Consumer Debt Litigation (mostly Texas)

Sunday, September 24, 2017

Featured Debt Collector: Nicole Hillman, Garnishor-in-Chief for National Collegiate Student Loan Trusts in Texas

GARNISHEE .... GREETINGS

Featured Debt Collector of the Month: Nicole Hillman, Garnishor-in-Chief of student-borrowers' bank accounts

for the National Collegiate Student Loan Trusts in Texas

Nicole Hillman is the attorney who has been filing garnishment actions on behalf of National Collegiate Student Loan Trust in Texas. This blawg post will show what the “paperwork” in those garnishments looks like.

But first an editorial note:

Some may think it is in bad taste to call out attorneys in this line of work publicly. I have concluded that there is nothing wrong with it, and that -- much rather -- their doings should be exposed and held up to public scrutiny and reasoned debate. It is the path they have taken. Nobody arrested them and marched them down this road.

They have chosen to make a living inflicting misery on others, people struggling to make ends meet or otherwise down on their luck.

How many student borrowers would “strategically default” on their student loans if they know it will ruin their credit for years? And how is it not rational to stop paying on student loans if your credit is already ruined and you can barely meet ordinary living expenses? Would you give preference to paying on unsecured loans and risk getting evicted for nonpayment of rent or mortgage, or having the car repossessed that you need to get to work every day?

That’s where the garnishment remedy comes in. It allows creditors to relieve borrowers of money they would otherwise spend on food, shelter, and other necessities of life.

And that’s important in a state like Texas where unsecured creditor cannot tap debtor’s wages directly.

For the financially strapped student loan obligors, whether borrower or co-signer, bankruptcy is not much of a solution to their predicament, given that educational debt is generally non-dischargeable.

Educational loans are not subject to discharge unless excepting such debt from discharge would impose an undue hardship on the debtor and the debtor's dependents. 11 U.S.C. § 523(a)(8).

The ultimate irony is when the collection attorneys themselves end up indigent or in bankruptcy. Anh Regent, for example, who until recently obtained private student loan default judgments for the National Collegiate Student Loan Trusts along with other creditors, see document samples below), or when debt collectors complain about their mortgage being foreclosed following failure to make payments on the note. Like Benjamin Sanchez, a once prolific collector of charge-off the credit card debt sold to debt buyers such as PHARIA LLC and DODEKA LLC . See 14-13-00272-CV for details, if you wish to sympathize with Ben, or indulge in a bit of Schadenfreude. Also see Sanchez verbatim below.

Texas Attorney's Woes Detailed

After Anh Regent went South, Nicole Hillman took on the task of collecting on the default judgments he procured against student borrowers, including hefty attorney’s fees.

$250 an hour, hundreds of times, once, during Regent's prime
years of collection

The practice of law may be a noble profession, but collection work hardly provides support for that lofty proposition. Much less post-judgment collection work.

The attorneys that opt to go into this line of business either oversee or are part of lawsuit mills.

They take advantage of very creditor-friendly laws and rules, and of courts that rubber-stamp default judgments and enforcement remedies. They know they are hurting people who do not have the wherewithal to defend themselves in a legal proceeding, and they know that most of them don’t have money to hire an attorney. They know that the targets of the lawsuits they file by the hundreds -- if not by the thousands -- are struggling financially, which is why they defaulted on their private student loans in the first place. Some will even say why: Because the loan servicer won’t work with them. So student loan debtors who are financially struggling work out some options for their federal loans, and stop paying on their private ones.

To be sure, some judges have check-lists or standard operating procedures in place to ascertain whether all the formal requisites for default judgments have been met, but creditors typically get default judgments anyhow. The court’s staff does some quality-control for them, like checking if the Defendant has, in fact, been served as alleged in the motion, checking if an answer is on file, and checking whether a nonmilitary affidavit has been submitted that is not already stale. Some judges make creditors’ attorneys show up in court if the motion for default judgment is found wanting. But the creditor prevails in the end. With very rare exceptions. And the courts are doing them a favor with rudimentary quality control – not to mention an exacting one -- because it makes their judgment virtually unassailable. Judgments with pegged-on attorney’s fees that augment the debt by thousands of dollars even the entire default judgment process was entirely transactional and based on only a few documents spat out from a computer system overseen by lowly paid clerical staff. The modern-day equivalent of paper shufflers, except that they use office computers and now efile, rather than just processing hard-copy paperwork (in the original sense of the term) and mail. Courts routinely approve thousands of dollars in attorney’s fees for lawsuits on which low-level non-attorney staff has spent minutes. They do so because the attorney on the case has sworn that their law firm takes cases on contingency and that $$$$ of dollars is reasonable or this case. Default judgment signed. Case closed.

Concededly, trial judges do not have much discretion to deny default judgments, no matter how unfair, because the rules themselves are stacked against the Defendants.

In Texas, a breach-of-contract plaintiff does not even have to attach the contract to the pleading, for example. In the default judgment context, the allegations in the pleading are deemed admitted, just not the damages. And the damages can be “proven up” by affidavit with a copy of the “instrument” attached. The affidavits submitted in support of default judgment are automatically acceptable if notarized because no one is present to challenge them, and the judge would not know it if the affiant is lying or making mistakes, unless the testimony is actually at odds with the attached documents. That happens fairly regularly, but to catch such error would require a more meticulous review than courts with high volume of business don’t have the time and resources for.

Especially not when the case is a run-of-the mill case that involves a comparatively small amount of money. Since the defendant didn’t get a lawyer to fight the lawsuit, he or she probably won’t hire a lawyer to appeal or otherwise complain of the default judgment, so even if the motion is not up to snuff, the likelihood of the resulting judgment for the creditor being challenged is small. The creditor’s attorney has already submitted the judgment. All the judge has to do is sign off on it. The chance of getting reversed on appeal approach nil.

And in JP courts, the amount is low by definition because those courts' jurisdiction is capped at $10,000. If there is an appeal, it won’t ever result in a published opinion reversing the lower court because the appeal will result in trial de novo in the court of record to which the appeal is taken. No JP court judgment is ever overturned on a finding that the justice of the peace committed legal error or abused his or her discretion.

For post-judgment writs of garnishment, a court order is not even needed. A mere application suffices. The writ will issue as a matter of course, and when served on the financial institution, will typically freeze all money in the account except possibly money that the bank can identify as protected by federal law.

Texas does not allow wage garnishment directly (except for child and spousal support), but it allows seizure of money deposited into a bank or a credit union accounts. So, all employed debtors who receive their pay via direct deposit are at risk of having ALL of their most recent earnings taken: All amounts remaining in the account from their last pay check as of the day the day the bank is served with the writ, and all additional amounts that arrive while the bank’s lawyer is preparing to answer the writ issued on application of the garnishor’s attorney.

In the case of National Collegiate Student Loan collection, the attorney who causes this to be done to them is Nicole Hillman. Texas Bar Card Number 24055666, licensed in Texas since 11/03/2006.

Meager earning, meager findings: Only $589.66 in debtor's account,
$687.66 a few days later,
Attorney Evan Moeller for Garnishee
Bank of America want $1,035 for the bank's trouble of having to answer the writ of garnishment.

Below are more snips from documents that demonstrate what such a garnishment action looks like:

Application for Writ of Garnishment by Trust Attorney Nicole Hillman
Affidavit in Support of Writ Application, sworn to by Nicole Hillman
Writ of Garnishment issued by the County Clerk, Harris County, Texas
Underlying default judgment for the Trust and undelivered notice of default judgment
Underlying motion for default judgment by NCSLT with attorney fee affidavit by Anh Regent
Excerpts from the student loan note and disclosure statement showing different cost-of-credit terms

Application for WRIT OF Garnishment

Affidavit in Support of Application for Post-Judgment Writ of Garnishment
signed by Nicole Hillman for Student Loan Trust 2007-1

Writ of Garnishment

Post-judgment Wrist of Garnishment issued September 1, 2017

on Judgment in favor of National Collegiate Student Loan Trust 2007-1 in by a

Harris County Civil Court at Law

NOTICE OF DEFAULT JUDGMENT WAS

RETURNED UNDELIVERED

Apparently they had a bad address for the defendant

THE UNDERLYING DEFAULT JUDGMENT

Default Judgment: Almost $6,000 added in "reasonable" attorney's fees

how the "reasonable" attorney's fees compute:
$250 per hour - Total: $5,936.63 = 23.75 hours to get a Default judgment - SERIOUSLY? non-perjuriously?

THE SECRET SAUCE IN THE STUDENT LOAN POOL
OR
HOW TO ORIGINATE HIGH-YIELD LOANS FOR SECURITIZATION

Step One: Offer a moderate teaser rate of say 7.25%
(Margin over Libor)

***

Student Loan Application signed and faxed 12/14/2006 - 7.25 "Margin" rate and 10.5% Origination fe

Step Two: Make the Loan for a much higher rate -- how about 13.647% -- and heap on a hefty origination fee on page 2.

***

Subprime loan-origination math: $1,749.78 origination fee = 10.5% of $15,000
Student has not graduated yet: Won't figure that $1,749.78 is 11.66% and that it's immediately added to the $15,000 and starts earning interest for the eventual investors along with the $15K.

Step Three: Hope the student will be so happy getting the check, and won't notice what happened between the signing of the loan application (here Dec 12, 2006) and disbursement (Dec. 19, 2006) until its time to start re-paying after graduation.
Risk: Applicant might cancel and return the check otherwise.

Step Four: Show would-be investors in Trust 2007-1 the high margins in your pool, and make them salivate for the high yields.

Student Loan Pool Distribution in terms of Margin (interest rate above LIBOR)
From Prospectus Supplement for Investors issued by the First Marblehead Corp. prior to securitization - Full document here

A DECADE DOWN THE ROAD TAKEN

(Former students being sued because the anticipated high yields are not materializing)

Word of a Very Unhappy Student Loan Customer
in 2017, at the receiving end of a collection lawsuit.
- Different Trust, different case, same issue.

exemplar of Answer to Writ of Garnishment
by bank of america as garnishee

underlying default judgment
obtained by anh regent

Another Affidavit by Chandra Alphabet, affidavit signer at TSI predecssor NCO

Chandra Alphabet, CFPB interviewee, with a very memorable last name.

