White v. GM Law Firm, LLC

1

CASEY M. WHITE, et al., Plaintiffs, v. GM LAW FIRM, LLC, Defendant.

No. 21-cv-80896-SINGHAL/MATTHEWMAN

United States District Court, S.D. Florida

December 13, 2023

MAGISTRATE JUDGE'S REPORT AND RECOMMENDATION ON DEFENDANT'S MOTION FOR JUDGMENT ON THE PLEADINGS AS TO COUNT II (RESCISSION) [DE 215]

WILLIAM MATTHEWMAN, United States Magistrate Judge.

THIS CAUSE is before the Court upon an Order of Reference from the Honorable United States District Judge Raag Singhal [DE 271] to enter a Report and Recommendation on Defendant GM Law Firm, LLC's Motion for Judgment on the Pleadings as to Count II (Rescission) (“Motion”) [DE 215]. The Motion is fully briefed. See DEs 219, 222. The Court heard argument on the Motion on December 7, 2023. This matter is now ripe for review.

I. BACKGROUND

On May 18, 2021, Plaintiffs Casey M. White and Patricia A. Crimmins filed their Complaint against several defendants, including Defendant GM Law Firm, LLC (“Defendant”). [DE 1]. This case was later consolidated with a related case, Case No. 21-cv-81127-AHS. [DE 85]. Ultimately, after a great deal of motion practice, only Defendant GM Law Firm, LLC remained as a defendant in this case. See DE 167; 168; 169; 172.

On November 22, 2022, Plaintiffs, Casey M. White, Patricia A. Crimmins, Nathan Montalvo, Lindsey Crits, Evan Wendt, Elizabeth Ripoli, and Jennifer Coley (“Plaintiffs”) filed an Amended Complaint against Defendant GM Law Firm, LLC [DE 170, Am. Compl]. The Amended Complaint alleges breach of fiduciary duty (Count I) and rescission of contract and return of fees paid (Count II). Id. Of note, there is a section of the Amended Complaint titled “Tolling of the Applicable Statutes of Limitations,” which alleges as follows:

114. Plaintiffs had no way of knowing the true nature and extent of Defendants' illegal advance-fee “student loan debt elimination” telemarketing scheme necessary to prosecute their claims until the following dates, respectively: Casey White and Patricia Crimmins, July 19, 2019; Nathan Montalvo, February 24, 2021; Lindsey Crits, early October 2019 (the date of service of the state court collection suit against her); Evan Wendt, October 2018; Elizabeth Ripoli, December 2018; and Jennifer Coley, December 2018.

115. GM Law Firm was under a continuous and constant duty to disclose to the Plaintiffs the true character, quality, and nature of the legal representation, and other “student loan debt elimination” services that it, and its agents, was providing.

116. GM Law Firm, and its agents, knowingly and actively concealed their illegal advance fee “student loan debt elimination” telemarketing scheme, and the Plaintiffs reasonably and detrimentally relied upon Defendant's knowing and active concealment. Plaintiffs, respectively, had no way of knowing the true character, quality, and nature of the legal representation for which they had been charged prior to the dates, listed above.

117. Accordingly, the applicable statutes of limitations have been tolled by operation of the discovery rule and Defendant's concealment with respect to all claims pleaded in this Amended Complaint. Due to this, Defendant is estopped from relying on any statutes of limitations in defense of this action.

118. Additionally, the statutes of limitations that apply to the claims of Plaintiffs, Evan Wendt, Elizabeth Ripoli, and Jennifer Coley (formerly Ackerman), are also tolled for the period of time that these Plaintiffs were named-Plaintiffs in the matter of Grijalva v. Kevin Mason, P.A., et al., Cause No. 8:18-cv-2010-MCS (DFMx) (C.D. Cal.).

[Am. Compl. ¶¶ 114-118].

Count II of the Amended Complaint alleges as follows:

151. Each Plaintiff in this action, respectively, pleads a claim for rescission of the illegal Limited Legal Services Agreement that they were induced to execute by GM Law Firm or agents working on behalf of GM Law Firm.

152. All the Limited Legal Services Agreements that the Plaintiffs executed with GM Law Firm contain non-refundable, excessive, advance fee payment terms for telemarketed debt relief services that violate both the TSR of the FTC and Rule 4 1.5 of the Rules Regulating the Florida Bar.

153. These nonrefundable advance fee terms are illegal under the TSR and they are grossly excessive and impermissible under Rule 4-1.5 of the Rules Regulating the Florida Bar.

154. GM Law Firm has not eliminated, renegotiated, or settled any student loan debts of any of the Plaintiffs in this action.

