss+FDCPA&hl=en&scisbd=2&as_sdt=3,44#r[2]" name="[2]" style="color: #660099;">[2]</a> The lawsuit was captioned <i>Barclays Bank Delaware v. Christopher O Smith,</i> Case No. JX1700978H, in the Justice Court, Precinct 1, Place 1, of Dallas County, Texas.</div>
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<a class="gsl_hash" href="https://scholar.google.com/scholar_case?case=12447851977073800680&q=Michael+Moss+FDCPA&hl=en&scisbd=2&as_sdt=3,44#r[3]" name="[3]" style="color: #660099; text-decoration: underline;">[3]</a> The court recognizes that, in <a href="https://scholar.google.com/scholar_case?case=10316855224385999495&q=Michael+Moss+FDCPA&hl=en&as_sdt=3,44" style="color: #660099; text-decoration: underline;"><i>Superior MRI Services, Inc. v. Alliance Healthcare Services, Inc.,</i> 778 F.3d 502, 504 (5th Cir. 2015),</a> the Fifth Circuit affirmed a district court decision in which a defendant "brought a factual attack on [plaintiff's] prudential standing." The court also recognizes that the terms "prudential standing" and "statutory standing" are sometimes used interchangeably, which may have prompted Moss to cite <i>Superior MRI Services</i> and posit that "[t]he Fifth Circuit has made it clear . . . that a party may submit evidence outside the pleadings when making a <i>factual</i> attack on a party's prudential or statutory standing." D. Reply 3 n.2. But <i>Superior MRI Services</i> did not involve statutory standing. In fact, the Fifth Circuit panel explicitly discussed the fact that the "type of prudential standing requirement" at issue in that case (third-party standing) was different from the type that was before the Supreme Court in <i>Lexmark</i> (statutory standing). <i>See </i><a href="https://scholar.google.com/scholar_case?case=10316855224385999495&q=Michael+Moss+FDCPA&hl=en&as_sdt=3,44" style="color: #660099; text-decoration: underline;"><i>Superior MRI Servs.,</i> 778 F.3d at 506</a>. Thus the court does not agree that <i>Superior MRI Services</i> should be applied to cases involving statutory standing.</div>
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MOTPhttp://www.blogger.com/profile/15883011307129083993noreply@blogger.com0tag:blogger.com,1999:blog-9105536336033560224.post-86801376809347390132019-04-20T08:14:00.001-07:002019-05-18T15:17:51.786-07:00Default Judgment in Credit Card Debt Suit Reversed: Gattenby v. TIB (Tex.App. 2019) <span style="background-color: white; color: #222222; font-family: "arial" , sans-serif; font-size: 14px;">Dallas Court of Appeals reverses default judgment for bank where attorney for credit card defendant filed <i>Craddock</i> motion to have default judgment set aside because bank's collection claim was based on credit card statements issued by a different bank, with no proof of assignment. </span><i>Gattenby v. TIB-The Independent Bankersbank</i>, No. <a href="http://search.txcourts.gov/Case.aspx?cn=05-18-00168-CV&coa=coa05" target="_blank">05-18-00168-CV</a> (Tex.App. - Dallas Feb. 6, 2019, no. pet) (default judgment for plaintiff reversed and case remanded in defendant's appeal from trial court's order denying post-judgment motion).<br />
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WARREN GATTENBY, Appellant,<br />v.<br />TIB-THE INDEPENDENT BANKERSBANK, Appellee.</h3>
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<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgpn8B-jy2WeI192v3Wtje4_eCRRSx70lCTTY0bGHiA6KzCptnV4Oqcgpgn-VPcE6kz7N5Vix48xTzYU96GsJpYi8dCE0vHWXQmEfPTQAl_6S5hmMOIU5LuTN1D8UrzZCt-hKgXaJDUh8qU/s1600/05-18-00168-CV+Warren+Gattenby+v+TIB+-+Mandate+2019-04-19.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img alt="Gattenby v. TIB-The Independent Bankersbank, No. 05-18-00168-CV (Tex.App. - Dallas Feb. 6, 2019, no. pet)" border="0" data-original-height="943" data-original-width="959" height="392" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgpn8B-jy2WeI192v3Wtje4_eCRRSx70lCTTY0bGHiA6KzCptnV4Oqcgpgn-VPcE6kz7N5Vix48xTzYU96GsJpYi8dCE0vHWXQmEfPTQAl_6S5hmMOIU5LuTN1D8UrzZCt-hKgXaJDUh8qU/s400/05-18-00168-CV+Warren+Gattenby+v+TIB+-+Mandate+2019-04-19.JPG" title="Gattenby v. TIB-The Independent Bankersbank, No. 05-18-00168-CV (Tex.App. - Dallas Feb. 6, 2019, no. pet)" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Mandate in <a href="http://search.txcourts.gov/Case.aspx?cn=05-18-00168-CV&coa=coa05" target="_blank">Gattenby v. TIB-The Independent Bankersbank</a> issued April 19, 2019)</td></tr>
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No. <a href="http://search.txcourts.gov/Case.aspx?cn=05-18-00168-CV&coa=coa05" target="_blank">05-18-00168-CV</a> </div>
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<b>Court of Appeals of Texas, Fifth District, Dallas.</b></div>
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Opinion Filed February 6, 2019</center>
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Christopher Deloney, Mark C. Snyder, for TIB-The Independent Bankersbank, Appellee.</div>
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Robert M. Clark, for Warren Gattenby, Appellant.</div>
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On Appeal from the 193rd Judicial District Court, Dallas County, Texas, Trial Court Cause No. DC-17-12078.</div>
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REVERSE and REMAND.</div>
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Before Justices Bridges, Brown, and Whitehill.</div>
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MEMORANDUM OPINION</h2>
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Opinion by Justice DAVID L. BRIDGES.</div>
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Appellee TIB-The Independent Bankersbank (the Bank) filed suit against appellant Warren Gattenby. </div>
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<span style="color: #222222;">After Gattenby failed to answer, the trial court granted a no-answer default judgment and awarded the Bank $16,935.87 as the principle </span><span style="color: blue;">[sic]</span><span style="color: #222222;"> amount owed, $3,000 in attorney's fees, and conditional attorney's fees for post-judgment appeals. Gattenby filed a motion for new trial, which the trial court denied. On appeal, Gattenby argues the trial court abused its discretion by denying his motion for new trial because he satisfied all three </span><i style="color: #222222;">Craddock</i><span style="color: #222222;"> elements. </span></div>
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<span style="color: #222222;">We reverse the trial court's judgment and remand to the trial court for further proceedings.</span></div>
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Background</h2>
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According to the Bank's original petition, Gattenby opened a credit account with the Bank on or about October 11, 2013. The Bank sent monthly itemized statements to Gattenby. He stopped making payments on or about April 12, 2014. The Bank filed suit against Gattenby on September 13, 2017, for breach of contract and account stated seeking damages in the amount of $16,935.87 and requesting $3,000 in attorney's fees.</div>
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On October 4, 2017, Gattenby received service of citation. It is undisputed Gattenby failed to timely answer the petition because the petition was accidentally paper-clipped to another file in his attorney's office.</div>
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On December 18, 2017, the Bank filed a motion for default judgment. The trial court granted the motion for default judgment on December 19, 2017 and awarded the Bank $16,935.87 in damages, $3,000 in attorney's fees, and conditional attorney's fees for post-judgment appeals.</div>
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<tr><td class="tr-caption" style="text-align: center;">Gattenby Default Judgment [<span style="color: blue;">with unreasonable amount of attorneys fees</span>]</td></tr>
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Gattenby filed a motion for new trial in which he argued failure to answer the lawsuit was an inadvertent mistake and not intentional. He further alleged he has a meritorious defense to the lawsuit because he has never had a financial relationship with the Bank, and the record does not indicate any assignment between the Bank and Town North Bank, the financial institution named on the billing statement, which the Bank attached to its motion for default judgment. Finally, he asserted a new trial will not cause delay, prejudice, or injury to the Bank.</div>
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The court held a hearing and indicated it did not believe Gattenby satisfied his burden of setting up a meritorious defense because his affidavit was conclusory. At the conclusion of the hearing, the trial court made the following oral findings:</div>
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For what it's worth, on the record I am making a finding that the first prong of <i>Craddock</i> was met, that I do not think that the failure to file was due to conscious indifference, it was a mistake and that. So I think the movant satisfied the first prong. I'll state that on the record. I think it's the second prong that's the problem.</blockquote>
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The third <i>Craddock</i> element was never contested. The trial court denied Gattenby's motion for new trial on January 22, 2018, and this appeal followed.</div>
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Standard of Review</h2>
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We review a trial court's denial of a motion for new trial after a default judgment for an abuse of discretion. <a href="https://scholar.google.com/scholar_case?case=1466015930650459754&q=05-18-00168-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>MobileVision Imaging Servs., L.L.C. v. LifeCare Hosp. of N. Tex., L.P.,</i> 260 S.W.3d 561, 564 (Tex. App.-Dallas 2008, no pet.)</a>. A trial court abuses its discretion if it acts in an unreasonable or arbitrary manner or without reference to any guiding rules and principles. <a href="https://scholar.google.com/scholar_case?case=2082544514791659438&q=05-18-00168-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Cire v. Cummings,</i> 134 S.W.3d 835, 838-39 (Tex. 2004)</a>.</div>
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A defendant moving for a new trial after a default judgment must prove the familiar elements from <a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=15328966074815780243&q=05-18-00168-CV&hl=en&as_sdt=4,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Craddock v. Sunshine Bus Lines,</i> 133 S.W.2d 124, 126 (Tex. 1939)</a>: (1) the defaulting party's failure to answer or to appear was not intentional, or the result of conscious indifference, but was due to a mistake or an accident; (2) the defaulting party has a meritorious defense or claim; and (3) the motion is filed at a time when the granting of a new trial will not occasion delay or work other injury to the prevailing party. When a defaulting party meets all three elements of the <i>Craddock</i> test, a trial court abuses its discretion if it fails to grant a new trial. <a href="https://scholar.google.com/scholar_case?case=7545889153277099240&q=05-18-00168-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Dolgencorp of Tex., Inc. v. Lerma,</i> 288 S.W.3d 922, 926 (Tex. 2009)</a>. However, if the motion and accompanying affidavits fails to establish each prong of the <i>Craddock</i> test, then the trial court's denial of a new trial will be upheld. <i>Rhodes v. Kelly,</i> No. 05-16-00888-CV, 2017 WL 2774452, at *8 (Tex. App.-Dallas June 27, 2017, pet. denied) (mem. op.).</div>
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Discussion</h2>
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<span style="background-color: white;">The Bank does not contest the first and third <i>Craddock</i> elements; therefore, </span><span style="background-color: yellow;">our analysis will focus on whether Gattenby presented evidence to raise a meritorious defense</span><span style="background-color: white;">. Gattenby argues he does not owe the money being sued for, he has never had a financial relationship with the Bank, and there is no evidence in the record indicating an assignment from Town North Bank to the Bank. Thus, he asserts the Bank has no standing to pursue the claim.</span></div>
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A meritorious defense is one, that if ultimately proved, will cause a different outcome when the case is tried again. <a href="https://scholar.google.com/scholar_case?case=7791743056292391849&q=05-18-00168-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Titan Indem. Co. v. Old S. Ins. Grp., Inc.,</i> 221 S.W.3d 703, 711 (Tex. App.-San Antonio 2006, no pet.)</a>. <i>Craddock</i> requires a movant to only "set up" a meritorious defense, not prove the defense. <a href="https://scholar.google.com/scholar_case?case=13280279189360369406&q=05-18-00168-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Cont'l Carbon Co. v. Sea-Land Serv., Inc.,</i>27 S.W.3d 184, 191 (Tex. App.-Dallas 2000, pet. denied)</a>. Once evidence of a meritorious defense is established, the allegations supporting it must be taken as true in spite of controverting evidence. <a href="https://scholar.google.com/scholar_case?case=7791743056292391849&q=05-18-00168-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Titan Idem. Co.,</i> 221 S.W.3d at 711</a>. A new trial should not be denied upon any consideration of counter affidavits or contradictory testimony offered in resistance to such motion. <i>Id.</i></div>
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Standing is a party's justiciable interest in a controversy. <a href="https://scholar.google.com/scholar_case?case=7472297450916122040&q=05-18-00168-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Town of Fairview v. Lawler,</i> 252 S.W.3d 853, 855 (Tex. App.-Dallas 2008, no pet.)</a>. Only the party whose primary legal right has been breached may seek redress for an injury. <a href="https://scholar.google.com/scholar_case?case=6473941225556183937&q=05-18-00168-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Nauslar v. Coors Brewing Co.,</i>170 S.W.3d 242, 249 (Tex. App.-Dallas 2005, no pet.)</a>. Without a breach of a legal right belonging to a plaintiff, that plaintiff has no standing to litigate. <i>Id.</i> </div>
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<span style="background-color: white;">Here, Gattenby argues, in part, that the Bank lacked standing to sue him because he never had any relationship with the Bank, and the record contains no evidence of any assignment between the financial institutions. He attached affidavits to his motion for new trial with similar statements, and in fact, the </span><span style="background-color: yellow;">record before us does not include evidence of an assignment</span><span style="background-color: white;"> between these two financial institutions. Rather, the Bank supported its claim for damages with a billing statement from a bank not party to this suit.</span></div>
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To the extent the Bank contends ownership is established because the last four digits of the account listed in its original petition is identical to the last four digits of the account listed on Town North Bank's billing statement attached to the Bank's motion for default judgment, we reject its argument. </div>
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Separate documents containing the same last four digits of an account is not evidence of an assignment.</div>
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The Bank cites two cases to support its argument that it owns the debt and has standing to sue. However, in both cases, the record contained evidence of an assignment of the accounts. <i>See </i><a href="https://scholar.google.com/scholar_case?case=11122789088373953734&q=05-18-00168-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Eaves v. Unifund CCR Partners,</i> 301 S.W.3d 402, 405 (Tex. App.-El Paso 2009, no pet.)</a> (concluding Unifund Partners had standing to sue to collect the debt because "[t]he bill of sale from Citibank to Unifund Portfolio conveyed good and marketable title to the account, and more importantly, Unifund Portfolio expressly assigned the rights to collect on the account, including litigation, to Unifund Partners"); <a href="https://scholar.google.com/scholar_case?case=10262643112845153830&q=05-18-00168-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Dulong v. Citibank (S.D.), N.A.,</i> 261 S.W.3d 890, 894 (Tex. App.-Dallas 2008, no pet.)</a>(concluding Citibank owned the debt based on evidence in financial statement under an "Important Message" heading noting "Universal Bank, N.A. has merged with Citibank"). Such evidence is absent in this case.</div>
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To the extent the Bank's attorney indicated during the motion for new trial hearing that the Bank issues cards on behalf of other banks and it "should have attached" this information, the trial court could not consider this contradictory "testimony" as evidence to deny Gattenby's motion. <i>See </i><a href="https://scholar.google.com/scholar_case?case=7791743056292391849&q=05-18-00168-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Titan Idem. Co.,</i> 221 S.W.3d at 711</a>. More importantly, argument of counsel is not evidence of an assignment or the Bank's ownership of the debt. <i>See </i><a href="https://scholar.google.com/scholar_case?case=8344225089666282107&q=05-18-00168-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Grant v. Espiritu,</i> 470 S.W.3d 198, 203 (Tex. App.-El Paso 2015, no pet.)</a>.</div>
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Accordingly, we conclude Gattenby "set up" the meritorious defense of standing because the Bank did not present evidence it owned the debt. The Bank has not contested the first and third <i>Craddock</i> elements. As such, Gattenby has established he is entitled to a new trial, and the trial court abused its discretion by denying his motion for new trial. <i>See </i><a href="https://scholar.google.com/scholar_case?case=7545889153277099240&q=05-18-00168-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Dolgencorp of Tex., Inc,</i> 288 S.W.3d at 926</a>.</div>
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Conclusion</h2>
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We reverse the trial court's judgment and remand for further proceedings.</div>
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JUDGMENT</h2>
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In accordance with this Court's opinion of this date, the judgment of the trial court is REVERSED and this cause is REMANDED to the trial court for further proceedings.</div>
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It is ORDERED that appellant WARREN GATTENBY recover his costs of this appeal from appellee TIB-THE INDEPENDENT BANKERSBANK.</div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEifp5QiCEanXvQboSEPPsYe2P4lAAQgUIkZzoZsYh6V_thZsEYYflGlFCN8I-sA3evc5MeIrdaO7TyTdv01LLdK2WMONbk7J9ZficedOdiWB_Q7wEkvERT9Hn_V0ItcwiqS8enpCLqOCj77/s1600/Gattenby+v+TIB+-+Default+Judgment+reversed+and+remanded+-+Bank+to+pay+costs+of+appeal.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img alt="Mandate in Gattenby v. TIB issued April 19, 2019 (reverse & remanding)" border="0" data-original-height="932" data-original-width="942" height="395" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEifp5QiCEanXvQboSEPPsYe2P4lAAQgUIkZzoZsYh6V_thZsEYYflGlFCN8I-sA3evc5MeIrdaO7TyTdv01LLdK2WMONbk7J9ZficedOdiWB_Q7wEkvERT9Hn_V0ItcwiqS8enpCLqOCj77/s400/Gattenby+v+TIB+-+Default+Judgment+reversed+and+remanded+-+Bank+to+pay+costs+of+appeal.JPG" title="Mandate in Gattenby v. TIB issued April 19, 2019 (reverse & remand)" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Mandate in <a href="http://www.search.txcourts.gov/Case.aspx?cn=05-18-00168-CV&coa=coa05" target="_blank">Gattenby v. TIB</a> issued April 19, 2019 </td></tr>
</tbody></table>
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<br />MOTPhttp://www.blogger.com/profile/15883011307129083993noreply@blogger.com0tag:blogger.com,1999:blog-9105536336033560224.post-67246485207156631512019-04-14T07:54:00.003-07:002019-06-14T10:28:48.107-07:00Germany v. Wells Fargo Bank, N.A. (Tex.App.- Houston [14th Dist.] 2019, pet. filed) <b><span style="color: #cc0000;">Standards again lowered to facilitate
robo-litigation with sloppy affidavits and minimal documentation in consumer debt collection cases. Judicial awareness of fitting facts tapped to fill voids in creditor's summary judgment evidence. </span><span style="color: red;"> </span></b><br />
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<o:p></o:p></div>
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<b style="mso-bidi-font-weight: normal;"><span style="color: red;"><br /></span></b></div>
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A February 2019 panel opinion of the Fourteenth Court of
Appeals in Houston marks a new nadir in the evolving jurisprudence governing credit card collection cases in Texas. <i>See Charles J. Germany, Jr. v. Wells Fargo Bank, N.A.</i>, <a href="http://www.search.txcourts.gov/Case.aspx?cn=14-17-00916-CV&coa=coa14" target="_blank">14-17-00916-CV</a> (Tex.App. –
Houston [14<sup>th</sup> Dist.] Feb. 7, 2019, <a href="http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=d9051523-5be9-47ae-83b6-821678334aed&coa=cossup&DT=BRIEFS&MediaID=a14cf87d-9c65-4320-bbd0-c44ea50a92d4" target="_blank">pet. filed</a> in Texas Supreme Court 4/9/2019) (memorandum opinion by Justice Tracy Christopher).<br />
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<o:p></o:p></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEitLfg_qMSuNfOkzKxqY03b8szqzVqImvUlkgVT16qcNX1r9YegkoYJDcUZ47rEp-Tepec5J9gjjx2K268BvoIts6moFOjSp3TYUOkqyaiJWQJW6xoXpw7WTW55RGwNKh6WJjGr4yMip9_R/s1600/Wells+Fargo+logo+in+front+of+Bank+Building.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="306" data-original-width="418" height="234" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEitLfg_qMSuNfOkzKxqY03b8szqzVqImvUlkgVT16qcNX1r9YegkoYJDcUZ47rEp-Tepec5J9gjjx2K268BvoIts6moFOjSp3TYUOkqyaiJWQJW6xoXpw7WTW55RGwNKh6WJjGr4yMip9_R/s320/Wells+Fargo+logo+in+front+of+Bank+Building.JPG" width="320" /></a></div>
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<span style="color: blue; mso-spacerun: yes;"><b>Different account type, non-matching account numbers, false representation of account status in affidavit </b></span><br />
<span style="mso-spacerun: yes;"><br /></span></div>
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Appealing a summary judgment in the creditor’s favor, counsel
for the defendant raised three issues regarding the Bank’s sparse summary
judgment evidence, consisting of an affidavit (by Loan Adjuster Lance Becker), a generic Consumer Credit Card Customer Agreement (Exhibit A) and two account statements (Exhibits B and C).<br />
<br />
(1) The Bank’s affiant identified the account as a “CORE
PLATNIUM” account, which did not match the attached boilerplate cardmember
agreement; (2) the affiant asserted that
the account balance had been accelerated, referring to the last statement,
which reflected that it had <i>not</i> been
accelerated; and (3) the two account statements attached to the Bank’s affidavit had different account number ending digits printed on them. </div>
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<b><span style="color: blue;">From three discrepancies to none - by fiat </span></b></div>
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<o:p></o:p></div>
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The panel opinion, authored by Justice Tracy Christopher, addresses each of the three discrepancies and then
declares them to be nonexistent. Rather than finding them not material or “trivial”,
as the Bank had urged in its appellee’s brief, the Court concludes without
qualification that “Wells Fargo produced uncontroverted evidence, free from any
contradictions or inconsistencies” and accordingly affirms the summary judgment granted by the Fort Bend County trial court. <o:p></o:p></div>
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<i>How did the Court make the discrepancies disappear? </i>– In a
highly unorthodox fashion: It extemporized its own theory of the case to resolve the observed lack of congruity in the evidence, and endeavored to cite caselaw to adduce facts missing from the Bank’s
summary judgment record, rather than citing cases for legal propositions, as is
the normal practice to justify appellate case resolution under applicable law. <o:p></o:p></div>
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<b style="mso-bidi-font-weight: normal;"><span style="color: red;"><span style="color: blue;">No judicial perception of conflict </span><span style="color: red;"><o:p></o:p></span></span></b></div>
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<b style="mso-bidi-font-weight: normal;"><span style="color: red;"><br /></span></b></div>
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As for the discrepancy in the identification of the type of credit card account, the panel opinion states that “we perceive no conflict between the
generally worded agreement and the loan adjustor's more specifically worded
affidavit.” </div>
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The boilerplate agreement did not contain the designation “CORE PLATINUM”,
so the Court reasoned that the affiant merely supplied more specific
information about the account (without a documentary basis) and inferred that a
CORE PLATINUM account could be one governed by the boilerplate agreement that
was attached to the affidavit as Exhibit A. </div>
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In concluding that Germany was bound by the
agreement because he had used the credit card, the Court relieved the Bank from its obligation
to prove that the specific version of a standard-term agreement had been
provided to him (offer) before he used the card (acceptance). The opinion does not reveal whether either one of the two billings statements actually evidences any card use to support the theory of contract-formation by account utilization. Other credit card issuers typically attach at least half a year worth of statements. American Express often produces hundreds of pages of account activity records and also attaches cardmember agreements that are dated, identify the type of card, have the cardholder's name printed on it, as well as the account number ending digits. No such details in Wells Fargo cases. </div>
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Additionally, the general boilerplate agreement ("core") would not
and does not contain the account-specific cost-of-credit terms, which would appear
on a separate document because they vary among customers even within the same category
of credit card account. <i>See </i><a href="https://scholar.google.com/scholar_case?case=12672708640276170820&q=tully+v+citibank+south+dakota+na&hl=en&as_sdt=4,44" target="_blank"><i>Tully v. Citibank (South Dakota), N.A</i>.</a>, 173 S.W.3d
212 (Tex.App.-Texarkana 2005) (reversing summary judgment for creditor
on breach of contract cause of action because Citibank failed to prove that cardholder agreed to the interest rates Citibank charged as shown on its account statements). <o:p></o:p><br />
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<b style="mso-bidi-font-weight: normal;"><span style="color: red;"><span style="color: blue;">Aff-Testimony in lieu of Proof of Offer & Acceptance: A</span></span></b><b style="mso-bidi-font-weight: normal;"><span style="color: red;"><span style="color: blue;">ttached-is-the-Applicable-Contract </span></span></b></div>
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<b style="mso-bidi-font-weight: normal;"><span style="color: red;"><br /></span></b></div>
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The Houston court of appeal’s relaxation of the requirements
to prove offer and acceptance with respect to an unsigned form contract bearing no identifying data that links it to the account or the account holder is not entirely unprecedented. <o:p></o:p></div>
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In a prior summary judgment appeal in which the consumer proceeded <i>pro se</i> both in the trial court and on appeal, the Fourteenth Court of Appeals held that Wells Fargo had proven
liability on the contract because the boilerplate agreement in that case said
that it applied to cardholder and the defendant was a cardholder. </div>
<blockquote class="tr_bq">
According to Wells Fargo's summary-judgment evidence, the account agreement states that by using the Wells Fargo Visa card, a cardholder accepts the terms of the account agreement. On about July 10, 2002, Wakefield used the Wells Fargo Visa card, accepting the terms.</blockquote>
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*** </div>
<blockquote class="tr_bq">
Wakefield asserts Wells Fargo failed to prove existence of a valid contract for several reasons. First, Wakefield argues Wells Fargo did not prove the contract it provided to support its summary-judgment motion specifically applied to her. Although Wakefield's name is not specifically identified on the account agreement, the agreement states: "This Customer Agreement and Disclosure Statement . . . constitutes your Agreement with us that covers your credit card account." The agreement also defines "you" and "your" as referring "to each cardholder." Rogers's affidavit and supporting monthly credit-card statements establish that Wakefield is a cardholder. Therefore, without controverting evidence from Wakefield, we reject this argument.</blockquote>
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The appellant
pointed out that she could not have accepted the attached agreement by using the
card on the date attested to by the affiant because that was years before the year
printed on the agreement proffered as a summary judgment exhibit. The Court however,
made short shrift of that argument by stating that the bank was allowed to modify
the terms. <i>See </i><a href="https://scholar.google.com/scholar_case?case=8450543540922788820&hl=en&as_sdt=6,44" target="_blank"><i>Wakefield v. Wells Fargo Bank, NA</i>,</a> No. 14-12-00686-CV, 2013 WL
6047031, at *2-*3 (Tex.App.-Houston [14th Dist.] Nov. 14, 2013, no pet.)