Agreed Judgment of Garnishment

Friday, September 22, 2017

CFPB-induced National Collegiate Student Loan Litigation Moratorium: Expect confusion, inconsistent implementation, and need for follow-up

On Sep. 18, 2017 the CFPB issued an administrative CONSENT ORDER that requires Transworld Systems, Inc. (TSI), the “special servicer” of the National Collegiate Students Trusts for defaulted loans, to clean up its act. See the Bureau's press release here.

TSI is the entity in charge of the Trust’s litigation machine (“attorney network”) and operates a high-volume litigation-exhibit and affidavit production center in Georgia (my characterization, not the Bureau’s). Unlike the proposed CONSENT JUDGMENT between the CFPB and the Trusts themselves, this order does not require court approval, and went into effective immediately.

NO COLLECTOR MEA CULPA

TSI did not admit the CFPB's rather damning findings regarding improper affidavit production and other irregularities in the litigation process (such as filing of time-barred collection suits and having affiants sign affidavits professing personal knowledge they lacked). In fact, TSI disputes the charges by press release, at least with respect to its current business practices, which -- it protests -- are up to snuff.

TSI disagrees with the CFPB's characterizations, and with many of the alleged facts in the Consent Order. Since assuming control of the Attorney Network in November 2014, Company management has worked diligently to enhance the compliance management system for the Attorney Network business unit to reflect TSI's company-wide culture of compliance. TSI's current practices in the Attorney Network business unit adhere to all federal and state consumer protection laws, and embody best practices in the industry, including having well-trained affiants, proper documentation for any legal claims, and diligent local law firms that review these cases in their entirety prior to taking any action in court.

But it consented to the imposition of a civil penalties of $2.5mil (which is very moderate, considering the size of the operation and the huge docket of cases) as well as the remedial measures, which include an audit of all cases to determine whether the available documentation justifies (or would justify) a lawsuit against the obligor(s).

How the remedial measures designed to undo the harm caused by the practices that attracted federal regulatory attention will play out at the ground level, however, is anything but clear. The CONSENT ORDER is not exactly the equivalent to an injunction that simply stops the litigation machine in its tracks. And the impact of the required compliance measure is bound to vary across jurisdictions.

Most likely, no new collection lawsuits will be filed for a while, but what about the ones that are well under way? What about the cases that already have default or agreed judgments which are now being collected? The consent order has very detailed provisions addressing such matters, and post-judgment collection is supposed to stop, but it leaves many questions nevertheless unanswered.

EFFECT ON COLLECTION CASES ALREADY IN THE PIPELINE

An immediate question is how it will affect the pending cases, and the answer will likely not only depend on how TSI implements the CONSENT ORDER and what directions it issues to the law firms that handle litigation in different states. Much rather, the implementation and impact will necessarily differ from state to state because lawsuits cannot necessarily just be put on hold unilaterally.

The attorneys on these cases do not only have obligations to the client (i.e. the Trusts, via TSI), but also have obligations under the rules of the courts in which their cases are pending, including deadlines and such. In Texas, plaintiffs are allowed unilaterally withdraw a lawsuit by filing a notice of nonsuit (as long as the case is not already in the midst of a trial, and sometimes even then), but such a nonsuit will not terminate a counterclaim. So, the case would not actually terminate even if TSI and the Trust’s law firm want to dismiss it.

The court would have to be presented with a motion to stay or abate the case, or to continue the trial setting and/or discovery deadlines and other deadlines, or issue a new docket control order. That, of course, is most relevant in cases in which the Defendant has retained a lawyer. Most Defendants don’t.

Even if TSI instructs the two Texas law firms on its cases the “withdraw” pending collection suits, it will not dispose of all of them because they depend on what the opposing parties/attorneys and courts do in these cases. And the counterclaim may very well proceed to trial. It is not inconceivable that a clever attorney for a defendant will file for a default judgment against a Trust if the Trust law firms is placed in limbo.

On the other hand, TSI may claim that it is now producing compliant affidavits, and that lawsuits may thus proceed, if need be, with substituted or amended affidavits. But it is not clear how a problematic affidavit could be withdrawn if a judgment has already been entered, or when a case already on appeal, or eligible to be appealed because the deadline to do so has not yet expired.

Nor is it clear what will happen with cases in which a settlement is pending or has already been signed, without the lawsuit having been terminated. Will the new regulatory development provide a basis for undoing a settlement agreement (which is a new contract on the old debt) or will it provide a basis for challenging an agreement judgment, if already entered? What if the court that signed the agreed judgment no longer has jurisdiction (plenary power, in Texas) to set it aside? Does the TSI CONSENT ORDER provide a basis for rescinding settlement agreements with payment plans, or is the defendant's remedy limited to no longer having to make payments on such an agreement?

And how will it be determined whether or not the criteria for relief under the CONSENT AGREEMENT were satisfied when the case was settled early, and the only evidence before the court was whatever was attached to the petition, which may not have included an affidavit? Most likely, the petition would have had the signature page of the loan agreement (page 1 of several) and the disclosure statement attached, but nothing else. Assignment proof would not be required at the pleading stage, and it could not be known by the defendant or the court whether the Plaintiff had evidence of assignment, and what kind, unless the parties had already engaged in discovery.

NOT ALL STATES HAVE THE SAME RULES REGARDING LIMITATIONS

One of the CFPB’s findings from its investigation and enforcement action concerns lawsuits brought on behalf of the Trusts that were filed past the “applicable” statute of limitations. It is not entirely clear how the Bureau arrived at the number. It the count is based on suits that were expressly dismissed as time-barred either pursuant to a motion invoking this defense or court orders stating the reason for dismissal (in Texas, a trial court is not required to state a reason when granting summary judgment), it would be straightforward. But matters are not as simple with pending cases, not to mention potential cases that have not even been filed yet (or assigned for litigation, for that matter). By definition, there is not yet a judicial determination that the Trust’s claim is time-barred.

The statutes of limitations are not same across jurisdictions in terms of length, and in many instances the choice-of-law state (which also varies, depending on the identity of the original creditor/program lender) does not govern the limitations issue if the courts of the state treat limitations as a procedural issue (or an issue regarding the availability of a legal remedy) as opposed to a substantive-law issue that would -- at least in theory -- be governed by the law of the jurisdiction specified in the standard terms of the loan contract. But in practice, the contractual choice of law is almost never invoked in any event, which means that limitations will be default be governed by the limitations law of the forum state.

To the extent limitations is deemed an affirmative defense, however, it must be properly invoked to avoid waiver, and sometimes there is an issue as to which statute of limitations applies (debt, contract, promissory note, negotiable instrument).

In other words, whether a collection suit is time-barred is dependent both on the law of the jurisdiction in which the lawsuit is filed (based on Defendant’s current residence, as required by the FDCPA), and on the procedural posture of the case, most notably, whether the limitations issue is even raised.

And it is, of course, also dependent on defendant- and loan-specific facts, namely the date of default, which implicates the reliability and accuracy of loan payment history from PHEAA/AES, which is dubious, as was also revealed by the recent audit conducted in connection with the new owner’s legal squabble with the primary servicer.

But even if there were no question as to reliability of payment histories extracted from the servicer’s account management system, different jurisdiction may have different rules regarding the accrual-of-claim date for limitations purposes (Does the breach/default occur when the first monthly installment payment is not made, or is it based on the last payment that was received and credited? What if the payment was only a partial payment?).

And there may be differences among jurisdictions as to whether or not, and under what conditions, a resumption of payments restarts the limitations clock. What if the payment history shows a "credit" that is merely in internal "accounting adjustment" rather than an actual payment made on the debt. Will it slow down the limitations clock? What if the servicer “granted” a deferment/forbearance that the borrower was not even aware of, and thereby also deferred the accrual of claim for SOL purposes through simple account gimmickry? Or claims that a deferment or forbearance was granted, but that the documentation is no longer available…and that there are only electronic event/status entries in the account history that is printed from the account system? Will those be deemed admissible in lieu of primary business records of these events, such as a copy of the borrower's request for a forbearance, or a notice letter to the borrower?).

Sensibly, the consent order assigns the compliance burden to the retained law firms, which would be cognizant of the law that applies in the jurisdiction in which their attorneys are licensed to practice, but that still leaves considerable uncertainty as to which lawsuits could be safely brought, and which not. Moreover, these collection attorneys would already be aware that they may incur FDCPA liability as third-party debt collectors for bringing a time-barred suit, so the practical effect of this component of the consent order may be limited because a deterrent is already in place in the form of private fair-debt collection actions against violators.

WHAT IS ADEQUATE PROOF OF THE “LOAN NOTE” AND A PARTICULAR TRUST’S OWNERSHIP OF IT?

The questions what is adequate in terms of proof of the underlying loan contract/note, and what was is adequate as proof of ownership by virtue of assignment not only varies by jurisdiction, but – even more importantly - is affected by rather tricky evidentiary issues, which are arguably even more complex than the limitations issue.

Unlike the filing of time-barred suits, FDCPA actions based on suits where the creditor failed to meet its burden to proof on the merits, or its standing to sue, are much more problematic and less likely to be successful. In this respect, then, the consent order may have a more significant impact, but many questions remain under the big question: What is adequate proof of the chain of title when the "note" at issue is not a negotiable instrument; and what constitutes "possession" of such proof so that the chain-of-title requirement for bringing a compliant collection suit under the consent order is satisfied?

The audit of a small sample of PHEAA/AES loan files commissioned by the current residuals owner of the Trusts has revealed that proof of assignment is missing from 100% of the loan files.

Audit report via NYT here

The Trusts' new owners apparently make much of this in the lawsuit they filed against PHEAA/AES in Delaware Chancery Court. The public version of the filings are heavily redacted, but the available information is sufficient to conclude that the goal of the legal action is to oust the servicer and replace it with a new one, presumably one that is cheaper and better at squeezing money from the legions of subprime borrowers struggling to make ends meet, not to mention making payments on high-interest loans.

