Wednesday, July 19, 2017

Debt Collector Profile: John C. Adams - Attorney in charge of Texas Attorney General Ken Paxton's Student Loan Collection Shop

JOHN C. ADAMS, Assistant Attorney General (Review)
John C. Adams is the State's student loan collector-in-chief. Not his official title, but a fitting moniker, considering what he does day-in, day-out. The loans at issue are administered by the Texas Higher Education Coordinating Board (THECB) and Adams takes them to court for collection when ex-students or their parents (or other co-signers) don't pony up.
By the thousands.
These are State of Texas loans, not federal student loans or private student loans. They are governed by statute. Chapter 52 of the Texas Education Code, to be specific. 
The most common ones are TEXAS B-ON-TIME (BT) loans and COLLEGE ACCESS LOANS (CAL) (current program description here), but there are others, including conditional grants or scholarships that are converted to repayable loans if the conditions for the grant are not met, such as when the student drops out of the program funded by the grant/loan.
Adams has been at it since 1999. He presides over a highly automated lawsuit production system with few employees geared up to produce default judgments (mostly) at a rapid rate with a minimum amount of effort and time expenditure. In other words, highly efficient. If a trial is needed or a hearing is requested on a case, Adams typically budgets 5 minutes for an in-court appearance. Unfortunately for Texas consumers, the cost-savings associated with the economies of scale are not passed on to them, as will be detailed below.
All State student loan collection suits are filed at the Travis County Courthouse, which is located within a few blocks of Adams' office at 300 W 15th St., Austin TX 78701-1649.
Documents to be filed with the court are assembled using electronic litigation forms (templates) into which a few pieces of variable data (such as name and address of Defendant, and amount of the alleged balance outstanding) are entered either manually or by using file merge functionality on office software. As a result, the documents in student loan case files are almost identical. They can be viewed by pulling up the docket sheet on the County Clerk's website, and selecting the "Document Event" option from the menu. The easiest way to access a case docket is by entering the cause number (if known) on the search screen. For research purposes, sets of cases can also be identified by searching for name of attorney or name of party (here "STATE OF TEXAS") and specifying a date range.


