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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`SHERMAN DIVISION
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`Civil Action No. 4:15-CV-00036
`Judge Mazzant
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`UNITED STATES OF AMERICA,
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`v.
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`COMMERCIAL RECOVERY SYSTEMS,
`INC., TIMOTHY L FORD,
`INDIVIDUALLY AND AS AN OFFICER
`OF COMMERCIAL RECOVERY
`SYSTEMS, INC.; AND DAVID J
`DEVANY, INDIVIDUALLY AND AS A
`FORMER OFFICER OF COMMERCIAL
`RECOVERY SYSTEMS, INC.;
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`MEMORANDUM OPINION AND ORDER
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`Pending before the Court is Plaintiff United States of America’s Memorandum in Support
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`of Civil Penalties against Defendant Timothy Ford (“Plaintiff’s Memo”) (Dkt. #103). The Court,
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`having considered Plaintiff’s Memo, finds Defendant Timothy Ford owes Plaintiff $2,000,000 as
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`a reasonable and appropriate civil penalty for his violations of the Fair Debt Collection Practices
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`Act.
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`BACKGROUND
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`This case commenced in January 2015, and the Complaint named as defendants
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`Commercial Recovery Systems, Inc. (“CRS”), its President, Timothy Ford, and its former Vice
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`President, David Devany. The Complaint alleges that defendants violated Sections 807(2)-(5) of
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`the Fair Debt Collection Practices Act (“FDCPA”) and Section 5 of the Federal Trade Commission
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`Act (“FTC Act”) by impersonating attorneys, attorneys’ staff and judicial employees; falsely
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`threatening litigation; falsely threatening wage garnishment and asset seizure; and misrepresenting
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`Case 4:15-cv-00036-ALM Document 112 Filed 03/21/17 Page 2 of 6 PageID #: 2657
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`the character or legal status of a debt. The Complaint seeks civil penalties and a permanent
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`injunction to halt CRS, Ford, and Devany’s unlawful practices.
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`On April 7, 2016, the Court granted the government’s motion for summary judgment
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`against Defendants CRS and Ford (Dkt. #69). In its April 7, 2016 Opinion and Order, the Court
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`described CRS:
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`Defendant CRS is a Texas corporation that has been in business since 1994. Until
`2013, its main office was in Dallas, with a secondary office in Plano, Texas. CRS
`is a third-party debt collector that primarily collects consumer debt that was
`‘primarily for personal, family, or household purposes,’ including auto loans and
`credit card debts, on behalf of the original creditors, and conducts business in
`numerous states. In November 2013, CRS sought bankruptcy protection under
`Chapter 11. Defendant Tim Ford, CRS’s President, Director, and majority
`shareholder, testified in CRS’s bankruptcy proceedings that the company’s
`insolvency resulted, in large part, from a number of Fair Debt Collection Practices
`Act (‘FDCPA’) lawsuits brought by private litigants.
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`As a third-party collector, CRS did not own the debts it collected. The company
`was not a law firm and did not sue debtors or garnish wages. CRS was a mid-size
`debt collection company. Shortly before declaring bankruptcy, the company
`employed approximately 300 employees, but downsized in 2013 to employing
`approximately 80 collectors
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`Id. at 1–2. Based on these findings, the Court held Defendants Ford and CRS liable for injunctive
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`relief, and issued a permanent injunction against both defendants. The Court also held Ford liable
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`for civil penalties, reasoning:
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`The summary judgment record establishes that Ford was the sole owner and
`President of CRS up until November 2013. He received daily updates on the
`company and represented the company in negotiations with government
`investigations. Ford himself removed David Devany from his role as Vice
`President. Thus, Ford had the authority to control the company’s collection
`practices. Therefore, Ford is liable for civil penalties for FDCPA violations by CRS.
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`Id. at 14–15.
