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State ex rel. Suthers v. Johnson Law Group, PLLC

Court of Appeals of Colorado, Second Division

November 6, 2014

State of Colorado, ex rel. John W. Suthers, Attorney General, and Julie Ann Meade, Administrator, Uniform Consumer Credit Code, Plaintiffs-Appellants and Cross-Appellees
v.
Johnson Law Group, PLLC, a Florida private limited liability company, and Clint L. Johnson, Defendants-Appellees and Cross-Appellants

Page 962

City and County of Denver District Court. No. 11CV2749. Honorable Herbert L. Stern, III, Judge.

John W. Suthers, Attorney General, Jeanine M. Anderson, Senior Assistant Attorney General, Nikolai N. Frant, Assistant Attorney General, Denver, Colorado, for Plaintiffs-Appellants and Cross-Appellees.

Bullock Law, L.L.C., Timothy Bullock, Castle Rock, Colorado; Richard G. Elie, Fort Lauderdale, Florida, for Defendants-Appellees and Cross-Appellants.

Opinion by JUDGE ROMÁ N. Casebolt and Gabriel, JJ., concur.

OPINION

Page 963

ROMÁ N, JUDGE.

[¶1] In this action under the Uniform Debt-Management Services Act (DMSA), sections 12-14.5-201 to -242, C.R.S. 2014, we are asked to determine whether the legal services exception in the DMSA implicates subject matter jurisdiction. Plaintiff, the State of Colorado, appeals the district court's order dismissing its complaint against defendants, Johnson Law Group, PLLC, a Florida private limited liability company, and Clint L. Johnson, for lack of subject matter jurisdiction. Defendants cross-appeal the district court's order denying attorney fees. Because we conclude that the legal services exception, section 12-14.5-202(10)(A), C.R.S. 2014, does not implicate subject matter jurisdiction, and we conclude defendants did not timely assert that defense, we reverse the district court's order and remand with directions. Based on this conclusion, we deem defendants' cross-appeal for attorney fees and costs moot.

I. Uniform Debt-Management Services Act

[¶2] The DMSA was enacted in 2008 to regulate all debt-management services in Colorado.[1] It requires that all providers of debt-management services apply to an administrator designated by the attorney general and supply detailed information, including financial statements, a description of the applicant's financial analysis and initial plan, copies of client agreements, and a schedule of fees and charges. § 12-14.5-206, C.R.S. 2014; see also 12-14.5-202(1), C.R.S. 2014 (The " administrator" is " the assistant attorney general designated by the attorney general." ). Providers must also submit a fee, a bond, and an identification of all trust accounts. § 12-14.5-205, C.R.S. 2014.

[¶3] If the application is approved by the administrator, the provider is subject to numerous rules and regulations controlling the debt-management services client relationship, including the fees that can be charged to clients. § 12-14.5-223, C.R.S. 2014. The administrator may enforce compliance with the DMSA by ordering the violators to cease and desist, prosecuting a civil action, and recovering restitution or civil penalties. § 12-14.5-233, C.R.S. 2014.

[¶4] DMSA defines " debt-management services" as " services as an intermediary between an individual and one or more creditors of the individual for the purpose of obtaining concessions . . . ." § 12-14.5-202(10)(A). As applicable here, debt-management services do not include, " [l]egal services provided in an attorney-client relationship by an attorney . . . ." § 12-14.5-202(10)(A)(i).

II. Defendants' Practice

[¶5] Johnson is an attorney who, in 2006, was licensed to practice law in Florida. His practice included personal injury, criminal defense, and family law. In 2008, he added a debt-management services practice that extended to approximately forty-two states.

Page 964

[¶6] Johnson's practice included two types of debt management services for unsecured debt. The first type -- debt management plans -- involved plans that eliminated or reduced late and other fees, as well as significantly lowered interest rates. As part of this service, clients were placed on set payment plans and paid the entire principal balance of the debt over time.

[¶7] The second type of debt management service -- debt settlement plans -- involved negotiating with third parties for settlement of debt for a lesser amount. The goal was to reduce the principal balance. As part of this plan, the client did not pay the entire principal balance. However, the client could often take advantage of mass settlements with other clients. To accomplish this, clients made payments into a trust account until an agreement with the creditor was reached.

III. Procedural History

[¶8] In 2011, plaintiff filed a complaint against defendants asserting violations of the DMSA and the Colorado Consumer Protection Act (CCPA), sections 6-1-101 to -1121, C.R.S. 2014. The district court granted partial summary judgment to the plaintiff on May 16, 2012, finding that defendants (1) were subject to regulation under the DMSA; (2) failed to register with the administrator as required by the DMSA; (3) charged clients excessive fees; (4) failed to provide clients with required cautionary disclosures; (5) provided clients with agreements that did not properly limit defendants' authority to settle debts; and (6) failed to comply with the DMSA procedures for terminating agreements, providing refunds, and cancellation. It entered a permanent injunction against defendants, prohibiting them from providing debt-management services to Colorado residents and from engaging in deceptive trade practices. The district court awarded restitution to plaintiff in the amount of $783,447.43.

[¶9] The trial management order, approved by the trial court on November 6, 2012, stated, " [t]he remaining issue for trial therefore is the amount of penalties that are to be assessed against ...


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