Consumer Fin. Prot. Bureau v. Frederick J. Hanna & Assocs., P.C.

Decision Date14 July 2015
Docket NumberCivil Action No. 1:14–CV–2211–AT.
Citation114 F.Supp.3d 1342
Parties CONSUMER FINANCIAL PROTECTION BUREAU, Plaintiff, v. FREDERICK J. HANNA & ASSOCIATES, P.C.; Frederick J. Hanna, individually; Joseph C. Cooling, individually; and Robert A. Winter, individually, Defendants.
CourtU.S. District Court — Northern District of Georgia

Lawrence D. Brown, Thomas G. Ward, Jeffrey Paul Ehrlich, Deputy Enforcement Director, John C. Wells, Assistant Litigation Deputy, Consumer Financial Protection Bureau, Washington, DC, Darcy F. Coty, Lena Amanti, U.S. Attorney's Office, Atlanta, GA, for Plaintiff.

Christopher Scott Anulewicz, Michael J. Bowers, Balch & Bingham LLP, Christopher J. Willis, Stefanie H. Jackman, Ballard Spahr, Atlanta, GA, for Defendants.


AMY TOTENBERG, District Judge.

Frederick J. Hanna & Associates, P.C. (the "Firm") is a self-proclaimed creditors' rights law firm. According to the Consumer Financial Protection Bureau (the "Bureau"), from 2009 through 2013, the Firm's small group of lawyers filed tens of thousands of lawsuits in Georgia each year to recover on allegedly defaulted debt. The Bureau alleges, however, that the Firm's lawyers have essentially no meaningful involvement in these lawsuits. Moreover, according to the Bureau, in these debt-collection lawsuits, the Firm's lawyers rely on affidavits, which the Firm and its three partners named in this case knew or should have known were executed by a person without personal knowledge of the facts contained in those affidavits. For these reasons, the Bureau lodges claims under the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq. and the Consumer Financial Protection Act ("CFPA"), 12 U.S.C. § 5536.

Defendants move to dismiss the Complaint [Doc. 20]. With the benefit of oral argument and for the reasons that follow, the Court DENIES Defendants' Motion to Dismiss.


A complaint should be dismissed under Rule 12(b)(6) only where it appears that the facts alleged fail to state a "plausible" claim for relief. Bell Atlantic v. Twombly, 550 U.S. 544, 555–556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ; Fed.R.Civ.P. 12(b)(6). The plaintiff need only give the defendant fair notice of the plaintiff's claim and the grounds upon which it rests. See Erickson v. Pardus, 551 U.S. 89, 93, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (citing Bell Atlantic v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ); Fed.R.Civ.P. 8(a). In ruling on a motion to dismiss, the court must accept the facts alleged in the complaint as true and construe them in the light most favorable to the plaintiff. See Hill v. White, 321 F.3d 1334, 1335 (11th Cir.2003).

A claim is plausible where the plaintiff alleges factual content that "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). A plaintiff is not required to provide "detailed factual allegations" to survive dismissal, but the "obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555, 127 S.Ct. 1955. The plausibility standard requires that a plaintiff allege sufficient facts "to raise a reasonable expectation that discovery will reveal evidence" that supports the plaintiff's claim. Id. at 556, 127 S.Ct. 1955. A complaint may survive a motion to dismiss for failure to state a claim even if it is "improbable" that a plaintiff would be able to prove those facts and even if the possibility of recovery is extremely "remote and unlikely." Id.


According to the allegations in the Complaint, since January 1, 2009, the Firm has collected or attempted to collect debts for several credit-card issuers and "debt buyers."1 (Compl. ¶ 12.) In the course of its debt collection practice, the Firm routinely files thousands of lawsuits each year. (Id. ¶ 13.) The Bureau estimates that "in Georgia alone, the Firm sued about 78,000 consumers in 2009; about 84,000 in 2010; about 71,000 in 2011; about 57,000 in 2012; and about 60,000 in 2013." The total estimated number of collection suits from 2009 through 2013 (the "Georgia Collection Suits") topped 350,000.