But the lack (or shoddy nature) of chain-of-title proof is a problem that is inherent in the business model that drove the creation of the trust as vehicles for the securitization scheme in the first instance. It is a systemic or structural problem.

The absence of documentary proof of assignment at the loan level (not really a loan file in the traditional sense of the term, which makes the hype about “missing paperwork” somewhat ironic) is anything but surprising because the “notes” were transferred by pool-transaction instruments called "Pool Supplements” with incorporation by reference of a data file denominated “Schedule”).

Pool Supplement is a meaningful label in this context. The term 'supplement' is descriptive because this contract document supplemented the pre-existing loan/note purchase agreements between originating bank and The First Marblehead Corporation, the sponsor of the securitization through its subsidiary National Collegiate Funding, LLC. The “pool” refers to the aggregate of the loans subject to the transaction on the particular occasion.

See examples of: Bank of America Pool Supplement and DASA for NCSLT 2007-2

The second chain-of-title document pertaining to transfers of "pools" to a trust is a Deposit and Sale Agreement for the specific trust (to be) formed for the purpose of aggregating and securitizing multiple pools of loans from different program lenders.

The data-file was used because that was much more efficient than physical transfer of files, or even individual electronic transfer of files at the loan-level.

Student Loan Purchase Agreement and Deposit and Sale Agreement
explained (from NCSLT 2007-3 Prospectus)

The problems the Trusts have encountered in collection cases in which borrowers/defendants hired a savvy defense attorney is the problem of proving that the particular loan at issue was included in the pool-transaction evidenced by the “Pool Supplement” and the “Deposit and Sale Agreement”. Those two documents are easy to come by because they are on file with the Securities and Exchange Commission for the whole world to view on the web and to puzzle over. While the data file is referenced in the Pool Supplement, e.g. "Schedule 1 [Transferred Bank of America Loans]", its content is not posted on the SEC's public-facing website.

The challenge for the TSI and the Trust’s attorney’s was to link the loan-origination documents (Signed signature page, additional pages of fine print, and TIL disclosure statement, -- more on those below) to the these documents evidencing transactions involving huge numbers of loans, and – in the case of the Deposit and Sale Agreement – multiple pools from different lenders. Apparently, they did not have access to the loan file, which was supposedly on file with the Indenture Trustee. Even assuming that TSI now has access to this file, that does not entirely solve the problem because they must still integrate the loan detail (data excerpt) with the pool-level transaction evidence, and that requires a properly qualified witness that can lay a proper predicate for the data file / Schedule or authenticate an data extracted from it pertaining to a particular loan.

As the CFPB observed, TSI would simply print the two document from the SEC website. These print-outs would then be attached to affidavits, if proof of assignment was needed in a particular jurisdiction, or a in a contested case. And a data-sheet with loan-level pieces of data would be inserted between the Pool Supplement and the Deposit & Sale Agreement as supposed "proof" that the particular loan at issue in the collection suit was indeed part of the deal. One appellate court in Texas called that addition the "orphan page". See Gillespie v National Collegiate Student Loan Trust 2005-3, A Delaware Statutory Trust. No. 02-16-00124-CV (Tex.App. - Forth Worth, June 29, 2017, no pet.)

But these finer points of proof typically only become issues where the defendants fight the lawsuit, and do so with competent legal representation.

THE NATURE OF THE PRIVATE STUDENT LOAN “NOTES”

The so-called private student loan “notes” that were bundled and pooled and ultimately became trust assets are not instruments comparable to closing documents in a mortgage loan transaction.

The “promissory notes” consist of a signed signature page that does double-duty as an application and as an agreement to repay (on terms not yet certain because the loan has not yet been approved when the page is signed) and a few more pages of fine print that might be called "Terms and Conditions" or "Standard Terms" although some standard terms and conditions are printed on the signature page also.

Example of faxed Signature Page (above)
from Bank One student loan originated in 2004 (NCSLT 2005-1)
NOTE DISCLOSURE STATEMENT (below)

The applicant would fax back the signature page only (to the agent of the program lender) and contractually agree that the fax is as good as the original (retained by the applicant), while the remainder of the pages (the fine print) is incorporated by reference. But those additional pages did not necessarily make it into the loan origination file, and in many instances lawsuits would be filed that included only the signature page (page 1 of 4) and the Note Disclosure Statement as evidence of the “note” or “loan contract”. Also see PHEAA audit, which showed that very few loans in the sample had the "Terms and Conditions" affixed to the signed notes.

Does the absence of the terms and conditions pages mean that the contract was not proven, or not fully proven? Arguably so, but it would not matter in the default judgment context. At least not in Texas. This is because the rules governing no-answer defaults provide that a defendant who does not answer automatically admits the allegations in the complaint (called Original Petition in Texas) as to liability. And the damages are proven by affidavit. Either one filed with the pleadings, or one attached to a motion for default judgment. That’s where TSI comes in, because it furnished these affidavits the fill in the gaps in the documentation with "testimony." See ---> prior post on this blawg on NCO / TSI robo-affidavits.

CFPB Findings re chain-of-title fibbing (under oath)

Can the default judgment procured with such an affidavit now be undone? That is not so clear. If the time for a post-judgment motion or an appeal has passed, the only potentially viable route would be appear to be action in equity called a bill of review suit, which must be brought within four years. The Texas rules of procedure, unlike the federal rules, do not know a motion for relief of a judgment, and the trial court generally loses jurisdiction to set aside a judgment after 30 days if no post-judgment motion is filed.

Would the TSI CONSENT ORDER and the CONSENT JUDGMENT as the TRUSTS provide a proper basis to re-open a case by bill of review when the normal requisites for bill of review are not satisfied? -- Not so clear. There would be no precedent directly on point, but a bill of review petition attacking a default judgment based on an affidavit of the kind found faulty by the CFPB (if not perjurious) might provide an opportunity for cutting-edge or ground-breaking lawyering. Or an occasion to present "an issue of first impression" to the judiciary.

Pick your metaphor or proper legal lingo.

A POSSIBLE SOLUTION IN TEXAS: BILL OF REVIEW RELIEF AND/OR RELEASE OF JUDGMENTS

Another approach may be for the CFPB to persuade or require TSI, and the attorneys whose actions it directs, to not oppose bill-of-review filings by defendants-in-judgment in Texas who seek vacature of final judgments obtained with dubious documents or questionable representations, or to require the Trusts to execute a release of judgment. The latter approach would solve the problem of eliminating judgments that cannot otherwise be undone for lack of proper procedural mechanisms in a jurisdiction such as Texas.

Non-enforcement or a stop to post-judgment collection will no doubt provide substantial relief to affected individuals (particularly in light of the fact that the National Collegiate Trusts used writs of garnishments to empty out borrower's bank accounts), but it is not the same as vacature of a judgment that should not have been entered, but was. Once final and unappealable, the judgment is res judicata.

No doubt, many unanswered questions remain, and time will tell how the implementation of the NCSLT CONSENT JUDGMENT and the TSI CONSENT ODER play out.

After the audit of the full population of student loans is completed, a certain percentage of them will no doubt pass muster under the newly-instituted documentation criteria, and the revamped collection lawsuit machine will roar again.

Thursday, September 21, 2017

State of Texas (AG Ken Paxton) v Samara Portfolio Management, LLC, Joseph Onwuteaka - One Amicus' Take on $25mil Penalty Price Tag for Venue Violations:

Trial Court Cause No. 2013-35721

THE STATE OF TEXAS, ACTING BY § IN THE DISTRICT COURT

AND THROUGH THE ATTORNEY §

GENERAL, KEN PAXTON §

Plaintiff §

VS. § OF HARRIS COUNTY, TEXAS

SAMARA PORTFOLIO MANAGEMENT, LLC,

LAW OFFICE OF JOSEPH ONWUTEAKA, and §

JOSEPH ONWUTEAKA, individually § 80^TH JUDICIAL DISTRICT

Defendants

Amicus Curiae Brief

in Support of New Trial on the Portion of Judgment

Imposing Penalties for Venue Violations

TO THE HONORABLE LARRY WEIMAN, STATE DISTRICT JUDGE.

Comes now the undersigned, as AMICUS CURIAE herein, and files this brief in support of a new trial in this case in the interest of justice with respect to one of the three types of code violations for which the three Defendants were held liable.[1]

Background

Judgment in this civil consumer-protection enforcement action was finally entered on July 14, 2017, following a multi-day trial to Harris County jury in June. It was initiated four years earlier by then-Attorney General Greg Abbott in 2013 in the name of the State of Texas and in the public interest. [2]

The jury delivered its verdict on June 7, 2017, and found for the State of Texas on its claim for damages in the form of statutory penalties plus attorney’s fees, but did not award the consumers affected by the wrongful conduct of the Defendants any monetary relief.

The jury found, inter alia, that each of the three Defendants had violated Texas law on numerous occasions by filing debt collection suits against Texas consumers in a county in which said consumers did not reside and in which they had not signed the underlying contract.[3]

The unanimous jury found 898 distinct violations by each of the three Defendants and assessed damages in the character of civil penalties in the amount of $6,286,000 against Samara Portfolio Management, LLC; $8,980,000 against the Law Office of Joseph Onwuteaka, P.C.; and $7,633,000 against Defendant Joseph Onwuteaka, Individually.[4]

Summary of the Argument

The judgment should be set aside, and the venue-violations claims should be retried, because the jury did not hear evidence that the Texas Attorney General engages in the very same conduct for which he brought the three Defendants to justice, and for which the Attorney General obtained a judgment that will likely wipe them out financially, without much benefit to the affected consumer-debtors.

The judgment awards all of the millions of dollars in monetary relief solely to the State of Texas, and that windfall is unwarranted under the circumstance of this case.

The proximate victims of the wrongful conduct were the consumer-debtors who were sued in the wrong venue, and they stand to receive no portion of the windfall under the signed final judgment.

The Court should set aside the judgment for the additional reason that the monetary penalties are grossly disproportionate, considering the nature of the wrongful conduct, and would likely be reversed on appeal, if not by the First or Fourteenth, by the Texas Supreme Court. This has happened before when a court tried to send a message to a debt buyer by imposing a much smaller penalty for questionable litigation conduct. See Unifund CCR Partners v. Villa, 299 S.W.3d 92 (Tex. 2009) (Granting, without hearing oral argument, petition for review reversing the court of appeals' judgment affirming an award of $18,685.00 to debt suit defendant Villa as sanctions and rendering judgment that Villa take nothing on his claim for costs for inconvenience and harassment).