155. Thus, all so-called “attorney's fees” that GM Law Firm has charged the Plaintiffs, all of whom were telemarketed by sales agents of GM Law Firm, are unlawful under the TSR and they are excessive and unreasonable under Rule 4-1.5 of the Rules Regulating the Florida Bar.

156. Each of the Plaintiffs made a unilateral mistake to enter into their respective Limited Legal Services Agreement with GM Law Firm for its student loan debt elimination “program”.

157. The unilateral mistake of each Plaintiff to enter into the GM Law Firm Limited Legal Services Agreements at issue in this action were induced by the promises of complete debt elimination made by GM Law Firm's telemarketing sales agents.

158. Under the facts of this law, and the Florida law governing rescission of contract, the granting of rescission to the Plaintiffs in this case of their contractual obligations to GM Law Firm, with disgorgement of the illegal fees charged to the Plaintiffs by GM Law Firm and its agents, with pre and post-judgment legal interest, is warranted in this case.

[Am. Compl. ¶¶ 151-158]. Count II is specifically titled as “Recission of Contract and Return of Fees Paid.” Id. at 33.

Defendant filed an Answer & Affirmative Defenses to Amended Complaint [Answer, DE 173] on December 5, 2022. Defendant denied Paragraphs 114-118 and also denied Paragraphs 152-158. Id. at 6, 8. It did, however, admit Paragraph 151. Id. at 8. With regard to affirmative defenses, Defendant pled in relevant part that “[o]ne or more claims fails to state a cause of action” and that “[o]ne or both claims are time-barred” since the “statute of limitations is not tolled for either count.” Id. at 9.

II. MOTION, RESPONSE, AND REPLY

A. Defendant's Motion [DE 215]

Defendant moves for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c) against all Plaintiffs as to Count II (rescission) “due to the statute of limitations and due to rescission being an inappropriate remedy.” [DE 215 at 1]. It argues that the statute of limitations for rescission is four years, and, “despite Plaintiffs' allegations in the Amended Complaint, the deadline is not tolled pursuant to either the delayed discovery doctrine or the existence of a prior lawsuit.” Id. at 2. Defendant next asserts that Plaintiffs “have not alleged, much less plausibly alleged, how these personal service contracts could be rescinded to return all parties to the status quo as of 2015 and 2016.” Id. at 1-2. According to Defendant, “the delayed discovery rule does not apply to contract or rescission claims” and the existence of a prior lawsuit in the Central District of California involving three of the plaintiffs in this case and which was dismissed without prejudice is “legally irrelevant.” Id. at 4-5.

Defendant further asserts that the Amended Complaint fails to even allege the fourth and fifth elements required to sufficiently plead a rescission claim. Id. at 6. Finally, Defendant contends that the service contracts at issue cannot be rescinded and that “Plaintiffs provide no plausible explanation for how, 6 or 7 years after contract execution, they could restore the Defendant to the status quo as of 2015 or 2016.” Id. at 7. Instead, “Count II reads more like a garden variety breach of contract action where the Plaintiffs allege that the Defendant did not comply with its obligations under the contract and is therefore seeking damages in the form of a refund of the fees Plaintiff paid to the Defendant.” Id. at 7-8.

B. Plaintiffs' Response [DE 219]

In response, Plaintiffs first argue that their “breach of contract claims in this case expire, for statute of limitations purposes, four years from the date of the last (illegal) installment payment that the Plaintiffs made under the GM Law Firm student loan debt ‘elimination' program, and not from the date that they, respectively, first entered into the GM Law Firm legal services agreement.” [DE 219 at 1-2]. Plaintiffs also point out that the “issue raised in GM Law Firm's pending Rule 12(c) motion, DE 215, involves mixed questions of law and fact.” Id. at 2. They assert that the law cited by Defendant with regard to the statute of limitations is inapplicable in the context of installment contracts. Id. at 3-4. Plaintiffs additionally maintain that whether the legal services contracts can be rescinded “is a factual inquiry that cannot be resolved at the Rule 12 stage in this case. The Plaintiffs allegations must be accepted as true.” Id. at 5. And, given the facts pled in the Amended Complaint, Plaintiffs argue that “there is no reason to blindly accept GM Law Firm's assertion that Plaintiffs' legal services contracts cannot be rescinded.” Id. at 5-6. More specifically, Plaintiffs believe that they would be made whole in terms of their economic damages if Defendant “were to refund [them] their illegal, advance, telemarketed legal fees, and pay them interest on these amounts.” Id. at 6. Also, Plaintiffs explain that the “issue of the delayed discovery and the tolling of the statute of limitations applies to Plaintiffs' breach of fiduciary duty claims only.” Id. Finally, Plaintiffs did not respond at all to Defendant's argument that Count II fails to include all the elements of a recission cause of action.

C. Defendant's Reply [DE 222]

In reply, Defendant first...