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In a recent published opinion, the Third Circuit affirmed the District Court's sanctions against JP Ward & Associates, attorney Travis Gordon, and attorney Joshua Ward for engaging in, as the District Court put it, "a campaign of deception.".
According to the court, the law firm drafted nonsensical hand-written letters to debt collectors in which they intentionally buried the following vague dispute reference "I saw that your company is reporting that I owe you a sum of money, but I just don't think that is current." The firm wrote the confusing letters to manufacture a claim for a violation of Section 807(8) of the Fair Debt Collection Practices Act, 15 U.S.C. 1692e(8), to garner $1,000 in statutory damages plus attorney fees when the debt collector failed to flag the account as disputed. See 15 U.S.C. § 1692k(a)(2), (3). The two handwritten letters are attached to the opinion.
Portfolio Recoveries Associates, LLC ("PRA") spotted the similarity between the almost identical complaints and handwritten debtor letters. PRA removed the cases brought by the firm from state court to federal court and raised the practice for the court's disposition under Federal Rule of Procedure 11 ("Rule 11"). Rule 11 states that by presenting a pleading to the court, the attorney "certifies that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances it is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation." Fed R. Civ. P. 11(b)(1).
The District Court conducted an evidentiary hearing to explore the letter drafting and purpose of sending the letters, during which the firm admitted having a paralegal use the firm's letter template to handwrite and sign the letters from clients without even speaking to them. The court ordered the lawyers to show cause as to why these actions should not be sanctioned, but the court determined that they failed to do so. Accordingly, the court dismissed the case with prejudice, awarded PRA attorney's fees and costs, ordered the lawyers to write apology letters, and attach the court's sanction order to future debt-dispute cases filed in the district. The attorneys and law firm appealed.
The Third Circuit affirmed the sanctions on appeal as proper under Rule 11, finding that "[the attorneys] and their firm violated Rule 11 by submitting complaints based on misrepresentations and half-truths to harass [PRA], increase its litigation costs, and gin up attorneys' fees." The Third Circuit noted that "the complaints were not what they purported to be—claims by frustrated debtors who had tried unsuccessfully to dispute their debts. The letters' real goal was just the opposite: to fail at disputing those debts, teeing up §1692e violations to benefit the firm."
The Third Circuit concluded "Actions have consequences.... We expect more from members of the bar, and we will affirm the sanctions."
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