(mem.op. by Christoper, J.) (“While it is true the account agreement Wells Fargo produced is not
the same one used in 2002, Wakefield is still bound to the new terms because
the agreement states, "[w]e can change or add to any terms of your account
at any time.")</div>
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<b style="mso-bidi-font-weight: normal;"><span style="color: red;"><span style="color: blue;">From judicial notice to judicial “awareness” of fitting facts gleaned from other court opinions </span><span style="color: red;"><o:p></o:p></span></span></b></div>
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<b style="mso-bidi-font-weight: normal;"><span style="color: red;"><br /></span></b></div>
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As for the discrepancy in the account numbers on the face of the two billing
statements in <i>Germany v. Wells Fargo Bank</i>, the Court invoked other court cases to
support the proposition that a bank may change account numbers for a variety of
reasons, and was satisfied that this possibility was sufficient to reconcile
the inconsistent account numbers found in the summary judgment record before
it.<br />
<br />
There was no mention that Wells Fargo has recently achieved notoriety with its massive creation of accounts without customer consent. See wiki article on <a href="https://en.wikipedia.org/wiki/Wells_Fargo_account_fraud_scandal" target="_blank">Wells Fargo Account Fraud Scandal</a> and references therein. </div>
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In <i>Germany v. Wells Fargo</i> the Houston court of appeals saw fit to <i>sua sponte</i> find facts on appeal that were not contained in the case-specific summary judgment record. <i>Cf. <a href="https://scholar.google.com/scholar_case?case=15068225522616802139&q=%22different+account+numbers%22&hl=en&scisbd=2&as_sdt=6,44" target="_blank">American Express Bank FSB v Damme</a></i>, No. 1 CA-CV 16-0024 (Ariz. Court of Appeal [1st Div.] Feb. 16, 2017) (summary judgment for bank on credit card debt affirmed where assistant custodian of record testified that the account sued-upon had two different numbers over its life).<br />
<blockquote class="tr_bq">
<span style="font-size: x-small;">¶7 Here, American Express's motion for summary judgment was supported by the affidavit of Anthony D. Mendez (Mendez), assistant custodian of records for American Express. The Mendez affidavit stated that in his position with American Express, Mendez was familiar with American Express's card member account records. The affidavit further stated that Mendez personally reviewed American Express's card member records concerning the Dammes, and that the records "reflect that [the Dammes] opened an American Express credit card account, the current account number ending in 52008, previously 51000 . . . in November 2011." The Mendez affidavit stated that the Dammes defaulted on the account, American Express closed it, and as of August 12, 2015 the Dammes owed $28,217.11 on the account, exclusive of attorneys' fees and costs. The affidavit referenced two exhibits attached to the affidavit in support of Mendez's assertions: exhibit A, a card member agreement dated November 30, 2011, and exhibit B, a credit card statement dated July 27, 2014 showing a past due amount of $28, 217.11. </span></blockquote>
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<span style="mso-bidi-font-weight: normal;">This approach is wholly inconsistent with traditional notion of judicial notice. S<i>ee Tafel v. State</i>, 536 S.W.3d 517, 523 (Tex. 2017) (</span>"An appellate court is limited to the record that is before it on appeal and generally may take judicial notice only of (1) facts that could have been properly judicially noticed by the trial judge or (2) facts that are necessary to determine whether the appellate court has jurisdiction of the appeal."). "[A]ppellate courts are reluctant to take judicial notice of matters which go to the merits of a dispute," because they are not triers of fact. <i>SEI Bus. Sys., Inc. v. Bank One Texas, N.A.</i>, 803 S.W.2d 838, 840 (Tex. App.-Dallas 1991, no writ).<br />
<b style="mso-bidi-font-weight: normal;"><span style="color: red;"><span style="color: blue;"><br /></span></span></b>
<b style="mso-bidi-font-weight: normal;"><span style="color: red;"><span style="color: blue;">Amount Outstanding vs. Amount Actually Due / Past-Due </span><span style="color: red;"><o:p></o:p></span></span></b></div>
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Finally, with respect to the affiant’s testimony that the
account balance had been accelerated, the Court concluded that this could be
true because the affidavit <i>post</i>-dated the final account statement, and that
acceleration could have happened in the interim. <i>Ergo</i>, no conflict. <o:p></o:p></div>
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Testimony by affidavit in the summary judgment context,
however, must be supported by copies or originals of the documents or records
on which the testimony is based. Tex. R. Civ. P. 166a(f) ("Sworn or certified copies of all papers or parts thereof referred to in an affidavit shall be attached thereto or served therewith."). The documentary substantiation requirement is obviously nontrivial in the summary judgment context because testimony by affidavit would otherwise be hearsay at trial since the affiant is not subject to cross-examination. </div>
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The affiant in <i>Germany v. Wells Fargo</i> based
his claim of “personal knowledge” on review of the attached records, rather than on
some other source. The last account statement reveals that the outstanding balance on the account had <i>not</i>
been accelerated, and that payment of a much smaller amount was due. Therefore,
the testimony about acceleration having occurred, and the entire balance balance being due in a lump sum, was unsupported and conclusory.<i> See <a href="https://scholar.google.com/scholar_case?case=8909759136933082134&q=05-15-01229-CV&hl=en&as_sdt=6,44" target="_blank">Camarillo v. Cabinets by Michael, Inc.</a></i>, No. 02-17-00154-CV (Tex.App.- Fort Worth, Jun. 28, 2018)(reversing summary judgment granted based on an affidavit about number of overtime hours worked that was conclusory because it was not supported by the referenced time-records, and was therefore no evidence.), <i>citing, inter alia, <a href="https://scholar.google.com/scholar_case?case=2362894279146639948&q=05-15-01229-CV&hl=en&as_sdt=6,44" target="_blank">Brown v. Mesa Distribs, Inc.</a></i>, 414 S.W.3d 279, 287 (Tex. App.-Houston [1st Dist.] 2013, no pet.) (noting that an affidavit that states only legal or factual conclusions without providing factual support is not proper summary judgment evidence).<br />
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And since Wells Fargo's affiant purported to recite factual information gleaned from attached exhibits that affirmatively reflected something else, it did not meet the criteria governing the acceptability of affidavits by interested witnesses under the summary judgment rule: </div>
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<blockquote class="tr_bq">
"A summary judgment may be based on uncontroverted testimonial evidence of an interested witness, or of an expert witness as to subject matter concerning which the trier of fact must be guided solely by the opinion testimony of experts, if the evidence is clear, positive and direct, otherwise credible and free from contradictions and inconsistencies, and could have been readily controverted." TRCP 166a(c). </blockquote>
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Nor could a conclusory assertion that acceleration had occurred be easily controverted by the defendant as nonmovant. How could the consumer prove the opposite, which is a negative: the Bank's non-exercise of the option to accelerate the revolving balance on the account? </div>
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<b style="mso-bidi-font-weight: normal;"><span style="color: red;"><span style="color: blue;">Texas law requires notice of intent to accelerate and notice
of acceleration </span><span style="color: red;"><o:p></o:p></span></span></b></div>
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<b style="mso-bidi-font-weight: normal;"><span style="color: red;"><br /></span></b></div>
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Appellate counsel for Germany additionally pointed out
that there was no evidence that Wells Fargo had complied with Texas law regarding
acceleration, which requires two notices: (1) Notice of intent of accelerate
and (2) notice of acceleration. The Court disposed of this argument by
mis-citing a prior precedent of its own for the proposition that the debtor
must specifically raise the lack-of-notice issue in his pleadings to preserve a
complaint about it for appeal. <o:p></o:p></div>
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The Court cited <i><a href="https://scholar.google.com/scholar_case?case=10089474360465741480&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44" target="_blank">Miller v. Univ. Sav. Ass'n</a></i>, 858 S.W.2d 33,
36 (Tex. App.-Houston [14th Dist.] 1993, writ denied) for “holding that a
summary-judgment movant was not required to prove the requisites for
accelerating a note because there was no specific denial of conditions
precedent in the nonmovant's answer.”<br />
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What the Panel Opinion fails to say, however, is that the nonmovant in the <i style="mso-bidi-font-style: normal;">Miller</i> case
was a <i><u>guarantor</u> </i>rather than a <i><u>principal obligor</u></i>; that the case was a second
appeal after a limited remand on the issue of damages only; and that the
nonmovant’s defenses had not been raised in the prior proceeding (“We reversed
the judgment and remanded the case only for a determination of damages.”). Once the mandate has issued, the trial court has no authority to take any action inconsistent with or beyond the scope of the mandate. <i>See Hudson v. Wakefield</i>, 711 S.W.2d 628, 630 (Tex. 1986) ("When this court remands a case and limits a subsequent trial to a particular issue, the trial court is restricted to a determination of that particular issue."). <o:p></o:p><br />
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<i style="mso-bidi-font-style: normal;">Miller</i> actually supports
Germany’s argument about being entitled to notice of acceleration, which is not
surprising because those notice requirements rest on Texas Supreme Court
precedent that the intermediate court of appeals in Houston was bound to follow. In <i style="mso-bidi-font-style: normal;">Miller</i>, the Fourteenth Court expressly distinguished guarantors
from makers of promissory notes: <o:p></o:p></div>
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<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><span style="background: white; color: #222222; line-height: 107%;">In
support of his argument that appellees' did not prove their entitlement to
judgment as a matter of law, appellant directs us to the case law regarding
promissory </span>notes and the requirements of acceleration. Generally,
the holder of a note must perform three requirements before he can properly
accelerate the maturity of a note, namely: 1) make presentment, or demand for
payment upon the maker; 2) give notice of <i style="-webkit-text-stroke-width: 0px; font-variant-caps: normal; font-variant-ligatures: normal; orphans: 2; text-align: start; text-decoration-color: initial; text-decoration-style: initial; widows: 2; word-spacing: 0px;">intent</i><span style="-webkit-text-stroke-width: 0px; float: none; font-variant-caps: normal; font-variant-ligatures: normal; orphans: 2; text-align: start; text-decoration-color: initial; text-decoration-style: initial; widows: 2; word-spacing: 0px;"> to accelerate, and; 3) notify maker of actual
acceleration. </span><a href="https://scholar.google.com/scholar_case?case=18315752287015279335&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44" style="-webkit-text-stroke-width: 0px; font-variant-caps: normal; font-variant-ligatures: normal; orphans: 2; text-align: start; widows: 2; word-spacing: 0px;"><i><span style="background: white; color: #660099; line-height: 107%;">Shumway v. Horizon Credit Corp.,</span></i><span style="background: white; color: #660099; line-height: 107%;"> 801 S.W.2d 890, 892 (Tex.1991)</span></a><span style="background: white; color: #222222; line-height: 107%;"><span style="-webkit-text-stroke-width: 0px; float: none; font-variant-caps: normal; font-variant-ligatures: normal; orphans: 2; text-align: start; text-decoration-color: initial; text-decoration-style: initial; widows: 2; word-spacing: 0px;">; </span></span><a href="https://scholar.google.com/scholar_case?case=8582604229250253679&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44" style="-webkit-text-stroke-width: 0px; font-variant-caps: normal; font-variant-ligatures: normal; orphans: 2; text-align: start; widows: 2; word-spacing: 0px;"><i><span style="background: white; color: #660099; line-height: 107%;">Ogden v. Gibraltar Sav Ass'n,</span></i><span style="background: white; color: #660099; line-height: 107%;"> 640 S.W.2d 232, 233</span></a><span style="background: white; color: #222222; line-height: 107%;"><span style="-webkit-text-stroke-width: 0px; float: none; font-variant-caps: normal; font-variant-ligatures: normal; orphans: 2; text-align: start; text-decoration-color: initial; text-decoration-style: initial; widows: 2; word-spacing: 0px;">; </span></span><a href="https://scholar.google.com/scholar_case?case=3046504035443633953&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44" style="-webkit-text-stroke-width: 0px; font-variant-caps: normal; font-variant-ligatures: normal; orphans: 2; text-align: start; widows: 2; word-spacing: 0px;"><i><span style="background: white; color: #660099; line-height: 107%;">Allen Sales & Servicenter v. Ryan,</span></i><span style="background: white; color: #660099; line-height: 107%;"> 525 S.W.2d 863, 865 (Tex.1975)</span></a><span style="background: white; color: #222222; line-height: 107%;"><span style="-webkit-text-stroke-width: 0px; float: none; font-variant-caps: normal; font-variant-ligatures: normal; orphans: 2; text-align: start; text-decoration-color: initial; text-decoration-style: initial; widows: 2; word-spacing: 0px;">. However, this case does not involve a holder's obligation
to a maker. Instead, it involves the liability of a </span><i style="-webkit-text-stroke-width: 0px; font-variant-caps: normal; font-variant-ligatures: normal; orphans: 2; text-align: start; text-decoration-color: initial; text-decoration-style: initial; widows: 2; word-spacing: 0px;">guarantor</i><span style="-webkit-text-stroke-width: 0px; float: none; font-variant-caps: normal; font-variant-ligatures: normal; orphans: 2; text-align: start; text-decoration-color: initial; text-decoration-style: initial; widows: 2; word-spacing: 0px;"> when the
maker defaults on the loan. <span style="background: yellow; mso-highlight: yellow;">While
we agree with appellant that Texas law requires a holder to notify a maker of
his intent to accelerate a note, it does not require that notice of intent to
accelerate be given to a guarantor</span>. </span></span><a href="https://scholar.google.com/scholar_case?case=7893174997913303147&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44" style="-webkit-text-stroke-width: 0px; font-variant-caps: normal; font-variant-ligatures: normal; orphans: 2; text-align: start; widows: 2; word-spacing: 0px;"><i><span style="background: white; color: #660099; line-height: 107%;">United States v. Little Joe Trawlers, Inc.,</span></i><span style="background: white; color: #660099; line-height: 107%;"> 776 F.2d 1249, 1252 (5th Cir.1985)</span></a></span><span style="background: white; color: #222222; line-height: 107%;"><span style="float: none; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; word-spacing: 0px;">. While a guaranty clause may incorporate certain terms and
provisions of the underlying promissory note, it is a separate contract with
separate ramifications and obligations imposed on those parties.</span><span style="font-family: "arial" , sans-serif; font-size: 10.5pt;"><o:p></o:p></span></span></div>
<br />
<span style="background-color: white; color: #222222; font-size: 14.6667px; text-align: center;">Also see -- > </span><a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3394610" style="background-color: white; font-size: 14.6667px; text-align: center;" target="_blank">Beyond Judicial Notice: A Critique of Sua Sponte Speculation and Factfinding on Appeal</a><span style="background-color: white; color: #222222; font-size: 14.6667px; text-align: center;"> (in-depth critique of Charles J. Germany v. Wells Fargo Bank) </span><br />
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<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhhOibAwEs7eFS8Mi2gxJYPUA6LZaKV_rZW9w5MkXLOJ1gFwhkT2DwT7SzeEdRGlw1rPpyK-JOboeu1MKsVqZludMs0VM_GFEzI-aaoyWVpRIjzy1qS5gLJr4Pmu9VqcCM1w22Qq8LhWAcq/s1600/Germany-v-Wells-Fargo-Bank-Opinon-Page-1.PNG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="996" data-original-width="998" height="398" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhhOibAwEs7eFS8Mi2gxJYPUA6LZaKV_rZW9w5MkXLOJ1gFwhkT2DwT7SzeEdRGlw1rPpyK-JOboeu1MKsVqZludMs0VM_GFEzI-aaoyWVpRIjzy1qS5gLJr4Pmu9VqcCM1w22Qq8LhWAcq/s400/Germany-v-Wells-Fargo-Bank-Opinon-Page-1.PNG" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><a href="http://www.search.txcourts.gov/Case.aspx?cn=14-17-00916-CV&coa=coa14" target="_blank">Germany v. Wells Fargo Bank </a></td></tr>
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<span style="color: #3d85c6; font-size: large;"><span style="background-color: white; font-family: "arial" , sans-serif;"><b>CHARLES J. GERMANY JR., Appellant,</b></span>v.<br />WELLS FARGO BANK, NA, Appellee.</span></h2>
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<span style="color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: 14px;">No. <a href="http://www.search.txcourts.gov/Case.aspx?cn=14-17-00916-CV&coa=coa14" target="_blank">14-17-00916-CV</a> </span></span></center>
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<b>Court of Appeals of Texas, Fourteenth District, Houston.</b></div>
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Memorandum Opinion filed February 7, 2019. </center>
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Roger G. Jain, Thomas Henry Smith, III, for Charles J. Germany, Junior, Appellant.</div>
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Edgar Quijada Mendez, Scott E. Hayes, Thomas M. Sellers, for Wells Fargo Bank, N.A., Appellee.</div>
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On Appeal from the 458th District Court, Fort Bend County, Texas, Trial Court Cause No. 17-DCV-239533.</div>
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Affirmed.</div>
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Panel consists of Justices Christopher, Jewell, and Hassan.</div>
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MEMORANDUM OPINION</h2>
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TRACY CHRISTOPHER, Justice.<br />
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Wells Fargo sued Charles Germany, alleging a single cause of action for breach of contract. After Germany filed a pro se answer, Wells Fargo moved for a traditional summary judgment. Germany did not respond to Wells Fargo's motion, and the trial court granted summary judgment in Wells Fargo's favor. Because Germany did not file a response, the only question we consider on appeal is whether Wells Fargo satisfied its burden of showing that it was entitled to judgment as a matter of law. <i>See </i><a href="https://scholar.google.com/scholar_case?case=14799062681785224179&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44" style="color: #660099;"><i>McConnell v. Southside Indep. Sch. Dist.,</i> 858 S.W.2d 337, 343 (Tex. 1993)</a> ("If a non-movant fails to present any issues in its response or answer, the movant's right is not established and the movant must still establish its entitlement to summary judgment. The effect of such a failure is that the non-movant is limited on appeal to arguing the legal sufficiency of the grounds presented by the movant.").</div>
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STANDARD OF REVIEW</h2>
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Our review of the summary judgment is de novo. <i>See </i><a href="https://scholar.google.com/scholar_case?case=7289980774227861157&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44" style="color: #660099;"><i>Katy Venture, Ltd. v. Cremona Bistro. Corp.,</i> 469 S.W.3d 160, 163 (Tex. 2015) (per curiam)</a>. To prevail on its traditional motion for summary judgment, Wells Fargo had to establish that there was no genuine issue of material fact as to each element of its claim such that it was entitled to judgment as a matter of law. <i>See</i> Tex. R. Civ. P. 166a(c); <a href="https://scholar.google.com/scholar_case?case=17330570719512203476&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44" style="color: #660099;"><i>M.D. Anderson Hosp. & Tumor Inst. v. Willrich,</i> 28 S.W.3d 22, 23 (Tex. 2000) (per curiam)</a>. In deciding whether there is a genuine issue of material fact, we consider all of the evidence in the light most favorable to Germany, indulging every reasonable inference and resolving any doubts in his favor. <i>See </i><a href="https://scholar.google.com/scholar_case?case=18303564960181757665&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44" style="color: #660099;"><i>City of Keller v. Wilson,</i> 168 S.W.3d 802, 824 (Tex. 2005)</a>.</div>
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MOTION FOR SUMMARY JUDGMENT</h2>
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Wells Fargo argued in its motion that it was entitled to judgment on its contract claim because Germany entered into a consumer credit card agreement with Wells Fargo, and Germany breached that agreement by defaulting on his payments.<br />
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Wells Fargo supported that claim with the affidavit of a loan adjustor, who testified that he worked for Wells Fargo and that he had acquired personal knowledge of the business records involved in this case. The loan adjustor attached a consumer credit card agreement to his affidavit, and he testified that it was a true and correct copy of the agreement that Germany had entered.<br />
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The loan adjustor also attached two credit card statements associated with Germany's account, one dated from 2016, and the other dated from 2017. The loan adjustor testified that Germany's last payment to his account was reflected in the 2016 statement. Because Germany had not remitted any additional payments since that time, the loan adjustor testified that the entire balance on Germany's account had been accelerated according to the terms of the agreement. The loan adjustor cited the account balance on the 2017 statement as proof of the amount that was due and owing.<br />
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Now represented by appellate counsel, Germany argues that Wells Fargo's motion is insufficient because the summary-judgment evidence is not "free from contradictions and inconsistencies." <i>See</i> Tex. R. Civ. P. 166a(c). Germany focuses on three evidentiary issues in particular.</div>
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CREDIT CARD AGREEMENT</h2>
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The first issue relates to the loan adjustor's affidavit testimony that Germany "entered into an agreement for a CORE PLATINUM Account." Germany contends that this testimony is inconsistent with the agreement itself because the agreement does not reflect that Germany obtained a CORE PLATINUM Account.<br />
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The agreement is silent about many things, and appears to have been drafted with standardization in mind. For example, it does not bear Germany's name or even require his signature as a condition to contract formation. By its own terms, Germany is deemed to have accepted the terms of the agreement "by using or activating [his] Account." <i>See </i><a href="https://scholar.google.com/scholar_case?case=10456033731113852494&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44" style="color: #660099;"><i>Mid-Continent Cas. Co. v. Global Enercom Mgmt., Inc.,</i> 323 S.W.3d 151, 157 (Tex. 2010)</a>("Texas law recognizes that a contract need not be signed to be `executed' unless the parties explicitly require signatures as a condition of mutual assent.").</div>
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In keeping with its boilerplate character, the agreement has a generally worded heading: "Consumer Credit Card Customer Agreement & Disclosure Statement." Beneath that heading, there is a short subheading—"Visa® or MasterCard®"— followed by terms that are applicable to both types of credit cards, unless otherwise stated.<br />
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The agreement does not indicate which type of credit card was issued to Germany. In fact, the agreement defines the word "Card" as "any credit card we issue to use your Account." The word "Account" is also defined in the barest of terms as "your credit card account."<br />
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Germany correctly observes that the agreement does not contain the words "CORE PLATINUM," but he fails to explain how that omission creates an inconsistency. The agreement does not affirmatively state that Germany obtained an account with Wells Fargo that bore a different title. Absent that sort of discrepancy, we perceive no conflict between the generally worded agreement and the loan adjustor's more specifically worded affidavit. <i>See </i><a href="https://scholar.google.com/scholar_case?case=15128787280674888372&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44" style="color: #660099;"><i>Hernandez v. Lukefahr,</i> 879 S.W.2d 137, 143 (Tex. App.-Houston [14th Dist.] 1994, no writ)</a> (explaining that the types of inconsistencies prohibited by Rule 166a(c) are those that create "equivocating positions which do not serve to clarify the pertinent issues in the case").</div>
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CREDIT CARD STATEMENTS</h2>
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The next issue relates to differing descriptions of Germany's account in the loan adjustor's affidavit and the two credit card statements. The loan adjustor testified that Germany had a CORE PLATINUM Account ending with the numbers 5236. Those account numbers are accurately reflected in the 2017 statement, but not in the 2016 statement, which represented that Germany's account ended with the numbers 5921.<br />
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We agree with Germany that this evidence gives rise to a discrepancy, but the discrepancy is immaterial. The loan adjustor did not testify that Germany's account ended with the numbers 5236 at the time his account was opened, or that his account has always ended with those numbers. Rather, the loan adjustor testified that Germany's account "ends"—in the present tense—with the numbers 5236. That testimony comports with the account number appearing on the 2017 statement, which the loan adjustor described as the "last statement" that was sent to Germany.<br />
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The loan adjustor did not explain the discrepancy between the two credit card statements, but we are aware that financial institutions can change account numbers when the need arises. <i>See, e.g., Wells Fargo Bank, N.A. v. Blackburn,</i> No. 02-10-00166-CV, 2011 WL 346951, at *1 (Tex. App.-Fort Worth Feb. 3, 2011, no pet.) (mem. op.) (numbers were changed after the account holder closed and then reactivated the account); <a href="https://scholar.google.com/scholar_case?case=3096982416658693298&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44" style="color: #660099;"><i>United States v. Parson,</i> 599 F. Supp. 2d 592, 605 (W.D. Pa. 2009)</a> (numbers were changed after the account holder expressed a concern about identity theft). The mere fact that a change may have occurred here does not raise a genuine issue of material fact because there was uncontroverted evidence that Germany owned the account ending in 5236 and Wells Fargo's claim for damages was limited to the balance due under that account. <i>Cf. </i><a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=16917568461017015790&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Reagan Nat'l Advert. of Austin, Inc. v. Hazen,</i> No. 03-05-00699-CV, 2008 WL 2938823, at *11 (Tex. App.-Austin July 29, 2008, no pet.)</a> (mem. op.) (factual discrepancies regarding the number of times that an attorney communicated with a third party, who initiated those disputed communications, and how a written agreement was delivered to the third party did not preclude a summary judgment on the attorney's defense that he was entitled to attorney immunity).<br />
