Last week a federal judge in California issued an order in a Fair Debt Collection Practices Act (FDCPA) suit granting a defendant the right to recover fees and costs incurred in defending a case the court found “from the beginning, lacked a factual basis.” The case is Forto v. Capital One Bank National Association, et al. (Case No. 14-cv-05611, U.S.D.C. Northern District of California).

A copy of the court’s order on Motion for Attorney’s Fees can be found here

Background 

Plaintiff opened a credit card account with defendant Capital One Bank (U.S.A.), N.A. (Capital One). She stopped making payments on the account, and it became delinquent. Capital One retained defendant United Recovery Systems, LP, (now known as Alltran Financial) (URS), to collect the debt. 

In October 2013, plaintiff owed $2,940.83 on the debt; she negotiated an agreement with URS by which she would pay $1,911.54 in monthly installments over a period of 36 months. Plaintiff provided URS with her checking account and bank routing numbers so URS could automatically withdraw the monthly installments from her checking account. A URS representative informed plaintiff that URS would send a reminder or confirmation letter five to ten days prior to withdrawing the funds. 

URS was unsuccessful in withdrawing any of the agreed-upon monthly payments, as plaintiff’s credit union rejected URS's payment requests with error codes such as “no account.” On January 3, 2014, the URS representative who negotiated the agreement called plaintiff to address the problem. Plaintiff cut the conversation short and said, “I’m not talking to you, don’t call me.” URS unsuccessfully attempted to reach plaintiff over 20 times between January 3, 2014 and March 13, 2014. 

On December 23, 2014, plaintiff sued defendants in United States District Court, asserting two claims under (1) the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq., against URS; and (2) the Rosenthal Fair Debt Collection Practices Act (Rosenthal Act), Cal. Civ. Code §§ 1788-1788.32, against both defendants. Plaintiff alleged she fulfilled her obligations on the debt by providing defendants with access to her checking account, yet defendants' subsequent efforts to collect the funds violated the FDCPA and the Rosenthal Act. Plaintiff did not repay any portion of her debt. 

Both Defendants filed motions for Summary Judgment.

Editor’s NoteA motion for summary judgment is based upon a claim by one party (or, in some cases, both parties) that contends that all necessary factual issues are settled or so one-sided they need not be tried. The summary judgment is appropriate when the court determines there no factual issues remaining to be tried, and therefore a cause of action or all causes of action in a complaint can be decided upon certain facts without trial. 

On March 20, 2017, the honorable James Donato granted Summary Judgment in favor of defendants on both claims, finding “defendants did nothing that even comes close to an unscrupulous debt collection practice.” 

On the contrary, Judge Donato found "defendants' conduct was reasonable, fair and consistent with legal collection practices.”  Judge Donato rejected plaintiff’s argument that she upheld her side of the agreement simply by providing URS with a checking account number, writing, “For Forto to say now that her side of the deal was merely to give URS an account number and then wish it well, flies in the face of the express terms she agreed to.” Judge Donato further found plaintiff “fail[ed] to show any genuine dispute of material fact [regarding the parties' agreement], and her subjective (and self-serving) interpretations of the agreement d[id] not amount to a relevant consideration.” 

The defendants subsequently filed Motions for Attorney’s Fees and Costs, seeking a total of $80,168.20: $61,418.20 for URS and $18,750 for Capital One. Capital One withdrew its request for $18,750. The URS request remained pending. 

The Court’s Decision

The decision was written by the Honorable Maria-Elena James, United States Magistrate Judge. 

Judge James wrote: 

While nothing in the record indicates Plaintiff intended to harass URS, the same cannot be said about her counsel. There is evidence that Plaintiff’s counsel has unreasonably and vexatiously multiplied the proceedings. 

In sum, the record shows that for nearly three years, Plaintiff’s counsel’s conduct has forced URS to waste time and resources defending an action that, from the beginning, lacked a factual basis. That Plaintiff’s counsel nevertheless continued to prosecute Plaintiff’s claims, despite being presented with evidence that her claims were meritless, shows that counsel unreasonably and vexatiously multiplied these proceedings and did so in bad faith. Taken as a whole, the undersigned finds Plaintiff’s counsel’s conduct in this case amounts to harassment. 

Accordingly, URS is entitled to attorneys' fees from Plaintiff’s counsel. 

The judge did not order a specific amount of attorney’s fees at this time. She ordered URS to “file in the public docket time keeping records that show the number of hours counsel worked on this litigation with sufficient descriptions to allow the undersigned to evaluate the reasonableness of the hours.” 

Plaintiff’s attorneys will have the right to respond to the materials filed.

insideARM Perspective 

The initial insideARM reaction to this story is a single word: Wow! This is one of the more strongly worded opinions we have seen chastising any law firm for pursing this type of case. 

It will be interesting to see how much of the requested $61,418.20 in attorney’s fees and costs will be ultimately awarded.


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