Ghostwriting Dispute Letters for Clients Is Not Fraudulent

• Pages: 9-9
• Date: 01 January 2024
• Author: Josephine M. Bahn
• Subject Matter: Civil Law

law f‌irm can sign and send

letters on its clients’ behalf

that challenge the accuracy

of its clients’ credit report

information without dis-

closing the f‌irm’s involvement. A fed-

eral court of appeals has held that this

practice does not violate state fraud

laws as long as the clients specif‌ically

authorized such action in the retainer

contract. ABA Litigation Section lead-

ers note that the decision is important

because it rises and falls on the details

of the engagement agreement.

In The CBE Group v. Lexington Law

Firm, two companies that supply con-

sumer f‌inancial information to credit

bureaus sued a law f‌irm acting as a

credit repair organization in the U.S.

District Court for the Northern District

of Texas. The organizations alleged

the law f‌irm sent thousands of nearly

identical dispute letters that appeared

to come directly from their clients

and were not signed by any member

of the law f‌irm. Under the Fair Credit

Reporting Act (FCRA) and the Fair

Debt Collection Practices Act (FDCPA),

furnishers of credit information must

investigate when a consumer disputes

credit report information, but not when

a law f‌irm does so.

The plaintis contended that by

misrepresenting who sent the dis-

pute letters, the defendants caused

the plaintis to expend additional

resources investigating disputes that

they otherwise would not have. The

complaint raised claims under Texas

law based in fraud and tortious inter-

ference with both the plaintis’ existing

contracts with creditors and the plain-

tis’ prospective relations.

A jury awarded the plaintis over

Ghostwriting Dispute Letters for

Clients Is Not Fraudulent

$2 million. However, on the defendants’

motion, the district court vacated the

verdict, f‌inding that the evidence failed

to show that the law f‌irm made any

false statements or representations,

material or otherwise, when it signed its

clients’ names. The district court found

that the law f‌irm “had the legal right

to sign its clients’ names on the cor-

respondence it sent on their behalf to

data furnishers who reported inaccurate

information about the clients’ credit.”

On appeal to the U.S. Court of

Appeals for the Fifth Circuit, the appel-

late court armed the lower court’s

decision. The appeals court agreed that

the law f‌irm did not make any false

or misleading representations under

Texas’s fraud statute because the law

f‌irm had a legal right to sign and send

the letters under the law f‌irm’s engage-

ment agreement. The contract spe-

cif‌ically stated that the letters would

be sent under the clients’ name “and

[would] not be identif‌ied as being sent

by” the law f‌irm.

Additionally, the Fifth Circuit rea-

soned that because the attorney-client

relationship is an agency relationship,

an attorney’s actions within the scope

of his or her employment are attrib-

uted to the client. It also noted that the

plaintis failed to establish that they

justif‌iably relied on any representation

in the letters, as their “internal poli-

cies require[d] them to investigate and

respond to dispute letters sent by con-

sumers and third parties alike.” Lastly,

the appellate court held that the law

f‌irm did not have a duty to disclose the

origin of the letters, because the f‌irm

had a legal right to send the letters on

the clients’ behalf and with their signa-

ture axed.

By Josephine M . Bahn, Litigatio n News Associate Editor

Litigation Section leaders note that

attorneys should designate all aspects

of the engagement agreement to pro-

tect themselves against liability. As

a practical matter, the “best practice

would have been to avoid this lawsuit

either by providing a disclosure or hav-

ing the clients actually sign the pre-

pared letters,” advises John S. Austin,

Raleigh, NC, cochair of the Section’s

Trial Practice Committee.

Nevertheless, Section leaders sug-

gest that the law f‌irm was able to act

on its clients’ behalf because of the

agency relationship. “An agent may

speak for and on behalf of its client,

within the bounds of authority granted

by that client,” opines Elizabeth T.

Timkovich, Charlotte, NC, cochair of

the Section’s The Woman Advocate

Committee. “As attorneys, we regularly

prepare correspondence for our clients,

to be signed by our clients. And clients

may authorize us (or others) to put pen

to paper and sign correspondence for

them,” Timkovich suggests. She noted

that this principle also applies to guard-

ians, conservators, and individuals with

powers of attorney.

If law f‌irms are unable to have their

clients sign these letters, specif‌ically

detailed agreements are necessary.

Section leaders suggest that engage-

ment agreements should establish the

scope of an attorney’s agency to write

credit dispute letters. “The fact that the

engagement agreement expressly set

forth authorization for the law f‌irm to

prepare the type of correspondence

in question, and to sign for the client

or consumer, is what was fatal here

to the plaintis’ fraud-based claims,”

Timkovich concludes.

WINTER 2024 • VO L. 49 NO. 2

9 | A BA LITIGATION SECTION

Published i n Litigation News Vo lume 49, Numbe r 2, Winter 2024. © 2 024 by the Americ an Bar Assoc iation. Repro duced with perm ission. All r ights reser ved. This infor mation or any por tion thereof

may not be copied o r disseminated i n any form or by any means o r stored in an elec tronic databas e or retrieval system w ithout the expres s written consen t of the American Ba r Association .

ETHICS STRU GGLES IN THE LEGAL WOR LD