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Germany also contends that there is an inconsistency because both credit card statements indicate that he has a Wells Fargo Visa Account, as opposed to a CORE PLATINUM Account. However, neither statement actually identifies the title of Germany's account. The statements merely contain logos for Wells Fargo and Visa. The Visa logo permits a reasonable inference that Germany was issued a Visa credit card, but nothing in the statements identifies which type of Visa credit card. Because the statements are silent regarding the title of Germany's account, we do not perceive any inconsistency with the loan adjustor's affidavit testimony that Germany obtained a CORE PLATINUM Account. <i>See Blackburn,</i> 2011 WL 346951, at *3 (indicating that Visa has a "Platinum" line of credit cards).</div>
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ACCELERATED BALANCE</h2>
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Germany's final issue relates to the loan adjustor's affidavit testimony that Wells Fargo is owed an accelerated balance of $24,809.38. That figure matches the total balance of Germany's account as reflected in the 2017 statement, but Germany argues that there is a conflict because the same statement shows a minimum balance due of only $3,579.38. In a related complaint, Germany argues that the loan adjustor's testimony is conclusory because, even if he owned the account, there is insufficient proof that the total balance actually became due and owing. We address these points in reverse order.</div>
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There is uncontroverted evidence that Wells Fargo had a right to accelerate the balance of Germany's account. The credit card agreement provided that if Germany defaulted by "fail[ing] to pay a Minimum Payment by the Payment Due Date," then Wells Fargo's rights included, but were not limited to, "requiring the immediate payment of the Outstanding Balance."<br />
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The 2017 statement proved that Germany had defaulted. A notice included in that statement said the following:</div>
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Our records indicate that your account is in default for failure to make payments due. Unless the past due amount shown on this month's billing statement is received by the end of the present calendar month, immediate payment in full of your account may be required (this is also called "acceleration").</blockquote>
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There is no evidence, however, that Wells Fargo gave notice to Germany that his account balance had actually been accelerated. Without such evidence, Germany argues that Wells Fargo did not satisfy its burden of showing that the balance was accelerated.<br />
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Assuming for the sake of argument that Wells Fargo was required to give notice of acceleration, we conclude that proof of this notice was unnecessary because Wells Fargo pleaded that all conditions precedent had been performed and Germany failed to specifically deny that notice had been given. <i>See</i> Tex. R. Civ. P. 54 ("In pleading the performance or occurrence of conditions precedent, it shall be sufficient to aver generally that all conditions precedent have been performed or have occurred. When such performances or occurrences have been so plead, the party so pleading same shall be required to prove only such of them as are specifically denied by the opposite party."); <a href="https://scholar.google.com/scholar_case?case=10089474360465741480&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44" style="color: #660099;"><i>Miller v. Univ. Sav. Ass'n,</i> 858 S.W.2d 33, 36 (Tex. App.-Houston [14th Dist.] 1993, writ denied)</a> (holding that a summary-judgment movant was not required to prove the requisites for accelerating a note because there was no specific denial of conditions precedent in the nonmovant's answer). Accordingly, the loan adjustor's testimony was not conclusory, and Wells Fargo's motion was not insufficient for lacking more proof of acceleration.<br />
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The only remaining complaint is Germany's argument that the evidence was inconsistent. Germany contends that his account balance could not have been accelerated as the loan adjustor had testified because the 2017 statement did not reflect that the entire account balance was due and owing, and because the notice attached to that statement merely warned that immediate payment in full "may be required." But the 2017 statement predated the loan adjustor's affidavit by more than three months. That statement does not contradict the loan adjustor's subsequent testimony that Germany's balance "has been accelerated" as a result of his failure to remit payments. <i>Cf. </i><a href="https://scholar.google.com/scholar_case?case=17452091645109314178&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44" style="color: #660099;"><i>Hammer v. Powers,</i> 819 S.W.2d 669, 672 (Tex. App.-Fort Worth 1991, no writ)</a> (affiant's testimony that testatrix had testamentary capacity two days before the will was executed was not contradicted by testimony that the testatrix had been hospitalized for alcoholism seven days before the will was executed).</div>
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CONCLUSION</h2>
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Wells Fargo produced uncontroverted evidence, free from any contradictions or inconsistencies, that Germany entered into a credit card agreement; that Germany defaulted under that agreement; and that $24,809.38 is due and owing as a result of Germany's breach. Based on this uncontroverted evidence, we conclude that Wells Fargo established that it was entitled to judgment as a matter of law on its claim for breach of contract.</div>
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We therefore affirm the trial court's judgment.</div>
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<b>858 S.W.2d 33 (1993)</b></center>
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Vance C. MILLER, Appellant,<br />v.<br />UNIVERSITY SAVINGS ASSOC., and Landmark Savings Assoc., Appellees.</h3>
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<a href="https://scholar.google.com/scholar?scidkt=5553195918376502036&as_sdt=2&hl=en" style="color: #660099;">No. B14-92-00746 CV.</a></center>
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<b>Court of Appeals of Texas, Houston (14th Dist.).</b></div>
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July 1, 1993. </center>
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Rehearing Denied August 19, 1993.</center>
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Before MURPHY, SEARS and DRAUGHN, JJ.</div>
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OPINION</h2>
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DRAUGHN, Justice.<br />
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This is an appeal from a judgment in favor of appellees, and the denial of appellant's summary judgment motion. In four points of error, appellant contends the trial court erred in granting appellees' summary judgment motion based on their claim and appellant's counter-claim of usury. Appellant also asserts the trial court committed reversible error in denying and failing to grant his motion for summary judgment. We affirm the judgment of the trial court.<br />
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This is the second time this case has been before us on appeal. <i>See </i><a href="https://scholar.google.com/scholar_case?case=4768241123495124977&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44" style="color: #660099;"><i>University Sav. Ass'n v. Miller,</i> 786 S.W.2d 461 (Tex. App.-Houston [14th Dist.] 1990, writ denied)</a>. As the facts have not changed, and we are presented with some variations of the same issues decided in the first appeal, a brief recitation of the facts and procedural posture of this case is necessary.<br />
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On August 26, 1977, appellant entered into a guaranty agreement with appellee, University Savings Association ("University"), in conjunction with a loan by University Savings to Miller Warehouse of Houston. This loan was documented by a promissory note, and further secured by a deed of trust covering an apartment complex in Houston. The loan was for $2,740,000.00.<br />
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Miller Warehouse defaulted on the loan, beginning with the failure to pay the September 1, 1985 installment payment. On January 9, 1986, University Savings accelerated <a class="gsl_pagenum" href="https://scholar.google.com/scholar_case?case=10089474360465741480&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44#p35" style="color: #aaaaaa; font-size: 13px; left: -55px; position: absolute; text-decoration-line: none;">35</a><a class="gsl_pagenum2" href="https://scholar.google.com/scholar_case?case=10089474360465741480&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44#p35" id="p35" style="color: #aaaaaa; font-size: 13px; text-decoration-line: none;">*35</a>the maturity of the note and made demand upon appellant, as guarantor, to make the payment required under the guaranty agreement. As of the date of acceleration, the amounts owed to University were as follows: 1) Unpaid principal balance $2,573,620.02; 2) unpaid accrued interest $130,718.51; 3) unpaid negative escrow balance owed for advances made by University for unpaid taxes due on the secured real property in the sum of $23,807.15; and 4) $4,322.32 for unpaid accrued late charges, for a total of $2,732,468.00. The addition of ten percent attorney's fees and foreclosure costs immediately preceding the foreclosure sale of the apartment complex made the total indebtedness owing to University $3,027,019.43. The apartment complex was bought by University at the foreclosure sale for $2,400,000.00, and the proceeds applied to the unguaranteed portion of the indebtedness.<br />
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In the original trial of this case, the trial court was faced with cross-motions for summary judgment. At that time, the trial court granted appellant's motion for summary judgment and denied appellees' motion for summary judgment, based upon that court's interpretation of the guaranty agreement. Basically, the trial court found that the guaranty agreement, by its terms, terminated after the foreclosure sale. University appealed, both on the ground that Miller's motion for summary judgment was improvidently granted, but also on the ground that the trial court improperly denied its motion for summary judgment. The appeal was limited to the summary judgment evidence based upon the construction of the guaranty agreement.</div>
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Upon the first appeal to this court, we held that not only was Miller's motion for summary judgment improperly granted, but also that University had proven its entitlement to summary judgment relief as a matter of law. We reversed the judgment and remanded the case only for a determination of damages.</div>
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On remand, appellees, University, and Landmark Savings, the assignee of the note, filed a Motion for Entry of Judgment and provided the trial court with proof of the liquidated damages owed. Appellant, though not directly responding to appellees' motion for entry of judgment/second motion for summary judgment, filed his own Motion for Summary Judgment, alleging, for the first time, that the interest charged against him was usurious. The trial court, in accordance with our previous opinion, entered judgment for appellees and awarded the appropriate, liquidated damages.<br />
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In this second appeal, appellant contends the trial court erred by entering the judgment in appellees' favor and in granting their motion for summary judgment on appellant's counterclaim of usury. Appellant further asserts that the trial court improperly denied his motion for summary judgment. And, for the first time, appellant raises the issue that appellees' failed to prove their entitlement to summary judgment relief, as a matter of law, in the <i>original</i> proceeding, based upon their alleged failure to send him notice of intent to accelerate the note. Appellant asserts this issue even though no defense to appellees' first or second motions for summary judgment on the grounds of failure to send notice of intent was ever made.<br />
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In his first point of error, appellant claims the trial court erred in granting the appellees' motion for summary judgment, even in light of our prior opinion remanding the case for entry of judgment in appellees' favor and a determination of damages. Specifically, appellant contends our first decision on this case, rendering summary judgment relief for appellees, was in error, as appellees did not sustain their burden proving a right to such relief as a matter of law because they failed to prove the necessary requisites for accelerating the underlying note. In the alternative, appellant contends that the "law of the case" doctrine does not apply because substantially different facts now exist, namely, those giving rise to a claim of usury which arose on remand.<br />
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In support of his argument that appellees' did not prove their entitlement to judgment as a matter of law, appellant directs us to the case law regarding promissory <a class="gsl_pagenum" href="https://scholar.google.com/scholar_case?case=10089474360465741480&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44#p36" style="color: #aaaaaa; font-size: 13px; left: -55px; position: absolute; text-decoration-line: none;">36</a><a class="gsl_pagenum2" href="https://scholar.google.com/scholar_case?case=10089474360465741480&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44#p36" id="p36" style="color: #aaaaaa; font-size: 13px; text-decoration-line: none;">*36</a> notes and the requirements of acceleration. Generally, the holder of a note must perform three requirements before he can properly accelerate the maturity of a note, namely: 1) make presentment, or demand for payment upon the maker; 2) give notice of <i>intent</i> to accelerate, and; 3) notify maker of actual acceleration. <a href="https://scholar.google.com/scholar_case?case=18315752287015279335&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44" style="color: #660099;"><i>Shumway v. Horizon Credit Corp.,</i> 801 S.W.2d 890, 892 (Tex.1991)</a>; <a href="https://scholar.google.com/scholar_case?case=8582604229250253679&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44" style="color: #660099;"><i>Ogden v. Gibraltar Sav Ass'n,</i> 640 S.W.2d 232, 233</a>; <a href="https://scholar.google.com/scholar_case?case=3046504035443633953&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44" style="color: #660099;"><i>Allen Sales & Servicenter v. Ryan,</i> 525 S.W.2d 863, 865 (Tex.1975)</a>. However, this case does not involve a holder's obligation to a maker. Instead, it involves the liability of a <i>guarantor</i> when the maker defaults on the loan.<br />
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While we agree with appellant that Texas law requires a holder to notify a maker of his intent to accelerate a note, it does not require that notice of intent to accelerate be given to a guarantor. <a href="https://scholar.google.com/scholar_case?case=7893174997913303147&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44" style="color: #660099;"><i>United States v. Little Joe Trawlers, Inc.,</i> 776 F.2d 1249, 1252 (5th Cir.1985)</a>. While a guaranty clause may incorporate certain terms and provisions of the underlying promissory note, it is a separate contract with separate ramifications and obligations imposed on those parties.<br />
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Even if we assume <i>arguendo</i> appellant's interpretation, he has waived this point of error and argument by failing to raise it either at the prior trial or on appeal therefrom. In their original petition, appellees plead that "all conditions precedent have been performed or have occurred," and appellant failed to specially except to this pleading. Nor did he object to it, or bring it to the trial court's attention by controverting it at the prior summary judgment stage.<br />
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We are well aware that a non-movant is not required to respond to a motion for summary judgment when the movant's summary judgment proof is legally insufficient. <i>See </i><a href="https://scholar.google.com/scholar_case?case=2309135939030844167&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44" style="color: #660099;"><i>Cove Inv. Inc. v. Manges,</i> 602 S.W.2d 512, 514 (Tex.1980)</a>. However, Tex. R.Civ.P. 54 provides:</div>
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In pleading the performance or occurrence of conditions precedent, it shall be sufficient to aver generally that all conditions precedent have been performed or have occurred. <i>When such performances or occurrences have been so plead,</i> the party so pleading same shall be required to prove only such of them as are <i>specifically denied by the opposite party.</i>(Emphasis added).</blockquote>
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We find it hard to sympathize with appellant on this second appeal when he failed to raise the issue either at the trial level or at the first appeal, either by cross-point or in his motion for rehearing. He limited his arguments to the construction of the guaranty agreement and wholly failed to address the sufficiency of appellees' summary judgment proof on this issue. Having plead that all necessary requirements had been met, and obtaining a judgment based on those summary judgment pleadings, appellees are not now subject to an insufficiency claim by appellant, who failed to specifically deny the existence of those conditions as required by Rule 54, or to raise it on the original appeal. Accordingly, point of error one is overruled.<br />
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In point of error two, appellant complains of the trial court's granting of appellees' motion for summary judgment on his counter-claim of usury. Appellant contends appellees' Motion for Entry of Judgment charges him with interest at the rate of 18%, when he is only liable for interest at the legal rate of 6% from the date of maturity upon whatever damages may be assessed against him. He further asserts that this claim of usury is not precluded by the "law of the case" doctrine or res judicata, because the interest was not charged or demanded until the remand of this case for entry of the judgment and determination of the amounts owed. Appellant also argues that he is not liable for any "post-maturity" sums owing on the note, although we included the time period of the foreclosure sale in our order.<br />
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The guaranty agreement incorporated the terms of the promissory note in its provisions by stating: "... reference being made to the aforesaid note for all of the terms and conditions thereof and same by reference is made a part hereof for all purposes." The note itself provided for interest at the maximum lawful rate permitted upon default, until such time the <a class="gsl_pagenum" href="https://scholar.google.com/scholar_case?case=10089474360465741480&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44#p37" style="color: #aaaaaa; font-size: 13px; left: -55px; position: absolute; text-decoration-line: none;">37</a><a class="gsl_pagenum2" href="https://scholar.google.com/scholar_case?case=10089474360465741480&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44#p37" id="p37" style="color: #aaaaaa; font-size: 13px; text-decoration-line: none;">*37</a> payment of indebtedness had been made in full.<br />
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The highest rate allowed on such a note is 18% per annum. TEX.REV.CIV.STAT. ANN. art. 1302-2.09 (Vernon 1989). Furthermore, appellant is not liable for this entire amount. The guaranty agreement states:</div>
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guarantors jointly and severally, for themselves, their heirs, executors, administrators, and successors, absolutely and unconditionally guarantee to the Association, its successors and assigns, the prompt, complete and full payment at maturity, howsoever such maturity may be brought about, of the first or top <i>ten percent (10%)</i> of all sums owing <i>and to be owing</i> upon the note, including interest and attorneys' fees as provided for therein (emphasis added).</blockquote>
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Thus, by the explicit wording of the agreement, appellant is liable for the interest <i>through</i>t he foreclosure sale. Furthermore, the interest owed by a guarantor cannot be usurious when it is allowed under law.<br />
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Also, appellant is obligated only to pay the top 10% of the principal and interest charged on the note and 10% of the attorneys' fees. It follows that the amount of interest is clearly not usurious.<br />
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Moreover, the amount of the loan and the rate of interest are liquidated damages which were ascertainable at the time of the original proceeding. As such, this claim, since not plead in the initial motion, is waived. These issues have already been determined by this court, as we held that judgment for appellees should include interest from the date of foreclosure. <i>See </i><a href="https://scholar.google.com/scholar_case?case=4768241123495124977&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44" style="color: #660099;"><i>University Sav. Ass'n. v. Miller,</i> 786 S.W.2d at 464</a>. If appellant believed that the interest rates were usurious, he should have so plead, as those amounts have not changed and were known at all times by merely reading the provisions of the promissory note and the guaranty agreement.<br />
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Nonetheless, appellant argues that principles of <i>res judicata</i> do not apply because the facts have changed which alter the legal rights or relations of the parties. <i>See </i><a href="https://scholar.google.com/scholar_case?case=8410971050460050514&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44" style="color: #660099;"><i>City of Lubbock v. Stubbs,</i> 160 Tex. 111, 327 S.W.2d 411, 414 (Tex.1959)</a>. On the contrary, the facts have not changed at all. As mentioned above, only simple mathematics was required to calculate the exact sums owing. The interest rates have been fixed throughout these proceedings, and were known at the time appellant brought his first motion for summary judgment. Having failed to bring this claim before the trial court in the initial proceeding, appellant is now barred from asserting this cause of action. Point of error two is overruled.<br />
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In his third and fourth points of error, appellant claims the trial court erred in both denying and failing to grant his motion for summary judgment on the usury claim. As discussed above, appellant is precluded from bringing this claim, because no facts have changed the rights or relationship of the parties. <a href="https://scholar.google.com/scholar_case?case=8410971050460050514&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44" style="color: #660099;"><i>Lubbock v. Stubbs,</i> 327 S.W.2d at 414</a>. Furthermore, the doctrine of "law of the case" applies, as this court has already determined the issues involved, and the only duty the trial court had was to enter judgment for appellees on the guaranty and apply the mathematical computations. <i>See </i><a href="https://scholar.google.com/scholar_case?case=4768241123495124977&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44" style="color: #660099;"><i>University Sav. Ass'n. v. Miller,</i> 786 S.W.2d 461</a>; <a href="https://scholar.google.com/scholar_case?case=13966806800704346093&q=Germany+v.+Wells+Fargo&hl=en&as_sdt=4,44" style="color: #660099;"><i>Pan American Petro. Corp. v. Southland Royalty Co.,</i> 396 S.W.2d 519 (Tex.Civ.App.-El Paso 1965, writ dism'd)</a>. Therefore, since appellant was barred from bringing this claim, and, as we have already discussed, appellant did not prove usury as a matter of law, the trial court could not have abused its discretion in denying or failing to grant appellant's summary judgment motion. Points of error three and four are overruled.</div>
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Accordingly, the judgment of the trial court is, hereby,</div>
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AFFIRMED.</div>
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<br />MOTPhttp://www.blogger.com/profile/15883011307129083993noreply@blogger.com0tag:blogger.com,1999:blog-9105536336033560224.post-72219264645078206302019-01-04T09:10:00.002-08:002019-05-11T13:32:03.944-07:00Claim accrual for SOL purposes in a credit card collection case: Date of last payment? <div style="text-align: center;">
<span style="font-size: x-small;">Matkin v. American Express Centurion Bank, No. <a href="http://search.txcourts.gov/Case.aspx?cn=05-17-01438-CV&coa=coa05" target="_blank">05-17-01438-CV</a> (Tex.App. - Dallas, Nov. 7, 2018, no pet.) (sent to publisher 1/3/2019) (holding that the accrual date of the bank's claim is the date of the cardholder's last payment, not the dates the charges were made) </span></div>
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<span style="font-size: x-small;"><br /></span></div>
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<span style="color: red;"><b>WAS A PORTION OF THE CREDIT CARD ACCOUNT BALANCE </b></span></div>
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<span style="color: red;"><b>BARRED BY LIMITATIONS? </b></span></div>
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In <i>Matkin v. Amex</i>, the Dallas Court of Appeals rejected the proposition that the application of the statute of limitations is governed by the date specific charges on the credit card were made, and that--based the dates the card was used and charges were incurred--part of the balance sought to be collected by the Bank was time-barred under the four-years statute of limitations that governs debt claims in Texas.<br />
<blockquote class="tr_bq">
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: x-small;">The statute of limitations on a claim for debt based on breach of contract is four years after the date the cause of action accrues. TEX. CIV. PRAC. & REM. CODE ANN. § 16.004; Dodeka, L.L.C. v. Campos, 377 S.W.3d 726, 730 (Tex. App.-San Antonio 2012, no pet.). A claim for breach of contract based on credit card debt accrues on the date the last payment on the account is made. See Dodeka, 377 S.W.3d at 731. The summary judgment evidence submitted by Matkin showed he made his last payment on the account in September 2015. The bank filed suit in June 2017 which was well within the four-year limitations period.</span></blockquote>
The Dallas Court was indisputably correct in rejecting the proposition that the instances of card use/extension of credit were the controlling events for limitations accrual purposes, but it nevertheless erred in holding that the Bank's claim accrued on the date of the last payment.<br />
<br />
Here is why:<br />
<br />
A breach-of-contract cause of action accrues when the contract is breached and the nonbreaching party may avail itself of a legal remedy for the breach. <i><a href="https://scholar.google.com/scholar_case?case=11787409436171520113&hl=en&as_sdt=6,44" target="_blank">Stine v. Stewart</a></i>, 80 S.W.3d 586, 592 (Tex. 2002) (statute of limitations for breach of contract is four years and breach of contract claim accrues when contract is breached). A party asserting a breach of contract claim must sue no later than four years after the day the claim accrues. Tex. Civ. Prac. & Rem.Code § 16.051. It is well-settled law that a breach of contract claim accrues when the contract is breached. <i>See Smith v. Fairbanks, Morse & Co.</i>, 101 Tex. 24, 102 S.W. 908, 909 (1907).<br />