Adams sues student loan obligors wherever they live, whether in the State of Texas, or elsewhere. If they live in-state, he has them served by private process servers (rather than by certified mail or constable/sheriff). It they live out of state, he has them served by the Texas Secretary of State by certified mail. Sometimes, the original address of the defendant is incorrect or no longer current. Adams may then file an amended pleading with the updated address, and have it served. 
The principal documents in a student loan case filed by John C. Adams consist of the following:
The PLAINTIFF'S ORIGINAL PETITION shows the Plaintiff as 'STATE OF TEXAS' or “THE STATE OF TEXASE” in the case style. This document has a copy of the signed promissory note or similar contract document and a loan disclosure page attached to it. If several loans are involved, there will be several such exhibits, usually bearing exhibit stickers A, B, C and so one, respectively -- one for each set of loan origination documents. There are a limited number of petition templates to accommodate the differences between loans and conditional grants, and the distinctions between in-state and out-of-state defendants. Within a category, the pleadings look alike except for the basic case-level data, i.e. defendant identity information and amount of principal. This is because they are all prepared with the same document template. Defendants are identified with prior names or alias, if applicable, address, and social security number. The latter is blackened out, or – in legal speak – redacted, because such data is sensitive and protected by privacy laws and rules.
The CITATION is normally prepared by the clerk of the court, but is here pre-printed as part of the AG student loan pleading template. It is served either by a process server or via the Texas Secretary of State (in the case of out-of-state debtors). After service on the defendant, the private process server will file a RETURN OF SERVICE in the form of a declaration under penalties of perjury attesting to service (with date and manner of service) or a declaration/affidavit of DUE DILIGENCE detailing service attempts that were unsuccessful. In the latter case, a motion for alternate service will likely be filed, unless the address for the Defendant was bad. 
A MOTION FOR ENTRY OF DEFAULT JUDGMENT is filed when the Defendant does not answer by the time his or her written answer is due, as stated on the CITATION. The motion is a one-page document accompanied by an affidavit by Cheryl Bellesen titled AFFIDAVIT IN SUPPORT OF FINAL JUDGMENT BY DEFAULT and an attorney fee affidavit by John C. Adams, the attorney who signs all pleadings and motions, and is the attorney in charge under rule 8 of the Texas Rules of Civil Procedure. AG Ken Paxton’s name is on the pleadings, but he is too busy to handle garden-variety litigation of this sort. A proposed default judgment is filed with the motion.
If the Defendant files an answer, and by doing so contests the lawsuit, a motion for default judgment is no longer appropriate under the rules governing civil suits, regardless of whether the answer is filed without a lawyer (pro se) or through an attorney. An attorney will typically file a document labeled DEFENDANT'S ORIGINAL ANSWER which will – at the minimum – contain a general denial. Some attorney’s also raise other issues. When an answer is filed by or on behalf of a student loan defendant,  Adams can be expected to file a MOTION FOR SUMMARY JUDGMENT because such a motion is the next-best procedural mechanism to quickly obtain a judgment in the creditor's favor.
In Texas state courts, it is enough to file a "general denial" to contest the case, which puts the burden on the Plaintiff to prove its cause of action, here breach of promissory note/loan agreement or breach of guaranty, depending on whether the student or the co-signer is named as the defendant. In student loan cases litigated by Adams, however, the evidence submitted to support a default judgment is virtually the same as the evidence submitted in support of summary judgment. These cases rarely reach the trial stage because they are disposed of by resort to alternative means: Motion for Default Judgment or Motion for Summary Judgment, Agreed Judgment, or formal agreement for a payment plan and associated stay of litigation. 
The motion filed in lieu of a motion for entry of default will be titled PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT and will be accompanied by an affidavit by Cheryl Bellesen titled AFFIDAVIT IN SUPPORT OF PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT and by an AFFIDAVIT IN SUPPORT OF ATTORNEY'S FEES by John C. Adams. 
All affidavits on the merits of the State's claim are signed by CHERYL BELLESEN, and are notarized by KATHERINE M. BUXTON, who is a notary without bond because she works in the Attorney General's Office, i.e. for the State of Texas. Buxton is a Legal Secretary and performs administrative functions, such as interacting with the clerks of the Travis County Courts at Law, in which the State's student loan cases are prosecuted.
Both a motion for entry of default judgment and a motion for summary judgment will have a proposed judgment attached, but it will not be titled "proposed" because Adams expects it to be signed as drafted (or rather, as computer-generated). The presiding judges of the county courts, Judge TODD WONG and Judge ERIC SHEPPERD, will normally sign Adams' judgments as presented, but may occasionally revise the amount of attorney's fees (downward) and may occasionally cross out interest or change the rate, if they find an error in the documentation. This is highly unlikely to happen in the default judgment context, however, because no one will be before the court to lodge any objections, or to point out any errors or omissions. Assistant Attorney General Adams himself does not make an in-court appearance for default judgments. The paperwork is simply submitted to the court by his legal secretary for approval and signing by either one of the two presiding judges (or, in rare instances, a visiting judge).  
Occasionally, Assistant AG Adams files a nonsuit (voluntary dismissal) or a motion to consolidate two cases against the same defendant or two cases involving the same debt initially brought against a former student and the guarantor under two separate cause numbers, or an agreement for a payment plan signed by the Defendant. In the latter scenario, the case might be put on hold (stayed or abated). A great many cases, however, proceed speedily to a default judgment in the absence of a timely answer the Defendant or an agreement, provided that the service of citation was successful. If not, a motion for substitute service will likely be filed.