What message will it send if the jury’s verdict in this case is thrown out on appeal and the Defendants get to gloat that they have been vindicated? What message will it send when abuse at the hands of a shyster-at-law, committed as a pattern and practice as proven to the jury at trial of this case, is officially condoned as treatment rightly inflicted upon the affected consumer-defendants qua deadbeats?

Finally, when a case is prosecuted by the State in the public interest, the public should receive a full hearing too, without the Attorney General interposing himself as a gate-keeper and coming to court with unclean hands -- as will be detailed below - and keeping the entirety of the spoils, rather than providing meaningful relief to those affected by the Defendants’ wrongdoing.

Argument and Empirical Support

A. The Texas Attorney General engages in the same type of conduct

Based on the content of the live pleading upon which this case was tried and based on the charge of the court, neither trial judge nor jury had opportunity to consider the equities of the case in light of the fact that the Office of the Texas Attorney General, under the leadership of Ken Paxton, routinely engages in the very same litigation conduct that forms the crux of the complaint against the Defendants in this case: suing scores of Texas residents in a county in which they do not reside (and many others who are not even residents of this state).

The Texas Attorney General does so in the collection of student loans administered by the Texas Higher Education Coordinating Board (THECB).

AMICUS EXHIBIT A-1

LOCUS OF DEFENDANT WHEN SUED IN TRAVIS COUNTY, AND LOCUS ON LOAN APPLICATION/NOTE

THECB COLLECTION SUITS FILED IN JANUARY 2017 (N=95).

The Attorney General does not violate any law in doing so. In fact, the Texas Education Code requires that all collection suits on loans administered by the Texas Higher Education Coordinating Board be filed in Travis County.[5]

When venue is challenged, the Attorney General files a response asserting that venue is not only proper, but mandatory, in Travis County, citing the special venue law.[6]

At the receiving end, however, the consequences are no different for the defendants: Whether consumers who do not reside in Houston are served with suit papers from Justice of the Peace Patronella on orders of Joseph Onwuteaka litigating from the comfort of his office in Houston or Sugarland. Or whether non-Austinites are served with citation issued on orders of an Assistant Attorney General overseeing the OAG’s well-oiled litigation machine in Austin, Texas.

Here is what one pro-se litigant had to say about being sued in Austin while struggling to make a living in Midland, Texas: “I filed an original answer with the court by the established deadline of January 30^th 2017,” citing to Barcode # 1178782. “It would be very difficult for me to appear in person since I live several hours away in Midland.” See Cause No. C-1-CV-16-011009 in Travis County Court at law No. 2.

This is not just one man’s gripe. It is an issue that is systemic and affects hundreds of other borrowers and guarantors of student loans.

Amicus Exhibit A-1 details the place of residence of the defendants sued by the Texas Attorney General in January 2017 on THECB loans.[7] All 95 defendants were sued in Austin, Travis County, but only nine (9) lived there at the time the petition was filed.[8] The vast majority of Defendants lives elsewhere in Texas, 11 were sued long-arm out of State (within the United States), and one was sued out of the country, in Japan.

B. The Texas Attorney General routinely moves for default judgment not only against out-of-county defendants, but defendants who have answered

In C-1-CV-16-011009 the pro-se defendant also complained that he had not been given notice. The docket does, in fact, reflect that his narrative answer was docketed on January 30, 2017, and that a motion for default judgment was filed on February 22, 2017. Even allowing for a delay in posting on the Travis County Clerk’s electronic docketing system, the answer had already been on file for weeks when the Attorney General filed his motion for default.

This is not an isolated case.[9] Much rather, it appears that the student loan collection unit of the Attorney General’s Office does not have a quality-control process in place to prevent the submission of motions for default with answers on file.

If the OAG maintained the Travis County’ Clerk’s URLs for active cases in its case management database, a case status check could be done in less than a minute by simply clicking the hotlink to the case docket, followed by a click on the >Document Events button under the Civil Events tab. See below:

Under Ken Paxton’s stewardship, however, and with Ken Paxton’s name on the signature block, Assistant Attorney General John C. Adams routinely represents to the court that the requirements for default judgment have been met when that is not true in all cases, and when the truth could easily have been ascertained.

This questionable practice, however, affects only a small percentage of student loan collection cases because most defendants never file an answer at all. Another dubious practice is much more ubiquitous.

C. The Texas Attorney General routinely engages in deceptive conduct in debt collection against borrowers and their co-signers

In Cause No. C-1-CV-17-000942 the Attorney General obtained a default judgment for $14,435.99 and $2,000.00 in "reasonable attorney's fees." The default judgment additionally awards interest at the rate of 9% on the $14,435.99 amount. It was signed by a visiting judge, JD Phillips, on April 13, 2017.

The case may appear unremarkable at first glance. This is, after all, but one of numerous THECB collection cases, and a high proportion of them result in default judgments in due course, usually within two months.

But a closer examination reveals a more troubling story. The facts as they appear of record themselves tell this story, rather than merely a hand-penned “sob story” by an unrepresented litigation that attorneys and judges may not be willing to credit, and may not be will to even consider at all unless it contains the magic words “general denial.”

The College Access Loan (“CAL”) at issue in Cause No. C-1-CV-17-000942 was applied for in 1994, and the Defendant had signed the note in Palestine, TX (Anderson County) as guarantor for his step-child on June 21. 1994.

Twenty-two and a half years later, on January 31, 2017, the Attorney General sued him, and he was served by private process server in Chandler, Henderson County, TX 75758 on February 15, 2017.

In its petition, the Attorney General averred that "Plaintiff requests that Defendant be cited to appear and answer, and that, on final hearing, Plaintiff have judgment of and from Defendant the principal sum of 5,000.00 plus interest, reasonable collection costs, and other charges which have lawfully accrued, according to the note's/notes' terms, attorney fees of not less than 1,000.00, post judgment interest, and such other and further relief to which Plaintiff may be justly entitled either at law or in equity. See ORIGINAL PETITION, Bar Code ID 1179774.

***

The 5,000.00 amount of loan principal was underlined and rendered in bold font. It stands out from the surrounding text.

But the judgment that followed it was for a total of $16,435.99 (sum of $14,435.99 and $2,000.00 in attorney’s fees), which is almost thrice the amount set forth in the petition. See DEFAULT JUDGMENT, Bar Code ID 1206924.

In the collection of state education loans, the Texas Attorney General routinely represents in the initial pleadings (which are rarely amended) that the debt is much smaller than the amount that his office already knows it will hold the defendant liable for, thereby inducing defendants not to question or contest the claim.

Most student loan defendants do not file an answer. The Attorney General then promptly moves for default judgment with an AFFIDAVIT IN SUPPORT OF FINAL JUDGMENT BY DEFAULT signed by Cheryl Bellesen, Manager, Student Loan Collection, Bankruptcy and Collections Division of the Office of the Attorney General and an "AFFIDAVIT IN SUPPORT OF ATTORNEY'S FEES" signed by John C. Adams.[10]

Unlike the original petition that preceded it, the Bellesen Affidavit attached to the motion for default judgment will state the full amount of the debt claimed as outstanding, including accrued interest and late fees, if any. The Adams fee affidavit will be for $1,500, $2,500, or $5,000, depending on the order of magnitude of the principal claim plus finance charges.[11]

Put on the defense, the Attorney General would no doubt retort that the petition accurately states the principal amount of the loan was $5,000.00, which matches the amount shown on the attached “CAL” note with the signed guaranty of payment. And he would likely argue that use of the two words "plus interest" does not rule that the accrued interest may actually be a multiple of the principal amount. State-court pleading standards satisfied.

Regarding the method of accruing the interest, the Texas pleading rules do not require disclosure of the contract rate sought in a petition. And as for attorney's fees, the petition did not need to state that $2,000.00 would be sought in the default or summary judgment because it stated "not less" than $1,000.00 and left open the possibility that fees might be higher.

And he would be right in a formalistic sense.[12] The petition was not technically false. It was just deceptive, designed to mislead the Defendant. In a very clever and calculated way. In a way one might expect an unscrupulous private debt collector to operate. Someone like Joseph Onwuteaka.

A person of ordinary intelligence would have looked at the dollar figure - rendered and bold font for emphasis - and thought he was being sued for $5,000.00, rather than for $14,435.99, almost three times (3x) that much.

The average co-signing step parent - now on the receiving end of a lawsuit - may have missed the dollar figure for the attorney's fees because it was not shown in bold digits; but if he read carefully, it would have been reasonable for him to conclude that he was being sued for $1,000.00 in legal fees, rather than twice that.

And he might have thought it best to just let the AG have his way, rather than seek out a lawyer and put up a fight. After all, he was just being sued for a total of $6,000.00, one thousand of that being fees. Nor would the defendant know that the paperwork was generated by a computer system, and that the filing attorney’s attention to the case consisted of little more than signing the boilerplate pleading, motion for judgment, and fee affidavit.

A default judgment was duly entered in Cause No. C-1-CV-17-000942. With interest now quantified as $9,435.99 on top of the $5,000.00 amount of principal, and attorney’s fees doubled up to $2,000.00

"The Court [...] finds that Defendant is indebted to Plaintiff for the principal sum of $ 5,000.00, interest in the amount of $9,435.99, late charges in the amount of $0.00 for a total sum of $14,435.99 plus 9.00% interest thereon per annum from the date of this judgment until paid. The Court further finds that Plaintiff is entitled to reasonable attorney's fees in the amount of $ 2,000.00."

Case closed as of April 13, 2017, date of the judgment. Plenary power expired. Res judicata.

A judgment-debtor on the default judgment would not even know the amount of the judgment entered because the notice sent by Travis County Clerk does not include that information. When discovered, plenary power will likely have expired, and the appellate deadline will likely have passed.