<br />
Any and all credit card agreements provide for repayment of the revolving balance in monthly installments (or similar time period, given that the length of months vary). The due date and the minimum payment amount are shown on the billing statements and is computed based on a formula spelled out in the applicable cardmember agreement.<br />
<br />
Leaving aside other forms of default, a credit card contract is breached when a required installment payment is not made at all, is not made in a timely fashion, or is not made in an amount equal to the required minimum payment amount. If a required monthly payment is merely made late, but in the amount shown as due on the prior billing statement, the Bank will normally charge a late fee, but will not have a viable claim for breach-of-contract damages because the delinquency would have been cured (unless the Bank were to sue solely for the purpose of obtaining a quick judgment on the full accelerated balance on the account). Additionally, the Bank would not normally cancel the account (terminate the contract) upon the occurrence of a single late payment, but will assess a late fee contemplated by the credit card agreement, thereby continuing to act under the contract even if it had the right to declare the account cancelled and the contract as terminated. Card issuers will typically continue to charge late fees and interest as long as they may avoid treating the account as nonperforming under the Fed's uniform chargeoff policy.<br />
<br />
Regardless, the last timely payment by the cardholder in the required minimum payment amount constitute <i><b>performance</b></i> under the credit card agreement, <i><b>not breach</b></i>, and cannot therefore give rise to a claim for breach. Much rather, it would be the failure to make the next payment, i.e. the payment due after the last payment that would constitute the event of breach, which would normally be approximately a month later (although it may be more if the last payment was made before it was due).<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhDAKS1D1XoCiWo3kXh7tzxwFCtJARz738gw51LP-ag61YrCNtYtOL7F2HLua7jxrQ1MJQx-UDJH_pm4OLO58MobtskI9YKs7CFgMxpIfOfV2tZdTO27yboMEJnFINTzdtf8KCGLG0j2Gjg/s1600/Amex+v+Matkin+-+Opinion+snip+%2528style+of+case%2529.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img alt="Matkin v. American Express Centurion Bank, No. 05-17-01438-CV (Tex.App. - Dallas, Nov. 7, 2018, no pet.) (" border="0" data-original-height="927" data-original-width="1060" height="348" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhDAKS1D1XoCiWo3kXh7tzxwFCtJARz738gw51LP-ag61YrCNtYtOL7F2HLua7jxrQ1MJQx-UDJH_pm4OLO58MobtskI9YKs7CFgMxpIfOfV2tZdTO27yboMEJnFINTzdtf8KCGLG0j2Gjg/s400/Amex+v+Matkin+-+Opinion+snip+%2528style+of+case%2529.JPG" title="Matkin v. American Express Centurion Bank, No. 05-17-01438-CV (Tex.App. - Dallas, Nov. 7, 2018, no pet.) (" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Matkin v. American Express Centurion Bank, <br />
No. 05-17-01438-CV (Tex.App. - Dallas, Nov. 7, 2018, no pet.) (</td></tr>
</tbody></table>
The difference in timing may not have been case-dispositive in this case, but it may be in others when the card issuer sues approximately four years after the last payment.<br />
<br />
<div style="text-align: center;">
(This rarely happens these days. Amex typically sues within a year of default).</div>
<br />
The Dallas Court got the accrual rule wrong, but this case now stands for the proposition that (the last act of) performance under the contract by the cardholder amounts to breach. Another example of nonsense established by judicial fiat. -- > How creditor-friendly appellate justices hand down nonsense rulings, then cite them as legal authority.<br />
<br />
But the irony here is that the use of the date of last installment payment that was actually made--as opposed to the date of the subsequent payment that was due and not made--could operate in the debtor's favor, rather than the creditor's. Not in this case, of course, but another one in the future where the creditor (or a debt buyer suing as assignee) did not bring the collection lawsuit against the debtor until a few years later.<br />
<span style="font-family: inherit;"><br /></span>
<span style="background-color: white; color: #222222; font-family: inherit;">Case Number: <a href="http://search.txcourts.gov/Case.aspx?cn=05-17-01438-CV&coa=coa05" target="_blank">05-17-01438-CV</a></span><br />
<span style="background-color: white; color: #222222; font-family: inherit;">Mike Matkin vs American Express Centurion Bank. </span><br />
<a data-saferedirecturl="https://www.google.com/url?q=http://search.txcourts.gov/Case.aspx?cn%3D05-17-01438-CV&source=gmail&ust=1546703320080000&usg=AFQjCNFusI1Lx_Opbge4PJ6Sh5tV5xLf_A" href="http://search.txcourts.gov/Case.aspx?cn=05-17-01438-CV" rel="noreferrer" style="background-color: white; color: #1155cc;" target="_blank"><span style="font-family: inherit;">http://search.txcourts.gov/Cas<wbr></wbr>e.aspx?cn=05-17-01438-CV</span></a><br />
<span style="font-family: inherit;">Issue addressed: Claim accrual date for statute-of-limitations purposes in a credit card collection case</span><br />
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MIKE MATKIN, Appellant,<br />v.<br />AMERICAN EXPRESS CENTURION BANK, Appellee.</h3>
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<a href="https://scholar.google.com/scholar?scidkt=10506505862779413402&as_sdt=2&hl=en" style="color: #660099;">No. 05-17-01438-CV.</a></center>
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<b>Court of Appeals of Texas, Fifth District, Dallas.</b></div>
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Opinion Filed November 7, 2018.</center>
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Elise Manchester, Erin M. Mitchell, Laura L. Bedford, Leslie L. Sun, for American Express Centurion Bank, Appellee.</div>
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Joe Putnam, for Mike Matkin, Appellant.</div>
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On Appeal from the County Court at Law No. 2 Dallas County, Texas, Trial Court Cause No. CC-17-03442-B.<br />
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AFFIRMED.<br />
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Before Justices Bridges, Francis, and Lang-Miers.</div>
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MEMORANDUM OPINION</h2>
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Opinion by Justice MOLLY FRANCIS.</div>
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Mike Matkin appeals a summary judgment rendered against him in this breach of contract suit brought by American Express Centurion Bank. Matkin contends the judgment was improper because the summary judgment evidence created an issue of fact as to whether some portion of the bank's claim was barred by the statute of limitations. Matkin additionally argues the evidence is insufficient to support the judgment because the bank failed to present an itemized statement of his account.<br />
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We affirm the trial court's judgment.</div>
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The bank filed this suit on June 27, 2017 seeking to recover $7,964.93 in unpaid credit card debt. Matkin filed a general denial and asserted the affirmative defense of limitations. In August, the bank moved for a traditional summary judgment. As supporting evidence for its claim, the bank submitted the affidavit of Vivian Hinds, an assistant custodian of records for American Express. Attached to the affidavit were a copy of Matkin's cardmember agreement and a statement showing the balance due on his account.<br />
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Hinds stated the account was closed after Matkin stopped making payments. Hinds further testified there was no record of Matkin asserting a valid, unresolved objection to the balance shown on the statement.</div>
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<span style="background-color: white;">In response to the motion, </span><span style="background-color: yellow;">Matkin argued that many of the charges on the account were made outside the limitations period and the bank had the burden to present evidence that its claim was not time barred</span><span style="background-color: white;">. In support of his response, Matkin submitted the affidavit of his attorney which included a summary of his account showing he made payments until September 2015. The trial court granted the bank's motion for summary judgment and awarded the full amount claimed together with costs of the proceeding. </span><br />
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<span style="background-color: white;">Matkin brought this appeal.</span></div>
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<span style="background-color: white;">In a single issue, Matkin asserts two overlapping arguments. He contends (1) the summary judgment was improper because the bank failed to present evidence of when the individual charges on the account were made and (2) there is </span><span style="background-color: yellow;">a question of fact regarding whether recovery on some of those charges was barred by limitations</span><span style="background-color: white;">. We apply well known standards in our review of a traditional summary judgment. </span><i style="background-color: white;">See </i><a href="https://scholar.google.com/scholar_case?case=1299273196667953801&q=05-17-01438-CV&hl=en&as_sdt=4,44" style="background-color: white; color: #660099;"><i>Nixon v. Mr. Prop. Mgmt. Co.,</i> 690 S.W.2d 546, 548 (Tex. 1985)</a><span style="background-color: white;">. The movant has the burden to demonstrate that no genuine issue of material fact exists as to the essential elements of his claim and he is entitled to judgment as a matter of law. </span><i style="background-color: white;">Id.</i><span style="background-color: white;"> at 548-49. If the party opposing the motion relies on an affirmative defense to avoid summary judgment, that party has the burden to present evidence sufficient to raise a fact issue on each element of the defense. </span><i style="background-color: white;">See </i><a href="https://scholar.google.com/scholar_case?case=11541122740409125336&q=05-17-01438-CV&hl=en&as_sdt=4,44" style="background-color: white; color: #660099;"><i>Brownlee v. Brownlee,</i> 665 S.W.2d 111, 112 (Tex. 1984)</a><span style="background-color: white;">.</span></div>
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Merely raising an affirmative defense will not, by itself, defeat a motion for summary judgment. <i>See </i><a href="https://scholar.google.com/scholar_case?case=6396565542310447496&q=05-17-01438-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Nicholson v. Mem'l Hosp. Sys.,</i> 722 S.W.2d 746, 749 (Tex. App.-Houston [14th Dist.] 1986, writ ref'd n.r.e</a>.). A plaintiff is under no initial obligation to negate affirmative defenses when moving for summary judgment and the mere pleading of an affirmative defense will not prevent summary judgment in favor of a plaintiff who establishes an absence of fact issues on his claim for relief. <i>See Holmes v. First Gibralter Bank, FSB,</i> No. 05-93-01632-CV, 1994 WL 370078, at *2 (Tex. App.-Dallas July 7, 1994, no writ) (not designated for publication). In this case, Matkin had the burden to present evidence sufficient to raise a fact issue on his limitations defense to defeat the bank's motion. <i>See </i><a href="https://scholar.google.com/scholar_case?case=6396565542310447496&q=05-17-01438-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Nicholson,</i> 722 S.W.2d at 749</a>; <i>Holmes,</i> 1994 WL 370078, at *2.</div>
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The statute of limitations on a claim for debt based on breach of contract is four years after the date the cause of action accrues. TEX. CIV. PRAC. & REM. CODE ANN. § 16.004; <a href="https://scholar.google.com/scholar_case?case=10612691797526674821&q=05-17-01438-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Dodeka, L.L.C. v. Campos,</i> 377 S.W.3d 726, 730 (Tex. App.-San Antonio 2012, no pet.)</a>. A claim for breach of contract based on credit card debt accrues on the date the last payment on the account is made. <i>See </i><a href="https://scholar.google.com/scholar_case?case=10612691797526674821&q=05-17-01438-CV&hl=en&as_sdt=4,44" style="color: #660099;"><i>Dodeka,</i> 377 S.W.3d at 731</a>. The summary judgment evidence submitted by Matkin showed he made his last payment on the account in September 2015. The bank filed suit in June 2017 which was well within the four-year limitations period.</div>
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<span style="background-color: white;">Matkin's argument that the judgment is not supported by sufficient evidence is based on his assertion the bank had the burden to submit an itemized statement to show when the individual charges on the account were made to determine </span><span style="background-color: yellow;">when the limitations period on each charge began</span><span style="background-color: white;">. As discussed above, however, </span><span style="background-color: #f4cccc;">the accrual date of the bank's claim is the date of Matkin's last payment, not the dates the charges were made</span><span style="background-color: white;">. </span><i style="background-color: white;">See </i><a href="https://scholar.google.com/scholar_case?case=9248996430196700583&q=05-17-01438-CV&hl=en&as_sdt=4,44" style="background-color: white; color: #660099;"><i>Williams v. Unifund CCR Partners Assignee of Citibank,</i> 264 S.W.3d 231, 234 (Tex. App.-Houston [1st Dist.] 2008, no pet.)</a><span style="background-color: white;">. The bank had no burden to negate Matkin's limitations defense unless he came forward with evidence to create a fact issue on each element of that defense. </span><i style="background-color: white;">See </i><a href="https://scholar.google.com/scholar_case?case=6396565542310447496&q=05-17-01438-CV&hl=en&as_sdt=4,44" style="background-color: white; color: #660099;"><i>Nicholson,</i> 722 S.W.2d at 749</a><span style="background-color: white;">. </span></div>
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Matkin's own evidence showed the bank's suit was brought timely. The account statement submitted by the bank showing the balance owed was sufficient evidence of the amount of the debt, and an itemized statement was not required. <i>See </i><a class="gsl_co_link" href="https://scholar.google.com/scholar_case?about=10738303590737903653&q=05-17-01438-CV&hl=en&as_sdt=4,44" style="border-bottom: 1px dotted rgb(102, 0, 153); color: #660099; text-decoration-line: none;"><i>Ghia v. Am. Express Travel Related Servs.,</i>No. 14-06-00653-CV, 2007 WL 2990295, at *3 (Tex. App.-Houston [14th Dist.] Oct. 11, 2007, no pet.)</a> (mem. op.). </div>
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We resolve Matkin's sole issue against him.</div>
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We affirm the trial court's judgment.</div>
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JUDGMENT</h2>
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In accordance with this Court's opinion of this date, the judgment of the trial court is AFFIRMED.</div>
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It is ORDERED that appellee AMERICAN EXPRESS CENTURION BANK recover its costs of this appeal from appellant MIKE MATKIN.</div>
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MOTPhttp://www.blogger.com/profile/15883011307129083993noreply@blogger.com0tag:blogger.com,1999:blog-9105536336033560224.post-42372260117605916362018-12-31T16:07:00.000-08:002019-01-04T09:45:34.696-08:00End-of-Year (2018) Index of Blawg Coverage of Private Student Loans and Debt Collection Litigation Generally <div style="text-align: center;">
<b><span style="color: red;">INDEX OF THIS YEAR'S CROP OF </span></b></div>
<div style="text-align: center;">
<b><span style="color: red;">STUDENT LOAN </span></b><b><span style="color: red;">AND DEBT COLLECTION BLAWG POSTS </span></b></div>
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<b><span style="color: red;">WITH HOTLINKS </span></b></div>
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<br /></div>
<div class="MsoNormal" style="line-height: normal;">
<a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/12/illinois-court-of-appeals-implores.html" target="_blank">Illinois Court of Appeals implores Legislature to change law to provide for wage-garnishment relief</a>,
finding itself constrained to exercise discretion in extreme hardship cases. National Collegiate Student Loan Trust 2004-1 v. Ogunbibi, No. 1-17-08612018 IL App (1st) 170861 (December 24, 2018). KEY WORDS: judgment-execution-garnishment,
National-Collegiate-Student-Loan-Trusts, wage-garnishment. Posted on 12/30/18. <span style="mso-spacerun: yes;"> </span><br />
<o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="line-height: normal;">
Not So Jolly Is the Season:
<a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/12/not-so-jolly-is-season-discover-banks.html" target="_blank">Discover Bank's lawyers in Texas move to strike Pro Bono Amicus Brief</a> submitted
in support of Pro-Se Debtor who had trouble putting together a proper appellate
brief of his own. Posted on 12/25/18. <o:p></o:p></div>
<div class="MsoNormal" style="line-height: normal;">
<br /></div>
<div class="MsoNormal" style="line-height: normal;">
<a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/12/hoffmann-v-transworld-systems-inc-post.html" target="_blank">Hoffman v. Transworld Systems,Inc.</a>: <i style="mso-bidi-font-style: normal;">post-</i>Consent-Order <a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/12/hoffmann-v-transworld-systems-inc-post.html" target="_blank">FDCPA actionsurvives TSI's initial motion to dismiss</a> in part. KEY WORDS: affidavits,
class-action, FDCPA, National-Collegiate-Student-Loan-Trusts, robosigning,
Transworld-System-Inc. Posted on 12/23/18. <o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="line-height: normal;">
<a href="https://causeofactionelements.blogspot.com/2018/11/asset-freeze-by-temporary-injunction.html" target="_blank">Asset freeze by temporaryinjunction based on unadjudicated claim for unliquidated damages</a> reversed by
Austin Court of Appeals injunctive-relief. Posted on 11/29/18. <o:p></o:p></div>
<div class="MsoNormal" style="line-height: normal;">
<br /></div>
<div class="MsoNormal" style="line-height: normal;">
<a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/11/did-teri-guaranty-bring-ncslt.html" target="_blank">Did TERI guaranty bring NCSLT-securitized student loans within the non-dischargeability provision ofthe Bankruptcy Code?</a> KEY TERMS: bankruptcy,
dischargeability-of-student-loan-debt, National-Collegiate-Student-Loan-Trusts,
private-student-loans, TERI. Posted on 11/29/18. <o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="line-height: normal;">
Not sad to see Justice Harvey
Brown <i style="mso-bidi-font-style: normal;">et al</i> removed from the
appellate bench in Houston: <a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/11/not-sad-to-see-justice-harvey-brown-et.html" target="_blank">A critical look at the First Court of Appeals'private student loan jurisprudence</a>. KEY WORDS: National-Collegiate-Student-Loan-Trusts,
private-student-loans. Posted on 11/11/18. <o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="line-height: normal;">
<a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/11/nonfamily-cosigner-liable-to-ncslt-on.html" target="_blank">Cosigner liable to National Collegiate Student Loan Trust on private student loan after no-asset bankruptcy discharge, based on TERI guaranty</a> KEY WORDS: bankruptcy., dischargeability-of-student-loan-debt, National-Collegiate-Student-Loan-Trusts,
private-student-loans, TERI. Posted on 11/5/18. <o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="line-height: normal;">
US District <a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/11/us-district-court-in-delaware-okays.html" target="_blank">Court in Delaware okays Odyssey's appointment as additional servicer of NCSLT private student loans</a>, clearing way for sale of defaulted loans. KEY WORDS: National-Collegiate-Student-Loan-Trusts,
private-student-loans, Transworld-System-Inc. Posted on 11/2/18. <o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="line-height: normal;">
<a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/10/cfpb-v-national-collegiate-student-loan.html" target="_blank">Interventions in Enforcement Action of Consumer Financial Protection Bureau vs. National Collegiate Student Loan Trusts finally approved</a>; but where are the parties to the Proposed Consent Judgment
signed in September 2017? KEY WORDS: CFPB, federal-enforcement-actions,
National-Collegiate-Student-Loan-Trusts, PHEAA-AES, private-student-loans,
Transworld-System-Inc. 10/31/18. <o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="line-height: normal;">
Interventions granted in CFPB v
NCSLT Trusts (Oct 19, 2018). KEY WORDS: CFPB,
National-Collegiate-Student-Loan-Trusts, PHEAA-AES, Transworld-System-Inc.
Posted on 10/31/18. <o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="line-height: normal;">
<a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/09/payday-lenders-arbitration-cert-pet-in.html" target="_blank">Payday Lenders & Arbitration:Cert Pet. in Henry v. Cash Biz LP (Tex. 2018)</a> set for SCOTUS Conference Sep.
24, 2018. KEY TERMS: consumer-arbitration, payday-loans-and-lenders, unfair-debt-collection,
waiver-of-right-to-arbitrate. Posted on 9/23/18. <o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="line-height: normal;">
<a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/09/gss-data-services-inc-and-wilmington.html" target="_blank">GSS Data Services, Inc. and Wilmington Trust Company win dismissal of law firm's suit</a> brought against them
in New York over NCSLT-related legal work. KEY WORDS: National-Collegiate-Student-Loan-Trusts,
private-student-loans, Wilmington-Trust-Company. Posted on 9/21/18. <o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="line-height: normal;">
<a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/09/bana-v-lerma-texapp-20018-banks.html" target="_blank">BANA v Lerma</a> (Tex.App. 2018)
<a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/09/bana-v-lerma-texapp-20018-banks.html" target="_blank">Bank's Business Records with Affidavit found untrustworthy</a> for failure to show
payment credit. KEY WORDS: authentication of bank records, Bank-of-America,
business records-exception-to-hearsay, suit-on-credit-card-debt. Posted on 9/16/18.
<o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="line-height: normal;">
<a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/09/taylor-v-discover-bank-tex-app-2018.html" target="_blank">Pitfalls of Consumer Collection Suit Defense in Texas: Taylor v. Discover Bank</a> (Tex. App. - Austin 2018). KEY WORDS; appeal-of-summary-judgment,
contract-formation, credit-card-debt-plaintiffs, credit-card-statements,
Discover-Bank, evidentiary-objections, proof-of-damages. Posted on 9/13/18. <o:p></o:p></div>
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<br /></div>
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<a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/08/how-donald-uderitz-and-ncslt-bond.html" target="_blank">How Donald Uderitz and NCSLT bond investors found friends in post-Harvey Houston</a> while undergoing three haircuts.
KEY TERMS: National-Collegiate-Student-Loan-Trusts, private-student-loans.
Posted on 8/27/18. <o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="line-height: normal;">
<a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/08/motion-to-compel-arbitration-in.html" target="_blank">Motion to Compel Arbitration in Bankruptcy Court Denied</a> (student loan debtor). KEY WORDS: bankruptcy,
dischargeability-of-student-loan-debt, Federal-Arbitration-Act,
motion-to-compel-arbitration, student-loan. Posted on 8/9/18. <o:p></o:p></div>
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<br /></div>
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<a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/07/no-citation-in-courts-file-no-valid.html" target="_blank">No Citation in the Court's file,no Valid Service</a> based merely on Affidavit of Process Server, no Valid Default
Judgment. KEY WORDS: bill-of-review, citation, defective-service-of-citation,
no-answer-default-judgment. Posted on 7/13/18. <o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="line-height: normal;">
<a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/07/leteff-v-roberts-texapp-2018-denial-of.html" target="_blank">Denial of usury damages andattorney's fees in claim based on unpaid usurious loans reversed</a>. <a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/07/leteff-v-roberts-texapp-2018-denial-of.html" target="_blank">Leteff vs. Roberts</a> (Tex.App.- Houston 2018). <a href="http://search.txcourts.gov/SearchMedia.aspx?MediaVersionID=1ec1d3e9-6c19-4a0a-85b2-f10694162882&coa=coa01&DT=Opinion&MediaID=3aebc76b-5593-4710-9502-66cde1f22c18" target="_blank">Leteff v. Roberts d/b/a City Auto Sales</a>, No. <a href="http://www.search.txcourts.gov/Case.aspx?cn=01-17-00398-CV&coa=coa01" target="_blank">01-17-00398-CV</a> (Tex.App. - Houston [1st Dist.] May 22, 2018, no. pet.) (denial of relief under the Texas usury statute reversed and case remanded for further proceedings). KEY WORDS: Texas-Finance-Code,
usury. Posted on 7/12/18.<br />
<o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="line-height: normal;">
<a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/06/deroeck-v-dhm-ventures-llc-no-17-0033.html" target="_blank">Acknowledgement of Debt: TexasSupreme Court Disagrees on Pleading Sufficiency Issue</a>, Reverses: DeRoeck v. DHM
Ventures, LLC, No. 17-0033 (Tex. June 6, 2018). KEY WORDS: acknowledgment-of-debt,
creditor-causes-of-action, statute-of-limitations, Texas-Supreme-Court. Posted
on 6/23/18. <o:p></o:p></div>
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<br /></div>
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<a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/06/cfpb-found-unconstitutionally.html" target="_blank">CFPB found unconstitutionally structured and incapable of pursuing enforcement action</a> in New York [here is
the link to the opinion order]. KEY WORDS: CFPB, federal consumer protection enforcement.
Posted on 6/22/18. <o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="line-height: normal;">
<a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/06/texas-attorney-joseph-onwuteaka-debt.html" target="_blank">Joseph Onwuteaka, attorney anddebt collector for his own debt-buying company loses another appeal in an FDCPAcase</a> over his practice of suing consumers in the wrong county. KEY WORDS; FDCPA,
unfair-debt-collection, venue-violations, collection lawsuit in wrong-venue.
Posted on 6/19/18. <o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="line-height: normal;">
<a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/06/fifth-circuit-tells-pro-se-foreclosure.html" target="_blank">Fifth Circuit tells pro seforeclosure plaintiffs in 2nd appeal that their claims shall remain in federalcourt after removal from state court</a>. KEY WORDS: FDCPA, foreclosure,
removal-to-federal-court, pro se litigants. Posted on 6/18/18. <o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="line-height: normal;">
<a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/06/prolific-fdcpa-violator-taken-to-task.html" target="_blank">Prolific FDCPA Violator taken totask: Infante v. Law Office of Joseph Onwuteaka, P.C.</a> (5th Cir. May 31, 2018).
KEY WORDS: debt-collection-lawyers, FDCPA, venue-violations. Posted on 6/2/18. <o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="line-height: normal;">
<a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/05/wilmington-trust-na-v-rob-5th-cir-2018.html" target="_blank">Fifth Circuit recognizes that acceleration of maturity is a harsh remedy, and that equitable constraintsapply</a>: <a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/05/wilmington-trust-na-v-rob-5th-cir-2018.html" target="_blank">Wilmington Trust, N.A. v. Rob (5th Cir. 2018)</a>. KEY WORDS: acceleration-of-loan-maturity,
foreclosure, notice-of-acceleration, notice-of-intent-to-accelerate, opportunity-to-cure-default.
