Summary
interpreting federal law
Summary of this case from LAL v. AMERICAN HOME MORTGAGE SERVICING, INC.Opinion
CASE No. 03-CV-1666 B
January 29, 2004
ORDER: DENYING DEFENDANT'S MOTION FOR ATTORNEY FEES
I. Introduction
On January 16, 2004, Defendant's Motion for Attorney's Fees came on for regular hearing. Joshua Swigart, Esq. appeared on behalf of Plaintiff and John O. Clune, Esq. appeared on behalf of Defendant. Thomas E. Jensen, Esq. was also present.
Having reviewed the record, heard oral argument and for the reasons here below, the Court hereby DENIES Plaintiffs Motion for Attorney's Fees.
II. Background
On August 20, 2003, Heather Lemieux filed a complaint against Thomas E. Jensen ("Defendant") alleging violations of the Fair Debt Collections Practices Act, 15 U.S.C. § 1692 et seq., ("FDCPA") and the Rosenthal Fair Debt Collections Practices Act, C AL. CIV. §§ 1788-1788.32 ("RFDCPA").
Defendant is an attorney who provides legal services for Atlantic Credit, Inc., a debt settlement company.
On August 21, 2003, Defendant wrote a letter to Plaintiff advising Plaintiff of his intention to file a motion to dismiss pursuant to FRCP 12(b)(6) and a motion for sanctions pursuant to FRCP 11(b). Defendant asserted in the letter a variety of reasons why neither the FDCPA nor the RFDCPA was applicable, including the fact that he was not a "debt collector" as defined by the FDCPA and RFDCPA.
On August 22, 2003, Plaintiff filed a first amended complaint, deleting the cause of action under the RFDCPA.
On August 28, 2003, Defendant apparently telephoned Plaintiff and asked if he intended to dismiss the action. Plaintiff alleges that during that telephone conversation, Defendant attempted to pressure him into dismissing the case stating an intention to file a motion for Rule 11 sanctions and reporting Plaintiff's behavior to the State Bar of California.
On September 2, 2003, Defendant faxed a letter to Plaintiff reiterating his intention to file a motion for Rule 11 sanctions and stating that he had not received a copy of the amended complaint.
On September 9, 2003, John O. Clune, Esq., informed Plaintiff that he would be representing Defendant in all further matters. Also on September 9, 2003, Defendant filed a motion to dismiss pursuant to FRCP 12(b)(6). Defendant's motion included several sworn declarations, including one by Defendant. The hearing was originally noticed for October 14, 2003.
On September 16, 2003, Plaintiff dismissed the case with prejudice.
On September 19, 2003, Defendant again wrote Plaintiff. In that letter, Defendant made a series of allegations that Plaintiff had violated numerous ethical rules.
III. STANDARDS OF LAW
It is well established that under the "American rule" courts ordinarily will not award the prevailing party attorneys' fees absent statutory authority to do so. See, e.g., Hensley v. Eckerhart, 461 U.S. 424, 429 (1983). When a statute provides for such fees, it is termed a "fee-shifting" statute. Under a fee-shifting statute, the court "must calculate awards for attorneys' fees using the `lodestar' method,"Ferland v. Conrad Credit Corp., 244 F.3d 1145, 1149 n. 4 (9th Cir. 2001).
IV. DISCUSSION
Plaintiff argues that he is entitled to attorney's fees pursuant to section 1692k(a)(3) of the Fair Debt Collection Act ("FDCPA"). 15 U.S.C. § 1692, et seq. Section 1692k(a)(3) provides, in pertinent part, that
. . . [o]n a finding by the court that an action under this section was brought in bad faith and for the purpose of harassment, the court may award to the defendant attorney's fees reasonable in relation to the work expended and costs.
Accordingly, for the Court to award Defendant attorney's fees, the Court must find that the action was brought "in bad faith" and "for the purpose of harassment."
First, Defendant offers as evidence the fact that Plaintiff did not name Atlantic Credit, Inc. as a co-defendant, "[notwithstanding] the obvious agency relationship inferred from assignment of a debt for collection." Def's Mem. of PA, at 1, 4. Defendant argues that this fact demonstrates Plaintiffs attorney was not interested in obtaining "full relief for his client, but merely to impose economic harm upon Defendant." Id. at 4. This fact, however, is without significance for the simple reason that Plaintiff is under no obligation to name a principal as a co-defendant in a suit against an agent. This is especially true in the present case where the suit is brought under a statute that applies only to the debt collector and not the creditor, the suit is for a relatively small monetary amount, and where the Defendant is a solvent attorney who likely has sufficient assets to cover an adverse judgment. Consequently, a negative inference cannot reasonably be drawn from Plaintiffs failure to name Atlantic Credit as a co-defendant in this case.