The Bureau maintains that, although the Georgia Collection Suits "may have featured the signatures of attorneys," these lawsuits were in fact "prepared and filed without meaningful attorney involvement" in either the decision to initiate the lawsuit or in the preparation of the pleadings. (Id. ¶¶ 17, 28.) To support this assertion, the Bureau points to a number of facts. For example, during the relevant time, the Firm allegedly employed hundreds of non-attorney staff but only between 8 and 16 attorneys. (Id. ¶ 14.) The Firm then delegated to the non-attorneys many important responsibilities including determining whether a case was "suit worthy," determining the alleged principal, interest, and attorneys' fees owed, and actually drafting complaints. (Id. ¶ 16.) The Bureau further alleges that the Firm's attorneys routinely relied on "an automated system and support-staff research" to determine (1) "whether consumers had sought relief in bankruptcy"; (2) "whether their debts were barred by limitations"; and (3) "legally significant facts such as each consumer's date of initial contract and the date the consumer last made a payment." (Id. )

Once the Firm delegated these tasks to non-attorney staff or automated systems, the few attorneys on staff were allegedly left to essentially skim and sign the prepared pleadings. The Firm's attorneys thus allegedly gave "only cursory review to" the suits the Firm was filing, "checking the pleadings prepared by non-attorney support staff for grammar and spelling errors." (Id. ¶ 18.) The alleged expectation was that the lawyer would spend "no more than one minute reviewing and signing the pleadings prepared by support staff." (Id. ) This makes sense, given the alleged ratio of the volume of lawsuits filed to the number of attorneys at the Firm. In 2009 and 2010, for instance, the Firm allegedly arranged for one attorney to sign about 138,000 lawsuits, averaging about 1,300 collection suits each week. (Id. ¶ 15.) Assuming this one attorney did nothing but review and sign collection suits for eight hours a day, five days per week, for every week of the year without vacation, the lawyer would literally have less than a minute to approve each suit. (See id. ) For these reasons, the Bureau alleges that the "Firm's attorneys did not exercise independent professional judgment in determining whether to file the Georgia Collection Suits or what remedies to seek." (Id. ¶ 18.)

Moreover, according to the Bureau, the Firm routinely relied on affidavits that its lawyers knew or should have known were executed by persons who lacked personal knowledge of the facts. (Id. ¶ 23.) Specifically, in support of many of the Georgia Collection Suits, the Firm allegedly offered an affidavit of a person who attested to personal knowledge of the validity and ownership of the debt. (Id. ) For those affidavits received from its debt-buyer clients (as opposed to its creditor clients), the Firm allegedly "did not determine whether any underlying documentation for the debt was available." (Id. ¶ 24.) The Firm also allegedly failed to "review the contracts governing the sale of accounts to determine whether those contracts disclaimed any warranties regarding the accuracy or validity of the debts." (Id. ¶ 24.) Along the same vein, the Bureau also alleges that "Defendants filed the Georgia Collection Suits without investigating or verifying support for the suits, including whether the facts alleged were true." (Id. ¶ 20.)

Apparently, the Firm's Georgia Collection Suits were largely successful. According to the Bureau, most cases ended in a default judgment or settlement. (Id. ¶ 21.) However, in those few cases where the consumer responded to the lawsuit, the Firm routinely dismissed the cases. (Id. ¶ 22.) The Bureau reports that since 2009, the Firm voluntarily dismisses about 155 cases each week. (Id. ) The Bureau does not allege the reason for these voluntary dismissals. But the Bureau notes that "consumers who retained attorneys were almost four times more likely to have their cases dismissed." (Id. )

The Bureau argues that the Firm's litigation practices violate the FDCPA and CFPA in two ways. First, the Bureau argues that the filing of the Georgia Collection Suits, signed by attorneys, falsely conveyed to consumers that an attorney was meaningfully involved in preparing or filing the case. According to the Bureau, this false implication violates (1) Section 807 of the FDCPA, and specifically 807(3), which prohibits "the false representation or implication that ... any communication is from an attorney," 15 U.S.C. § 1692e(3), and (2) the CFPA's prohibition against "any unfair, deceptive, or abusive act or practice." 12 U.S.C. § 5536(a)(1)(B). Second, the Bureau contends that the use of affidavits, which the Defendants knew or should have known were unsupported by personal knowledge, also violates several provisions of the FDCPA, 15 U.S.C. §§ 1692e(2)(A), (10), and 1692f, and the same provision of the CFPA identified above.2 The Bureau overall contends that the Defendants used false or deceptive representations in their consumer collection debt litigation.


Defendants raise several arguments in support of their Motion to Dismiss. First, Defendants assert that the "practice-of-law exclusion" in the CFPA, 12 U.S.C. § 5517(e), bars enforcement of the CFPA claims here. Second, Defendants argue that the Bureau's claims should be dismissed on constitutional grounds because (1) they infringe on Defendants' First Amendment right to petition the courts for redress and (2) they violate the Equal Protection clause by impeding debt-collection lawyers'...

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