Substantial Sanctions Awarded to Debt Collectors in Recent FDCPA Case

Note: Moss & Barnett associate Issa Moe also contributed to this article.

John Rossman

Has your company ever matched up against an attorney who files boilerplate complaints, does not participate in the litigation process and then refuses to lay down the sword despite being informed that his or her arguments are likely baseless?  If your company has been involved in such a case, you know the frustration with feeling that the normal rules of litigation do not seem to apply.

In one recent case, two debt collectors chose to take a principled stand and fight against apparent vexatious tactics.  The Court agreed with the debt collectors in that recent case and awarded them more than $13,000 in total sanctions against a consumer attorney.

Debt Collectors Face Dozens of “Boilerplate” FDCPA Lawsuits in California

Over the past 12 months, consumers filed a wave of nearly identical lawsuits in California against debt collectors. The complaints in those cases were boilerplate, containing virtually identical claims and allegations related to credit reporting activity. According to the generic complaints, the plaintiffs would review their credit reports, and then bring suit against a laundry list of creditors, debt buyers and debt collectors identified in those reports.

The California Courts dismissed a number of these lawsuits for failure to comply with local rules, failure to meet and confer about discovery, failure to attend hearings and failure to respond to court orders. The Courts also dismissed a number of the lawsuits for failure to state a claim.

Moss & Barnett Secures Sanctions On Behalf Of Its Clients

On May 11, 2012, a consumer filed one of the “boilerplate lawsuits” against several debt collectors asserting claims under the Fair Debt Collection Practices Act (FDCPA), the Fair Credit Reporting Act (FCRA), and related state laws. The Plaintiff supported her claims by alleging that the defendants obtained and reviewed her credit report without a permissible purpose.  The Plaintiff served some of the Defendants, but otherwise failed to participate in the case.  The Court dismissed the case for failure to prosecute on October 29, 2012.

Following the dismissal, attorney Issa K. Moe of Moss & Barnett, P.A. filed motions seeking an award of fees and costs in favor of two debt collector Defendants in the case.  The Court noted that the debt collectors’ unopposed assertions in support of their motions for sanctions stated:

…the claims in Plaintiff’s Complaint were baseless and were neither supported by law nor fact; the Complaint was a form complaint that does not satisfy the minimum pleading requirements; [Plaintiff's counsel] failed to investigate whether facts exist that would enable him to include allegations to satisfy those pleading requirements; and [Plaintiff's counsel] has demonstrated little interest in prosecuting this case by, inter alia, failing to serve Defendants with a Complaint until 150 days after commencing this case.

The debt collectors sought their fees and costs pursuant to either the Court’s inherent power to sanction bad faith litigants, the fee shifting provisions of the FDCPA and FCRA, or the Court’s power to sanction vexatious litigators under 28 U.S.C. § 1927.  Read a full discussion of sanctions available in FDCPA cases.

The Court Awards Fees And Costs Under 28 U.S.C. § 1927

The Court considered the debt collectors’ motions for fees and costs in two separate opinions that were subsequently published by Westlaw at 2013 WL 500480 (C.D. Cal. Feb. 11, 2013) and 2013 WL 500452 (C.D. Cal. Feb. 11, 2013).

In these reported opinions, the Court declined to grant fees directly against the Plaintiff under the FCRA or the FDCPA.  However, the Court awarded the debt collectors’ fees and costs totaling $13,278.50 against the Plaintiffs’ counsel as a sanction pursuant to 28 U.S.C. § 1927.  That statute provides that “[a]ny attorney…who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.”

Conclusion

Sanctions are not appropriate in all cases and in reality are rarely granted.  However, when a collection agency is faced with apparent vexatious tactics, thoughtful consideration can be given to seeking sanctions if all other avenues for relief are unsuccessful.

This publication is provided only as a general discussion of legal principles and ideas. Every situation is unique and must be reviewed by a licensed attorney to determine the appropriate application of the law to any particular fact scenario. If you have a legal question, consult with an attorney. The reader of this publication will not rely upon anything herein as legal advice and will not substitute anything contained herein for obtaining legal advice from an attorney. No attorney-client relationship is formed by the publication or reading of this document. Moss & Barnett, A Professional Association, assumes no liability for typographical or other errors contained herein or for changes in the law affecting anything discussed herein.