Amicus Exhibit A-2 shows that the Attorney General routines understates the amount of attorney’s fees by pleading for $1,000.00 in College Access Loan cases (“CL00” pleading template) and $750 in Texas B-On-Time loan cases (“BT00” version), but routinely seeks and obtains much higher awards with dispositive motions and supporting fee affidavits in both types of student loan cases.

AMICUS EXHIBIT A-2

ATTORNEY FEE ENHANCEMENT UPON JUDGMENT IN CASES FILED IN DECEMBER 2016 THAT HAD RECEIVED DEFAULT JUDGMENT AS OF SEPTEMBER 7, 2017

(N=44 of 98)

CAUSE NO	Case Status	Judgment Type		Signing Judge	Date of Judgment	Atty Fees	Judgment Amount	Pleaded for Fees	Fee Factor x Multiplier\|%
C-1-CV-16-011717	DISPOSED		DJ	VJ	4/13/2017	5000	26732	750	6.66667	667%
C-1-CV-16-011620	DISPOSED		DJ	TTW	2/17/2017	5000	30143	1000	5	500%
C-1-CV-16-011710	DISPOSED		DJ	EMS	2/23/2017	5000	34198	1000	5	500%
C-1-CV-16-011756	DISPOSED		DJ	TTW	3/2/2017	5000	36565	1000	5	500%
C-1-CV-16-011757	DISPOSED		DJ	TTW	2/23/2017	5000	36534	1000	5	500%
C-1-CV-16-011839	DISPOSED		DJ	EMS	6/2/2017	5000	71224	1000	5	500%
C-1-CV-16-011977	DISPOSED		DJ	EMS	2/28/2017	5000	37854	1000	5	500%
C-1-CV-16-011990	DISPOSED		DJ	EMS	2/28/2017	5000	46333	1000	5	500%
C-1-CV-16-012386	DISPOSED		DJ	EMS	3/30/2017	5000	59523	1000	5	500%
C-1-CV-16-012387	DISPOSED		DJ	EMS	3/30/2017	5000	59523	1000	5	500%
C-1-CV-16-012392	DISPOSED		DJ	EMS	3/8/2017	5000	57221	1000	5	500%
C-1-CV-16-011975	DISPOSED		DJ	TTW	4/21/2017	5000	37950	1000	5	500%
C-1-CV-16-011867	DISPOSED		DJ	EMS	1/6/2017	2500	24139	1000	2.5	250%
C-1-CV-16-011699	DISPOSED		DJ	EMS	3/20/2017	2000	10423	NO $	#VALUE!	n/a
C-1-CV-16-011718	DISPOSED		DJ	TTW	2/23/2017	2000	14464	NO $	#VALUE!	n/a
C-1-CV-16-011688	DISPOSED		DJ	TTW	1/30/2017	2000	10074	750	2.66667	267%
C-1-CV-16-011861	DISPOSED		DJ	EMS	2/17/2017	2000	12675	750	2.66667	267%
C-1-CV-16-011981	DISPOSED		DJ	VJ	4/13/2017	2000	15125	750	2.66667	267%
C-1-CV-16-011983	DISPOSED		DJ	EMS	2/23/2017	2000	10683	750	2.66667	267%
C-1-CV-16-012372	DISPOSED		DJ	TTW	4/14/2017	2000	17814	750	2.66667	267%
C-1-CV-16-011705	DISPOSED		DJ	EMS	2/23/2017	2000	10823	750	2.66667	267%
C-1-CV-16-011679	DISPOSED		DJ	EMS	2/23/2017	2000	14739	1000	2	200%
C-1-CV-16-011683	DISPOSED		DJ	TTW	3/20/2017	2000	11684	1000	2	200%
C-1-CV-16-011707	DISPOSED		DJ	TTW	3/6/2017	2000	14766	1000	2	200%
C-1-CV-16-011755	DISPOSED		DJ	EMS	3/20/2017	2000	10017	1000	2	200%
C-1-CV-16-011866	DISPOSED		DJ	TTW	2/15/2017	2000	11735	1000	2	200%
C-1-CV-16-011954	DISPOSED		DJ	TTW	2/15/2017	2000	11408	1000	2	200%
C-1-CV-16-011972	DISPOSED		DJ	EMS	3/20/2017	2000	15518	1000	2	200%
C-1-CV-16-011974	DISPOSED		DJ	TTW	2/15/2017	2000	15754	1000	2	200%
C-1-CV-16-012373	DISPOSED		DJ	TTW	7/28/2017	2000	16517	1000	2	200%
C-1-CV-16-011778	DISPOSED		DJ	EMS	2/23/2017	1500	9977	NO $	#VALUE!	n/a
C-1-CV-16-011987	DISPOSED		DJ	TTW	3/20/2017	1500	6829	NO $	#VALUE!	n/a
C-1-CV-16-011716	DISPOSED		DJ	TTW	1/25/2017	1500	5637	750	2	200%
C-1-CV-16-011854	DISPOSED		DJ	EMS	2/17/2017	1500	7852	750	2	200%
C-1-CV-16-011860	DISPOSED		DJ	TTW	2/24/2017	1500	7445	750	2	200%
C-1-CV-16-011982	DISPOSED		DJ	TTW	2/21/2017	1500	6803	750	2	200%
C-1-CV-16-011985	DISPOSED		DJ	TTW	2/21/2017	1500	6896	750	2	200%
C-1-CV-16-012421	DISPOSED		DJ	TTW	4/14/2017	1500	7577	750	2	200%
C-1-CV-16-011953	DISPOSED		DJ	EMS	2/27/2017	1500	8545	1000	1.5	150%
C-1-CV-16-011970	DISPOSED		DJ	EMS	3/20/2017	1500	6675	1000	1.5	150%
C-1-CV-16-011971	DISPOSED		DJ	TTW	2/15/2017	1500	6646	1000	1.5	150%
C-1-CV-16-012382	DISPOSED		DJ	EMS	6/16/2017	1500	7767	1000	1.5	150%
C-1-CV-16-012385	DISPOSED		DJ	TTW	2/23/2017	1500	7677	1000	1.5	150%
C-1-CV-16-012388	DISPOSED		DJ	TTW	2/23/2017	1500	8114	1000	1.5	150%

Total DJ Cases:	44		DJ		Total $$$:	117500	886595	36750	3.19728	320%
Mean value:					Mean:	2670	20150	835	3.19728	320%

The ample statistical data for a month’s worth of cases compels the conclusion that this is done deliberately and systematically.

D. The Texas Attorney General routinely engages in fee-bloating and double-dipping

Under Ken Paxton’s stewardship of the Attorney General’s Office, the State of Texas routinely sues two people on the same debt.

This is also part of the current business model.

Many of the THECB loans are co-signed. The Attorney General regularly sues both the student borrower and the co-signer/guarantor, but not in the same lawsuit so as to obtain a judgment that holds them jointly and severally liable for the debt that they are jointly responsible for. Instead, he files two separate suits, one against each obligor, and obtains two separate judgments on the very same debt. He also claims and routinely receives awards of attorney’s fees in the same amount, one in each lawsuit, thereby doubling the amount of fees awarded.[13]

Because the second case is the electronic equivalent of a carbon copy of the first, the cost of processing the second is marginal, the only difference being the name and other identifying information for the Defendant and the cause number.[14] The boilerplate pleadings do not even distinguish whether a defendant is being sued as principal obligor or as a co-signer/guarantor.

Leaving aside court filing fees, which are assessed for each case filed by the court’s clerk, the costs of litigation for the second suit, which is virtually identical to the first, would be a fraction of the first for the OAG. Assistant Attorney General John C. Adams nevertheless routinely swears that this legal work in both cases is worth $1,500, $2,500, or $5,000, depending on the size of the amount outstanding. See AMICUS EXHIBIT A-3. Also see the exemplar below.

2 Judgment on same debt entered in Cause Nos.

C-1-CV-16-012386 (parent) and C-1-CV-16-012387 (student)

$5,000.00 in attorney’s fees x 2

AMICUS EXHIBIT A-3

EXEMPLAR OF TWO SUITS AND TWO JUDGMENTS ON SAME DEBT

WITH HOTLINKS TO DOCKETS

C-1-CV-16-011756 Bottom of Form		C-1-CV-16-011757
SUIT AGAINST PARENT		SUIT AGAINST STUDENT
GOINS MARVIN LEE		GOINS KHADYSHA Z
OPN:CV ORIGINAL PETITION	1162152	OPN:CV ORIGINAL PETITION	1162149
MOT:CV DEFAULT JUDGMENT	1189015	MOT:CV DEFAULT JUDGMENT	1186625
DSP:CV DEFAULT JUDGMENT	1191996	DSP:CV DEFAULT JUDGMENT	1189044

But the small marginal cost of an additional collection suit is not merely a feature of the second action (of two) against borrower and co-signer, respectively. It applies to all THECB student loan suits because they are prosecuted with the same litigation software and templates. Barring exceptional circumstances,[15] the collection suits therefore cost the same to produce (measured in staff resources) regardless of the amount in controversy.[16] And in Travis County courts at law, default judgments are granted without hearings. So no live court appearance is necessary.

A single Assistant Attorney General is responsible for student loan collection suit and signs as attorney-in-charge. He swears that $250.00 is the reasonable value of an hour of his time. That may be unobjectionable for an attorney of his experience, but hearings (in the few cases that require them) are requested for 5 minutes only,[17] and the cost of document production is negligible. In order to justify a $2,500.00 fee award in a single case under Lodestar principles, Adams would have to spend ten hours on a single case, rather than ten minutes.[18]

Under Ken Paxton’s leadership, the attorney-in-charge of THECB student loan collection engages in egregious fee padding as a pattern and practice, and routinely shifts the inflated fees to Texas student obligors and their co-signers.

With very few exceptions, the Travis County courts at law grant the full amount of fees requested, because that amount is sworn to by Assistant AG Adams under penalties of perjury to support the State’s motions for default and for summary judgment.[19]

A Janus-faced Attorney General

Under the stewardship of Ken Paxton, the Office of the Texas Attorney General’s engages in some of the very same harmful practices for which the Defendants in this lawsuit had millions of dollars in penalties entered against them. Harmful to Texas consumers/debtors.