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`On July 11, 2016, the Court entered an order setting a briefing schedule to determine civil
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`penalties. The Court ordered Plaintiff to submit its brief by August 9, 2016, and Ford to submit his
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`2
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`Case 4:15-cv-00036-ALM Document 112 Filed 03/21/17 Page 3 of 6 PageID #: 2658
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`response on September 9, 2016. On August 8, 2016, Plaintiff filed its Memorandum in Support of
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`Civil Penalties against Defendant Timothy Ford (Dkt. #103). Ford did not file a response.
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`ANALYSIS
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`The Court determined in its April 7, 2016 Opinion and Order that Defendant Ford is liable
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`for civil penalties under the FDCPA and FTC Act (Dkt. #69 at 14–15). Ford had actual knowledge
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`that his collectors were not complying with the FDCPA. The issue before the Court is to determine
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`the proper penalty for Ford’s violation of the FDCPA and FTC.
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`Section 5(m) (1) (A) of the FTC Act authorizes a civil penalty of up to $40,000 for each
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`instance of conduct that violates the FDCPA with actual or implied knowledge of the FDCPA. A
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`separate violation of the FDCPA occurs each time a prohibited threat or representation is made to
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`a consumer in a collection contact. United States v. ACB Sales & Service, Inc., 683 F. Supp. 734,
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`741 (D. Ariz. 1987) (FDCPA enforcement action); United States v. Central Adjustment Bureau,
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`Inc., 667 F. Supp. 370, 385 n.29 (N.D. Tex. 1986) (each use of an improper dunning letter is a
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`separate and distinct violation). In determining the appropriate civil penalty, the Court must take
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`into account the factors listed at 15 U.S.C. § 45(m)(1)(C), which include the degree of culpability,
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`history of prior such conduct, ability to pay, effect on ability to continue to do business, and such
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`other matters as justice may require. The “other matters” many courts consider include injury to
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`the public and the benefits derived from the violations. See, e.g., United States v. Nat’l Fin. Servs.,
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`98 F.3d 131, 140 (4th Cir. 1996) (considering the good or bad faith of defendant; the injury to the
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`public; the desire to eliminate benefits derived from the violation; and the necessity of vindicating
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`the authority of the FTC and deterring further violations by the defendant or others).
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`Plaintiff’s Memo estimates the number of FDCPA violations committed by Defendant.
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`Plaintiff reached this estimation by sampling Defendant’s hard drive containing audio recordings
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`Case 4:15-cv-00036-ALM Document 112 Filed 03/21/17 Page 4 of 6 PageID #: 2659
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`of thousands of calls made by CRS collectors between November 1, 2012, and March 21, 2013.
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`Of the 647,750 calls produced, 147,973 were longer than one minute. Plaintiff listened to a random
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`sample of 300 recordings. Of this sample, 50 included CRS collectors falsely representing the
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`character or legal status of a debt, in violation of FDCPA Section 807(2); 77 included CRS
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`collectors impersonating attorneys, attorneys’ staff, or judicial employees, in violation of FDCPA
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`Section 807(3); 21 included CRS collectors threatening garnishment, seizure, or attachment, in
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`violation of FDCPA Section 807(4); and 68 included CRS collectors expressly or impliedly
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`threatening litigation, in violation of FDCPA Section 807(5). From this sample, Plaintiff calculated
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`incident rates of 16.7%, 25.7%, 7.0%, and 22.7% of Sections 807(2), 807(3), 807(4), and 807(5),
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`respectively. Applying these rates to the phone calls greater than sixty seconds over the November
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`1, 2012 and March 21, 2013 sample period implies a total of 109,643 violations. The Court finds
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`this estimation both accurate and conservative. The audio recording sample spanned six months,
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`whereas the consumer complaint trends continued for four years. If the Court were to base its
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`assessment of civil penalties on the actual 216 violations contained in the mere 300-call sample,
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`the calculation would yield a maximum theoretical penalty of $8,640,000. The maximum
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`theoretical penalty for the estimated 109,634 violations exceeds $4 billion ($40,000 x 109,643).
