No Fraud by Law Firm That Signed Client Names in Credit Disputes

A law firm is entitled to dismissal of a fraud claim filed against it under Texas law because it had permission to use its clients’ signatures on letters it sent on their behalf to credit agencies challenging their credit reports, the Fifth Circuit said.

Lexington Law Firm sent the letters to CBE Group and RGS Financial, which furnish consumer financial information to credit bureaus. The letters were signed using a reproduction of the consumers’ signatures and had no indication they were from Lexington, so CBE and RGS were required by federal law to investigate them.

CBE and RGS said that Lexington violated Texas’s fraud statute and sued to recover the money they spent investigating the claims they weren’t required to investigate. A jury found for CBE and RGS, but the trial judge reversed as a matter of law.

Lexington’s engagement agreement specifically said the letters would “be sent in your name, and will not be identified as being sent by Lexington,” the opinion by Judge Carl E. Stewart said. Lexington had a legal right to sign and send the letters and therefore didn’t make a false representation when it did so, the court said Thursday.

It’s also well settled under Texas law that the attorney-client relationship is an agency one and an attorney acts within the scope of their employment are regarded as acts of the client, the U.S. Court of Appeals for the Fifth Circuit said.

CBE and RGS’s fraud-by-nondisclosure claim was also properly dismissed, the court said. Lexington didn’t have a duty to disclose the letters were from it, because it had a legal right to send them under its clients’ signatures, it said.

Malone Frost Martin PLLC represented CBE and RGS. Williams & Connolly LLP and Quintairos Prieto Wood & Boyer represented Lexington.

Judges Stephen A. Higginson and Cory T. Wilson joined the opinion.

The case is CBE Group Inc. v. Lexington Law Firm, 2021 BL 122216, 5th Cir., No. 20-10166, 4/1/21.