Posted on 5/28/18. <o:p></o:p></div>
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<br /></div>
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Update on <a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/05/delaware-usdc-magistrate-okays-odysseys.html" target="_blank">Wrangle over NC TrustAsset Control: Delaware USDC Magistrate okays Odyssey's designation as servicer of 6 National Collegiate Student Loan Trusts</a> in row between Indenture Trustee U.S. Bank and NCSLT trust
certificate owners; overrules all of US Bank's objections National-Collegiate-Student-Loan-Trusts,
student-loan-servicing. KEY WORDS: NCSLT, Transworld-System-Inc, SLABS, private
student loans. . Posted on 5/7/18. <o:p></o:p></div>
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<br /></div>
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<a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/04/may-student-loan-trust-sue-in-its-own.html" target="_blank">May Student Loan Trust sue in itsown name?</a> It may depend on state law - NCSLT 2006-3 v Poole, KEY TERMS: capacity-to-sue,
National-Collegiate-Student-Loan-Trusts, right-of-sue-as-assignee,
standing-to-sue-issue, private student loans. Posted on 4/29/18.</div>
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<br /></div>
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<i>Redemptio ex machina</i> for
Transworld Systems Inc.: <a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/04/foster-v-national-collegiate-student.html" target="_blank">TSI Affidavit Machine Receives Judicial Bailout inTexas</a>; did not even have to pray for it, not being a party - Ladanta Foster v. National Collegiate Student Loan Trust 2007-4. KEY WORDS: admission-exclusion-of-evidence,
business records-exception-to-hearsay, evidentiary-objections,
National-Collegiate-Student-Loan-Trusts, private-student-loans,
Transworld-System-Inc. Posted on 4/5/18. <o:p></o:p></div>
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<br /></div>
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<a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/04/how-not-to-waste-400-fighting-repo-man.html" target="_blank">How (not) to waste $400 fighting the repo man</a> - U.S Magistrate Judge explains requirements for bringing consumer
action in federal court, dismisses pro se complaint without prejudice. KEY
WORDS: FDCPA, pro se litigants. Posted on 4/4/18. <o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="line-height: normal;">
<a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/04/cfpb-status-report-on-enforcement.html" target="_blank">CFPB Status Report on Enforcement Actions against NCSLT and TSI</a>. KEY WORDS: federal-enforcement-actions,
National-Collegiate-Student-Loan-Trusts, private-student-loans,
Transworld-System-Inc. Posted on 4/3/18. <o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="line-height: normal;">
<a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/04/mulvaneys-half-year-report-to-congress.html" target="_blank">Mulvaney's Mid-FY Report to Congress: Push to Dismantle CFPB's Independence and to Curtail its Consumer Protection Mission</a> Continues. CFPB, federal consumer protection laws and
enforcement. Posted on 4/2/18. <o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="line-height: normal;">
<a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/03/access-group-inc-loans-taken-out-to-pay.html" target="_blank">Access Group loans taken out topay for law school generally not subject to discharge in Bankruptcy</a> §
523(a)(8)(A). KEY TERMS: bankruptcy, student-loan. Posted on 3/27/18. <o:p></o:p></div>
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<br /></div>
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Seeing No Evil: <a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/03/see-no-evil-texas-supreme-court-blesses.html" target="_blank">Texas Supreme Court approves diversion of lawsuit against payday lender over egregious criminal collection tactics into private arbitration</a>. <a href="https://debt-suit-litigation-in-texas.blogspot.com/2018/03/see-no-evil-texas-supreme-court-blesses.html" target="_blank">Henry v. Cash Biz, LP</a>,
551 S.W.3d 111 (Tex. 2018). KEY TERMS: consumer-arbitration,
criminal-aspects-of-debt, motion-to-compel-arbitration,
payday-loans-and-lenders, waiver-of-right-to-arbitrate. Posted on 3/26/18. <o:p></o:p></div>
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<b><span style="color: red;">NEW AND UPDATED PAGES:</span></b></div>
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Appealing Pro Se in Texas: Not so Appealing </div>
<br />
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<a href="https://debt-suit-litigation-in-texas.blogspot.com/p/sample-briefs.html" target="_blank">Sample Appellate Briefs</a> </div>
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<a href="https://debt-suit-litigation-in-texas.blogspot.com/p/debt-suit-who-is-who-original-creditors.html" target="_blank">FDCPA vs TDCA </a></div>
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<a href="https://debt-suit-litigation-in-texas.blogspot.com/p/debt-suit-who-is-who-original-creditors.html" target="_blank">Who is Who in Debt Collection in Texas</a> </div>
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<a href="https://debt-suit-litigation-in-texas.blogspot.com/p/ncslt.html" target="_blank">National Collegiate Student Loan Trusts Appellate Litigation in Texas</a> </div>
<div>
<a href="https://debt-suit-litigation-in-texas.blogspot.com/p/blog-page.html" target="_blank">National Collegiate Student Loan Trusts Links to SEC Documents</a><br />
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<br />MOTPhttp://www.blogger.com/profile/15883011307129083993noreply@blogger.com0tag:blogger.com,1999:blog-9105536336033560224.post-20664034894082052342018-12-30T22:17:00.000-08:002018-12-31T15:44:56.349-08:00Illinois Court of Appeals implores Legislature to change law to provide for wage-garnishment relief, finding itself constrained to exercise discretion in extreme hardship cases <span style="font-size: x-small;"> National Collegiate Student Loan Trust 2004-1 v. Ogunbibi, No. 1-17-08612018 IL App (1st) 170861 (December 24, 2018)</span><br />
<blockquote class="tr_bq">
The legislature, in 2007, decided to take 15% of wages, regardless of the extreme hardship such a loss will impose on many persons. Because the legislature explicitly eliminated judicial discretion in the determination of the amount to deduct from wages, we must reverse the circuit court’s order and remand for further proceedings in accord with this opinion. </blockquote>
<blockquote class="tr_bq">
Recognizing the limited role of the courts, constrained to give effect to the clear intent of the legislature, we must reverse the circuit court’s order and remand for further proceedings on the application for a wage deduction order. We implore the legislature to consider its amendment to section 12-803 and to adopt a statute similar to section 5240 of the New York Civil Practice Law and Rules (N.Y. C.P.L.R. 5240 (McKinney 2016)).</blockquote>
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2018 IL App (1st) 170861</div>
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No. 1-17-0861<o:p></o:p></div>
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December 24, 2018<o:p></o:p></div>
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FIRST DIVISION<o:p></o:p></div>
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IN THE APPELLATE
COURT OF ILLINOIS<o:p></o:p></div>
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FIRST DISTRICT<o:p></o:p></div>
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NATIONAL COLLEGIATE
STUDENT LOAN TRUST 2004-1 VS. DEBORAH OGUNBIYI and EMMANUEL OGUNBIYI<o:p></o:p></div>
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Appeal from the
Circuit Court of Cook County.</div>
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No. 11 M6 004634<o:p></o:p></div>
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JUSTICE WALKER delivered the judgment of the court, with
opinion.<o:p></o:p></div>
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Presiding Justice Mikva and Justice Griffin concurred in the
judgment and opinion.<o:p></o:p></div>
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<b><span style="color: #4472c4; mso-themecolor: accent1;"><br /></span></b></div>
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<b><span style="color: #4472c4; mso-themecolor: accent1;">OPINION<o:p></o:p></span></b></div>
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Deborah Ogunbiyi (Deborah) did not repay her student
loans. When she found a job<o:p></o:p></div>
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paying $573.35 per week, the note holder sought an order
garnishing 15% of her pretax<o:p></o:p></div>
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income. The Cook County circuit court found that the
garnishment would impose excessive<o:p></o:p></div>
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hardship on Deborah and ordered Deborah to pay $100 per
month until she paid off the debt.<o:p></o:p></div>
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The note holder appeals. We find that the legislature
expressly disallowed the exercise of<o:p></o:p></div>
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judicial discretion in ordering wage garnishment, even in
cases of extreme hardship. We <o:p></o:p></div>
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reverse the circuit court’s order and remand for further
proceedings on the application for a<o:p></o:p></div>
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wage deduction order.<o:p></o:p></div>
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<b><span style="color: #4472c4; mso-themecolor: accent1;">BACKGROUND<o:p></o:p></span></b></div>
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In 2004 Charter One Bank loaned Deborah $8000 for her
enrollment at Lincoln College.<o:p></o:p></div>
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Emmanuel Ogunbiyi (Emmanuel) cosigned the loan. In December
2011, National Collegiate<o:p></o:p></div>
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Student Loan Trust 2004-1 (Trust) filed a complaint against
Deborah and Emmanuel,<o:p></o:p></div>
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alleging that Deborah and Emmanuel defaulted on the loan,
and that Charter One sold its<o:p></o:p></div>
<div class="MsoNormal">
interest in the loan to the Trust. The Trust sought to
recover more than $10,000 for the note.<o:p></o:p></div>
<div class="MsoNormal">
Deborah and Emmanuel were self-represented, but they filed
no answer to the complaint. In<o:p></o:p></div>
<div class="MsoNormal">
2012 the circuit court entered a default order against
Deborah and Emmanuel, finding that<o:p></o:p></div>
<div class="MsoNormal">
they owed $10,472.91 as of the date of the order. The court
subsequently entered an agreed<o:p></o:p></div>
<div class="MsoNormal">
judgment including a payment schedule.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In November 2016 the Trust sent to Enova International,
Inc., a wage deduction notice,<o:p></o:p></div>
<div class="MsoNormal">
informing Enova that the Trust would ask the circuit court
to enter a judgment against Enova<o:p></o:p></div>
<div class="MsoNormal">
for the garnishable wages Enova owed to Deborah. An attorney
for the Trust certified that<o:p></o:p></div>
<div class="MsoNormal">
Deborah and Emmanuel repaid only $150 of the debt, which had
grown to $14,529.65. The<o:p></o:p></div>
<div class="MsoNormal">
Trust filed a document asserting that Deborah earned $14.25
per hour working for Enova, for<o:p></o:p></div>
<div class="MsoNormal">
a total of $1146.70 in gross earnings for every two-week pay
period. After taxes, Deborah<o:p></o:p></div>
<div class="MsoNormal">
received $1013.15 every paycheck, if she took no time off.
The Trust asserted that the Code<o:p></o:p></div>
<div class="MsoNormal">
of Civil Procedure established its right to receive $172.01
($1146.70 x 0.15) from each<o:p></o:p></div>
<div class="MsoNormal">
paycheck. The deduction would leave Deborah with $841.14
($1013.15 – $172.01) each pay<o:p></o:p></div>
<div class="MsoNormal">
period, for $21,869.64 per year ($841.14 x 26), if she took
no time off.<o:p></o:p></div>
<div class="MsoNormal" style="text-align: center;">
2 <o:p></o:p></div>
<div class="MsoNormal">
Deborah appeared in court and persuaded the court that
the wage deduction would<o:p></o:p></div>
<div class="MsoNormal">
impose excessive hardship on her. The trial court entered an
order, dated January 31, 2017,<o:p></o:p></div>
<div class="MsoNormal">
dismissing the wage deduction action against Enova and
directing Enova to “cease all<o:p></o:p></div>
<div class="MsoNormal">
withholdings and release” to Deborah her earnings.<o:p></o:p></div>
<div class="MsoNormal">
The Trust filed a motion to vacate the dismissal of the
wage deduction complaint. The<o:p></o:p></div>
<div class="MsoNormal">
Trust asserted that hardship could not provide grounds for
the court to dismiss the complaint.<o:p></o:p></div>
<div class="MsoNormal">
The trial court denied the motion to vacate and ordered
Deborah to pay the Trust $100 per<o:p></o:p></div>
<div class="MsoNormal">
month until she paid off the loan. The Trust filed a notice
of appeal.<o:p></o:p></div>
<div class="MsoNormal">
<b><span style="color: #4472c4; mso-themecolor: accent1;"><br /></span></b></div>
<div class="MsoNormal">
<b><span style="color: #4472c4; mso-themecolor: accent1;"> ANALYSIS<o:p></o:p></span></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The Trust argues on appeal only that the statute
mandates garnishment of $172.01 from<o:p></o:p></div>
<div class="MsoNormal">
every one of Deborah’s paychecks, regardless of hardship.
The Trust did not include in the<o:p></o:p></div>
<div class="MsoNormal">
record on appeal a transcript of the hearing at which
Deborah persuaded the court that the<o:p></o:p></div>
<div class="MsoNormal">
15% deduction from her gross income will cause her economic
hardship. On this record, the<o:p></o:p></div>
<div class="MsoNormal">
Trust cannot contest the trial court’s factual finding that
the garnishment of the maximum<o:p></o:p></div>
<div class="MsoNormal">
amount permitted by the statute will cause Deborah undue
hardship.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
We review the court’s interpretation of the statute de
novo. Revolution Portfolio, LLC v.<o:p></o:p></div>
<div class="MsoNormal">
Beale, 332 Ill. App. 3d 595, 600 (2002). The Trust relies
solely on the language of the<o:p></o:p></div>
<div class="MsoNormal">
statute. The Trust cites no case that supports its assertion
that the court lacks authority to take<o:p></o:p></div>
<div class="MsoNormal">
into account the hardship court orders will impose on
litigants. The Trust did not mention a<o:p></o:p></div>
<div class="MsoNormal">
significant change in the wording of the statute.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Until 2007, section 12-803 of the Code of Civil
Procedure provided that “The maximum<o:p></o:p></div>
<div class="MsoNormal">
wages *** subject to collection under a deduction order”
could not exceed 15% of the<o:p></o:p></div>
<div class="MsoNormal" style="text-align: center;">
3 <o:p></o:p></div>
<div class="MsoNormal">
employee’s gross pay, and the deduction order had to leave
the employee with at least 45<o:p></o:p></div>
<div class="MsoNormal">
times the federal minimum hourly wage each week. 735 ILCS
5/12-803 (West 2006). In<o:p></o:p></div>
<div class="MsoNormal">
2007, the General Assembly enacted Public Act 95-661 (eff.
Jan. 1, 2008), which amended<o:p></o:p></div>
<div class="MsoNormal">
several statutes. The Act eliminated from section 12-803 the
word “maximum,” so that “[t]he<o:p></o:p></div>
<div class="MsoNormal">
wages *** subject to collection under a deduction order”
could not exceed either limit<o:p></o:p></div>
<div class="MsoNormal">
previously imposed. Id.; 735 ILCS 5/12-803 (West 2016). The
governor issued an<o:p></o:p></div>
<div class="MsoNormal">
amendatory veto, specifically asking the legislature to put
the word “maximum” back into<o:p></o:p></div>
<div class="MsoNormal">
section 12-803.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
On October 10, 2007, the Illinois Senate voted to
override the amendatory veto. 95th Ill.<o:p></o:p></div>
<div class="MsoNormal">
Gen. Assem., Senate Proceedings, Oct. 10, 2007, at 30-31. On
October 11, the Illinois House<o:p></o:p></div>
<div class="MsoNormal">
considered the same veto. The transcript of House debates
shows the following discussion:<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
“[Representative] Feigenholtz: *** In this legislation you
have… you removed<o:p></o:p></div>
<div class="MsoNormal">
the word ‘maximum’ in the underlying Bill in the language.
Is that correct?<o:p></o:p></div>
<div class="MsoNormal">
[Representative] Mathias: That’s correct.<o:p></o:p></div>
<div class="MsoNormal">
Feigenholtz: So, right now, judges have discretion when
deciding how much<o:p></o:p></div>
<div class="MsoNormal">
wages are to be garnished. Is that correct?<o:p></o:p></div>
<div class="MsoNormal">
Mathias: *** [O]ne (1) judge in particular in Cook County
*** interpreted that<o:p></o:p></div>
<div class="MsoNormal">
that he could, in effect, not follow the percentage that’s
listed in the law and lower<o:p></o:p></div>
<div class="MsoNormal">
that percentage and basically, that’s what we’re trying to
correct. I believe it was the<o:p></o:p></div>
<div class="MsoNormal">
original intent of the Bill to make it a set amount ***.<o:p></o:p></div>
<div class="MsoNormal">
* * *<o:p></o:p></div>
<div class="MsoNormal" style="text-align: center;">
4 <o:p></o:p></div>
<div class="MsoNormal">
Feigenholtz: So, in current statute and also the intent of
this Bill is to continue<o:p></o:p></div>
<div class="MsoNormal">
under those circumstances that are unique to allow certain
discretions for the<o:p></o:p></div>
<div class="MsoNormal">
judiciary. Is that true? ***<o:p></o:p></div>
<div class="MsoNormal">
Mathias: The exemption is not discretionary. ***<o:p></o:p></div>
<div class="MsoNormal">
Feigenholtz: So, is what you’re saying that judges will
still have the flexibility in<o:p></o:p></div>
<div class="MsoNormal">
hardship cases to order a smaller percentage of garnishment?<o:p></o:p></div>
<div class="MsoNormal">
Mathias: No that isn’t correct ***.<o:p></o:p></div>
<div class="MsoNormal">
Feigenholtz: But if the life circumstances of the *** person
whose wages are to<o:p></o:p></div>
<div class="MsoNormal">
be garnished change, they have an opportunity to go back to
the judge?<o:p></o:p></div>
<div class="MsoNormal">
Mathias: No, they do not.<o:p></o:p></div>
<div class="MsoNormal">
Feigenholtz: So… so, for instance, if a father of *** seven
(7) children who ***<o:p></o:p></div>
<div class="MsoNormal">
has to provide a lot of support for a family, they’re not
allowed to go back to court?<o:p></o:p></div>
<div class="MsoNormal">
*** I’m a little concerned that there are going to be some,
a few situations, a few<o:p></o:p></div>
<div class="MsoNormal">
hardship cases, where a smaller percentage of garnishment
might be more livable.<o:p></o:p></div>
<div class="MsoNormal">
Mathias: Again, if someone’s wages go below the formula in
the Bill, then they<o:p></o:p></div>
<div class="MsoNormal">
would not have any of their wages *** deducted. These,
again, if they do not meet<o:p></o:p></div>
<div class="MsoNormal">
that criteria, then the law is followed.<o:p></o:p></div>
<div class="MsoNormal">
Feigenholtz: And it doesn’t have anything to do with how big
their family is, the<o:p></o:p></div>
<div class="MsoNormal">
federal poverty level rate, the only mathematical
calculation is forty-five (45) times<o:p></o:p></div>
<div class="MsoNormal">
[federal] minimum wage?<o:p></o:p></div>
<div class="MsoNormal">
Mathias: Yeah. ***<o:p></o:p></div>
<div class="MsoNormal" style="text-align: center;">
5 <o:p></o:p></div>
<div class="MsoNormal">
* * *<o:p></o:p></div>
<div class="MsoNormal">
[Representative] Lang: *** [T]o not override this Veto is to
say that people don’t<o:p></o:p></div>
<div class="MsoNormal">
have to pay their bills. To not override this Veto means
that you’re saying to<o:p></o:p></div>
<div class="MsoNormal">
businesses, well, maybe you’ll collect the money people owe
you, maybe you won’t.<o:p></o:p></div>
<div class="MsoNormal">
To not override the Veto says that we’re going to allow
judges their own discretion<o:p></o:p></div>
<div class="MsoNormal">
as to who’s going to pay their bills and who is not. *** The
wage deduction laws<o:p></o:p></div>
<div class="MsoNormal">
allow creditors *** a deduction of a small amount from a
weekly wage to recover the<o:p></o:p></div>
<div class="MsoNormal">
money owed. The size of the person’s family is *** not
important because if you buy<o:p></o:p></div>
<div class="MsoNormal">
a TV and you don’t pay it back whether you’ve got twelve
(12) children or no<o:p></o:p></div>
<div class="MsoNormal">
children, you should pay back the money for the TV you
bought. If we don’t do this,<o:p></o:p></div>
<div class="MsoNormal">
we’re going to continue to have judges who decide on their
own who pays what,<o:p></o:p></div>
<div class="MsoNormal">
under what circumstances they pay it. ***<o:p></o:p></div>
<div class="MsoNormal">
* * *<o:p></o:p></div>
<div class="MsoNormal">
[Representative] Turner: So, if you were to summarize what
we’re doing with<o:p></o:p></div>
<div class="MsoNormal">
this Bill, it pretty much is dealing with the issue of
judicial discretion. Am I correct?<o:p></o:p></div>
<div class="MsoNormal">
Mathias: Yes. ***<o:p></o:p></div>
<div class="MsoNormal">
* * *<o:p></o:p></div>
<div class="MsoNormal">
[Representative] Davis, M.: *** I think that if a person
owes a debt he should be<o:p></o:p></div>
<div class="MsoNormal">
responsible for paying it, but I do not believe there should
be no consideration for his<o:p></o:p></div>
<div class="MsoNormal">
other responsibilities, a new family, college students, a
baby that’s ill. *** [T]here<o:p></o:p></div>
<div class="MsoNormal">
are many considerations and I really like the law currently
that allows a judge to<o:p></o:p></div>
<div class="MsoNormal">
make a determination of should it be a 15 percent deduction,
a zero, a 1 percent, a 2<o:p></o:p></div>
<div class="MsoNormal" style="text-align: center;">
6 <o:p></o:p></div>
<div class="MsoNormal">
percent. I don’t like the idea of someone settling how much
it should be before they<o:p></o:p></div>
<div class="MsoNormal">
know any of the circumstances. *** This is a Bill to help
someone else, but it is not<o:p></o:p></div>
<div class="MsoNormal">
to help constituents or working people in the State of
Illinois.” 95th Ill. Gen. Assem.,<o:p></o:p></div>
<div class="MsoNormal">
House Proceedings, Oct. 11, 2007, at 100-14.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Ninety-two representatives voted to override the veto.
Only nine voted to sustain it. Id. at<o:p></o:p></div>
<div class="MsoNormal">
115.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
We have found no Illinois case deciding whether section
12-803, prior to 2007, permitted<o:p></o:p></div>
<div class="MsoNormal">
the circuit court to exercise discretion to order
garnishment of an amount less than the<o:p></o:p></div>
<div class="MsoNormal">
maximum set by section 12-803. Courts in other jurisdictions
interpreting similar statutes<o:p></o:p></div>
<div class="MsoNormal">
held that the garnishment statutes set only an upper limit
on garnishable wages, and courts<o:p></o:p></div>
<div class="MsoNormal">
had discretion to order garnishment of lesser amounts while
still requiring repayment of the<o:p></o:p></div>
<div class="MsoNormal">
entire debt. See, e.g., Fishler v. Fishler, 63 N.Y.S.3d 445,
447-48 (N.Y. App. Div. 2017);<o:p></o:p></div>
<div class="MsoNormal">
Gerber v. Holcomb, No. W2005-02794-COA-R3-CV, 2006 WL
3019731, at *2-3 (Tenn. Ct.<o:p></o:p></div>
<div class="MsoNormal">
App. Oct. 25, 2006); Thompson v. Dehne, 2009-NMCA-120, ¶¶
19-20, 147 N.M. 283, 220<o:p></o:p></div>
<div class="MsoNormal">
P.3d 1132; In re Chambers, 5 S.W.3d 341, 343 (Tex. Ct. App.
1999). By removing the word<o:p></o:p></div>
<div class="MsoNormal">
“maximum” from the statute, the legislature showed its
intent to deny the courts the<o:p></o:p></div>
<div class="MsoNormal">
discretion to enter a wage deduction order in an amount less
than the amount set by section<o:p></o:p></div>
<div class="MsoNormal">
12-803.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The circuit court here did not enter a wage deduction
order in a lesser amount. The court<o:p></o:p></div>
<div class="MsoNormal">
entered an order (1) denying the motion for a wage deduction
order and (2) dismissing Enova<o:p></o:p></div>
<div class="MsoNormal">
from the case, with the admonishment that Enova must
continue paying Deborah her aftertax wages. The court then ordered Deborah to
pay the Trust $100 per month to pay off her<o:p></o:p></div>
<div class="MsoNormal" style="text-align: center;">
7 <o:p></o:p></div>
<div class="MsoNormal">
student loans. Courts in other jurisdictions have entered
similar orders denying wage<o:p></o:p></div>
<div class="MsoNormal">
garnishments while directing the judgment debtor to adhere
to a payment schedule set by the<o:p></o:p></div>
<div class="MsoNormal">
court. See American Acceptance Co. v. Willis, 984 N.E.2d
653, 655 (Ind. Ct. App. 2013);<o:p></o:p></div>
<div class="MsoNormal">
Warner Bros. Records Inc. v. Patnode, No. 2:06-CV-160, 2010
WL 431908, *1 (W.D. Mich.<o:p></o:p></div>
<div class="MsoNormal">
Feb 5., 2010); M.M. v. T.M., 17 N.Y.S.3d 588, 599-600 (N.Y.