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`Plaintiff requests a civil penalty of $2 million.
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`Plaintiff has evidenced Defendant’s lack of good faith. Defendant admitted CRS had no
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`formal FDCPA training program. Defendant admitted to hiring abusive collection managers and
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`refused to fire them if they were effective. Defendant was aware of consumer complaints starting
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`in 2011 and the FTC’s investigation into CRS’s collection practices in March 2013. Finally,
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`Defendant had the ultimate authority over the collection managers and the collectors. The Court
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`finds Defendant fully culpable for the FDCPA violations. See F.T.C. v. Hughes, 710 F. Supp. 1524,
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`Case 4:15-cv-00036-ALM Document 112 Filed 03/21/17 Page 5 of 6 PageID #: 2660
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`1530 (N.D. Tex. 1989) (finding “complete” culpability where the defendant “had actual knowledge
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`of Rule violations, [was] responsible for the day-to-day decisions . . . and ha[d] directed and
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`controlled his employees' activities.”).
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`The Court must consider Defendant’s ability to pay in assessing civil penalties. By
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`Defendant’s own admission, he was taking home well over $2 million per year. Plaintiff contends
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`Defendant has not cooperated in discovery and has failed to provide any financial documentation
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`to evidence his net worth. In a deposition, Defendant claimed he was recently a multimillionaire
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`but now claims to have nothing. When questioned as to where the substantial salary funds went,
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`he testified that his current wife spends his money. But in early 2016, Defendant told his ex-wife
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`that he must “look poor.” Without accurate financial statements, the Court cannot assess whether
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`Defendant has the ability to pay the requested $2 million. However, a defendant’s “‘ability to pay’
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`is not a determinative factor in assessing a § 45(m)(1)(A) civil penalty.” United States v.
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`Cornerstone Wealth Corp., Inc., 549 F. Supp. 2d 811, 823–24 (N.D. Tex. 2008). Rather, it is
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`merely one factor to be considered by the Court. The Court finds a civil penalty of less than one
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`year’s salary is reasonable. Another factor, the penalty’s effect on Defendant’s ability to continue
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`to do business, is not an issue because Defendant and CRS has been ordered to cease all debt
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`collection activity. Finally, the Court finds a substantial civil penalty is appropriate and
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`commensurate with the volume, persistence, and breadth of violations to deter future egregious
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`behavior. The purpose of the FDCPA is to “eliminate abusive debt collection practices by debt
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`collectors, to insure that those debt collectors who refrain from using abusive debt collection
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`practices are not competitively disadvantaged, and to promote consistent State action to protect
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`consumers against debt collection abuses.” 15 U.S.C. § 1692(e). The amount of a civil penalty
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`should reflect the seriousness of the violation, must punish the offender, and most importantly,
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`Case 4:15-cv-00036-ALM Document 112 Filed 03/21/17 Page 6 of 6 PageID #: 2661
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`must provide a deterrent to future violations by the offender and others. United States v. ITT
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`Continental Baking Co., 420 U.S. 223, 232 (1975). Based on the foregoing, the Court finds
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`Plaintiff’s request for $2 million in damages is reasonable and appropriate and meets the goals of
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`the FDCPA.
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`CONCLUSION
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`Defendant Ford has violated the FDCPA and is fully culpable for such violations. Plaintiff
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`has presented substantial evidence in support of its request for civil penalties. Defendant Ford did
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`not respond, but the Court finds Defendant’s conduct commensurate with the Plaintiff’s request
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`for damages. The Court finds Defendant Ford owes Plaintiff $2,000,000 as a reasonable and
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`appropriate civil penalty for his violations of the FDCPA.
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`Within fourteen days of this date, counsel for Plaintiff will submit a proposed form of
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`judgment consistent with this memorandum order.
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`IT IS SO ORDERED.
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