Opinion ID: 6326729
Heading Depth: 3
Heading Rank: 1

Heading: The Three Suits

Text: This matter arises out of three separate suits that were consolidated by the district court. In the first case, Ozmun alleged violations of the FDCPA and the TFDCPA against the Debt-Collection Defendants. Ozmun’s allegations arose from attempts by the Debt-Collection Defendants to collect an allegedly defaulted credit card debt from Ozmun (“the First Debt”). On May 31, 2016, PRA received a letter from Ozmun (the “First Dispute Letter”) that stated in relevant part: I am writing to you regarding the account referenced above. I refuse to pay this debt. My monthly expenses exceed my monthly income; as such there is no reason for you to continue contacting me, and the amount you are reporting is not accurate either. If my circumstances should change I will be in touch. Approximately two months after PRA had received the First Dispute Letter, PRA reported the First Debt to a credit reporting agency. It did not indicate that the debt was disputed. PRA—through its attorneys, RSIEH—filed suit against Ozmun in Texas state court to collect the First Debt. While the case was pending, Ozmun made a payment of $57.00 towards the First Debt. Five months later, PRA filed a motion for default judgment in the collection case seeking 4 Case: 19-50397 Document: 00516252490 Page: 5 Date Filed: 03/24/2022 No. 19-50397 $2,065.21, the original total debt Ozmun allegedly owed without a deduction for the $57.00 he had paid. Ozmun was represented in this action by Wood and Chatman, who handled the filings and managed the litigation, and Tyler Hickle, a third Community Lawyers Group attorney, with whom Ozmun communicated directly. Ozmun subsequently filed the first action underlying this appeal in the district court (the “First Proceeding”), alleging that the debt collection efforts by the Debt-Collection Defendants were in violation of the FDCPA because they had reported the debt to a credit reporting agency without reporting that the debt had been challenged and because they had failed to credit the $57.00 that he had already paid toward that debt they had attempted to recover in the state court proceeding. He presented the DebtCollection Defendants with a settlement demand of $6,500. According to Ozmun, the Debt-Collection Defendants agreed to the settlement. Thereafter, however, PRA informed Ozmun’s counsel that any settlement must include a “global release”—a release of any and all claims that Ozmun may have against PRA, including all claims that were not raised in the First Proceeding. Ozmun filed a motion to enforce the $6,500 settlement without the global release provision. The district court denied Ozmun’s motion as presenting only “he said/she said:” evidence of a settlement agreement, stating in its order that it was “troubling that a $6,500 case is in the United States District Court” and bemoaning the costs incurred by the parties’ lawyers in their efforts to settle the case, noting that the court would “ultimately determine costs and perhaps attorney's fees and has a long memory.” RSIEH then filed for summary judgment on Ozmun’s claims, asserting that they were meritless and had been brought in bad faith. The district court deferring ruling on the motion pending negotiations between the parties, encouraging them to come to a settlement agreement. In its 5 Case: 19-50397 Document: 00516252490 Page: 6 Date Filed: 03/24/2022 No. 19-50397 order, the district court “caution[ed] Plaintiff Ozmun that this case could warrant sanctions if the only basis for this lawsuit is a technical violation involving $57.00 (if any violation at all).” Subsequently, PRA also filed for summary judgement, echoing RSIEH’s claims and arguing that Ozmun’s dispute of the debt had been fabricated by his attorneys to manufacture a lawsuit. PRA also contended that Ozmun had failed to demonstrate any actual injury3 resulting from his allegations. Ozmun responded in opposition and filed his own cross-motion for summary judgment. While the cross motions were pending, Ozmun filed a second and third suit against PRA (the “Second Proceeding” and the “Third Proceeding,” respectively). In the Second and Third