On December 16, 2011, Juanita White v. Morgan Drexen was filed in Virginia. Frankly, I’m getting sick of reporting on all the suits in the debt industry and I was going to pass on this one, until I read it. If all the facts and allegations are true, it’s enlightening.
I think readers will be especially interested in the details that are brought to light in the attorney deposition which was attached as an exhibit.
The case also makes the following interesting observation in the “back office” support role that Morgan Drexen plays. The complaint states:
“The attorneys do not pay Morgan Drexen for any “paralegal support,” but rather Morgan Drexen pays the attorneys for the purpose of using the attorneys’ names on the letterhead of letters that Morgan Drexen writes and sends.”
What follows are the facts and allegations from the complaint that was filed in Nelson County, Virginia on behalf of Ms. White, a 79 year old woman who was assisted by the Central Virginia Legal Aid Society.
The suit claims Morgan Drexen was not registered to provide services under the Virginia Credit Counseling Act. Debt Management Plan providers are required to be registered. “Injured consumers are entitled to have their actual damages trebled and to an award of costs and attorneys’ fees.”
“Morgan Drexen has never had a license to provide a DMP in the Commonwealth, yet it offered and provided Ms. White with a Debt Management Plan for which it charged Ms. White $2,021 of fees that the VCCA specifically prohibits. Morgan Drexen misrepresented to Ms. White that it would take her 20 years to repay the $10,020 that she owed her only creditor (BB&T) unless she enrolled in Morgan Drexen’s program. Morgan Drexen also misrepresented to Ms. White that an attorney would negotiate on her behalf settlement of her debts with BBkT.
Before Morgan Drexen interfered, Ms. White was working with BB&T to pay as much as possible toward her two credit cards. Ms. White used those cards to finance purchases of groceries and car repairs that her social security income did not cover. As part of its unlawful Debt Management Plan, Morgan Drexen advised Ms. White to stop paying BBAT and to divert her payments to Morgan Drexen.
Ms. White paid $2,021 to Morgan Drexen only to see her credit ruined after BB&T obtained a judgment against her. Due to penalty interest and late payment fees, Ms. White now owes more money to BBAT than she did on the day Morgan Drexen induced her to enroll in its program. Moreover, her relationship with her only creditor has been ruined and she no longer has the means to finance emergency purchases. Ms. White brings this action to redress these injuries resulting from Morgan Drexen’s unlawful actions.”
In April 2010, Ms. White owed BBKT roughly $ 10,000 on two credit card accounts. She owed approximately $300 on one account and $9700 on the second. Each month Ms. White was working with BB&T to pay what she could.
In April 2010, Ms. White received a telephone call from Morgan Drexen.
The Morgan Drexen representative induced Ms. White to enroll in Morgan Drexen’s program with a false statement that it would take Ms. White twenty years to repay her debts to BB&T unless Ms. White enrolled in Morgan Drexen’s program.
On April 19, 2010, Morgan Drexen sent Ms. White a letter “recap[ping] our conversation regarding the Debt Recovery Program.” That letter described the program:
As we discussed, the program is designed to negotiate mutually agreeable settlements between you and your creditors over an approximate period of 60 months. Your monthly installment/transfer to your client trust account with the law firm will be $ 152.00 per month, which we expect will save you approximately $900.00 upon successful completion.
The April 19, 2010 letter also stated that it “may take over 20 years, making minimum payments” to repay her creditors if she did not enter the program:
Your current unsecured debt totals $10,020.00 According to the Department of the Treasury statistics (www.ustreas.pov), your total amount of debt may exceed the current national average of household credit card debt. Based on this amount of debt, we estimate that it will take well over 20 years, making minimum payments, to fully pay these obligations.
A copy of the April 19, 2011 letter is attached hereto as Exhibit A.
Morgan Drexen also misrepresented to Ms. White that a lawyer would represent her in resolving her debts.
In the initial telephone call, the Morgan Drexen representative told Ms. White that she would have a lawyer “on her side” and “working for her.”
Morgan Drexen’s April 19, 2011 letter told Ms. White that she was “qualified for enrollment” and “the Law Firm is willing to accept [her] case.” (Ex. A.) The April 2011 letter also referenced a “Unsecured Debt Negotiation/Settlement Attorney/Client Fee Agreement” (“Fee Agreement” ). (Ex. A.) Morgan Drexen also sent Ms. White this Fee Agreement, which is a standard contract, at the top of which Morgan Drexen places the name of the law firm licensed in the customer’s jurisdiction — in this case “FerrisBowman PLLC.” Attached as Exhibit B are the pages of the Fee Agreement Ms. White had in her possession.
