The opinion of the court was delivered by: Larson, United States Magistrate Judge.
ORDER DENYING MOTION TO ADD THIRD-PARTY DEFENDANTS
Defendants' Motion to Add Third-Party Defendants was heard on November
17, 1999. Mark Ellis and June Coleman appeared for Defendants. Paul Arons
and Lorraine Baur appeared for Plaintiffs. After oral argument, the Court
took the matter under submission.
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiffs Kathleen R. Irwin, Nancy Heth, and Lorraine L. Castaneda
filed suit on December 31, 1997, for damages and injunctive relief in
this action against defendants Owen T. Mascott, Commonwealth Equity
Adjustments, Inc. ("CEA"), and Eric W. Browning, for alleged violations
of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq.
["FDCPA"], and the California Unfair Business Practices Act, Cal.
Business & Professions Code §§ 17200, et seq. ("CUBPA").
Plaintiffs alleged that CEA, and its executive director Browning,
through its then attorney, Owen Mascott, violated the FDCPA and CUBPA
through written communications to debtors which:
1) contained impermissible threats of future
2) sought add-on charges and damages which CEA (and
its attorneys) were not entitled to collect under
California law; and
3) often contained draft lawsuits, which Mascott had
no intention of filing, as a deceptive practice in an
attempt to extort extra charges from debtors.
(Complaint, ¶¶ 36-43, 51-61).
The class was certified on March 24, 1999. Irwin v. Mascott, 186
F.R.D. 567 (N.D.Cal. 1999).
CEA and its president, Eric Browning,*fn1 move for this Court's
permission to serve a third-party complaint on Homan and Lobb, and its
successor, Homan and Stone ("Homan firms"), CEA's former law firms.
Mascott was CEA's general counsel up to the time of the filing of the
lawsuit. The Homan firms took over in 1998 and 1999. CEA claims that
certification of the plaintiff class extended CEA's potential liability
through the present, into the time period when its collection advice was
provided by the Homan firms. Plaintiffs included these firms in the class
notice, despite CEA's objection that they were not named defendants in
the action and should not appear on the notice absent amendment of the
Between July and mid-September, 1999, CEA decided that it had no choice
but to file a third-party action against the law firms that had acted as
its counsel after the lawsuit was filed. Its basis for doing so is that:
1) these firms advised CEA whether its collection
program was in compliance with state and federal law;
2) CEA is being held vicariously liable for the
allegedly wrongful acts of its collections attorneys,
including the written collection communications from
the Homan firms.
CEA believes that the liability, if any, of the Homan firms is
"inextricably intertwined" with the liability, if any, of CEA to
CEA seeks to implead the Homan firms in the interest of judicial
economy. It denies any prejudice to Plaintiffs, saying in fact that the
Homan firms' insurance will enlarge the potential pool for Plaintiffs'
recovery. CEA denies any undue delay, citing the class certification as
its first notice that it could be liable for collection activities
occurring after the filing of the lawsuit.
Plaintiffs object, claiming delay and prejudice, with the addition of
parties setting up a potential conflict of interest of existing CEA
counsel, addition of new counsel who will need time to be brought up to
speed, re-taking of discovery, and refiling of motions. Plaintiffs observe
that the Homan firms are themselves the defendants in other lawsuits and
that their insurance is probably nearly exhausted by now. Plaintiffs
minimize the participation of the Homan firms in the alleged violations
of the FDCPA and CUBPA, claiming that they only continued to use
Mascott's boilerplate collection letters and lawsuit templates, merely
changing the names on the stationery.
Plaintiffs contend that this Court could legitimately find that the
impleader by defendants of the Homan firms would transplant a legal
malpractice case into this consumer protection case. The legal facts and
issues in the malpractice case would be quite separate and not necessary
at all to the plaintiffs' case. Since the FDCPA is a strict liability
statute, no showing of intent is necessary to establish liability,*fn2
and there is no advice of counsel defense. Defendants have also asserted
this defense to the CUBPA claims, despite the fact that lack of intent is
not available as a defense to liability for violations of CUBPA, premised
on violation of FDCPA.
Defendants rely on Judge Williams' decision in Banks v. City of
Emeryville, 109 F.R.D. 535 (N.D.Cal. 1985). In that case, a jail inmate
died when her mattress caught fire. Her family sued the City and the
police chief, who moved to implead the mattress manufacturer for indemnity
or contribution. The court denied impleader of third-party defendants as
part of the plaintiff's § 1983 claim, but permitted it on an ancillary
state law claim for negligence or comparative fault. The court in effect
said that the third-party plaintiffs could recover from the third-party
defendants only for the state law claims. In the Banks case, presumably
these claims included wrongful death, a substantial ...