Unlike the non-governmental defendants in this action, the Attorney General does not and cannot violate the venue laws of this State by suing Texans and former students of institutions of higher education in Texas by the hundreds and – over the years – by the thousands in Travis County (Austin, Texas) regardless where they may live because a special venue provision has been enacted for the Attorney General’s convenience.

For better or worse, that is the Texas Legislature’s doing.

But the Texas Legislature has not decreed that the OAG should engage in massive deception in the collection of student loan balances owed to the Texas Higher Education Coordinating Board, and has not authorized the Attorney General to file disingenuous affidavits regarding the true cost of legal work performed by a single Assistant Attorney General handling a caseload of more than 1000 mass-litigation cases per year, and claiming reasonable fees between $1,500 and $5,000 in each default case, for a total annual amount aggregating to millions.

If it be good public policy to turn student loan collection into a profit center, the Texas Legislature should enact special legislation to exempt the Attorney General and his staff from the requirement to tell the truth under oath in a legal proceeding. The truth about the efficiencies of mass litigation in the age of efiling, and the precipitous drop in marginal costs of each additional lawsuit churched out by the electronic-age equivalent of a lawsuit mill.

The current practice under AG Ken Paxton’s watch, and in his name, is for a state employee to routinely misrepresent the true per-unit cost of collection litigation and to thereby beef up the budget of the Attorney General’s office, and cross-subsidize other parts of the agency and, at least indirectly, the state government. At the expense of people struggling to repay student loans either as borrowers or as guarantors. A good number of the latter category are of advanced age.[20] Some are sued decades after the loan was made.

The Link

What does the Attorney General’s gouging of student loan obligors have to do with this lawsuit? -- Quite a bit.

In assessing penalties, if any, the jurors in State of Texas v Samara Portfolio et al were asked to consider, inter alia, (1) the seriousness of the violation, including the nature, circumstances, extent, and gravity of any prohibited act or practice; (2) the amount necessary to deter future violations; and (3) any other matter that justice may require.

If the jury had heard that being sued in a distant venue is a fate suffered by many of their peers around the State and beyond its borders, and that the indignity was being inflicted upon them by the very same Texas Attorney General that urged them to throw the books at Onwuteaka and his company, they might very well have come to different conclusions regarding the gravity of Onwuteaka’s misconduct.

At the minimum, they might have concluded that Attorney General Ken Paxton is a hypocrite. The members of the jury would have been entitled to weigh the balance of equities under the circumstances because they were to consider “any other matter that justice may require.”

While the Attorney General may not be subject to estoppel or quasi-estoppel for inequitable conduct in a formal legal sense,[21] the jury might very well have taken into account that the Office of the Attorney General, under the leadership of Ken Paxton, squeezes money from consumer-debtors utilizing means that -- although legal at least in part for the Attorney General due to his special status – are nevertheless no less reprehensible than those employed on a comparable scale by Joseph Onwuteaka and his ilk.

Judge Weiman instructed jurors to inflict punishment as they see fit in their discretion.[22]

Specifically, the jury was advised to impose punishment on the defendants as a warning and example to the wrongdoer, and to others, so as to deter the same or similar conduct in the future.

It was clearly up to the jury to exercise its own moral judgment within the parameters of the law. That discretion included the discretion not to reward the State with millions of dollars in civil fines for conduct harmful and unfair to consumer-debtors that the State, through its Attorney General, itself engages in with predictable regularity and with impunity.

The jury should have had an opportunity to hear about the Attorney General’s own patterns and practices in the business of debt collection, the institutionalized pattern of deception in dealing with student loan obligors under his leadership, and his lack of clean hands.

Equal Protection Concerns

This Court should additionally have an opportunity to assess the constitutionality of the disparate treatment of Texas consumers sued for unpaid obligations based on who is suing them; whether the distinction between OAG and private collection attorneys passes muster under the rational-basis test, and – if the answer is no – whether the appropriate remedy is to strike down the venue provisions of the Texas Debt Collection Act (and other applicable statutes that might provide a basis for liability) or to strike down the exclusive venue provision of the Texas Education Code to rectify the constitutionally impermissible disparity. See Sessions v. Morales-Santana, __ U.S. ___ (June 12, 2017) ("[W]hen the `right invoked is that to equal treatment,' the appropriate remedy is a mandate of equal treatment, a result that can be accomplished by withdrawal of benefits from the favored class as well as by extension of benefits to the excluded class." Heckler v. Mathews, 465 U. S. 728, 740 (1984) (quoting Iowa-Des Moines Nat. Bank v. Bennett, 284 U. S. 239, 247 (1931); emphasis deleted). "How equality is accomplished . . . is a matter on which the Constitution is silent." Levin v. Commerce Energy, Inc., 560 U. S. 413, 426-427 (2010)).”

The Injunction Is a Paper Tiger in PDF

Under the final judgment entered in this civil consumer protection enforcement case, the only purported benefit for the affected Texas consumers against whom venue violations were committed is an injunction prohibiting the Defendants from collecting the ill-gotten judgments against them. See FINAL JUDGMENT AND PERMANENT INJUNCTION, p. 5, part III, ¶10.

A. This injunction is close to meaningless because it is easily circumvented

All Samara Portfolio Management, LLC has to do to render this injunction ineffective is to sell the judgments to another debt buyer, who can then proceed to collect on them as owner, rather than as an agent for the enjoined defendants who would be bound by the injunction. Alternatively, the State of Texas may acquire the ill-gotten judgments against the consumer-debtors by executing on Samara’s assets, and will then be in the position to go after the consumer debtors instead of Samara Portfolio and Onwuteaka doing it themselves. The appointment of a receiver would make no difference for the affected consumer-debtors either, as the receiver would then be duty-bound to either liquidate Samara’s assets or collect from the consumers/judgment-debtors directly.[23]

B. Texas consumers more broadly speaking will not benefit either

Sub-paragraph ‘c.’ of Injunction paragraph 10 also purports to enjoins venue violations beyond the 898 individuals listed on Exhibit B.[24]

This may be more than merely symbolic, but it does not accomplish much, as it is duplicative. Both federal and state law already prohibit the conduct that the Defendants are enjoined from committing, and under the relevant statutes, abused consumers would be entitled to seek actual damages (if any), a statutory penalty amount regardless of actual damages, and their attorney’s fees; -- none of which any single Texas consumer has received through the efforts of the Attorney General in this case.

Additionally, it is doubtful that future consumers sued in the wrong venue would have standing to enforce paragraph 10c of the permanent injunction unless the Attorney General were to agree to do it on their behalf. Which is unlikely, given that the primary objective of Attorney General Ken Paxton evidently consists of using consumer-protection litigation as a revenue source, as illustrated in this very case, in addition to the general policy priorities articulated by the current Attorney General in his formal budgeting documents.[25]

It is unlikely that the two entity defendants in this case would have any assets left after the execution of the State’s judgment against them. It is also unlikely that the natural-person Defendant in this case, Joseph Onwuteaka, would have any non-exempt assets left after all writs of execution and writs of garnishment have been executed. Therefore, there would be no economic incentive for the Attorney General to come to the aid of future victims of venue-violation by these Defendants.

Conclusion

Wherefore, premises considered, the undersigned AMICUS CURIAE urges the Court to take judicial notice of the judicial case-data presented in, and hot-linked to, from this brief,[26] vacate the final judgment entered in this consumer protection action, and re-set the case for a new trial to allow for consideration of the issues raised in this brief in the interest of justice and in the interest of Texas consumers/debtors, for whose benefit and protection this case was ostensibly filed by then-Attorney General Greg Abbott in 2013.

AMICUS EXHIBIT A-1

LOCUS OF DEFENDANT WHEN SUED IN TRAVIS COUNTY, AND LOCUS ON LOAN APPLICATION/NOTE

THECB COLLECTION SUITS FILED IN JANUARY 2017 (N=95)

Seq LOCUS OF D

CAUSE NO

STATUS

D SUED IN

STATE

ZIP

NOTE SIGNED IN

Out-of-Country

C-1-CV-17-000747

DISPOSED

JAPAN

HOUSTON, TX

Out-of-State

C-1-CV-17-000955

DISPOSED

FREEMONT

94539

GONZALES TX

Out-of-State

C-1-CV-17-000561

DISPOSED

DENVER

80216

AUSTIN, TX

Out-of-State

C-1-CV-17-000858

DISPOSED

GLENDALE

80246

WICHITA FALLS, TX

Out-of-State

C-1-CV-17-000359

CV PENDING

GAINESVILLE

32608

SAN ANTONIO, TX

Out-of-State

C-1-CV-17-000941

CV PENDING

FORT LAUDERDALE

33308

DALLAS, TX

Out-of-State

C-1-CV-17-000551

DISPOSED

BATON ROUGE

70815

BATON ROUGHT, LA

Out-of-State

C-1-CV-17-000552

DISPOSED

BATON ROUGE

70815

WACO, TX

Out-of-State

C-1-CV-17-000377

DISPOSED

HATTIESBURG

39401

HUNTSVILLE, TX

Out-of-State

C-1-CV-17-000829

DISPOSED

NEW YORK

10029

RICHLAND HILL TX

Out-of-State

C-1-CV-17-000544

DISPOSED

MOORE

74160

NORMAN, OK

Out-of-State

C-1-CV-17-000951

CV PENDING

DUPONT

98327

CONROE, TX

Out-of-County

C-1-CV-17-000831

DISPOSED

ABILENE

79601

ABILENE, TX

Out-of-County

C-1-CV-17-000736

DISPOSED

ABILENE

79603

ABILENE, TX

Out-of-County

C-1-CV-17-000383

DISPOSED

ARLINGTON

76002

GLENN HEIGHTS, TX

Out-of-County

C-1-CV-17-000365

CV PENDING

ATS

ARLINGTON

76014

ARLINGTON, TX

Out-of-County

C-1-CV-17-000367

CV PENDING

ARLINGTON

76014

ARLINGTON, TX

Out-of-County

C-1-CV-17-000380

CV PENDING

ARLINGTON

76014

ARLINGTON, TX

In Home City

C-1-CV-17-000810

CV PENDING

AUSTIN

78704

AUSTIN, TX

In Home City

C-1-CV-17-000715

CV PENDING (?)