In reality, FerrisBowman PLLC, and in particular Mr. James Bowman never represented Ms. White.
Attached as Exhibit C is a copy of the agreement between Morgan Drexen and Mr. James Bowman. As explained in more detail below, Morgan Drexen hires and pays attorneys in Virginia, and in other states in which it does business, in order to evade the licensing requirements of the VCCA and similar statutes in other states.
On April 23, 2010, Morgan Drexen sold Ms. White its Debt Management Plan. That same day, Morgan Drexen sent a letter to Ms. White welcoming her to the program” on behalf of FerrisBowman PLLC and Morgan Drexen.
Morgan Drexen wrote the April 23, 2010 letter, but placed the name FerrisBowman PLLC above Morgan Drexen’s California address.
The letter described the work that Morgan Drexen would perform:
1. To tell banks and other creditors about your circumstances and inform them of the service we are providing for you. Also, to let them know how and when we will be settling your debt with them and that we will not be making monthly payments on your accounts.
2. To update the banks and other creditors of your progress in the program.
3. To negotiate settlements on your debts as the money is available to do this.
A copy of the April 23, 2010 letter is attached hereto as Exhibit D (emphasis added).
Morgan Drexen opened two accounts for Ms. White: a general account and a trust account. The purpose of the general account was to collect Ms. White’s money to pay Morgan Drexen’s fees. Indeed, on April 22, 2010, Morgan Drexen charged Ms. White a $918.75 “Engagement Fee and a $45 “Monthly Servicing Fee,.” That same day, Morgan Drexen withdrew $100.00 from Ms. White’s personal checking account and—after deducting the $45 “Monthly Servicing Fee,”—applied the remaining $55.00 toward Morgan Drexen’s $918.75 “Engagement Fee.” Morgan Drexen required Ms. White to pay the entire “Engagement Fee” before it would transfer money into her trust account. The purpose of the trust account was to collect what remained of Ms. White’s monthly payments after Morgan Drexen paid itself its fees. Morgan Drexen would only make settlement offers, however, once the trust account balance was large enough to induce a creditor to settle.
It was not until January 2011—after paying Morgan Drexen $ 1,413—that Morgan Drexen transferred a paltry $29.25 from Ms. White’s general account into her trust account.
Morgan Drexen did not make any settlement offers to BBkT until over a year after it enrolled Ms. White in its “program.”
On May 11, 2011, Morgan Drexen paid $155 to BB&T on Ms. White’s behalf.
Six days after receiving the $15S payment, BB&T filed a warrant in debt against Ms. White for $9,885.88 plus interest and costs.
By May 22, 2011, Ms. White had paid Morgan Drexen $2,021. Copies of Morgan Drexen’s monthly statements between April 2010 and May 2011 are attached hereto as Exhibit E.
Realizing that she had fallen victim to a predator, at the end of May 2011, Ms. White instructed her bank to cease making monthly payments to Morgan Drexen.
Morgan Drexen will likely tell the Court that it never offered or provided Ms. White with a Debt Management Plan. Instead, Morgan Drexen will present the same defense that it has made in other proceedings against it. Morgan Drexen will likely pretend to be an outsourced provider of back office support to Virginia lawyers. The Court should not be fooled by this charade.
Morgan Drexen seeks to evade the requirements of the VCCA—and similar statutes in other states—by claiming to be a service provider to Virginia lawyers. The VCCA provides that “[t]he provisions of this chapter shall not apply to a person licensed to practice law in the Commonwealth.” Va. Code ( 6.2-2001(A). According to Morgan Drexen, its customers are the clients of lawyers licensed in the Commonwealth of Virginia. Nothing could be further from the truth.
The truth is that the Virginia attorneys, whose names Morgan Drexen places on the letterhead of its letters, provide no services to the customer who has enrolled in Morgan Drexen’s program.
All communications with the customer are prepared and sent by Morgan Drexen from its offices in California.
Morgan Drexen handles all negotiations with its customers’ creditors.
The attorneys do not negotiate with the creditors.
The attorneys do not pay Morgan Drexen for any “paralegal support,” but rather Morgan Drexen pays the attorneys for the purpose of using the attorneys’ names on the letterhead of letters that Morgan Drexen writes and sends.
The purpose of this subterfuge is to evade the licensing requirements of the VCCA and similar statutes in other states.