Debtors represented by attorney will also promptly face a motion for summary judgment (served on their attorney, instead of directly on them), but will have a better chance of such motion being postponed. It will thus win them time, even if they ultimately have a judgment entered against them. Apart from a delay in entry of judgment, the most attorneys for debtors can typically accomplish is a reduction of attorney’s fees, or a consolidation of cases when the attorney is hired to represent both the student-obligor and the co-signer, which will also likely yield a reduction in fees awarded because the duplication of fees is eliminated. 
AGREED JUDGMENTS, like default judgment, are uncontested, but - unlike default judgment, have been expressly agreed to by the Defendant and are signed by the Defendant in addition to being signed by Adams (for the State as Plaintiff) and by the judge. That means they are unappealable, but such an agreed judgment will nevertheless state that it is appealable because that language is on the template that Adams uses to submit such judgments.
Other agreements, such a payment plan, are in the nature of a contract and do not require the court's approval or signature.
Adams' agreed judgments typically reflect at best a reduction of the amount of attorney's fees from what they would otherwise be, but no reduction of principal or interest. Agreed judgment can generally not be attacked after they are signed by the court, which distinguishes them from default judgments, which may be appealed or attacked by post-judgment motion, albeit subject to certain rather unforgiving deadlines.
In a large number of cases, the Defendants, who reside in locations all over the State (and some even beyond), never file an answer, and Adams then promptly moves for default judgment with two above-mentioned affidavits, one by Cheryl Bellesen attesting to the amounts owed (broken down by principal, accrued interest, and late fees, if any) and the applicable post-judgment interest rate (typically between 5% and 6%, in some cases as high as 9%) and an affidavit on attorney's fees.
Adams pleads for "not less than" $750.00 or $1,000 in attorney's fees in the petition that is served on the Defendant, but he routinely swears to a higher amount as reasonable and necessary once he moves for default or summary judgment.
Even if a Defendant answers the lawsuit, thus preventing a default judgment, he or she will not be able to effectively counter the fee claim because the reasonableness and necessity of attorney's fees is considered a matter on which expert testimony is required. Adam's boilerplate fee affidavit ipso facto qualifies as "expert testimony" because he is an attorney. It does not matter that it comes from an assembly line.
Courts take fee testimony as true (even if it is not) because it is not contested, and routinely enter judgment in the amount requested. If it comes to trial, pro se defendants face the same predicament. They are not qualified to offer testimony on attorney's fees because they are lay persons, and they will not even be aware of the large caseload Adams oversees, and how little time he actually spends on a single case.
The county courts in Austin (Travis County) that process these student loan cases routinely grant everything Adams asks for, including $1,500 - $5,000 in attorney’s fees even though Adams would have spent less than an hour, probably more likely no more than a few minutes, on any one single case. With rare exceptions, such as when an attorney for a debtor challenges venue or the Bellesen’s affidavit, thus forcing Adams to do a little extra work, they are all cookie-cutter cases. If service on the defendant is successful and the defendant does nothing, a default judgment will be entered in due course.
Adams typically brings separate lawsuits against the student and the guarantor, and seeks separate judgments against the two defendants on the same debt (thus doubling the amount), and also duplicates the award of attorney's fees by pursuing this dual-track strategy. He may agree to consolidate such parallel lawsuits on the same debt, but that will likely only happen if both Defendant are represented by a single attorney, which is rare. Most Defendants do not have the benefit of legal assistance and are sitting ducks, to put it metaphorically.  
Two county courts process hundreds of student loan cases ("hear" would be a misleading term, given the prevalence of default judgments without court appearance) and do not require Adams to support the affidavit testimony on the amount outstanding in principal and interest with accounting records of any kind. Adams therefore does not submit any, basing the request for judgment solely on the testimony of Cheryl Bellesen. 
The only bits of data that vary among cases are the type and number of loans and amounts owed, the interest rate, the amount of attorney's fees, and the information that identifies the Defendant. Bellesen does not even specifically state whether the Defendant owes the money based on having signed the loan agreement/promissory note as student borrower, or whether the Defendant is being sued as a co-signer / guarantor. The remainder of her testimony is boilerplate, including the assertion that the Defendant has missed as many as six installment payments, which is what the Texas Education Code requires to trigger acceleration of the outstanding balance that would otherwise be payable over the course of many years, like a mortgage. Bellesen does not state in what amount monthly payments were required to be made by a particular defendant, and no documentation containing this information is submitted to the court (except, in rare instances, where it comes to a bench trial).  
The only documentation Adams typically provides to support a motion seeking judgment for the State are the loan origination documents (promissory note/cosigner guaranty and disclosure statement), which obviously do not reflect any payment history.
As an assistant attorney general, Adams is not subject to the fair debt collection laws and routinely engages in litigation conduct that would violate the spirit, if not the letter, of consumer protection laws, if private collection attorneys and debt collection law firms engaged in it. Including those enforced by the same Attorney General, i.e. Texas Debt Collection Act and DTPA. 
Suing student loan obligors and guarantors in a county in which they do not reside is a practice that is mandated by statute, as the Education Code states that all such suits shall be filed in Travis County (Austin). Relative to the State as a whole, Austin is a small city and only a small percentage of the entire population of student loan obligors lives there. The vast majority of such Defendants are therefore faced with a lawsuit in a distant forum. In one recent instance, Adams even sued a Defendant long-distance in Japan. He regularly sues them in other states, serving them through the Texas Secretary of State.  
As to where student loan collection suits are filed, the Attorney General has no choice, though the mandatory venue provision was likely enacted for the Attorney General's convenience and efficiency in denigration of the competing interest of the Defendants, who would otherwise be entitled to defend a lawsuit in the county where they live.
The actual conduct of litigation, however, is a different matter. There is choice in how the Attorney General goes about managing the student loan caseload, and how he treats debtors, and some of the standard practices engaged in by Assistant AG Adams, with approval of his superiors - ultimately AG Ken Paxton - are both properly characterized as deceptive and abusive, as will be demonstrated below.
Deceptive representation as to the amount of damages and attorney's fees sought
When student loan defendants are served with law suit papers but do not answer, Adams promptly submits a motion for default judgment with an affidavit by Cheryl Bellesen that states the amount of principal, the amount of accrued interest, and the amount of late charges (if any). In some cases, the accrued interest is a substantial portion of the total. In the case of very old loans, the accrued interest may exceed half the amount of the principal, even if the interest rate is low (typically between 5 and 7 per cent).
When he files the original petitions, however, Adams only states the dollar amount of "the principal sum" even though the information on the full amount of the judgment he will be seeking is readily available. The difference is hidden in the phrase "plus interest." Why would Adams not state the full amount in the petition? The obvious answer is that a Defendant is less likely to fight the lawsuit if the amount of the debt is understated and is much lower than the amount of the judgment that will ultimately ensue.
The same with the attorney's fees. Adams plead a dollar figure for attorney's fees in most of his original petitions (either $750.00 or $1,000.00, depending on the type/amount of the loan), but he qualifies this specific dollar amount with the term “not less than” (In some cases, attorney's fees are mentioned, but no dollar figure is stated). 

