Ad Astra Recovery Servs. v. Heath

• Court: U.S. District Court — District of Kansas
• Writing for the Court: JOHN W. BROOMES UNITED STATES DISTRICT JUDGE
• Decision Date: 03 March 2021
• Docket Number: Case No. 18-1145-JWB
• Citation: Ad Astra Recovery Servs. v. Heath, Case No. 18-1145-JWB (D. Kan. Mar 03, 2021)
• Parties: AD ASTRA RECOVERY SERVICES, INC., Plaintiff, v. JOHN CLIFFORD HEATH, ESQ., et al., Defendants.

AD ASTRA RECOVERY SERVICES, INC., Plaintiff, v. JOHN CLIFFORD HEATH, ESQ., et al., Defendants.

Case No. 18-1145-JWB

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS

March 3, 2021

MEMORANDUM AND ORDER

This matter comes before the court on Plaintiff's motion in limine to exclude the opinions of Bruce Green (Doc. 260). The motion has been fully briefed and the court is prepared to rule. (Docs. 261, 262, 263, 303, 326.) For the reasons stated herein, Plaintiff's motion is GRANTED.

I. Facts

The facts of this case have been set forth in this court's memorandum and order on the motions for summary judgment. (Doc. 363.) The facts that are relevant to the pending issues are restated below.

Plaintiff Ad Astra is a debt collector and data furnisher. Plaintiff brings claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§1962(c) and (d), and a Kansas common law fraud claim. (Doc. 257-1.) As a debt collector, Plaintiff collects debts primarily on behalf of one client, CURO Group Holdings Corp. ("CURO"). (Id. at 3.) Plaintiff is subject to the provisions in the Fair Credit Reporting Act ("FCRA"), Fair Debt Collection Practices Act ("FDCPA"), and state laws applicable to debt collection. Defendant John C. Heath, Attorney at Law, PC d/b/a Lexington Law Firm ("Lexington Law") is a law firm that provides services to its clients, including credit repair services. (Id.) Lexington Law's principal place of business is in North Salt Lake City, Utah. Lexington Law employs attorneys in house and it also engages law firms in certain states to serve as "of counsel." (Id.)

Relevant to the issues in this case, the FCRA gives consumers the right to have negative information on their credit reports, which are generated by Equifax, Experian, and TransUnion (the "Bureaus"), referred to as "tradelines," investigated for accuracy. A consumer may submit a dispute regarding these tradelines. See 15 U.S.C. §§ 1681i(a)(1)(A), 1681s-2(8). Upon receipt of a dispute by a consumer, an investigation must be conducted by Plaintiff in accordance with the statute. The investigation requirement does not apply to a dispute submitted by a credit repair organization ("CRO"). Id. § 1681s-2(a)(8)(G). An investigation is also not required when "the furnisher has a reasonable belief" that a CRO submitted or prepared the dispute for the consumer or the dispute is submitted on a form supplied to a consumer by a CRO. 12 C.F.R. § 1022.43(b)(2). Lexington Law is registered as a credit services organization in both Utah and California under those states' statutes regarding credit repair agencies, which are similar in definition to CRO under the federal statute. (Doc. 318-13.)

Lexington Law, along with Defendant Progrexion Marketing, markets Lexington Law as a leading credit repair law firm. (Doc. 310-47.) Consumers are referred to Lexington Law from Defendant Teleservices by intake agents. Teleservices' agents then provide the consumers with an engagement agreement for Lexington Law. The engagement agreement, which is signed by Lexington Law's consumer clients, states that Lexington Law will send written communications to debt collectors such as Plaintiff and sign those letters in the consumer client's name.

Since 2014 through the filing of Plaintiff's Amended Complaint, Lexington Law sent Plaintiff at least 595,117 letters on behalf of consumers. The letters are generated by an automated process that is based on a patent owned by Defendant Progrexion IP. This patent is licensed toLexington Law and is used to generate dispute letters from a bank of form letters. (Doc. 334 at 5.) The form letters were previously drafted and approved by attorneys although the computer program will make some changes to those letters. (Doc. 334-5 at 182:12-16.) An automated process typically determines which letters from the bank of form letters should be sent out. (Id. at 182:21-23; Doc. 269-8 at 97:4-25.) In this automated process, the letters are selected using the information in the Case Valet system, which is a system that the consumer clients can access to provide information regarding their debts. (Doc. 269-8 at 97:4-25.) The dispute letters are not sent under Lexington Law's letterhead but sent with the return address reflecting the name of the consumer. The letters are also signed in the name of the consumer and written in first person. (See id. at 183:16-23, Doc. 310-8.) The individual dispute letters are not reviewed by an attorney or a paralegal prior to being sent out. (Docs. 318 at 25; 334 at 5.) The consumer also does not review the letters prior to them being sent on his or her behalf. (Doc. 310-25 at 60:24-61:4.) The consumer can request to review the letters and will be provided with the template letter that was sent but not the letter with the electronic signature. (Doc. 334-5 at 133:10-24, 137:5-13.)