AUSTIN

78721

SAN BENITO, TX

In Home City

C-1-CV-17-000746

DISPOSED

AUSTIN

78723

BEDFORD, TX

In Home City

C-1-CV-17-000814

DISPOSED

AUSTIN

78735

MESQUITE TX

In Home City

C-1-CV-17-000854

DISPOSED

AUSTIN

78735

CEDAR PARK, TX

In Home City

C-1-CV-17-000808

CV PENDING

AUSTIN

78739

TRAVIS COUNTY TX

In Home City

C-1-CV-17-000743

DISPOSED

AUSTIN

78745

AUSTIN, TX

In Home City

C-1-CV-17-000711

DISPOSED

AUSTIN

78746

AUSTIN, TX

In Home City

C-1-CV-17-000555

DISPOSED

AUSTIN

87826

SAN ANTONIO

Out of County

C-1-CV-17-000360

DISPOSED

BEDFORD

76021

BEDFORD, TX

Out of County

C-1-CV-17-000361

DISPOSED

NONSUIT

BEDFORD

76021

BEDFORD, TX

Out of County

C-1-CV-17-000378

DISPOSED

BEDFORD

76021

BEDFORD, TX

Out of County

C-1-CV-17-000851

DISPOSED

CEDAR PARK

78613

CEDAR PARK, TX

Out of County

C-1-CV-17-000942

DISPOSED

CHANDLER

75758

PALESTINE, TX

Out of County

C-1-CV-17-000952

CV PENDING

CONROE

77303

CONROE, TX

Out of County

C-1-CV-17-000835

CV PENDING

CORPUS CHRISTI

78411

CORPUS CHRISTI, TX

Out of County

C-1-CV-17-000820

DISPOSED

CORPUS CHRISTI

78412

CORPUS CHRISTI, TX

Out of County

C-1-CV-17-000742

DISPOSED

DALLAS

75034

GARLAND, TX

Out of County

C-1-CV-17-000940

CV PENDING

DALLAS

75205

BRIDGEPORT, TX

Out of County

C-1-CV-17-000358

CV PENDING

DALLAS

75206

DALLAS, TX

Out of County

C-1-CV-17-000560

DISPOSED

DALLAS

75216

DALLAS, TX

Out of County

C-1-CV-17-000722

CV PENDING

DALLAS

75216

DALLAS, TX

Out of County

C-1-CV-17-000837

DISPOSED

DALLAS

75224

DALLAS, TX

Out of County

C-1-CV-17-000372

DISPOSED

DALLAS

75243

DALLAS, TX

Out of County

C-1-CV-17-000827

CV PENDING

DALLAS

75244

LEWISVILLE, TX

Out of County

C-1-CV-17-000373

DISPOSED

NONSUIT

DALLAS

75287

TYLOR, TX

Out of County

C-1-CV-17-000962

DISPOSED

DALLAS

75287

DENTON TX

Out of County

C-1-CV-17-000364

CV PENDING

DENTON

76207

LEWISVILLE, TX

Out of County

C-1-CV-17-000857

DISPOSED

EL PASO

79907

EL PASO, TX

Out of County

C-1-CV-17-000546

DISPOSED

FLORESVILLE

78114

FLORESVILLE, TX

Out of County

C-1-CV-17-000547

DISPOSED

FLORESVILLE

78114

FLORESVILLE, TX

Out of County

C-1-CV-17-000753

CV PENDING

FORT WORTH

76105

FORT WORTH, TX

Out of County

C-1-CV-17-000553

CV PENDING

FORT WORTH

76107

EL PASO, TX

Out of County

C-1-CV-17-000557

CV PENDING

FORT WORTH

76107

EL PASO, TX

Out of County

C-1-CV-17-000748

DISPOSED

FORT WORTH

76137

WATAUGA, TX

Out of County

C-1-CV-17-000741

DISPOSED

FORT WORTH

76177

FORT WORTH, TX

Out of County

C-1-CV-17-000542

DISPOSED

FRISCO

75035

CARROLTON

Out of County

C-1-CV-17-000382

DISPOSED

GLENN HEIGHTS

75154

GLENN HEIGHTS, TX

Out of County

C-1-CV-17-000937

DISPOSED

GLENN HEIGHTS

75154

ROWLETT, TX

Out of County

C-1-CV-17-000363

CV PENDING

HOUSTON

77008

SAN MARCOS, TX

Out of County

C-1-CV-17-000384

CV PENDING

HOUSTON

77008

SAN MARCOS, TX

Out of County

C-1-CV-17-000852

DISPOSED

HOUSTON

77016

HOUSTON, TX

Out of County

C-1-CV-17-000853

DISPOSED

HOUSTON

77016

HOUSTON, TX

Out of County

C-1-CV-17-000828

DISPOSED

HOUSTON

77038

HOUSTON, TX

Out of County

C-1-CV-17-000713

DISPOSED

HOUSTON

77043

HOUSTON, TX

Out of County

C-1-CV-17-000752

CV PENDING

HOUSTON

77064

EAGLE PASS, TX

Out of County

C-1-CV-17-000948

DISPOSED

HOUSTON

77069

DESOTO, TX

Out of County

C-1-CV-17-000717

CV PENDING

HOUSTON

77079

FORT WORTH, TX

Out of County

C-1-CV-17-000559

DISPOSED

HOUSTON

77082

FORT WORTH, TX

Out of County

C-1-CV-17-000821

DISPOSED

HOUSTON

77089

HOUSTON, TX

Out of County

C-1-CV-17-000744

DISPOSED

HOUSTON

77096

KILLEEN, TX

Out of County

C-1-CV-17-000550

CV PENDING

KINGSLAND

78639

KINGSLAND, TX

Out of County

C-1-CV-17-000809

DISPOSED

LAREDO

78045

FORT WORTH, TX

Out of County

C-1-CV-17-000813

DISPOSED

LEANDER

78641

MESQUITE TX

Out of County

C-1-CV-17-000959

CV PENDING

ATS

LEWISVILLE

75067

PLANO, TX

Out of County

C-1-CV-17-000811

CV PENDING

MCKINNEY

75070

FRISCO, TX

Out of County

C-1-CV-17-000819

CV PENDING

MESQUITE

75191

MESQUITE, TX

Out of County

C-1-CV-17-000953

CV PENDING

ATS

MISSION

78573

MISSION, TX

Out of County

C-1-CV-17-000817

DISPOSED

PASADENA

77504

HOUSTON, TX

Out of County

C-1-CV-17-000549

DISPOSED

PFLUGERVILLE

78660

PFLUGERVILLE, TX

Out of County

C-1-CV-17-000739

DISPOSED

NONSUIT

RICHMOND

77406

RICHMOND, TC

Out of County

C-1-CV-17-000740

DISPOSED

NONSUIT

RICHMOND

77469

RICHMOND, TC

Out of County

C-1-CV-17-000725

DISPOSED

SAN ANGELO

76905

ABILENE, TX

Out of County

C-1-CV-17-000562

DISPOSED

SAN ANTONIO

78201

SEGUIN, TX

Out of County

C-1-CV-17-000719

DISPOSED

SAN ANTONIO

78227

SAN ANTONIO, TX

Out of County

C-1-CV-17-000366

CV PENDING

ATS

SAN ANTONIO

78228

SAN ANTONIO, TX

Out of County

C-1-CV-17-000938

DISPOSED

SAN ANTONIO

78230

EAGLE PASS, TX

Out of County

C-1-CV-17-000745

DISPOSED

SAN ANTONIO

78238

ELMENDORF, TX

Out of County

C-1-CV-17-000963

CV PENDING

ATS

SAN ANTONIO

78247

SAN ANTONIO, TX

Out of County

C-1-CV-17-000399

DISPOSED

SAN ANTONIO

78249

SAN ANTONIO, TX

Out of County

C-1-CV-17-000379

CV PENDING

SAN MARCOS

78666

SAN MARCOS, TX

Out of County

C-1-CV-17-000818

DISPOSED

SPRING

77373

HOUSTON, TX

Out of County

C-1-CV-17-000716

DISPOSED

SPRING BRANCH

78070

SAN ANTONIO, TX

Out of County

C-1-CV-17-000718

DISPOSED

SPRING BRANCH

78070

SAN ANTONIO, TX

Out of County

C-1-CV-17-000548

DISPOSED

TAYLOR

76574

PFLUGERVILLE, TX

Out of County

C-1-CV-17-000528

CV PENDING

TEXARKANA

75501

OVERTON, TX

Out of County

C-1-CV-17-000856

DISPOSED

WICHITA FALLS

76305

WICHITA FALLS, TX

Seq

CAUSE NO

STATUS

D SUED IN

STATE

ZIP

NOTE SIGNED IN

[1] This amicus brief does not address the propriety of judgment with respect to violations of the Texas Identity Theft Enforcement and Protection Act, Tex. Bus & Com. Code §521.001 et seq, or noncompliance with the license requirement under the Motor Vehicle Installment Sales Finance Act. Tex. Fin. Code. §348.501.

[2] The State’s live pleading at trial was filed on June 5, 2017 during the trial (presumably with leave of court) in the name of current incumbent Attorney General Ken Paxton. It nevertheless states on page 2 that “[t]his action is brought by Attorney General Greg Abbott by and through his Consumer Protection Division, in the name of the State of Texas and the public interest. See PLAINTIFF’S THIRD AMENDED PETITION AND APPLICATION FOR TEMPORARY AND PERMANENT INJUNCTION, p. 2, ¶¶3.-5.

[3] All such collection suits were filed in a single court, Harris County Justice Court Precinct 1, Place 2, presided over by Justice of the Peace David M. Patronella.

[4] JURY ANSWERS TO QUESTION NO. 2 and 3, respectively.