Second, Defendant alleges that Plaintiff filed suit without any prior investigation or research as required under FRCP Rule 11. In support, Defendant alleges Plaintiff made no allegation in the complaint that Defendant "regularly engaged" in debt collection, arguing that the FDCPA clearly defines a debt collector as one who regularly engages in the collection of debts. Def's Reply, at 1. Also in support, Defendant cites the fact that Plaintiff did not amend the federal cause of action after receiving Defendant's letter of August 21, 2003, explaining to Plaintiff that Defendant was not a debt collector under the statutory definition. Def's Mem. of PA, at 2. Further in support, Defendant points to the fact that Civil Code § 1788.2(c) of the RFDCPA (the state version of the FDCPA) specifically provides that the term debt collector "does not include an attorney or counselor at law." Def's Reply, at 4, 8.
Defendant's claim that Plaintiff did not allege that Defendant was regularly engaged in the collection of debts is incorrect. Plaintiff alleged that Defendant is "a `debt collector' as that term is defined by 15 U.S.C. § 1692 a(6)." Complaint at ¶ 6. However, it is true that Plaintiff pled no evidence in support of the allegation. Plaintiff believed that through subsequent discovery, it could be shown that Defendant was "regularly engaged" in the collection debts. Id. It is difficult to imagine how Plaintiff could have determined whether Defendant was regularly engaged in debt collection without filing suit. The only two entities that would have such information would be Atlantic Credit and the Defendant.
Defendant's argument that Plaintiffs failure to amend the federal cause of action after receiving Defendant's August 21, 2003 letter supports a finding of bad faith and purposeful harassment is unpersuasive. Plaintiff is under no obligation to accept Defendant's letter as true. As opposing party in a lawsuit, Plaintiff had every right to expect that Defendant would be protective in his statements. Plaintiffs position was that Atlantic Credit was an organization that took advantage of persons in financial difficulties and "engaged in questionable business practices with many unsatisfied clients." Pl's Opposition, at 5. Plaintiffs theory of the case was that when a client was unsatisfied and made a demand for a refund, Defendant then tried to collect the debt allegedly owed to Atlantic Credit. Id. Notably, after Plaintiff received Defendant's 12(b)(6) motion with an attached sworn affidavit by Defendant stating that Defendant was not regularly engaged in the collection of debts, Plaintiff dismissed the suit.
Defendant argues that Plaintiff must not have done any investigation or research in bringing the state cause of action because its very terms exclude attorneys. Plaintiff asserts that § 6077.5 of the California Business and Professions Code removes the exclusion for attorneys under the state statute. Pl's Opp, at 4. Plaintiff is incorrect. Section 6077.5 states in part, "[a]n attorney . . . employed primarily to assist in the collection of a consumer debt owed to another," as defined in the RFDCPA, "shall comply with all of the following: (a) The obligations imposed on debt collectors pursuant to" the RFDCPA. While Defendant is correct that Plaintiff should have brought suit under Section 6077.5 of the California Business and Professional Code and not directly under the RFDCPA, the Court is not overly persuaded that Plaintiff did not conduct any investigation prior to bringing suit or that Plaintiff acted in bad faith and for purposes of harassment. Although Plaintiff brought suit under the wrong statutory section, it does not follow that Plaintiffs suit was brought for an improper purpose. At some point, Defendant could have pointed out Plaintiff's deficiency and Plaintiff could have amended the complaint to state the proper statutory section.
VI. CONCLUSION
While there are certainly inferences that can be made to support Defendant's assertion that Plaintiff acted in bad faith, they are not compelling. More importantly, even if the Court were to accept all of Defendant's arguments as true, the Court would still be unconvinced that Plaintiff acted "for purposes of harassment." Defendant does not provide sufficient evidence of bad faith and purposeful harassment to support an award of attorney's fees. Consequently, Defendant's Motion for Attorney's Fees is DENIED.