After receiving a letter like the ones at issue in this case, Plaintiff treats it as a "dispute" coming from an individual consumer. Plaintiff then conducts an investigation and responds to the letter. This takes approximately five to ten minutes, on average. (Doc. 286 at 436:7-10.) Plaintiff's policy, however, is to not investigate dispute letters sent by a CRO because it considers those disputes frivolous.

Plaintiff filed this suit against Defendants in May 2018. (Doc. 1.) Plaintiff asserts that it has suffered more than $3 million in compensatory damages due to the statutory investigations undertaken in responding to the dispute letters at issue and in pausing collections on the debt at issue. (Doc. 257-1 at 37.) The court denied Defendants' motions for summary judgment and thismatter is set for trial in May 2021. Defendants seek to call Bruce Green to opine regarding the propriety of Lexington Law sending the dispute letters at issue in the consumer's name. Plaintiff moves to exclude his opinions on the basis that they are unreliable.

II. Standard

Federal Rule of Evidence 702, which controls the admission of expert witness testimony, provides:

A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if:

(a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;

(b) the testimony is based on sufficient facts or data;

(c) the testimony is the product of reliable principles and methods; and

(d) the expert has reliably applied the principles and methods to the facts of the case.

Fed. R. Evid. 702. Under this rule, the district court must satisfy itself that the testimony is both reliable and relevant, in that it will assist the trier of fact, before permitting a jury to assess such testimony. Schulenberg v. BNSF Ry. Co., 911 F.3d 1276, 1282 (10th Cir. 2018) (citing United States v. Nacchio, 555 F.3d 1234, 1241 (10th Cir. 2009) (en banc)). The district court must first determine whether the witness is qualified by knowledge, skill, training, experience, or education to render an opinion. Id. If so, the district court must determine whether the witness's opinion is reliable by assessing the underlying reasoning and methodology. Id. at 1283. The court is not required to admit opinion evidence that is "connected to existing data only by the ipse dixit of the expert," and may exclude the opinion if "there is simply too great an analytical gap between the data and the opinion offered." Id. (quoting Gen. Elec. Co. v. Joiner, 522 U.S. 136, 146 (1997)). But the rejection of expert testimony is the exception rather than the rule, and "[v]igorous cross-examination, presentation of contrary evidence, and careful instruction on the burden of proof are the traditional and appropriate means of attacking shaky but admissible evidence." Daubert v. Merrell Dow Pharm., Inc. 509 U.S. 579, 596 (1993).

"The court has discretion to determine how to perform its gatekeeping function under Daubert." In re EpiPen (Epinephrine Injection, USP) Mktg., Sales Practices & Antitrust Litig., No. 17-MD-2785-DDC-TJJ, 2020 WL 1164869, at *3 (D. Kan. Mar. 10, 2020) (citing Bill Barrett Corp. v. YMC Royalty Co., LP, 918 F.3d 760, 770 (10th Cir. 2019)). The most common method of fulfilling that role is by conducting a Daubert hearing, "although such a process is not specifically mandated." Goebel v. Denver & Rio Grande W. R.R. Co., 215 F.3d 1083, 1087 (10th Cir. 2000). In this instance, neither party has requested a Daubert hearing. Moreover, the nature of the opinions expressed, the relative completeness of the expert report, and the materials cited in support of and against the challenged opinions lead the court to conclude that the motions can be decided without a Daubert hearing. Ho v. Michelin N. Am., Inc., 520 F. App'x 658, 664 (10th Cir. 2013) (district court permissibly exercised its discretion in ruling without a formal Daubert hearing).

III. Analysis

Defendants have offered the expert testimony of Bruce Green, an attorney who is a full-time Professor at Fordham Law School. Green is admitted to practice in New York and has been a member of the faculty at Fordham since 1987. He regularly teaches courses on professional conduct and has co-authored a casebook on this subject. Green has served on many committees related to professional responsibility over several years and has been previously retained as an expert on lawyers' professional conduct. Defendants retained Green to address the application of professional standards to "Lexington's preparation and sending of letters on behalf of its clients todebt collection agencies such as plaintiff...." (Doc. 263-1.) Green's three main opinions in this case include the following: 1) Lawyers can perform limited services, such as drafting correspondence for their clients; 2) Lawyers need not disclose their role in drafting or sending clients' correspondence to third parties; and 3) Lexington acted consistent with professional standards in...