Fitzpatrick v. Law Solutions Chi., LLC

• Decision Date: 21 March 2018
• Docket Number: No. 3:17–CV–258,No. 3:17–CV–257,3:17–CV–257
• Citation: 584 B.R. 203
• Parties: Michael H. FITZPATRICK, Trustee, Plaintiff, v. LAW SOLUTIONS CHICAGO, LLC, et al., Defendants. Michael H. Fitzpatrick, Trustee, Plaintiff, v. Law Solutions Chicago, LLC, et al., Defendants.
• Court: U.S. District Court — Eastern District of Tennessee

584 B.R. 203

Michael H. FITZPATRICK, Trustee, Plaintiff,

v.LAW SOLUTIONS CHICAGO, LLC, et al., Defendants.

Michael H. Fitzpatrick, Trustee, Plaintiff,

v.Law Solutions Chicago, LLC, et al., Defendants.

No. 3:17–CV–257

No. 3:17–CV–258

United States District Court, E.D. Tennessee, Northern Division, At Knoxville.

Filed March 21, 2018

Ryan Jarrard, Quist, Cone & Fitzpatrick, PLLC, Knoxville, TN, for Plaintiff.

Dean B. Farmer, James Frederick Parker, Hodges, Doughty & Carson PLLC, Elliott J. Schuchardt, Schuchardt Law Firm, Knoxville, TN, for Defendants.

MEMORANDUM OPINION AND ORDER

J. RONNIE GREER, UNITED STATES DISTRICT JUDGE

Finding that there were common questions of law and fact, this Court previously ordered these two civil cases¹ consolidated. The matters currently before the Court are two motions to dismiss, [Lead case, doc. 20 and Member case, doc. 21]. The defendants² who have been served process in the Lead case have filed a motion to dismiss plaintiff's³ complaint pursuant to Federal Rules of Civil Procedure 12(b)(6) and 12(b)(2) for (1) failure to state a claim and (2) lack of personal jurisdiction over defendants Doe and Heuser, [Lead case, doc. 20]. The defendants in the Member case have also filed a motion to dismiss plaintiff's complaint pursuant to Federal Rules of Civil Procedure 12(b)(6) and 12(b)(2) for (1) failure to state a claim and (2) lack of personal jurisdiction over defendants Solis, Brown, and Sheehan, [Member case, doc. 21]. The plaintiffs have responded to both motions, [Lead case, doc. 27 and Member case, doc. 23], and replies have been filed, [Lead case, doc. 32 and Member case, doc. 28]. The matters are ripe for review. Given the minimal variation between the parties' briefing for both of these motions, this Court will consider them simultaneously and refer to any difference of fact or argument as needed. For the reasons that follow, both of the defendants' motions, [Lead case, doc. 20 and Member case, doc. 21] will be GRANTED and both of these cases will be DISMISSED .

I. BACKGROUND

These two consolidated cases involve a similar set of circumstances which occurred within a reasonably close timeframe. As required when this Court considers a motion to dismiss for failure to state a claim, the facts recited herein are taken from the complaints, "exhibits attached to the complaint[s], public records, items appearing in the record of the case[s] and exhibits attached to the defendant[s'] motion to dismiss so long as they are referred to in the complaint and are central to the claims contained therein...." Rondigo, LLC v. Township of Richmond , 641 F.3d 673, 680 (6th Cir. 2011) (quoting Bassett v. Nat'l Collegiate Athletic Ass'n , 528 F.3d 426, 430 (6th Cir. 2008) ). For purposes of these two motions to dismiss for failure to state a claim, the Court accepts the plaintiffs' allegations as true. See Bassett v. Nat'l Collegiate Athletic Ass'n , 528 F.3d 426, 430 (6th Cir. 2008).

The defendant Law Solutions Chicago LLC d/b/a UpRight Law LLC ("UpRight Law") is a national law firm which specializes in representing clients considering bankruptcy. All of the individually named defendants are either licensed attorneys associated with the firm or non-attorney staff employees who assist with the legal operations of UpRight Law. While UpRight Law maintains an office in Chicago, Illinois, it advertises its services to potential clients outside of the state through the internet. Typically, out-of-state potential clients who contact UpRight Law via the telephone will initially speak with non-attorney staff in the Chicago office before their call is transferred to an attorney. After the initial consultation, UpRight Law will then turn the client's case over to be handled by a partner attorney in the appropriate jurisdiction for representation.

A. Lead Case: Annette Harris Haynes

On December 7, 2015, Annette Haynes, a Tennessee resident, contacted UpRight Law via telephone to inquire about filing for bankruptcy relief. Her call was initially answered by defendant George Doe, who is a non-attorney staff employee of UpRight Law. During this initial phone conversation, Doe, who is not licensed to practice law, encouraged her to pursue bankruptcy and affirmed that she would be allowed to keep her truck through the bankruptcy. Shortly thereafter, the plaintiff's call was transferred to Austen Heuser, a member of the Illinois bar and licensed attorney for UpRight Law. Heuser is not licensed to practice law in the state of Tennessee. During their phone conversation, Heuser provided legal advice to the plaintiff regarding Chapter 7 and Chapter 13 forms of bankruptcy relief, and negotiated a fee of $1,685.00 to undertake representation of the plaintiff in a Chapter 7 bankruptcy case.