Sup. Ct. 2015).<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The M.M. court found that it had “broad discretion to
regulate the enforcement of a<o:p></o:p></div>
<div class="MsoNormal">
money judgment to prevent unreasonable annoyance, expense,
embarrassment, disadvantage,<o:p></o:p></div>
<div class="MsoNormal">
or other prejudice to any person or the courts.” M.M., 17
N.Y.S.3d at 600. A New York<o:p></o:p></div>
<div class="MsoNormal">
statute provides, “The court may at any time, on its own
initiative or the motion of any<o:p></o:p></div>
<div class="MsoNormal">
interested person, and upon such notice as it may require,
make an order denying, limiting,<o:p></o:p></div>
<div class="MsoNormal">
conditioning, regulating, extending or modifying the use of
any enforcement procedure.”<o:p></o:p></div>
<div class="MsoNormal">
N.Y. C.P.L.R. 5240 (McKinney 2016). We find no similar
statute in Illinois. Section 12<o:p></o:p></div>
<div class="MsoNormal">
808(e) of the Code of Civil Procedure apparently disallows
the exercise of judicial discretion,<o:p></o:p></div>
<div class="MsoNormal">
as it states that, upon proof of the debt and the lack of
any proof of the extremely limited<o:p></o:p></div>
<div class="MsoNormal">
grounds for denying wage deduction, “an order shall be entered
compelling the employer to<o:p></o:p></div>
<div class="MsoNormal">
deduct from wages of the judgment debtor *** an amount which
is” the amount set by<o:p></o:p></div>
<div class="MsoNormal">
section 12-803. 735 ILCS 5/12-808(e) (West 2016). Public Act
95-661 also amended section<o:p></o:p></div>
<div class="MsoNormal">
12-808(e), which, prior to 2007, said the deduction order
must set an “amount not to exceed”<o:p></o:p></div>
<div class="MsoNormal">
the amount set by section 12-803. Compare 735 ILCS
5/12-808(e) (West 2006), with 735<o:p></o:p></div>
<div class="MsoNormal">
ILCS 5/12-808(e) (West 2016).<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
We hold
that the wage deduction provisions of the Code of Civil Procedure leave the<o:p></o:p></div>
<div class="MsoNormal">
circuit court no discretion to deny a request for a wage
deduction order on grounds of<o:p></o:p></div>
<div class="MsoNormal" style="text-align: center;">
8 <o:p></o:p></div>
<div class="MsoNormal">
extreme hardship. We commend Judge Panozzo’s consideration
of the equities that should<o:p></o:p></div>
<div class="MsoNormal">
determine the amounts taken from a debtor and the time
allotted for repayment of a debt.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Recognizing the limited role of the courts, constrained
to give effect to the clear intent of<o:p></o:p></div>
<div class="MsoNormal">
the legislature, we must reverse the circuit court’s order
and remand for further proceedings<o:p></o:p></div>
<div class="MsoNormal">
on the application for a wage deduction order. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
We implore
the legislature to consider its amendment to section 12-803 and to adopt </div>
<div class="MsoNormal">
statute similar
to section 5240 of the New York Civil Practice Law and Rules </div>
<div class="MsoNormal">
(N.Y. C.P.L.R. 5240 (McKinney
2016)).</div>
<div class="MsoNormal">
<o:p></o:p></div>
<div class="MsoNormal">
<b><span style="color: #4472c4; mso-themecolor: accent1;"><br /></span></b></div>
<div class="MsoNormal">
<b><span style="color: #4472c4; mso-themecolor: accent1;">CONCLUSION<o:p></o:p></span></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The legislature, in 2007, decided to take 15% of wages,
regardless of the extreme</div>
<div class="MsoNormal">
<o:p></o:p></div>
<div class="MsoNormal">
hardship such a loss will impose on many persons. Because
the legislature explicitly<o:p></o:p></div>
<div class="MsoNormal">
eliminated judicial discretion in the determination of the
amount to deduct from wages, we<o:p></o:p></div>
<div class="MsoNormal">
must reverse the circuit court’s order and remand for
further proceedings in accord with this<o:p></o:p></div>
<div class="MsoNormal">
opinion.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Reversed and remanded.<o:p></o:p></div>
<br />
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: center;">
9</div>
MOTPhttp://www.blogger.com/profile/15883011307129083993noreply@blogger.com0tag:blogger.com,1999:blog-9105536336033560224.post-16925261897250148782018-12-25T03:00:00.000-08:002019-01-01T10:49:35.572-08:00Not So Jolly Is the Season: Discover Bank's lawyers in Texas move to strike Pro Bono Amicus Brief submitted in support of Pro-Se Debtor who had trouble putting together a proper appellate brief of his own <div style="text-align: center;">
<b><span style="color: #3d85c6;">Goddamn v. Discover Bank: </span></b></div>
<div style="text-align: center;">
<span style="color: #3d85c6;"><b>Pro Bono meets the Grinch, </b><b>or was it Ebenezer Scrooge? Shylock? </b></span></div>
<div style="text-align: center;">
<b><br /></b></div>
<div style="text-align: center;">
<span style="color: #cc0000; font-size: large;"><b>PROSAIC PEDESTRIAN PROSE & JUDGE POSNER</b></span></div>
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgkuinsPlLd73q_dNOQ_JbqcA-siPEUR7GAYxveTSqeTzsXJqMatCadxW9Kq0xXuOOqiJ47X0t0bzUj7uI3nqbLInESU19wzddiIWEXerwRrIPZxA-zLI_RJCG0Yc44B7gqmL1jTPEy9fiZ/s1600/05-17-01442-CV+Discover+Bank%2527s+Motion+to+Refuse+Amicus+Brief.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img alt="Discover Bank's Motion to Strike Pro Bono Amicus Curiae Brief in Dallas Court of Appeals " border="0" data-original-height="848" data-original-width="921" height="367" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgkuinsPlLd73q_dNOQ_JbqcA-siPEUR7GAYxveTSqeTzsXJqMatCadxW9Kq0xXuOOqiJ47X0t0bzUj7uI3nqbLInESU19wzddiIWEXerwRrIPZxA-zLI_RJCG0Yc44B7gqmL1jTPEy9fiZ/s400/05-17-01442-CV+Discover+Bank%2527s+Motion+to+Refuse+Amicus+Brief.JPG" title="Discover Bank's Motion to Strike Pro Bono Amicus Curiae Brief in Dallas Court of Appeals " width="400" /></a></div>
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<a href="http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=322d1a6d-9729-4b07-b93f-fccb89a9edf2&coa=coa05&DT=Motion&MediaID=774fa37e-df15-41af-bc5d-6cd77e286e7e" target="_blank">Discover Bank's motion to strike pro bono amicus brief</a> </div>
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WL Cite for <a href="http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=6d98eeb2-877c-4f60-8d55-8d67c6a3bf69&coa=coa05&DT=Brief&MediaID=65b14a77-2f55-4962-bcc4-898a10686472" target="_blank">Pro Bono Amicus Brief in Discover Bank credit card case</a>: </div>
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2018 WL 6334674 (Tex.App.-Dallas) (Appellate Brief)</div>
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Appealing from summary judgment against him, Discover Bank credit card judgment debtor filed <i>tale-of-woe</i> brief in all-Republican state Court of Appeals in Dallas (the Other Fifth Court of Appeals) and had it duly found fault with for formal deficiencies.<br />
<br />
Pro Se litigants cannot, after all, be treated differently. Appropriately monickered TRAPs (Texas Rules of Appellate Procedure) must be complied with. If unrepresented litigants were cut a slack, duly licensed Texas lawyers would suffer an unfair disadvantage, and litigants would be encouraged to forgo their precious right to retain an attorney of their choice (that they cannot afford anyhow).<br />
<br />
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<b><span style="color: #cc0000;">NOT A SCINTILLA OF SYMPATHY</span></b></div>
<br />
Gleefully, Discover Bank's Texas-licensed lawyers then filed a <a href="http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=3a0ba7c8-d32d-4700-bc5f-feabc2974b93&coa=coa05&DT=Motion&MediaID=09844f6d-b692-429c-a1df-ee836798e573" target="_blank">motion to dismiss the <i>pro se</i> appeal</a> with prejudice (whatever that means when there is no chance of refiling a notice of appeal anyhow) because debtor Goddamn had not figured out how to file a compliant brief and had gone silent after having requested oral argument together with his defective submission:<br />
<br />
Actual face time with appellate judges is an obvious no-go for a <i>pro se</i> on appeal. A self-represented litigant, of course, wouldn't know that.<br />
<br />
In the meantime, an amicus curiae out of nowhere [identity redacted to protect protagonists in the no-good-deed-must-go-unpunished serial] had filed what purports to be a compliant brief in support of the Appellant, and had included in his TRAP 11 Statement (Amicus Curiae Disclosure) a provision that the <i>pro se</i> appellant was free to adopt the amicus brief or any portion of it as his own if he wised to do so.<br />
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<br /></div>
Discover Bank's lawyers then filed a motion to strike the amicus brief based on the argument that (1) the amicus had no stake in the matter (i.e., no standing), as if that mattered in a charity case, and (2) that the amicus was just duplicating what the appellants' arguments <i>would be</i> (which was sort of the point, since the appellant had obvious difficulty in putting together a proper brief of his own).<br />
<br />
To further fill the kitchen sink, Discover Bank averred that the amicus effort appeared to be just an academic exercise, and that it amounted to an improper bid to evade the word limit. Duh! If the court of appeals was not going to consider the pro se brief at all because it was not in proper legalese and wasn't properly formatted, the word count would be a clean and tidy 0. And the amicus brief came in at about 1/2 of the 15K limit. Not to mention that the word limit for an amicus under the Texas appellate rules is also 15,000 (like for any party), and is not charged to either party's limit.<br />
<br />
The ultimate irony is this: Discover Bank invoked the authority of Judge Posner in its bid to quash the amicus brief. The very same Judge Posner who just happened to write a book (actually several) on the plight of pro-se litigants, after stepping down from the federal bench, not to mention having opened a center which he calls<br />
<br />
<div style="text-align: center;">
<b><span style="font-size: large;"><a href="http://www.justice-for-pro-ses.org/" target="_blank">Posner Center for Justice for ProSe's</a> </span></b></div>
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Hopefully, one day Discover Bank will discover whose aid it sought in its unworthy effort to suppress an appeal on the merits by an out-of-luck defendant who couldn't afford a lawyer.<br />
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Here is the Dallas COA's diagnosis of how pro-se Appellant Goddamn failed to measure up under the Court's defect-in-form checklist:<br />
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<br />
RE: Court of Appeals Number: 05-17-01442-CV<br />
Trial Court Case Number: CC-17-00971-B<br />
<br />
The appellant's brief filed in the above referenced cause does not satisfy the requirements<br />
of Rule 38 of the Texas Rules of Appellate Procedure. Specifically, the brief is deficient as<br />
follows:<br />
<br />
_____ It does not contain a complete list of all parties to the trial courts’ judgment or appealable<br />
order with the names and addresses of all trial and appellate counsel. TEX. R. APP. P.<br />
38.1(a).<br />
__X__ It does not contain a table of contents with references to the pages of the brief. TEX. R.<br />
APP. P. 38.1(b).<br />
__X__ The table of contents does not indicate the subject matter of each issue or point, or group<br />
of issues or points. TEX. R. APP. P. 38.1(b).<br />
__X__ It does not contain an index of authorities arranged alphabetically and indicating the<br />
pages of the brief where the authorities are cited. TEX. R. APP. P. 38.1(c).<br />
__X__ It does not contain a concise statement of the case, the course of proceedings, and the trial<br />
court’s disposition of the case supported by record references. TEX. R. APP. P. 38.1(d).<br />
__X__ It does not concisely state all issues or points presented for review. TEX. R. APP. P.<br />
38.1(f).<br />
__X__ It does not contain a concise statement of the facts supported by record references. TEX.<br />
R. APP. P. 38.1(g).<br />
__X__ It does not contain a succinct, clear, and accurate statement of the arguments made in the<br />
body of the brief. TEX. R. APP. P. 38.1(h).<br />
__X__ The argument does not contain appropriate citations to authorities. TEX R. APP. P. 38.1(i).<br />
__X__ The argument does not contain appropriate citations to the record. TEX. R. APP. P. 38.1(i).<br />
_____ It does not contain a short conclusion that clearly states the nature of the relief sought.<br />
TEX. R. APP. P. 38.1(j).<br />
_____ Text of brief is not double spaced. TEX. R. APP. P. 9.4(d).<br />
_____ Text of brief is not proper size. TEX. R. APP. P. 9.4(e).<br />
__X__ It does not contain a proper certificate of compliance. TEX. R. APP. P. 9.4(i)(3).<br />
__X__ It does not contain a proper certificate of service. TEX. R. APP. P. 9.5(e)(2)(3).<br />
_____ Documents in appendix must be redacted to remove name of child. TEX. R. APP. P.<br />
9.8(b).<br />
_____ Documents in appendix must be redacted to remove name of parent. TEX. R. APP. P.<br />
9.8(b).<br />
_____ Documents contain sensitive data. TEX. R. APP. P. 9.9 or 9.10.<br />
__X__ One or more of the following is omitted from the appendix. Tex. R. App. P. 38.1(k).<br />
__X__ The trial court’s judgment. Tex. R. App. P. 38.1(k)(1)(A).<br />
__X__ The jury charge and verdict, if any, or the trial court’s findings of fact and<br />
conclusions of law, if any. Tex. R. App. P. 38.1(k)(1)(B).<br />
__X__ The text of any rule, regulation, ordinance, statute, constitutional provision, or<br />
other law (excluding case law) on which the argument is based. Tex. R. App. P.<br />
38.1(k)(1)(C).<br />
__X__ The text of any contract or other document that is central to the argument. Tex. R.<br />
App. P. 38.1(k)(1)(C).<br />
<br />
Failure to file an amended brief that complies with the Texas Rules of Appellate<br />
Procedure within 10 days of the date of this letter may result in dismissal of this appeal<br />
without further notice from the Court. See Tex. R. App. P. 38.8(a)(1), 42.3(b),(c)<br />
<br />
Respectfully,<br />
<br />
/s/ Lisa Matz, Clerk of the Court<br />
<br />
cc: Elise Manchester (DELIVERED VIA E-MAIL)<br />
<br />
FILE COPY<br />
<br />
<div style="text-align: center;">
<b><span style="color: #cc0000;">BELOW: POSNER PRO-SE CENTER PRESS RELEASE VERBATIM</span></b><br />
<b><span style="color: #cc0000;"><br /></span></b></div>
FOR IMMEDIATE RELEASE<br />
<br />
April 15, 2018<br />
<br />
Contact Person:<br />
Richard A. Posner<br />
President, The Posner Center of Justice for Pro Se’s<br />
Tel.: 773-702-9608<br />
E-mail: rposner@justice-for-pro-ses.org<br />
<br />
<b><span style="color: #0b5394;">The Renamed “Posner Center of Justice for Pro Se’s” is Open for Business</span></b><br />
<br />
CHICAGO, Illinois —Richard A. Posner has announced the renaming of his nationwide pro bono legal-services organization for assisting pro se litigants. Formerly named “Justice for Pro Se’s,” and before that “Team Posner,” it now goes by the name “The Posner Center of Justice for Pro Se’s.”<br />
<br />
On September 2, 2017, Judge Posner retired after almost 36 years as a judge of the Court of Appeals for the Seventh Circuit (including 7 years as its chief judge) because, as he says: “I believed, and still believe, that pro se’s, which is to say litigants without lawyers, are not receiving a fair shake from the courts.” Actually, it is even worse than that, as Judge Posner further explains: “Many judges are hostile to pro se’s, seeing them as a kind of ‘trash’ not even worth the courts’ time.”<br />
<br />
Ever the prolific writer, since his retirement Judge Posner has published four books explaining the pro se's need for legal assistance and setting out the framework for a legal-services organization that would provide that assistance free of charge. He then created what is now called the Posner Center of Justice for Pro Se’s, a nationwide organization of lawyers and non-lawyers who assist deserving pro se litigants free of charge with their cases. The Center now has some 80 lawyers and non-lawyer advisors distributed across 27 states, but expects eventually to have representatives in all 50 states plus the nation’s offshore possessions, such as the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, American Samoa, and the U.S. Virgin Islands.<br />
<br />
Although individuals have been representing themselves in court since the beginning of the Republic, it is only recently that the courts and the bar associations have begun to make accommodations for them—a trend that the Posner Center of Justice for Pro Se’s is building upon. As Judge Posner points out: “The need of pro se litigants for legal assistance is obvious. Few people can afford to pay an attorney for the years that a lawsuit often takes to get resolved. Also, the U.S. legal system is so complicated and confusing that no layperson can successfully get through its maze unaided by expert legal assistance.”<br />
<br />
A unique aspect of the Center is that while its lawyers will sometimes take over the pro se’s cases and represent the pro se’s in court, equally or even more often it will assist the pro se’s behind the scenes to enable them to successfully represent themselves—to be in effect their own courtroom lawyers. For, as Judge Posner has explained, “Representing oneself in court is often the best way for a pro se to obtain justice. Unlike judges, juries tend to be impressed by a lone litigant standing up against a gaggle of lawyers.”<br />
<br />
At present none of the Center’s representatives is paid (although that may change). But not for Judge Posner, who has announced “This work is a labor of love and I will not accept even a single penny for my work on behalf of pro se’s.”<br />
<br />
A few of the legal luminaries from academia who have joined the Center are law professors Lawrence Lessig (Harvard), Abbe Gluck (Yale), Rebecca Stone (UCLA), Daniel Klerman (USC), Shon Hopwood (Georgetown), Sandra Aistars (George Mason University), Christopher Ogolla (Savannah Law School), as well as Eric Posner, Alison Siegler, Thomas Miles, Joshua Avratin, David Zarfes, and William Landes (all from the University of Chicago).<br />
<br />
Although the Posner Center (which dates back to September 2017 though it has evolved over time) has already helped many pro se’s, as Judge Posner notes, “We are just touching the surface, for there are reliably believed to be at least a million pro se’s in the United States. Many of those pro se’s, however, don’t realize they can obtain legal assistance. Therefore, I will continue to work to get the message out that our organization exists, and then try to assist as many deserving pro se's as possible.”<br />
<br />
-- the end --<span style="color: #0b5394;"> </span><br />
<span style="color: #0b5394;"><br /></span>
<span style="color: #0b5394;">[Comment: It's not the end; it's just the beginning] </span><br />
<span style="color: #0b5394;"><br /></span>
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<b><span style="color: red;">BELOW: THE IMPERILED AMICUS BRIEF </span></b></div>
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<b><span style="color: red;"><br /></span></b></div>
<div style="text-align: center;">
<span style="color: #3d85c6;">[pseudonyms in use for web-posting]</span></div>
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<span style="color: #3d85c6;">[Click on Cause number to see original documents on court's website]</span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">No. <span class="MsoHyperlink"><a href="http://search.txcourts.gov/Case.aspx?cn=05-17-01442-CV&coa=coa05">05-17-01442-CV</a></span>
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<u><span lang="DE-AT" style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Appellant / Defendant below</span></u><span lang="DE-AT" style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">: ADAM
SCHULDENBERGER<o:p></o:p></span></div>
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<span lang="DE-AT" style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"> [pro se]<o:p></o:p></span></div>
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<span lang="DE-AT" style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"> <o:p></o:p></span></div>
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<u><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Appellee / Plaintiff below</span></u><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">: Discover Bank <o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Lead Attorney on Appeal: Matthew
Jirkovsky<o:p></o:p></span></div>
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<br /></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Attorney in Trial Court: Leslie
L. Sun<o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"> Ambreen
Dharani <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"> Elise
Manchester <o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"> ZWICKER
& ASSOCIATES, P.C. <o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"> Old
Town Square, 1 Chisholm Trail, Ste 301<o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"> Tel.:
(512) 218-0488<o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"> Fax:
(512) 218-0477 <o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"> Email:
<span class="MsoHyperlink"><a href="mailto:ZATXAttorneys@zwickerpc.com">ZATXAttorneys@zwickerpc.com</a></span>
<o:p></o:p></span></div>
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<b><span style="font-family: "calibri light" , sans-serif; font-size: 14pt;">TABLE OF CONTENTS<o:p></o:p></span></b></div>
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<br /></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Identity of Parties and Counsel. pdf p. 4<o:p></o:p></span></div>
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<br /></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Index of Authorities. pdf p. 4<o:p></o:p></span></div>
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<br /></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Statement of the Case. pdf p. 8<o:p></o:p></span></div>
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<br /></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Issues Presented by this Case. pdf p. 8 <o:p></o:p></span></div>
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<br /></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Statement of Facts. pdf p. 8 <o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"> <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Scope of Appellate Issues in the Amicus Brief. pdf p. 9<o:p></o:p></span></div>
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<br /></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Summary of the Argument on the Merits. pdf p. 10 <o:p></o:p></span></div>
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<br /></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Summary Judgment Standard and Standard of Review on Appeal. pdf p. 11<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"> <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Argument and Authorities. pdf p. 12 <o:p></o:p></span></div>
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<br /></div>
<div class="MsoListParagraphCxSpFirst" style="margin-left: .75in; mso-add-space: auto; mso-list: l1 level1 lfo11; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 107%;">A.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 107%;">To be viable,
a cause of action for breach of loan agreement <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: .75in; mso-add-space: auto;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 107%;">requires proof of the cost-of-credit terms. pdf p. 12<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .75in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l1 level1 lfo11; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">B.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Under Texas law, acceleration of maturity requires two notices. pdf p. 14 <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: .75in; mso-add-space: auto; mso-list: l1 level1 lfo11; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 107%;">C.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 107%;">There is no
notice of intent to acceleration here; nor is there a notice that acceleration
had been undertaken, or had otherwise occurred. pdf p. 15 <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: .75in; mso-add-space: auto; mso-list: l1 level1 lfo11; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 107%;">D.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 107%;">There is no
convincing rationale to draw a distinction <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: .75in; mso-add-space: auto;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 107%;">between secured and unsecured loans. pdf p. 16 <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .75in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l1 level1 lfo11; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">E.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Discover Bank’s final account statement reflects non-acceleration<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .75in; margin-right: 0in; margin-top: 0in; mso-add-space: auto;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">and a total amount due of only $3,064.45. pdf p. 19<o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Conclusion and Prayer. pdf p. 20 <o:p></o:p></span></div>
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<br /></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Certificates of Compliance with Length Limitations and Service. pdf p. 23 <o:p></o:p></span></div>
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<br /></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Amicus Curiae Statement, Copyright Notice, and Limited License. pdf p. 24<o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Appendix. pdf p. 25 <o:p></o:p></span></div>
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<br /></div>
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<b><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Tab A:</span></b><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"> Summary Judgment signed on November 16, 2017 awarding Discovery
Bank $10,909.45 in damages “minus any payments received after filing this
litigation.”<o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"> <o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"> <b>Tab
B</b>: Notice of Hearing without date in the
Certificate of Service<o:p></o:p></span></div>
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<br /></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"> <b>Tab
C:</b> Discover Bank’s Motion for Summary Judgment (without exhibits) <o:p></o:p></span></div>
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<br /></div>
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<b><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Tab D</span></b><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">: Untitled Affidavit of Janice Dorr, signed July 14, 2017 in Ohio
before Notary Franklin T. Akers (2 pages) <o:p></o:p></span></div>
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<br /></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"> <b>Tab E:</b> Last Account Statement with March
15, 2016 closing date (p. 1 of 6) </span></div>
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<br /></div>
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<b><span style="font-family: "calibri light" , sans-serif; font-size: 14pt;">INDEX OF AUTHORITIES <o:p></o:p></span></b></div>
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<br /></div>
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<b><u><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Cases<o:p></o:p></span></u></b></div>
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<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in;">
<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;"><a href="https://scholar.google.com/scholar_case?case=3046504035443633953&q=Allen+Sales+%26+Servicenter,+Inc.+v.+Ryan&hl=en&as_sdt=4,44" target="_blank">AllenSales & Servicenter, Inc. v. Ryan</a></span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">,
525 S.W.2d 863 (Tex. 1975) <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in;">
<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Am.
Express Travel Related Servs. v. Harris</span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">, </span><span style="font-family: "calibri light" , sans-serif; font-size: 14pt; text-indent: 0.5in;">831 S.W.2d
531 (Tex. App.-Houston [14th Dist.] 1992, no writ) 17</span></div>
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<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">APM
Enters., LLC v. Nat'l Loan Acquisitions Co</span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">., </span><span style="font-family: "calibri light" , sans-serif; font-size: 14pt; text-indent: 0.5in;">357 S.W.3d
405 (Tex. App.-Texarkana 2012, no pet.)15</span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in;">
<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;"><a href="https://scholar.google.com/scholar_case?case=12727892097299918635&q=14-11-00574-CV&hl=en&as_sdt=4,44" target="_blank">Ayersv. Target Nat'l Bank</a></span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">, No. <span class="MsoHyperlink"><a href="http://www.search.txcourts.gov/Case.aspx?cn=14-11-00574-CV&coa=coa14">14-11-00574-CV</a></span>,
2012 WL 3043043 </span><span style="font-family: "calibri light" , sans-serif; font-size: 14pt; text-indent: 0.5in;">(Tex.
App.-Houston [14th Dist.] July 26, 2012, no pet.) (mem. op.) 14</span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in;">
<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Brown
v. Hewitt</span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">, 143 S.W.2d 223 </span><span style="font-family: "calibri light" , sans-serif; font-size: 14pt; text-indent: 0.5in;">(Tex.Civ.App.—Galveston
1940, writ ref'd).</span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in;">
<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Browning
v. Prostok</span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">, 165 S.W.3d 336 (Tex. 2005) </span><i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Barlow
v. Lane</span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14pt; line-height: 150%;">, 745 S.W.2d 451 (Tex. App.-Waco
1988, writ denied) </span></div>
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<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Eurecat
US, Inc. v. Marklund</span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">, No. 14-15-00418-CV, 2017 WL 2367545 </span><span style="font-family: "calibri light" , sans-serif; font-size: 14pt; text-indent: 0.5in;">(Tex.
App.-Houston [14th Dist.] May 31, 2017, no pet.) </span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Faulk v. Futch</span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">, 147 Tex.
253, S.W.2d 614 (1948) <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in;">
<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Fitzpatrick
v. Leasecomm Corporation</span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">, </span><span style="font-family: "calibri light" , sans-serif; font-size: 14pt; text-indent: 0.5in;">No. 12-07-00487-CV (Tex.App. – Tylor,
2008, pet. denied) </span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Hiller v. Prosper Tex. Inc.</span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">, </span><span style="font-family: "calibri light" , sans-serif; font-size: 14pt; text-indent: 0.5in;">437
S.W.2d 412 (Tex.Civ. App.—Houston [1st] 1969, no writ) </span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Hussong v. Schwan's Sales Enterprises, Inc</span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">., </span><span style="font-family: "calibri light" , sans-serif; font-size: 14pt; text-indent: 0.5in;">896
S.W.2d 320 (Tex.App.-Houston [1</span><sup style="font-family: "calibri light", sans-serif; text-indent: 0.5in;">st</sup><span style="font-family: "calibri light" , sans-serif; font-size: 14pt; text-indent: 0.5in;"> Dist.]1995)</span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Intermedics, Inc. v. Grady</span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">,
683 S.W.2d 842 </span><span style="font-family: "calibri light" , sans-serif; font-size: 14pt; text-indent: 0.5in;">(Tex.App.-Houston
[1st Dist.] 1984, writ ref'd n.r.e.)</span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;"><a href="https://scholar.google.com/scholar_case?case=3095484614547381224&q=14-08-00939-CV&hl=en&as_sdt=4,44" target="_blank">Jaramillo v. Portfolio Acquisitions, LLC</a></span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">, No. <span class="MsoHyperlink">14-08-00939-CV</span>,
2010 WL 1197669 </span><span style="font-family: "calibri light" , sans-serif; font-size: 14pt; text-indent: 0.5in;">(Tex.