One attorney in West Virginia explained her role in the DMP’s Morgan Drexen offered to its customers. In sworn deposition testimony that she gave in connection with an investigation launched by the Office of the West Virginia Attorney General, Ms. Rachelle McIntyre-Nicholson testified the following:
Q: Are you involved with that settlement negotiation?
Q: But you don’t help put that plan together?
A: No, sir
Q: Okay. That’s all done by Morgan Drexen?
A: Yes, it’s done by that team that they have put together.
A: So technically Iam a rubber stamp, but I don’t see it that way because …it is not my job to say, well, I think a better settlement could have been negotiated, because that’s not what… That’s not what I do.
Q: You don’t call the clients and say, is this settlement good for you?
A: The client has already approved the settlement by the time it gets to
(Deposition of Rachelle D. McIntyre-Nicholson in the Matter of the Investigation of Morgan
Drexen, at 69:12-14; 75:12-14, 17-20; 81:23-82:1-11;98:14-17.) Please see excerpts of the
transcript attached as Exhibit G.
Mr. James Bowman played the same role in Morgan Drexen’s transaction with Ms. White that Ms. McIntyre-Nicholson described in her deposition testimony.
Indeed, Mr. Bowman’s contract with Morgan Drexen is substantially similar to Ms. McIntyre-Nicholson’s contract with Morgan Drexen.
In Section 2(F) of both contracts, Morgan Drexen agreed to pay Mr. Bowman and Ms. McIntyre-Nicholson $500 each month for the first 300 clients and an additional $2.00 for every client thereafter.
A copy of the contract between Morgan Drexen and Ms. McIntyre-Nicholson is attached hereto as Exhibit H.
Neither Mr. Bowman, nor any member of his law firm, ever provided any legal advice to Ms. White.
Neither Mr. Bowman, nor any member of his law firm, ever provided or administered Ms. White’s Debt Management Plan.
Neither Mr. Bowman, nor any member of his law firm, ever provided Ms. White with legal advice as to whether Morgan Drexen’s Debt Management Plan was in her best interest.
Neither Mr. Bowman, nor any member of his law firm, ever negotiated with BB&T regarding a settlement of Ms. White’s accounts.
Simply put, there has never been bona fide attorney client relationship between Ms. White and Mr. Bowman.
To the contrary, Morgan Drexen performed all the debt settlement work in connection with the Debt Management Plan that Morgan Drexen sold Ms. White.
After BB&T sued Ms. White, Morgan Drexen attempted to further profit at Ms. White’s expense. After Ms. White received notice of BBAT’s suit, Ms. White contacted Morgan Drexen for help and for an explanation of how she could have been sued after having paid Morgan Drexen over $2000. Morgan Drexen responded by sending Ms. White a letter dated May 23, 2011 (with “James E. Bowman PLLC” in the letterhead). This letter explained that “[b]ecause you are part of our non-formal debt resolution program, our team of attorneys can provide you with ‘Limited Scope Representation’ under a separate contract, which is attached hereto.” The attached contract set forth fees that James E. Bowman PLLC would charge her to “help [her] represent [herself] in a court of law by providing [her] with legal advice and suggested pleadings.” A copy of the May 23, 2011 letter and separate contract are attached hereto as Exhibit I.
I found it odd that Bownan CCed himself on the letter sent. Maybe that’s a practice I’m just not familiar with. See arrow.
Morgan Drexen controlled all communication with Ms. White.
Ms. White was not to bother Mr. Bowman unless she was to pay additional fees. The May 23, 2011 letter concluded by reminding Ms. White to “direct your questions or concerns to your assigned Client Coordinator whose contact information we have previously provided.” Ms. White’s Client Coordinator was a Morgan Drexen employee.
The truth is simple. Morgan Drexen sold Ms. White an iHegal Debt Management Plan. The plan is illegal because Morgan Drexen was not licensed to provide such a plan as is required by the VCCA. Morgan Drexen collected $2,021 from Ms. White in connection with that plan, from which it paid itself $ 1,613.25 in fees that licensed providers are statutorily prohibited from collecting. As a result, Ms. White has lost thousands of dollars, has an outstanding judgment against her, has been driven deeper into debt, and has had her credit ruined.
On October 13, 2011, Plaintiff’s counsel sent Morgan Drexen a letter demanding compensation for the harm that Morgan Drexen caused Ms. White. A copy of that letter is attached hereto as Exhibit J. Morgan Drexen ignored that letter. Ms. White now turns to this Court to redress the wrongs done to her by bringing the following causes of action against Morgan Drexen.
You can read the full Summons and Complaint filed.
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