At some time after the initial call was completed⁴ , Jessica Odgie, another non-attorney staff employee of UpRight Law, initiated a call with the plaintiff, following up on the previous call that had been made earlier that day. Odgie instructed the plaintiff to stop all payments on unsecured debts, and offered other legal advice with respect to the effects of a bankruptcy discharge. Odgie confirmed the fee of $1,685.00 for the representation of a Chapter 7 bankruptcy proceeding.

Sometime afterwards, UpRight Law referred the plaintiff's case to Grace Gardiner, a partner attorney licensed to practice law in the state of Tennessee, who is based in Knoxville, Tennessee. Gardiner was assigned the plaintiff's case to file the Chapter 7 bankruptcy in the state of Tennessee. Gardiner had an assistant, Judy Lovely, who is not an attorney. The plaintiff did not live in Knoxville herself, and therefore was required to make trips to Knoxville for the preparation of her case, most of which, she claims, was handled by Lovely. The plaintiff met with Lovely and discussed the requirements to file a Chapter 7 bankruptcy case, and Lovely advised the plaintiff that she would actually be required to file a Chapter 13 due to her income level. Although the plaintiff had signed a retainer agreement for representation for a Chapter 7, an additional retainer agreement was required for a Chapter 13. The plaintiff never signed the Chapter 13 agreement, and alleges that UpRight Law "cut and pasted" the plaintiff's signature from the prior Chapter 7 retainer agreement to the Chapter 13 agreement without the plaintiff's consent.⁵

Furthermore, the change to a Chapter 13 filing required an additional $1,315.00 retainer fee. Before her case was filed, the plaintiff had paid $1,900.00 to UpRight Law. The plaintiff met her attorney, Grace Gardiner, face to face for the first time at the 341 meeting of creditors on March 23, 2016. The plaintiff claims she was never advised that she would have to attend court in Knoxville for the 341 meeting of creditors.⁶ Furthermore, Gardiner had failed to file a number of required documents in the plaintiff's Chapter 13 case, which ultimately led to sanctions by the bankruptcy court. Gardiner's improper handling of the plaintiff's bankruptcy case resulted in her suspension from practice in the United States Bankruptcy Court for the Eastern District of Tennessee for five years.

After Gardiner was sanctioned, UpRight Law agreed to disgorge the $1,900.00 of fees that the plaintiff had paid prior to the filing of the Chapter 13 bankruptcy petition. The plaintiff subsequently hired another law firm to complete her bankruptcy case.

B. Member Case: Pamela Jo Hagstrom

The facts of the Member case are very similar. On March 1, 2016, Pamela Hagstrom contacted UpRight Law via telephone to inquire about filing for bankruptcy relief. Angelo Solis, a non-attorney staff employee of UpRight Law, answered the plaintiff's call initially. During the conversation, Solis provided advice on both Chapter 7 and Chapter 13 forms of bankruptcy relief, and solicited the plaintiff to use UpRight Law's legal services. He represented to the plaintiff that she would be able to file a Chapter 7 bankruptcy petition, and advised her as to the implications of a discharge, the effects of a reaffirmation agreement, the proper way to handle a related state court lawsuit, and the effects bankruptcy would have on the plaintiff's credit score. Solis negotiated a fee of $1,535.00 for the representation of the plaintiff in her Chapter 7 bankruptcy case, of which the plaintiff agreed to pay $1,200.00 before the bankruptcy petition was filed.

On March 3, 2016, Jacob Brown, a member of the Illinois bar who is not licensed to practice law in the state of Tennessee, initiated a follow-up call to the plaintiff, during which he instructed her to stop all payments on unsecured debts, and offered advice regarding the effects of a bankruptcy discharge. Brown also reiterated to the plaintiff that she would have no problem filing a Chapter 7 bankruptcy petition, and voiced his advice regarding a related state court lawsuit.

Sometime later, the plaintiff's bankruptcy case was referred to Grace Gardiner, a licensed attorney in the state of Tennessee, to prepare and file the appropriate forms for the Chapter 7 bankruptcy case in Tennessee. Gardiner apparently miscalculated the plaintiff's income for determining the means test, and incorrectly determined that the plaintiff was not eligible to file a Chapter 7 bankruptcy petition. Contrary to the attorney's understanding, the plaintiff was eligible to file a Chapter 7 petition. However, as a result of this miscalculation, the plaintiff was told that she would be required to file a Chapter 13 bankruptcy petition, which resulted in an additional $1,456.00 attorney fee.

This increase in price prompted the plaintiff to request a refund. After the plaintiff's request, Matt Sheehan, a non-attorney staff employee for UpRight Law, contacted the plaintiff via telephone to attempt to salvage the situation. During their conversation, Sheehan told the plaintiff that she would only be paying a fraction of her debt under a Chapter 13, advised her that she could buy a...