App.-Houston [14th Dist.] March 30, 2010, no pet.) (mem. op.)</span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Jarvis v. Peltier</span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">,
400 S.W.3d 644 (Tex. App.-Tyler 2013, pet. denied)<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Lee v. Emerson-Brantingham Implement Co</span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">., 222 S.W. 283 </span><span style="font-family: "calibri light" , sans-serif; font-size: 14pt; text-indent: 0.5in;">(Tex.
Civ. App.-Dallas 1920, no writ)</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"><a href="https://scholar.google.com/scholar_case?case=4568663885526452532&q=mock+v+national+collegiate+student+loan+trust&hl=en&as_sdt=4,44" target="_blank">Mock v. Nat'l Collegiate Student Loan Tr. 2007-4</a></span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">, </span><span style="font-family: "calibri light" , sans-serif; font-size: 14pt;">No.
</span><span class="MsoHyperlink" style="font-family: "calibri light" , sans-serif; font-size: 14pt;"><a href="http://search.txcourts.gov/Case.aspx?cn=01-17-00216-CV&coa=coa01" target="_blank">01-17-00216-CV</a></span><span style="font-family: "calibri light" , sans-serif; font-size: 14pt;">,
2018 WL 3352913 </span><span style="font-family: "calibri light" , sans-serif; font-size: 14pt; text-indent: 0.5in;">(Tex.
App.-Houston [1st Dist.] July 10, 2018, no pet.) (mem. op.) </span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Nixon v. Mr. Prop. Mgmt. Co</span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">.,
690 S.W.2d 546 (Tex. 1985)<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in;">
<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Ogden
v. Gibraltar Sav. Ass'n</span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">., 640 S.W.2d
232 (Tex. 1982)<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Outdoor Sys., Inc. v. BBE, L.L.C.</span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">, 105 S.W.3d 66 </span><span style="font-family: "calibri light" , sans-serif; font-size: 14pt; text-indent: 0.5in;">(Tex.App.-Eastland
2003, pet. denied) </span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in;">
<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Ortega-Carter
v. Am. Int'l Adjustment Co., </span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14pt; text-indent: 0.5in;">834 S.W.2d 439
(Tex. App.-Dallas 1992, writ denied)</span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in;">
<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;"><a href="https://scholar.google.com/scholar_case?case=1411577017970110966&q=Preston+State+Bank+v.+Jordan&hl=en&as_sdt=4,44" target="_blank">PrestonState Bank v. Jordan</a></span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">, 692 S.W.2d
740 (Tex.App.-Fort Worth 1985)<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Randall's Food Mkts., Inc. v. Johnson</span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">, 891 S.W.2d 640 (Tex. 1995) <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;"><a href="https://scholar.google.com/scholar_case?case=18315752287015279335&q=shumway+v+horizon+credit+corp&hl=en&as_sdt=4,44" target="_blank">Shumway v. Horizon Credit Corp.</a></span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">,
801 S.W.2d 890 (Tex. 1991)<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in;">
<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Sloan
v. Douglass</span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">, </span><span style="font-family: "calibri light" , sans-serif; font-size: 14pt; text-indent: 0.5in;">713 S.W.2d
436 (Tex. App.-Fort Worth 1986, writ ref'd n.r.e.) </span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in;">
<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Stephens
v. Dyck O’Neal, Inc., </span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14pt; text-indent: 0.5in;">No. </span><span class="MsoHyperlink" style="font-family: "calibri light" , sans-serif; font-size: 14pt; text-indent: 0.5in;">01-10-00512-CV</span><span style="font-family: "calibri light" , sans-serif; font-size: 14pt; text-indent: 0.5in;">
(Tex.App.- Houston, Feb. 16, 2012, no pet.)</span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in;">
<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">T.O.
Stanley Boot Co. v. Bank of El Paso</span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">,
847 S.W.2d 218 (Tex.1992) <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in;">
<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;"><a href="https://scholar.google.com/scholar_case?case=12672708640276170820&q=tully+v+citibank&hl=en&as_sdt=4,44" target="_blank">Tully v. Citibank (South Dakota), N.A.</a></span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">, </span><span style="font-family: "calibri light" , sans-serif; font-size: 14pt; text-indent: 0.5in;">173 S.W.3d
212 (Tex.App.-Texarkana 2005, no pet.)</span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in;">
<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;"><a href="https://scholar.google.com/scholar_case?case=12104676844166169562&q=wande+v+pharia+llc&hl=en&as_sdt=4,44" target="_blank">Wande v. Pharia</a></span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">, No. <span class="MsoHyperlink">01-10-00481-CV</span>,,
2011 WL 3820774 </span><span style="font-family: "calibri light" , sans-serif; font-size: 14pt; text-indent: 0.5in;">(Tex.
App.-Houston [1st Dist.] Aug. 25, 2011, no pet.) </span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in;">
<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Woodhaven
Partners, Ltd. v. Shamoun & Norman, LLP</span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">, </span><span style="font-family: "calibri light" , sans-serif; font-size: 14pt;">422
S.W.3d 821 (Tex. App.-Dallas 2014, no pet.) </span><br />
<span style="font-family: "calibri light" , sans-serif; font-size: 14pt;"><br /></span></div>
<div class="MsoNormal">
<o:p></o:p></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<u><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Rules</span></u><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Tex. R. Civ. P. 166a(c) <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<u><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Other Authorities<o:p></o:p></span></u></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<br /></div>
<div class="MsoNormal">
<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 107%;">Barbee</span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 107%;">, The
Lessor's Remedies for Nonpayment of Royalty, </span><span style="font-family: "calibri light" , sans-serif; font-size: 14pt; text-indent: 0.5in;">45
Tex. L. Rev. 132, 161 (1966) </span></div>
<div align="center" class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;">
<b><u><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">STATEMENT OF THE CASE<o:p></o:p></span></u></b></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">This is a debt collection case
wherein the creditor seeks to recover for breach of a written contract in the
form of an unsigned credit card agreement. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">The Defendant/Appellant appeals a
summary judgment in the Bank’s favor in the amount of $10,909.45. <o:p></o:p></span></div>
<div align="center" class="MsoNormal" style="line-height: 150%; margin-bottom: 6.0pt; text-align: center;">
<b><u><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">ISSUES PRESENTED BY THIS CASE: LEGAL SUFFICIENCY</span></u></b></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Has Discover Bank established conclusively,
as required to warrant the entry of summary judgment and affirmance thereof on
appeal, that it sustained $10,909.45 in damages caused by breach of contractual
duties by Defendant ADAM SCHULDENBERGER? <o:p></o:p></span></div>
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;">
<b><u><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">STATEMENT OF FACTS<o:p></o:p></span></u></b></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; text-align: justify;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Discover Bank filed the underlying
collection suit on February 23, 2017, and asserted breach of written contract
as its sole theory of recovery. CR__. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; text-align: justify;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">In its petition, the Bank alleged
that “[t]he current balance due, owing and unpaid under the Agreement, after
allowing all just and lawful payments, credits and offsets, is $10,909.45.”</span><a href="file:///C:/Users/wphdm/Documents/08-12-WPHDMPHD/Adam%20Schuldenberger%20v%20Discover%20Bank%20-%20Amicus%20Brief%20by%20de-identified%20Amicus%20Curiae%20-%202018-11-21.docx#_ftn1" name="_ftnref1" title=""><span class="MsoFootnoteReference"><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="font-size: 14pt; line-height: 107%;">[1]</span></span><!--[endif]--></span></span></a><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;"> CR __</span><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; text-align: justify;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Defendant ADAM SCHULDENBERGER filed
a pro se answer on May 25, 2017, thereby precluding a no-answer default
judgment against him. CR__.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; text-align: justify;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">On September 12, 2017, the Bank
filed a motion for summary judgment with a certificate of service certifying
service on the Defendant on the same day by mail.</span><a href="file:///C:/Users/wphdm/Documents/08-12-WPHDMPHD/Adam%20Schuldenberger%20v%20Discover%20Bank%20-%20Amicus%20Brief%20by%20de-identified%20Amicus%20Curiae%20-%202018-11-21.docx#_ftn2" name="_ftnref2" title=""><span class="MsoFootnoteReference"><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="font-size: 14pt; line-height: 107%;">[2]</span></span><!--[endif]--></span></span></a><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;"> CR __. Appendix,
Tab C. </span><br />
<span style="font-family: "calibri light" , sans-serif; font-size: 14pt; line-height: 150%; text-indent: 0.5in;"><br /></span>
<span style="font-family: "calibri light" , sans-serif; font-size: 14pt; line-height: 150%; text-indent: 0.5in;">On October 13, 2017 Discover Bank file a Notice of Oral Hearing for
a hearing on its summary judgment motion on November 16, 2017 at 10:30AM, with
a purported certificate of service attached that does not state any date of
service upon the Defendant.</span><a href="file:///C:/Users/wphdm/Documents/08-12-WPHDMPHD/Adam%20Schuldenberger%20v%20Discover%20Bank%20-%20Amicus%20Brief%20by%20de-identified%20Amicus%20Curiae%20-%202018-11-21.docx#_ftn3" name="_ftnref3" style="text-indent: 0.5in;" title=""><span class="MsoFootnoteReference"><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;"><span class="MsoFootnoteReference"><span style="font-size: 14pt; line-height: 107%;">[3]</span></span></span></span></a><span style="font-family: "calibri light" , sans-serif; font-size: 14pt; line-height: 150%; text-indent: 0.5in;"> CR__.
Appendix, Tab B.</span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; text-align: justify;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">On November 16, 2017, the trial
court heard the Bank’s motion and signed an order granting it. CR__. The
summary judgment awards $10,909.45, the exact amount pleaded for in the Bank’s
petition. It characterizes this amount as “principal damages” but qualifies the
award to allow credit for any payments that may have been made during the
pendency of the lawsuit. <i>Id.</i>, Appendix,
Tab A. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; text-align: justify;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Defendant Schuldenberger contends
that he did not have proper notice of the summary judgment hearing. CR__. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; text-align: justify;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Schuldenberger did not file a
post-judgment motion. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; text-align: justify;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Schuldenberger timely filed his
pro-se notice of appeal on December 16, 2017. CR__. <o:p></o:p></span></div>
<div align="center" class="MsoNormal" style="line-height: 150%; margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: center;">
<b><u><span style="font-family: "calibri light" , sans-serif; font-size: 14pt; line-height: 150%;">SCOPE OF APPELLATE ISSUES IN THE AMICUS BRIEF<o:p></o:p></span></u></b></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">This
brief does not address Schuldenberger’s lack-of-notice (or insufficient notice)
argument, but instead focuses on whether the Bank’s summary judgment evidence
was sufficient under the summary judgment standard to require affirmance. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">On
appeal, traditional summary judgments are reviewed under the same standard that
applies in the trial court. A legal sufficiency challenge does not require any
error preservation, wherefore waiver of evidentiary objections in the trial
court is not an issue in this appeal. <o:p></o:p></span></div>
<div align="center" class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;">
<b><u><span style="font-family: "calibri light" , sans-serif; font-size: 14pt; line-height: 150%;">SUMMARY OF THE ARGUMENT ON THE MERITS<o:p></o:p></span></u></b></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">To
prove its breach-of-contract claim, Discover Bank relies on a particular
version of a generic card member agreement that applies to a sub-set of
customers (terms level “24J”), but it did not attach the separate pricing schedule
that contains the account-specific cost-of-credit terms, which the generic
cardmember agreement incorporates by reference. The contractual basis for the
specific account, and the parties’ agreement on credit terms, is therefore
insufficiently proven, and the summary judgment should be reversed and remanded
for failure to prove the first element of a viable breach-of-contact cause of
action. Because the absence of proof of an agreement on material credit terms
goes to liability, the case would have to be remanded in its entirety, without
a need to first examine the sufficiency of the proof on the remaining elements
on which Discover Bank had the burden of proof. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Alternatively,
the judgment is reversible as to damages irrespective of proof of contract
terms. The award of $10,909.45 in this case constitutes error because the Bank
has not established proper acceleration of the revolving balance on the
account. This failure consists of two components: (1) absence of any evidence
that the outstanding balance was accelerated in fact, and (2) absence of any
evidence that notice of intent to accelerate and opportunity to cure was
provided to the cardholder/defendant. The latter omission would defeat Discover
Bank’s bid for a summary judgment for the entire outstanding balance even if it
had accelerated maturity as a factual matter, and even if it had furnished
competent evidence of such acceleration-in-fact for summary judgment purposes. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Based
on the summary judgment record before the court in this case, Discover Bank can
at best substantiate a claim for $2,857.45 because that is the highest amount
actually shown as “past due” on any of the account statements attached to its
summary judgment affidavit of Janice Dorr. CR __. See Appendix, Tab D (Untitled
Affidavit); CR__. Tab E (Page 1 of March 15, 2016 Account Statement). <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">By
contrast, amounts not yet due (i.e. future installment payments) cannot form
the basis for a claim of breach because a breach must occur before a claim can
accrue, and the damages sought must have been caused by a breach to be
recoverable in a lawsuit. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Discover
Bank has shown that a minimum payment of $3,064.45 was due by April 14, 2016.
Assuming that no further payments were made, the summary judgment evidence at
best supports the contention that $3,064.45 was subject to breach by future
nonpayment, and that prior breaches of the obligation to make installment
payments had resulted in damages of no more than $2,857.45 because that is the
amount shown as “past due” on the last statement with closing date March 15,
2016. CR__. Appendix, Tab E. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">In
the event the Court does not reverse the judgment based on Discover Bank’s
failure to prove the predicate contract, the Court should reform the judgment
to the largest amount shown as both due and not paid (i.e. the amount shown as “past-due”
on the last account statement) or offer Discover Bank an opportunity to accept
a commensurate remittitur in lieu of reversal and remand. <o:p></o:p></span></div>
<div align="center" class="MsoNormal" style="line-height: 150%; margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: center;">
<b><u><span style="font-family: "calibri light" , sans-serif; font-size: 14pt; line-height: 150%;">SUMMARY JUDGMENT STANDARD</span></u></b><u><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;"><o:p></o:p></span></u><br />
<b><u><span style="font-family: "calibri light" , sans-serif; font-size: 14pt; line-height: 150%;">AND STANDARD OF REVIEW ON APPEAL</span></u></b></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">This
is an appeal of a summary judgment in favor of a creditor. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">To
obtain a traditional summary judgment, a party moving for summary judgment must
show that no genuine issue of material fact exists and that the party is
entitled to judgment as a matter of law. TEX. R. CIV. P. 166a(c); <i>Randall's Food Mkts., Inc. v. Johnson</i>,
891 S.W.2d 640, 644 (Tex. 1995); <i>Nixon v.
Mr. Prop. Mgmt. Co</i>., 690 S.W.2d 546, 548 (Tex. 1985). <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">As
plaintiff and movant for summary judgment on its sole cause of action against
the Defendant, Discover Bank had the burden to show that he was entitled to
prevail on each and every element of his breach of contract claim. <i>See Ortega-Carter v. Am. Int'l Adjustment Co</i>.,
834 S.W.2d 439, 441 (Tex. App.-Dallas 1992, writ denied). The elements of a
breach of contract claim are (1) the existence of a valid contract; (2)
performance or tendered performance by the plaintiff; (3) breach of the
contract by the defendant; and (4) damages to the plaintiff resulting from that
breach. <i>Woodhaven Partners, Ltd. v.
Shamoun & Norman, LLP</i>, 422 S.W.3d 821, 837 (Tex. App.-Dallas 2014, no
pet.). <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">In
reviewing the grant of a summary judgment, the reviewing court must indulge
every reasonable inference and resolve any doubts in favor of the respondent. <i>Johnson</i>, 891 S.W.2d at 644; <i>Nixon</i>, 690 S.W.2d at 549. <o:p></o:p></span></div>
<div align="center" class="MsoNormal" style="line-height: 150%; margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: center;">
<b><u><span style="font-family: "calibri light" , sans-serif; font-size: 14pt; line-height: 150%;">ARGUMENT AND AUTHORITIES<o:p></o:p></span></u></b></div>
<div class="MsoListParagraphCxSpFirst" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .75in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l10 level1 lfo12; text-indent: -.25in;">
<!--[if !supportLists]--><b><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">A.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; font-weight: normal; line-height: normal;">
</span></span></b><!--[endif]--><b><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">To be viable, a cause of action for breach of loan agreement <o:p></o:p></span></b></div>
<div class="MsoListParagraphCxSpLast" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .75in; margin-right: 0in; margin-top: 0in; mso-add-space: auto;">
<b><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">requires proof of the cost-of-credit terms<o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Discover
Bank has apparently not argued that the law of its home state governs its
claim. In the absence of a motion for judicial notice of another state’s law,
Texas law applies by default to a case filed in a Texas court. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Under
Texas law, collection of the amount due under a credit card agreement is
treated as a claim for breach of a written contract. <i><a href="https://scholar.google.com/scholar_case?case=12672708640276170820&q=tully+v+citibank&hl=en&as_sdt=4,44" target="_blank">Tully v. Citibank (South Dakota), N.A.</a></i>, 173 S.W.3d 212, 215-220 (Tex.App.-Texarkana 2005, no pet.). The essential elements in a suit for breach of contract are: (1) the existence of a valid contract; (2) that the plaintiff performed or tendered performance; (3) that the defendant breached the contract; and (4) that the plaintiff was damaged as a result of the breach. Hussong v. Schwan's Sales Enterprises, Inc., 896 S.W.2d 320, 326 (Tex.App.-Houston [1st Dist.] 1995). A credit card creditor has the burden at trial to establish the existence of the contract and compliance with its provisions. <a href="https://scholar.google.com/scholar_case?case=1411577017970110966&q=Preston+State+Bank+v.+Jordan&hl=en&as_sdt=4,44" target="_blank"><i>Preston State Bank v. Jordan</i></a>, 692 S.W.2d 740, 743-744 (Tex.App.-Fort Worth 1985).</span><o:p></o:p></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">To
be enforceable, a contract must be sufficiently certain to enable a court to determine the rights and responsibilities of the parties. T.O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218, 221 (Tex.1992). The material terms of a contract must be agreed upon before a court can enforce the contract, and the interest rate is a material term.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Here,
the relevant contract consists of two documents: (1) a document titled <b>Cardmember Agreement</b> that sets for the
general terms and conditions of the account, and (2) the account-specific <b>Pricing Schedule</b>, which sets forth the
interest rate and other cost terms that vary among cardholders and their accounts
reflecting differences in creditworthiness, usage patterns, and other
variables. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-indent: .5in;">
<br /></div>
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<td style="border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 467.5pt;" valign="top" width="623"><div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in;">
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</td>
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<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 467.5pt;" valign="top" width="623"><div align="center" class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;">
<span style="font-family: "calibri light" , sans-serif; font-size: 12.0pt; line-height: 150%;">The
“Pricing Schedule” is incorporated into the Cardmember Agreement by reference<o:p></o:p></span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in;">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">In
this case, the former is attached to Discover Bank’s summary judgment affidavit,
but not the latter. This failure is fatal because the cost-terms are essential
credit terms. <i>See T.O. Stanley Boot</i>,
847 S.W.2d at 221 (holding that the interest rate is a material term in the context
of contract to loan money). <span class="MsoHyperlink"><i><a href="https://scholar.google.com/scholar_case?case=12727892097299918635&q=14-11-00574-CV&hl=en&as_sdt=4,44" target="_blank">Ayersv. Target Nat'l Bank</a></i></span>, <span class="MsoHyperlink">No.
<a href="https://scholar.google.com/scholar_case?case=12727892097299918635&q=14-11-00574-CV&hl=en&as_sdt=4,44" target="_blank">14-11-00574-CV</a></span>, 2012 WL 3043043 (Tex. App.-Houston [14th Dist.] July
26, 2012, no pet.) (mem. op.) (reversing summary judgment for the creditor
where the creditor failed to present the cardholder agreement, a portion of the
form language on the application was illegible, and the form was in a language
other than English); <span class="MsoHyperlink"><i><a href="https://scholar.google.com/scholar_case?case=12104676844166169562&q=01-10-00481-CV&hl=en&as_sdt=4,44" target="_blank">Wande v. Pharia</a></i></span>, No. 01-10-00481-CV, 2011 WL 3820774 (Tex. App.-Houston
[1st Dist.] Aug. 25, 2011, no pet.) (mem. op.) (reversing summary judgment for the
creditor where parts of the cardholder agreement were illegible, including a
section entitled "Finance Charges," and creditor presented no
evidence regarding the calculations it used to arrive at the outstanding
balance it claimed); <i>Jaramillo v.
Portfolio Acquisitions, LLC</i>, No. <span class="MsoHyperlink"><a href="http://www.search.txcourts.gov/Case.aspx?cn=14-08-00939-CV&coa=coa14">14-08-00939-CV</a></span>,
2010 WL 1197669 (Tex. App.-Houston [14th Dist.] March 30, 2010, no pet.) (mem.
op.) (holding evidence was insufficient to establish a valid contract where
cardmember agreement was admitted in evidence but many of the essential terms
of the contract were left out). <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">The
summary judgment should accordingly be reversed because Discover Bank has
failed to prove the parties’ agreement on essential credit terms that govern
the specific credit card account at issue in this case. <o:p></o:p></span></div>
<div class="MsoListParagraph" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .75in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l10 level1 lfo12; text-indent: -.25in;">
<!--[if !supportLists]--><b><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">B.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; font-weight: normal; line-height: normal;">
</span></span></b><!--[endif]--><b><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Under Texas law, acceleration of maturity requires two notices <o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Where
the holder of a promissory note has the option to accelerate maturity of the
note upon the maker's default, equity demands that notice be given of the
intent to exercise the option. <i>Brown v. Hewitt</i>, 143 S.W.2d 223 (Tex.Civ.App.—Galveston 1940, writ
ref'd). Thus, in the absence of a waiver, the holder of a delinquent
installment note must present the note and demand payment of the past due
installments prior to exercising his right to accelerate. <i>Allen Sales & Servicenter, Inc. v. Ryan</i>, 525 S.W.2d 863 (Tex.
1975). <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Acceleration
of a loan requires two separate notices: (1) clear notice of intent to exercise
acceleration rights followed by (2) a clear notice of actual acceleration. <i>See APM Enters., LLC
v. Nat'l Loan Acquisitions Co</i>.,
357 S.W.3d 405, 408-09 (Tex. App.-Texarkana 2012, no pet.). Notice that
the debt has been accelerated is ineffective unless preceded by proper notice
of intent to accelerate. <i><a href="https://scholar.google.com/scholar_case?case=3046504035443633953&q=Allen+Sales+%26+Servicenter,+Inc.+v.+Ryan&hl=en&as_sdt=4,44" target="_blank">Allen Sales& Servicenter, Inc. v. Ryan</a></i>, 525 S.W.2d 863 (Tex. 1975). <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Notice
of intent to accelerate is necessary in order to provide the debtor an
opportunity to cure his default prior to harsh consequences in the nature of
acceleration and foreclosure. Proper notice that the debt has been accelerated,
in the absence of a contrary agreement or waiver, cuts off the debtor's right
to cure his default and gives notice that the entire debt is due and payable. <i>See Faulk v. Futch</i>, 147 Tex. 253, 214
S.W.2d 614 (1948).<o:p></o:p></span></div>
<div class="MsoListParagraph" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .75in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l10 level1 lfo12; text-indent: -.25in;">
<!--[if !supportLists]--><b><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">C.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; font-weight: normal; line-height: normal;">
</span></span></b><!--[endif]--><b><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">There is no notice of intent to acceleration here; nor is there a
notice that acceleration had been undertaken, or had otherwise occurred <o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Discover
Bank attempts to prove its damages with the a series of account statements
attached to a summary judgment affidavit that does not itself contain any
specific testimony on default, acceleration, and damages. CR__. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">The
last account statement reflects a “New Balance” amount of $10,909.45 and a
“Total Minimum Amount Due” of $3,064.45. It also states a due date for the
“Total Amount Due,” which is April 14, 2016. Clearly, the numerical data
reflects that the entire “New Balance” amount was <i><u>not</u></i> due, and that only a partial payment was required. <i>See</i> <i> Intermedics, Inc. v. Grady</i>, 683 S.W.2d 842, 845 (Tex.App.-Houston [1st Dist.] 1984, writ
ref'd n.r.e.) (stating that when recovery is sought on an obligation
payable in installments, the statute of limitations runs against each
installment from the time it becomes due). <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<br /></div>
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<tr style="height: 13.8pt; mso-yfti-irow: 1; mso-yfti-lastrow: yes;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 13.8pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 371.75pt;" valign="top" width="496"><div align="center" class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 150%;">Account Status Information on Last
Account Statement <o:p></o:p></span></div>
<div align="center" class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 150%;">(Bank’s PMSJ Exhibit A). Appendix, Tab E<o:p></o:p></span></div>
</td>
</tr>
</tbody></table>
<div class="MsoListParagraphCxSpFirst" style="line-height: 150%; margin-bottom: .0001pt; margin: 0in; mso-add-space: auto; text-align: justify;">
<br /></div>
<div class="MsoListParagraphCxSpLast" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .75in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l10 level1 lfo12; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><b><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">D.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; font-weight: normal; line-height: normal;">
</span></span></b><!--[endif]--><b><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">There is no convincing rationale to draw a distinction between
secured and unsecured loans <o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Most
of caselaw on the notice requirements regarding acceleration involves mortgage
loans or other contracts affecting real estate. <i>See Ogden v. Gibraltar Sav. Ass'n</i>, 640 S.W.2d 232, 233-34 (Tex.
