Recently I covered a lawsuit filed against Morgan Drexen in Virginia, Morgan Drexen Sued in Virginia. Called Parasitic. Allegedly Violated Credit Counseling Act., Sykes v. Morgan Drexen 2:11-cv-00024-JPJ -PMS.
Morgan Drexen had responded and said the case should be tossed out. But in the response by the Plaintiff’s attorney I spotted an interesting development way back in the pages of the response.
The attorney says:
Moreover, it is difficult to see how Defendant plans to meet its burden of proving that “all debt management services were provided to Plaintiff by legal counsel, authorized to practice in the Commonwealth.” (Def. Mot. 6-7, fn1.) Plaintiff, through counsel, recently contacted the Virginia attorney, who Defendant claims provided her with debt management services. She instructed that attorney to provide her with any files that he kept in connection with his alleged representation of her, which the Virginia Rules of Professional Conduct require attorneys to provide to their former clients upon request. He refused to comply with Plaintiff’s request and advised Plaintiff’s counsel that, “the file is held by Morgan Drexen. They have asked that you make a formal request for the file under the Federal Rules under the current case.” If that attorney takes his instructions from the Defendant, then it is hard to see how Defendant will meet its burden of proof that this attorney was Plaintiff’s lawyer.
That issue certainly does raise some interesting issues. So was the Plaintiff’s lawyer not really her lawyer? And why is her attorney, who was supposed to be representing the consumer, saying he does not have control over his own client file?
This issues surfaces again in the response when the Plaintiff’s attorney says:
However, Defendant’s conduct further supports application of the rule in this case. Around July 2008, Defendant began placing the names of attorneys on the letterhead of its correspondence. (Compl. ¶ 42, Ex. F.) These attorneys did no real work and their names were included on Defendant’s letterhead only to evade liability under the VCCA. (Compl. ¶¶ 36-48; see infra Part III.) But Defendant’s deception created an impression that its relationship with Plaintiff was one built on the confidence and trust inherent in a bona fide attorney-client relationship. Defendant continues its farce before this Court by contending that “evidence will show that all debt management services were provided to Plaintiff by legal counsel, authorized to practice in the Commonwealth…” (Def. Mem. p. 6, fn 1.) If Defendant plans to contend that it is not subject to the VCCA, because the conduct Plaintiff challenges arises out of an attorney client relationship, then Defendant cannot in the same breath deny the application of the continuing undertaking rule to Plaintiff’s First Cause of Action. Application of that rule “is particularly appropriate to an attorney-client agreement in view of the confidence and trust inherent in that relationship.” McCormick, 214 Va. at 149. For these reasons, Plaintiff’s claims under the VCCA did not accrue until November 2010 when Defendant ceased to provide Plaintiff with a Debt Management Plan.
And this section makes for some interesting reading:
After 37 months of enrollment in Defendant’s Debt Management Plan, Plaintiff discovered Defendant’s fraud during a telephone conversation with Defendant’s employee in September 2010. In actions of fraud, as well as for violations of the VCPA, the action accrues when such fraud, mistake, misrepresentation, deception, or undue influence is discovered or should have been discovered by the exercise of due diligence. See Va. Code § 8.01-249(1); Schmidt v. Household Fin. Corp., II, 276 Va. 108, 117 (2008). During that September 2010 telephone call, Plaintiff learned that she would not be debt free in anywhere close to the 48 month period. Rather, she learned that she was even further away from completing the program than she was on the day she enrolled. (Compl. ¶ 71.) Morgan Drexen’s internal records show that after 37 months of making payments to Morgan Drexen, Plaintiff remained 65 months from completing Morgan Drexen’s program. (Compl. Ex. E.) Specifically, Plaintiff’s complaint alleges that she “spoke with a representative” and “[a]s a result of that conversation, Plaintiff began to understand that she was not going to be debt free at any time in the near future, and she sought the advice of counsel.” (Compl. ¶ 71.) After it became clear from this conversation that Defendant had moved the goal posts, Plaintiff began to suspect that Defendant never intended for her either to save money or complete the program.
If you would like to read the full response, you can read the document here.
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