At the point in time when Adams files the original petition, he knows that he will be asking for at least $1,500.00 in attorney’s fees, and as much as $5,000.00 in cases that involve higher loan balances. He knows this because seeking judgment for attorney’s fees in the range of $1,500.00 to $5,000.00 is an integral component of his office's standard operating procedures, and Adams personally signs and dates each one of the fee affidavits (assuming an image of his signature is not attached electronically). Needless to say, Defendants are generally not privy to this superior knowledge of the Attorney General's collection policies and practices, and associated standard operating procedures.

Example of Fee Aff from Default Judgment Case for $5,000.00 
While technically a pleaded claim for no less than $1,000 does not preclude a claim for $5,000, and can therefore not be said to be categorically false, it is nevertheless deceptive because a lay reader of ordinary intelligence will look at the specific dollar figure, and will not read and interpret "at least $1,000" as $1,000 times five, i.e. $5,000.00. 
Nor would it be reasonable for a defendant to reckon that the State's attorney will spend much time on the case if the Defendant decides not to contest it. Much rather, it would be reasonable for the defendant to assume that by not fighting the lawsuit, he or she will ease the workload for the State (and mitigate the State's damages, to the extent staff attorney time can be considered damages), and thereby keep the attorney's fees low. Notwithstanding, a defendant who does not respond to the lawsuit will then be hit with a default judgment that includes an award of attorney's fees that is higher than the $750.00 or $1,000.00 dollar figure in the petition that was served on the defendant.
Motions for default judgment are, in fact, highly automated and involve minimal attorney involvement. Just like the pleadings filed to open a new case, these motions all look alike except for a few case-level particulars such as defendant name, amount of principal and interest, and the applicable interest rate (5.25% for most loans, judgment interest of 5% if no interest rate is specified on the note). The affidavits in support of default are also very similar. Mass-produced with document production software. The attached promissory notes differ, or course, but they are preexisting documents, not documents created in the course of litigation.   
Assistant Attorney General John C. Adams was in private practice as a solo from May 1996 to 1999. He reports that prior to that he was an Associate at Hull & Associates, P.C., which is a Houston debt collection firm owned by James N. Hull.
Texas court records also reflect that Adams was affiliated with FREEDMAN, HULL, MATHEWS & PRICE, P.C. in the early 1990s.
John C. Adams mostly represented companies and financial institutions while in private practice of law in Houston, Texas.
Adams is a graduate of the UH Law Center and was licensed in 1989, just a few months after he received his JD degree from U of H. His State Bar of Texas license number (SBOT or TBN number) is 00865800 and his public profile on State Bar's website does not reflect any derogatory disciplinary history. 







Being sued by Texas AG in California 




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