1982) (holding that equity demands clear and unequivocal notice be given of a
party's intent to exercise such harsh consequences as acceleration or
foreclosure); <i>see also Shumway v. Horizon
Credit Corp</i>., 801 S.W.2d 890, 891-92 (Tex.1991) (holding harshness of
option of accelerating maturity of extended indebtedness requires both strict
reading of terms of option and notice to debtor, and notice of intent and
notice of acceleration must be clear and unambiguous); <i>Outdoor Sys., Inc. v. BBE, L.L.C.</i>, 105 S.W.3d 66, 71 (Tex.App.-Eastland 2003, pet. denied) ("The cases in
this State hold that a landlord cannot forfeit the lease of his tenant for
failure to comply with the provisions without first making demand upon the
tenant for performance."); <i>Barbee</i>,
The Lessor's Remedies for Nonpayment of Royalty, 45 Tex. L. Rev. 132, 161
(1966) (stating terms of a claim for forfeiture of an oil and gas lease must be
clear and unambiguous and lessor is held to strict proof of compliance with
notice and demand requirements).</span> <o:p></o:p></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;"> There is no convincing reason why
the same equitable and public policy concerns should not also govern other
forms of credit, including closed-end installment loans and open-end credit
agreements, such as credit cards and charge cards. This is so because judgments
obtained by creditors on unsecured consumer credit can be enforced against the
debtor’s earnings notwithstanding the long-standing constitutional protection
of wages from garnishment. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Under
Texas law, wages cease to be current and are no longer exempt immediately upon
their being paid to and received by the wage earner. <i>Am. Express Travel Related Servs. v. Harris</i>, 831 S.W.2d 531, 532-33 (Tex. App.-Houston [14th Dist.] 1992, no writ); <i>Barlow
v. Lane</i>, 745 S.W.2d 451, 453 (Tex. App.-Waco 1988, writ denied). The
exemption continues only until (1) the wages are due and in the possession of
the debtor, or (2) upon the debtor's demand, could be in his possession. <i>Sloan v. Douglass, </i>713 S.W.2d 436, 440
(Tex. App.-Fort Worth 1986, writ ref'd n.r.e.). The exemption continues only
until such time when the employee can collect his wages in the exercise of due
diligence. <i>Lee v. Emerson-Brantingham Implement Co</i>., 222 S.W. 283, 284 (Tex. Civ. App.-Dallas 1920, no writ).<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Texas
courts still adhere to the nation that the protection enjoyed by current wages
is lost once the wages are direct-deposited into a bank account, even though
this practice is nowadays ubiquitous and is the norm, rather than the
exception. In <i>Fitzpatrick v. Leasecomm
Corporation</i>, the court of appeals rejected the argument that “when her
paycheck was electronically deposited in her account, she had not ‘received’
it, because it was immediately trapped by the writ of garnishment and she had
had no opportunity to spend it on her daily living expenses.” No. 12-07-00487-CV 2008 WL 4225973, at *3 (Tex.App. – Tylor, 2008, pet. denied); <i>also see Stephens v. Dyck O’Neal, Inc.</i>, No. 01-10-00512-CV (Tex.App.- Houston, Feb. 16, 2012, no pet.) (overruling contention that wages retained their exempt status on deposit into credit union account, and affirming judgment of garnishment).<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">The
state constitutional protection of wages has thus been effectively rendered
inoperative unless and until the State’s jurisprudence catches up with the new
realities of e-commerce and electronic payroll systems. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;"> Based on existing precedents, a judgment
on unsecured consumer debt is thus as ominous as an impending foreclosure
because it may result in judgment-debtor being deprived of the means to meet
daily living expenses by having their entire bank account balance frozen and
seized by a writ of garnishment procured by a creditor. This practice may even
result in public assistance being tapped as a last resort, and would thus
undermine public policy and public fiscal interests for the private benefit of
unsecured creditors who had already priced the risk of default into the cost of
credit (i.e. interest rate) when they extended it, and thus mitigated their
risk exposure prospectively. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;"> In any event, the comparison of the
mortgage loans and nonmortgage loans may already be moot. A Houston Court of
Appeals panel has recently held that the two notices are required to accelerate
an unsecured private student loan. <i>See</i>
<span class="MsoHyperlink"><i><a href="https://scholar.google.com/scholar_case?case=4568663885526452532&q=mock+v+national+collegiate+student+loan+trust&hl=en&as_sdt=4,44" target="_blank">Mock v. Nat'l Collegiate Student Loan Trust</a> 2007-</i></span><i>4</i>, No. <span class="MsoHyperlink"><a href="http://search.txcourts.gov/Case.aspx?cn=01-17-00216-CV&coa=coa01" target="_blank">01-17-00216-CV</a></span>,
2018 WL 3352913 (Tex. App.-Houston [1st Dist.] July 10, 2018, no pet.) (mem.
op.). Because there was no evidence of a valid acceleration of maturity by the
creditor, the damages awarded in the trial court’s judgment were pared down on
appeal. <o:p></o:p></span></div>
<div class="MsoListParagraph" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .75in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l10 level1 lfo12; text-indent: -.25in;">
<!--[if !supportLists]--><b><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">E.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; font-weight: normal; line-height: normal;">
</span></span></b><!--[endif]--><b><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Discover Bank’s final account statement reflects non-acceleration
and a total amount due of only $3,064.45. <o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">In
this case, Discover Bank endeavored to prove the amount of damages that it
attributes to the Defendant’s breach with the March 15, 2016 account statement,
but this statement reflects that the <b><i>total amount due</i></b> was only $3,064.45,
which is much less than the amount awarded in the summary judgment ($10,909.45).
The statement reports the <b><i>past-due</i></b> portion of the amount due
as $2,857.45. CR__. Appendix, Tab E. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Based
on the billing cycle closing date on the face of the account statement, all
other amounts were not yet due. There is no affidavit testimony to add anything
further. Specifically, there is no affidavit testimony or documentary evidence on
whether additional payments were made or not made after the statement closing
date. The judgment itself expressly contemplates the possibility of additional
payments having been made between file date and entry. CR__. Tab A. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">A
breach-of-contract plaintiff must prove, <i>inter
alia</i>, damages sustained as a result of the breach. <i>Eurecat US, Inc. v. Marklund</i>, No. 14-15-00418-CV, 2017 WL 2367545,
at *16 (Tex. App.-Houston [14th Dist.] May 31, 2017, no pet.) (reciting
elements). The existence and amount of damages resulting from the alleged
breach an essential element of a breach-of-contract claim. <i>See Woodhaven Partners, Ltd. v. Shamoun & Norman, L.L.P</i>.,422
S.W.3d 821, 837 (Tex. App.-Dallas 2014, no pet.); <i>Jarvis v. Peltier</i>, 400 S.W.3d 644, 653 (Tex. App.-Tyler 2013, pet. denied).<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Amounts
that have not yet accrued for payment cannot be subject to breach. The summary
judgment record in this case accordingly does not support the full amount of damages
awarded in Discover Bank’s favor by the trial court. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Indeed,
the last account statement upon which Discover Bank relies in its bid for a
final summary judgment effectively controverts the proposition that
acceleration had already occurred as of the closing date of the statement (March
15, 2016), and there is no competent extrinsic or additional evidence that
acceleration occurred after the statement closing date. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Nor
is there any indication, not to mention competent summary judgment evidence, that
proper notice was given to the account holder of such an action by the Bank.
Without valid acceleration, the Bank can at best be entitled to
breach-of-contract damages in the amount of $2,857.45 or $3,064.45 based on the
summary judgment proof proffered, assuming it is admissible for the truth of
what is set forth on it in the absence of evidentiary objections preserved for
appeal. </span></div>
<div align="center" class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;">
<b><u><span style="font-family: "calibri light" , sans-serif; font-size: 14pt; line-height: 150%;">CONCLUSION AND PRAYER<o:p></o:p></span></u></b></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Texas
courts of appeals have long held that “[t]he exercise of the power of
acceleration is a harsh remedy and deserves close scrutiny." <i>Hiller v. Prosper Tex. Inc</i>., 437 S.W.2d
412, 415 (Tex.Civ. App.—Houston [1st] 1969, no writ). It is well-settled that
effective acceleration of maturity under Texas law requires both a notice of
intent to accelerate and a notice of acceleration. <i><a href="https://scholar.google.com/scholar_case?case=18315752287015279335&q=shumway+v+horizon+credit+corp&hl=en&as_sdt=4,44" target="_blank">Shumway v Horizon Credit Corp</a>., </i>801
S.W.2d 890, 892 (Tex. 1991).<i> </i><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">The
summary judgment evidence offered by Discover Bank in this case does not
contain the two required notices, and the Bank’s own evidence of the account
reflects non-acceleration. At best, the Bank’s final account statement supports
the proposition that $3,064.45 was subject to breach by nonpayment, and that
past failures to make required monthly installment payments caused a sum total
of $2,857.45 in damages because that is the amount that the Bank’s account-level
documentary evidence reports as “past due.” <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">There
are no subsequent account statements or other dated business records in the summary
judgment record offered in this case that would indicate that Discover Bank
resorted to the remedy of acceleration of maturity. There is no evidence on the
matter of whether the minimum amount due was paid by the due date, was paid in
part, or was not paid. If the account statements support a judgment for the
Bank, the amount of the judgment would have to be based on the past-due amount,
rather than the amount shown as due at a point in time after the March 15, 2016
statement closing date, i.e. prospectively, relative to the statement. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Critically,
there is no separate notice of acceleration of maturity in the record of this
case, not to mention a notice of intent to do so that would provide the
cardholder an opportunity to cure the delinquency and avoid being sued. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Because
the summary judgment record is devoid of evidence that Discover Bank properly
accelerated the revolving balance on the account by sending both notices
required by Texas decisional law, the Bank has failed to meet its summary
judgment burden with respect to the claimed outstanding balance that it sought
to collect in its entirety.<a href="file:///C:/Users/wphdm/Documents/08-12-WPHDMPHD/Adam%20Schuldenberger%20v%20Discover%20Bank%20-%20Amicus%20Brief%20by%20de-identified%20Amicus%20Curiae%20-%202018-11-21.docx#_ftn4" name="_ftnref4" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="font-size: 14pt; line-height: 107%;">[4]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">This
Court should accordingly either reform the judgment to $2,857.45 (which represents
the<b> </b>matured portion of the revolving
balance) or suggest a remittitur to accomplish the same, should the Court not
reverse the summary judgment and remand the case for re-trial in the court
below based on Discover Bank’s failure to prove the contractual basis for the
account, i.e. the parties’ agreement on interest rates and other
account-specific cost terms. <o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Respectfully submitted</span><span style="font-size: 14.0pt; line-height: 150%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">,
<o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">Date:
November _21_, 2018 </span><span style="font-size: 14.0pt; line-height: 150%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">/s/
__</span><i><span style="font-family: "magneto"; mso-bidi-font-family: "Calibri Light"; mso-bidi-theme-font: major-latin;">[<span style="color: #741b47;">Amicus
Signature</span>]</span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">__ <o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"><span style="color: #741b47;">Amicus Name and Acad. Credential</span><o:p></o:p></span></div>
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<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Amicus Curiae for Appellant-Defendant
<o:p></o:p></span></i></div>
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<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"> ADAM SCHULDENBERGER<o:p></o:p></span></i></div>
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<i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"><br /></span></i></div>
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<b><span style="font-family: "calibri light" , sans-serif; font-size: 14pt;">Certificate of Compliance with Length Limitations <o:p></o:p></span></b></div>
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;"> The
undersigned hereby certifies that this brief consists of a total of _5,292_ words,
as calculated by the word-count function of the Microsoft Word program.<a href="file:///C:/Users/wphdm/Documents/08-12-WPHDMPHD/Adam%20Schuldenberger%20v%20Discover%20Bank%20-%20Amicus%20Brief%20by%20de-identified%20Amicus%20Curiae%20-%202018-11-21.docx#_ftn5" name="_ftnref5" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="font-size: 14pt; line-height: 107%;">[5]</span></span><!--[endif]--></span></a>
The type face is Calibri (light), 14-point size for text and 12-point for
footnotes, proportionately spaced. The pdf-searchable documents in the merged Appendix
at Tabs A through E are not included in the word count. Cited cases not
published in the Southwestern Reporter are hot-linked to appellate docket
sheets and online opinions in pdf. <o:p></o:p></span></div>
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<span style="font-size: 14.0pt; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"> </span><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"> /s/ __</span><i><span style="color: #741b47; font-family: "magneto"; mso-bidi-font-family: "Calibri Light"; mso-bidi-theme-font: major-latin;">[Amicus Signature]</span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">__
<o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"><span style="color: #741b47;"> Amicus Name and Acad. Credential</span><o:p></o:p></span></div>
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<br /></div>
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<b><span style="font-family: "calibri light" , sans-serif; font-size: 14pt;">Certificate of Service <o:p></o:p></span></b></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">All
parties to this appeal are being served with an electronic copy of this brief
through the Texas eFile system on Nov. 21, 2018, provided they are registered
users, or alternatively via email through the courtesy notification facility of
Texas eFile, or alternatively by U.S. mail, should electronic service fail. <o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"> </span><span style="font-size: 14.0pt; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"> </span><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"> /s/ __</span><i><span style="color: #741b47; font-family: "magneto"; mso-bidi-font-family: "Calibri Light"; mso-bidi-theme-font: major-latin;">[Amicus Signature]</span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">__
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"> <span style="color: #741b47;">Amicus Name and Acad. Credential</span><o:p></o:p></span></div>
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<b><span style="font-family: "calibri light" , sans-serif; font-size: 14pt;">Amicus Curiae Statement <o:p></o:p></span></b></div>
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<b><span style="font-family: "calibri light" , sans-serif; font-size: 14pt;">Copyright Notice and Limited License <o:p></o:p></span></b></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;"> <o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">The
author is a researcher and writer, and is currently working on a scholarly
article on private student loan origination, securitization and collection, along
with other writing projects on related topics concerning law and courts. No
payment was received for the preparation of this amicus curiae brief, none has
been promised, and none is expected from any party to this appeal. Tex. R. App.
P. 11. The author asserts and shall retain the copyright to the original content
of this brief. Re-publication beyond fair use by individuals or non-state
entities shall only be with the author’s permission. Permission is hereby
granted on a <i>pro bono</i> basis for the
Appellant to re-use and/or adopt any portion of this brief for his own use in
this appeal without warranties of any kind, provided Appellant remains unable
to afford or is otherwise unable to obtain legal representation by
Texas-licensed counsel to file a merits brief in this appeal on his behalf. <o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; line-height: 150%;">The
parties/attorneys are being served electronically through <span class="MsoHyperlink"><a href="https://efile.txcourts.gov/ofsweb">https://efile.txcourts.gov/ofsweb</a></span>
contemporaneously with the e-filing of this amicus curiae brief on November 21,
2018. <o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">/s/ __</span><i><span style="font-family: "magneto"; mso-bidi-font-family: "Calibri Light"; mso-bidi-theme-font: major-latin;"> <span style="color: #741b47;">[Amicus Signature]</span></span></i><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">__ <o:p></o:p></span></div>
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<span style="color: #741b47; font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Amicus Name and Acad. Credentials </span><b style="text-align: center;"><span style="font-family: "calibri light" , sans-serif; font-size: 16.0pt;"> </span></b></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">No. <span class="MsoHyperlink"><a href="http://search.txcourts.gov/Case.aspx?cn=05-17-01442-CV&coa=coa05">05-17-01442-CV</a></span>
<o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">IN THE COURT OF APPEALS <o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">FOR THE FIFTH DISTRICT<o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">DALLAS, TEXAS<o:p></o:p></span></div>
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<span lang="DE-AT" style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">_________ <o:p></o:p></span></div>
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<span lang="DE-AT" style="font-family: "calibri light" , sans-serif; font-size: 16pt;">ADAM SCHULDENBERGER</span><span lang="DE-AT" style="font-family: "calibri light" , sans-serif; font-size: 16.0pt;">, <o:p></o:p></span></div>
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<i><span lang="DE-AT" style="font-family: "calibri light" , sans-serif; font-size: 16.0pt;">Appellant</span></i><span lang="DE-AT" style="font-family: "calibri light" , sans-serif; font-size: 16.0pt;"><br />
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<!--[endif]--><o:p></o:p></span></div>
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<span lang="DE-AT" style="font-family: "calibri light" , sans-serif; font-size: 16.0pt;">vs.<o:p></o:p></span></div>
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<span lang="DE-AT" style="font-family: "calibri light" , sans-serif; font-size: 16pt;">DISCOVER BANK</span><span lang="DE-AT" style="font-family: "calibri light" , sans-serif; font-size: 16.0pt;">, <o:p></o:p></span></div>
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<i><span style="font-family: "calibri light" , sans-serif; font-size: 16.0pt;">Appellee.</span></i><span style="font-family: "calibri light" , sans-serif; font-size: 16.0pt;"><o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">On Appeal from the County Civil
Court at Law No. 2<o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Dallas County, Texas<o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Hon. King Fifer <o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Trial Court Cause No.
CC-17-00971-B <o:p></o:p></span></div>
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<b><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; text-transform: uppercase;">APPENDIX TO BRIEF IN SUPPORT OF APPELLANT<o:p></o:p></span></b></div>
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<b><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt; text-transform: uppercase;">ADAM SCHULDENBERGER<o:p></o:p></span></b></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">November 21, 2018 <o:p></o:p></span></div>
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<b><span style="font-family: "calibri light" , sans-serif; font-size: 16.0pt;">APPENDIX<o:p></o:p></span></b></div>
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<b><span style="font-family: "calibri light" , sans-serif; font-size: 16.0pt;">TABLE
OF CONTENTS<o:p></o:p></span></b></div>
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<b><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Tab A:</span></b><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"> Summary Judgment signed on November 16, 2017 awarding Discovery
Bank $10,909.45 in damages “minus any payments received after filing this
litigation.”<o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"> <o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"> <b>Tab
B</b>: Notice of Hearing without date of
service in the Certificate of Service<o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"> <b>Tab
C:</b> Discover Bank’s Motion for Summary Judgment (without exhibits) <o:p></o:p></span></div>
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<b><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">Tab D</span></b><span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;">: Untitled Affidavit of Janice Dorr, signed July 14, 2017 in Ohio
before Notary Franklin T. Akers (2 pages) <o:p></o:p></span></div>
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<span style="font-family: "calibri light" , sans-serif; font-size: 14.0pt;"> <b>Tab E:</b> Last Account Statement with March
15, 2016 closing date (p. 1 of 6) <o:p></o:p></span></div>
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<span style="font-size: x-small;"><a href="file:///C:/Users/wphdm/Documents/08-12-WPHDMPHD/Adam%20Schuldenberger%20v%20Discover%20Bank%20-%20Amicus%20Brief%20by%20de-identified%20Amicus%20Curiae%20-%202018-11-21.docx#_ftnref1" name="_ftn1" title=""><span class="MsoFootnoteReference"><span style="font-family: "calibri light" , sans-serif;"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[1]</span></span><!--[endif]--></span></span></a><span style="font-family: "calibri light" , sans-serif;"> <span style="font-variant-caps: small-caps; font-variant-east-asian: normal; font-variant-numeric: normal;">Plaintiff’s Original Petition</span>, p. 2, ¶7.<o:p></o:p></span></span></div>
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<div class="MsoFootnoteText">
<span style="font-size: x-small;"><a href="file:///C:/Users/wphdm/Documents/08-12-WPHDMPHD/Adam%20Schuldenberger%20v%20Discover%20Bank%20-%20Amicus%20Brief%20by%20de-identified%20Amicus%20Curiae%20-%202018-11-21.docx#_ftnref2" name="_ftn2" title=""><span class="MsoFootnoteReference"><span style="font-family: "calibri light" , sans-serif;"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[2]</span></span><!--[endif]--></span></span></a><span style="font-family: "calibri light" , sans-serif;"> <span style="font-variant-caps: small-caps; font-variant-east-asian: normal; font-variant-numeric: normal;">Plaintiff’s Motion for Summary Judgment</span>,
p. 5.</span><span style="font-family: "calibri light" , sans-serif;"> </span><o:p></o:p></span></div>
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<span style="font-size: x-small;"><a href="file:///C:/Users/wphdm/Documents/08-12-WPHDMPHD/Adam%20Schuldenberger%20v%20Discover%20Bank%20-%20Amicus%20Brief%20by%20de-identified%20Amicus%20Curiae%20-%202018-11-21.docx#_ftnref3" name="_ftn3" title=""><span class="MsoFootnoteReference"><span style="font-family: "calibri light" , sans-serif;"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[3]</span></span><!--[endif]--></span></span></a><span style="font-family: "calibri light" , sans-serif;"> [</span><span style="font-family: "calibri light" , sans-serif;">Plaintiff’s] Notice of Oral Hearing</span><span style="font-family: "calibri light" , sans-serif;">, signed by
Attorney Christopher J. Mundt, p. 2. </span><span style="font-family: "calibri light" , sans-serif;"><o:p></o:p></span></span></div>
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<span style="font-size: x-small;"><a href="file:///C:/Users/wphdm/Documents/08-12-WPHDMPHD/Adam%20Schuldenberger%20v%20Discover%20Bank%20-%20Amicus%20Brief%20by%20de-identified%20Amicus%20Curiae%20-%202018-11-21.docx#_ftnref4" name="_ftn4" title=""><span class="MsoFootnoteReference"><span style="font-family: "calibri light" , sans-serif;"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[4]</span></span><!--[endif]--></span></span></a><span style="font-family: "calibri light" , sans-serif;"> When
it moved for summary judgment, Discover Bank did not request judicial notice
and application of the law of the jurisdiction specified in the choice-of-law
clause in the <span style="text-transform: uppercase;">Cardmember Agreement</span>,
which is Delaware. <o:p></o:p></span></span></div>
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<span style="font-size: x-small;"><a href="file:///C:/Users/wphdm/Documents/08-12-WPHDMPHD/Adam%20Schuldenberger%20v%20Discover%20Bank%20-%20Amicus%20Brief%20by%20de-identified%20Amicus%20Curiae%20-%202018-11-21.docx#_ftnref5" name="_ftn5" title=""><span class="MsoFootnoteReference"><span style="font-family: "calibri light" , sans-serif;"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[5]</span></span><!--[endif]--></span></span></a><span style="font-family: "calibri light" , sans-serif;"> Because the word count falls well below the
15,000 limit, no deductions were made for the parts of the brief that are not
chargeable to the limit.</span></span></div>
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<span style="color: #3d85c6;">NOTA BENE: </span><br />
<span style="color: #3d85c6;">Pseudonyms in use. Visit the Dallas Court of Appeals to view original documents by clicking appellate cause number </span><span class="MsoHyperlink" style="font-family: "calibri light" , sans-serif; text-align: center;"><a href="http://search.txcourts.gov/Case.aspx?cn=05-17-01442-CV&coa=coa05">05-17-01442-CV</a>. Direct links to documents in pdf: ---> <a href="http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=6d98eeb2-877c-4f60-8d55-8d67c6a3bf69&coa=coa05&DT=Brief&MediaID=65b14a77-2f55-4962-bcc4-898a10686472" target="_blank">Appellate Brief in Discover Bank v. Cardholder</a> (11/21/2018); <a href="http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=322d1a6d-9729-4b07-b93f-fccb89a9edf2&coa=coa05&DT=Motion&MediaID=774fa37e-df15-41af-bc5d-6cd77e286e7e" target="_blank">Discover Bank's Motion to Reject the Amicus Brief submitted in Support of Pro Se Appellant</a> (12/19/2018); <a href="http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=3a0ba7c8-d32d-4700-bc5f-feabc2974b93&coa=coa05&DT=Motion&MediaID=09844f6d-b692-429c-a1df-ee836798e573" target="_blank">Discover Bank's Motion to Dismiss Appeal based on Pro Se Appellants Failure to File TRAP-Compliant Brief</a> (11/13/2018). </span><br />
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