Proceedings, Ozmun alleged that PRA had engaged in similar false and misleading credit reporting regarding two more of his credit-card debts (the “Second Debt” and the “Third Debt,” respectively). Ozmun had sent PRA two additional letters disputing the Second and Third Debts (the “Second Dispute Letter” and the “Third Dispute Letter,” respectively) with wording essentially identical to that contained in the First Dispute Letter. According to Ozmun, PRA also reported the Second and Third Debts without disclosing that Ozmun had disputed them. In the First Proceeding, the district court granted in part and denied in part the Debt-Collection Defendants’ pending summary judgment motions and denied Ozmun’s cross-motion, determining that, although Ozmun lacked standing to pursue his claims under the TFDCPA because he did not assert actual damages4 or request injunctive relief, his allegations of 3 The TFDCPA requires actual damages when requesting relief other than an injunction. Tex. Fin. Cod. § 392.403. 4 Ozmun argues that the district court’s finding is contradicted by his deposition testimony regarding the damage caused by PRA to his credit score and reputation. 6 Case: 19-50397 Document: 00516252490 Page: 7 Date Filed: 03/24/2022 No. 19-50397 misconduct and injury were sufficient for his FDCPA claims to proceed to trial. PRA then moved to consolidate the Second and Third Proceedings into the First Proceeding, which the district court granted,5 and the DebtCollection Defendants proceeded to file another, joint motion for summary judgement in the consolidated cases, raising largely the same arguments as in the prior summary judgment motions. The district court again granted the motion in part and denied it in part, ruling that Ozmun did not have standing to bring his TFDCPA claims but that the issue of damages under the FDCPA was a genuine issue of material fact for which a trial was required. B. Judge Sparks’ Disciplinary Referral and the Recusal Motion While the three consolidated claims were proceeding before him, Judge Sparks sent a disciplinary referral letter (the “Disciplinary Referral Letter”) to the Admissions and Disciplinary Committee for the Western District of Texas (the “Disciplinary Committee”). The stated purpose of the letter was to “refer the conduct” of certain attorneys to the Disciplinary Committee for review. Judge Sparks named, among others, Wood and Chatman as attorneys that he sought to have investigated for potential disciplinary action. In the letter Judge Sparks asserted that there was evidence that the named attorneys were “involved in a scheme to force settlements from debt collectors by abusing the FDCPA.” He contended the attorneys were abusing the statute by inducing different clients to send identical debt dispute letters to debt collection agencies then filing suits alleging violations of the FDCPA based on the debt collectors’ failure to 5 On the same day, the district court entered a scheduling order directing Ozmun to submit a written settlement offer to the Debt-Collection Defendants and to serve his designation of potential witnesses, testifying experts, and proposed exhibits by November 1, 2017. Ozmun missed this deadline and Appellees moved for sanctions and contempt. The district court awarded monetary sanctions of $10,065 jointly against Ozmun and his attorneys. 7 Case: 19-50397 Document: 00516252490 Page: 8 Date Filed: 03/24/2022 No. 19-50397 acknowledge the disputes when reporting those debts to credit reporting agencies. Judge Sparks opined that the language of these letters was “unclear on whether a debt is being disputed or not[.]” Wood and Chatman now argue that Judge Sparks omitted a “critical point from this accusation[:]” that, in a companion case to one of the cases he cited in the Disciplinary Referral Letter, another presiding judge had ruled that the same language included in the dispute letters was a clear and valid debt dispute and had accordingly granted the plaintiff in that case summary judgment on the exact issue. Jones v. Portfolio Recovery Associates, LLC, Case No. 1:16-CV-572-RP, 2017 U.S. Dist. LEXIS 216568, -11 (W.D. Tex. Aug. 16, 2017). The Screening Subcommittee of the Disciplinary Committee (the “Screening Subcommittee”) ultimately issued findings disagreeing with Judge Sparks’ disciplinary referral and finding that the attorneys named therein had not acted in bad faith. As of this ruling, the Disciplinary Committee has taken no action to discipline Wood or Chatman. Also while the consolidated claims in this case were proceeding, Judge Sparks entered sanctions against Wood and Chatman in another thenpending case, Tejero v. Portfolio Recovery Associates LLC, et al., Case No. 1:16CV-767.3,6 which involved claims against PRA similar to those Ozmun had brought. Using much the same language as in his disciplinary referral, Judge Sparks ruled in that case that Wood and Chatman were involved in a “scheme to force settlements from debt collectors by abusing the FDCPA.” C. Settlement and Attorneys’ Fees A week before the trial was due to begin, Ozmun proposed a new settlement offer. The Debt-Collection Defendants agreed, and the parties filed a joint notice of settlement, setting forth that Ozmun would dismiss his 6 On appeal Tejero v. Portfolio Recovery Assocs., L.L.C., 955 F.3d 453 (5th Cir. 2020). 8 Case: 19-50397 Document: 00516252490 Page: 9 Date Filed: 03/24/2022 No. 19-50397 FDCPA claims against The Debt-Collection Defendants in exchange for $1,250, with both parties reserving the right to file fee applications. After tendering a cashier’s check, the Debt-Collection Defendants moved to dismiss, and the district court granted the motion, dismissing the suit with prejudice. The Debt-Collection Defendants then filed a motion for attorneys’ fees and costs. They argued that Wood and Chatman had acted in bad faith throughout the litigation and that The Debt-Collection Defendants were therefore entitled to an award of attorney’s fees under the FDCPA’s fee shifting provision, § 1692k(a)(3), the TFDCPA’s fee shifting provision, § 392.403(c), Rule 11 of the Federal Rules of Civil Procedure, and 28 U.S.C. § 1927.7 RSIEH demanded $114,773.03, and PRA $84,732.83. On the same day, Ozmun filed a motion for attorneys’ fees asserting that, because he had successfully received a settlement in the consolidated cases, he qualified as a prevailing party for purposes of the FDCPA’s fee shifting provision and therefore he—and not the Debt-Collection Defendants—should recover attorneys’ fees under 15 U.S.C. § 1692k(a)(3). Ozmun sought a total of $35,461.00. The district court denied Ozmun’s request for attorneys’ fees. The court found that Ozmun’s TFDCPA claims were brought in bad faith because the complaints failed to include sufficient allegations to support injunctive relief or actual damages, and that Wood and Chatman had brought all the claims in bad faith and for the purpose of harassment. The court stated that this “bad faith” made awarding attorneys’ fees to Ozmun inappropriate. 7 Rule 11 empowers federal courts to award sanctions under certain circumstances. See Fed. R. Civ. P. 11(b). 28 U.S.C. § 1927 allows courts to order any attorney who “unreasonably and vexatiously” multiplies the proceedings in a case to pay the costs and attorney’s fees incurred by this conduct. 28 U.S.C. § 1927. 9 Case: 19-50397 Document: 00516252490 Page: 10 Date Filed: 03/24/2022 No. 19-50397 It then granted in part and denied in part the motion by the Debt-Collection Defendants. The court rejected the Debt Collection Defendants’ Rule 11 and § 1927 arguments but granted them attorney’s fees under the fee shifting provisions of the FDCPA and the TFDCPA. In its order, the district court repeated the accusation that Wood and Chatman had “manufactured a case by misusing federal and state debt collection statutes . . . in an attempt to augment their attorneys’ fees” under the FDCPA and TFDCPA’s fee shifting provisions. Thus, the court ordered Wood and Chatman, rather than Ozmun, to pay PRA $84,732.83 and RSIEH $78,894.99 in attorneys’ fees. Ozmun, Wood, and Chatman now appeal the district court’s order. The Debt-Collection Defendants cross-appeal, asserting that the district court should also have granted them additional fees under Rule 11 and 28 U.S.C. § 1927. RSIEH also appeals a reduction in the rate allowed for one of its attorneys in the fees the district court did award.