[5] See Tex. Edu. Code §52.39. (“When any person who has received or cosigned as a guarantor for a loan authorized by this chapter has failed or refused to make as many as six monthly payments due in accordance with an executed note, then the full amount of the remaining principal and interest becomes due and payable immediately, and the amount due, the person's name and last known address, and other necessary information shall be reported by the board to the attorney general. Suit for the remaining sum shall be instituted by the attorney general, unless the attorney general finds reasonable justification for delaying suit and so advises the board in writing. Venue for a suit arising under this section is exclusively conferred on a court of competent jurisdiction in Travis County.”) (emphasis added).

[6] See Cause No. C-1-CV-17-002981. Motion to Transfer Venue, Barcode ID 1220369, and State’s Response to Motion to Transfer Venue, Barcode ID 1220568.

[7] Some collection cases involve conditional grants rather than conventional loans. The lawsuits were identified by using the Travis County Clerk’s website, which has party name and attorney name search functionality that also allows for delimitation of time-frames. Defendant address information at time of suit appears on page 1 of each petition. Locus at time of application/note is contained on the attached exhibit(s).

[8] Based on the Defendant address information in the petitions, which is not always up to date or correct.

[9] In Cause No. C-1-CV-16-011994 Catherine Jones, Court Operations Officer to the Honorable Judge Todd T. Wong, County Court at Law No 1. of Travis County informed Kathy Buxton, Legal Secretary, Student Loan Collections, at the Bankruptcy and Collections Division of the OAG that the “court is unable to sign the default because defendant has filed answer.” See Document with Bar Code ID 1185869 labeled PLD:CV LETTER TO COUNSEL. In Cause No. C-1-CV-16-012378 Priscela Valladares, Court Operations Officer for The Honorable Judge Eric M. Shepperd, County Court at Law No. 2 of Travis County, notified Asst. AG John Adams directly that “Judge Shepperd cannot sign this order as the defendant has filed an Answer to this lawsuit.” See Document with Bar Code ID 1196968 labeled. PLD:CV FILE COPY OF LETTER.

[10] Notarized by Katherine M. Buxton, Notary without bond and Legal Secretary, Student Loan Collections.

[11] The principal amount varies greatly based on the number of promissory notes on which suit is brought. Neither the AG’s pleadings nor its motions break down the amounts for each loan. Only the draft judgment does so, which is necessary to account for different interest rates for different loans. Bellesen does not attache account records or other business records to support her testimony even in cases where some payments were made on a loan, as reflected in the petition that sates the original amount of the loan and the amount of outstanding principal separately. Nor does she provide any information on the calculation of interest. The promissory notes and disclosure statements themselves only show the contract rate and the origination fee percentage.

[12] Pleadings are to be liberally construed in favor of the pleader, particularly when the complaining party has not filed any special exceptions. Lohmann v. Lohmann, 62 S.W.3d 875, 880-81 (Tex.App.-El Paso 2001, no pet.). The purpose of the pleading is to give notice of the claim involved. In re Pecht, 874 S.W.2d 797, 804 (Tex.App.-Texarkana 1994, no writ). A general request for attorney's fees in the prayer of the pleading is itself sufficient to authorize the award of attorney's fees. See Morgan v. Morgan, 657 S.W.2d 484, 491 (Tex.App.-Houston [1st Dist.] 1983, writ dism'd).

[13] In some rare cases in which the defendants hire an attorney, the two contemporaneous suits are consolidated, and the duplicative fee claims are pared down.

[14] Where the guaranty is on a separate page rather than merely a section or box on the loan note signed by the student applicant, there may be a 1-page discrepancy in the attachments.

[15] This would include cases in which defendants hire lawyers to defend them, which is rare, certainly less the 5% of the caseload.

[16] There may be a slight difference in the speed of document assembly in cases that involve multiple promissory notes as opposed to just a single one. But when two different types of loans (CAL and BT) are involved, the AG simply files two lawsuits against the same Defendant to avoid having to customize the pleadings.

[17] See, e.g., Cause Nos. C-1-CV-16-012378, C-1-CV-16-011844, C-1-CV-16-011863, C-1-CV-16-011865, C-1-CV-16-011969, C-1-CV-16-012423

[18] The lodestar method of determining what constitutes a reasonable attorney's fee involves two steps: (1) determining the reasonable hours spent by counsel and a reasonable hourly rate for such work, and (2) multiplying the number of such hours by the applicable rate, "the product of which is the base fee or lodestar." El Apple I, Ltd. v. Olivas, 370 S.W.3d 757, 760 (Tex. 2012). "[A] party applying for an award of attorney's fees under the lodestar method bears the burden of documenting the hours expended on the litigation and the value of those hours." Id. at 761. Sufficient evidence should include, "at a minimum, documentation of the services performed, who performed them and at what hourly rate, when they were performed, and how much time the work required." Id. at 764. Contemporaneous evidence may be unavailable, but it is permissible for attorneys to reconstruct their work to provide the factfinder with sufficient information. Long v. Griffin, 442 S.W.3d 253, 256 (Tex. 2014).

[19] The exceptions occur in contested cases, but not always.

[20] See generally, Office for Older Americans & Office for Students and Young Consumers. Snapshot of older consumers and student loan debt. Washington, DC: Consumer Financial Protection Bureau (2017).

Available at http://files.consumerfinance.gov/f/documents/201701_cfpb_OA-Student-Loan-Snapshot.pdf

[21] Quasi-estoppel precludes a party from asserting, to another's disadvantage, a right inconsistent with a position previously taken. Lopez v. Muñoz, Hockema & Reed, L.L.P., 22 S.W.3d 857, 864 (Tex. 2000). Quasi-estoppel applies when it would be unconscionable to allow a person to maintain a position inconsistent with one to which he acquiesced, or from which he accepted a benefit. See id. Quasi-estoppel requires mutuality of parties and may not be asserted by or against a "stranger" to the transaction that gave rise to the estoppel. See Swilley v. McCain, 374 S.W.2d 871, 875-76 (Tex. 1964); Am. Sur. Co. of N.Y. v. Martinez, 73 S.W.2d 109, 113 (Tex. Civ. App.-El Paso 1934, writ ref'd); Thomas v. C & M Jones Invs., LP, No. 03-14-00374-CV, 2016 WL 3924429, at *4 n.14 (Tex. App.-Austin July 15, 2016, no pet.) (mem. op.); Deutsche Bank Nat'l Trust Co. v. Stockdick Land Co., 367 S.W.3d 308, 315 n.13 (Tex. App.-Houston [14th Dist.] 2012, pet. denied) (op. on reh'g).

[22] The trial court shall submit instructions and definitions as shall be proper to enable the jury to reach a verdict and which are raised by the written pleadings and the evidence. Tex. R. Civ. P. 277, 278.

[23] The affected consumers/judgment debtors would be in a similar condition if the Defendants were to file for bankruptcy. As a part of "core proceedings" bankruptcy courts have the authority to sell property and liquidate assets of the bankruptcy estate. See 28 U.S.C. § 157(b)(2)(N),(O)(2006).

[24] Sub-paragraphs a and b have been struck from paragraph 10, and the remaining paragraphs have not been re-numbered. For clarity, it would be desirable if a superseding judgment were to be issued from which the text struck from the State’s proposed judgment is removed, with sections renumbered. Additionally, the exhibits referenced in final judgment as filed are not actually docketed as exhibits pertaining to the judgment, but are located elsewhere. See JUDGMENT (SIGNED), Doc ID 75993690 (8 pages only) and Plaintiff’s Motion for Entry of Final Judgement and Permanent Injunction, Doc ID 758772009 (3 pages and four Exhibits denoted A through D with separate Document ID numbers).

The final judgment, as e-filed, therefore requires resort to extraneous documents for completeness. Those documents are attached to a motion as exhibits, rather than filed separately by the Court Reporter.

At the minimum, the extraneous exhibits should be identified within the FINAL JUDGMENT AND PERMANENT INJUNCTION by their respective unique document ID numbers.

[25] See LEGISLATIVE APPROPRIATIONS REQUEST FOR FISCAL YEARS 2018 AND 2019. Submitted to the Office of the Governor, Budget Division and the Legislative Budget Board by the Office of the Attorney General, Ken Paxton. August 25, 2016, p. 37 (“The OAG has emerged as a significant source of both revenue and fiscal savings for the state. In FY 2015, the civil litigation divisions filed 27,247 lawsuits against violators and debtors, recovering over $160 million to GR for the State of Texas and its citizens harmed by wrongful conduct. Importantly, the agency self-funds part of this strategy through attorney fees awarded to the OAG in successful litigation. The OAG’s civil litigation divisions have yielded significant revenue for the state treasury and savings from cost avoidance for the state.”)

Available at https://www.texasattorneygeneral.gov/files/agency/lar_fy18-19.pdf.

[26] Appellate courts would be entitled to take notice of facts not noticed by a trial court. Harper v. Killion, 162 Tex. 481, 348 S.W.2d 521 (1961). Langdale v. Villamil, 813 S.W.2d 187, 190 (Tex.App.-Houston [14th Dist.] 1991, no writ) (acknowledging that a court may take judicial notice of matters of public record, whether requested by a party or on its own motion, for the first time on appeal); Lazarides v. Farris, 367 S.W.3d 788, 799 (Tex.App.-Houston [14th Dist.] 2012, no pet.) (taking judicial notice that the minutes were available on the city's website). See also In re First Marblehead Corp. Secs. Litig., 639 F. Supp. 2d 145, 148 (D. Mass. 2009) (citing In re Colonial Mortgage Bankers Corp., 324 F.3d 12, 19 (1st Cir. 2003) ("[M]atters of public record are fair game in adjudicating Rule 12(b)(6) motions, and a court's reference to such matters does not convert a motion to dismiss into a motion for summary judgment.")).

Sunday, September 24, 2017

Featured Debt Collector: Nicole Hillman, Garnishor-in-Chief for National Collegiate Student Loan Trusts in Texas

Friday, September 22, 2017

CFPB-induced National Collegiate Student Loan Litigation Moratorium: Expect confusion, inconsistent implementation, and need for follow-up

Thursday, September 21, 2017

State of Texas (AG Ken Paxton) v Samara Portfolio Management, LLC, Joseph Onwuteaka - One Amicus' Take on $25mil Penalty Price Tag for Venue Violations:

Legal Stuff and Warnings to Pro Se Litigants