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Loren Scott v. Kelkris Associates

March 28, 2012



Plaintiff Loren Scott brought this action against defendant Kelkris Associates, Inc., dba Credit Bureau Associates arising out of defendant's allegedly improper service of plaintiff in a debt collection action. Presently before the court is defendant's motion for attorney's fees.

I. Factual and Procedural Background

Defendant was assigned a debt that plaintiff allegedly owed to Travis Credit Union. After failing to collect the debt from plaintiff voluntarily, defendant initiated a debt collection suit against plaintiff in the Superior Court of California for Sacramento County on January 23, 2009. (Compl. ¶ 6, Ex. B.)

Through a licensed process server, defendant unsuccessfully attempted to effectuate substitute service on the plaintiff by leaving a copy of the summons and lawsuit with plaintiff's father at a house that defendant incorrectly believed to be plaintiff's residence and by mailing copies of the same to the residence. (Steinheimer Decl. ¶¶ 7-9 (Docket No. 28).) A default judgment was entered against plaintiff in the debt collection action. (Compl. ¶ 8.)

The first that plaintiff learned of the suit filed against him was when he received a letter notifying him of an Earning Withholding Order. After learning of the lawsuit and the default judgment against him, plaintiff contested the default judgment, which the Superior Court vacated "on the ground of inadvertence and excusable neglect." (Friedman Decl. Ex. A (Docket No. 18).)

Plaintiff brought suit against defendant alleging violations of §§ 1692b(1)-(2), 1692c(b), 1692d, 1692e, 1692e(10), and 1692f of the federal Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq., and §§ 1788.12(b) and 1788.14(a) of the California Rosenthal Fair Debt Collection Practices Act ("Rosenthal Act"), Cal. Civ. Code § 1788 et seq. (Docket No. 1.)

Defendant then brought a special motion to strike plaintiff's state law claims under California's anti-Strategic Lawsuits Against Public Participation ("anti-SLAPP") statute, Cal. Civ. Proc. Code § 425.16. (Docket No. 8.) The motion was granted only as to plaintiff's claim for invasion of privacy, eliminating the possibility that plaintiff could recover punitive damages. (Oct. 29, 2010, Order (Docket No. 13).) After the court issued its order on defendant's anti-SLAPP motion, defendant's counsel sent plaintiff's counsel an email requesting attorney's fees, but did not file a motion. (Shaw Decl. ¶¶ 5-8, Ex. A (Docket No. 29).) Plaintiff's counsel objected to the request, contending that because the invasion of privacy claim was not "the crux" of plaintiff's lawsuit and plaintiff would not have ultimately sought to recover the punitive damages requested in the complaint, defendant was not a "prevailing defendant" on its anti-SLAPP motion. (Id. ¶¶ 3-7, Ex. A.)

During discovery, plaintiff served one set of what defendant characterizes as "boilerplate discovery" and did not take any depositions. (Steinheimer Decl. ¶ 3.) Plaintiff identified only one witness who supported his claims, his father Lewis Scott. (Id. ¶ 4.) Shortly before defendant had requested that he be deposed, Lewis Scott suffered a stroke that rendered him unable to attend the deposition. (Friedman Decl. ¶ 11 (Docket No. 29); Scott Decl. ¶ 12.) The deposition was rescheduled after he had recovered, but he failed to appear at the deposition. (Friedman Decl. ¶ 11; Scott Decl. ¶¶ 9-12.) Lewis Scott did not respond to calls from plaintiff or plaintiff's counsel when they attempted to find out why he had not appeared at the deposition as he had indicated he would. (Friedman Decl. ¶ 11; Scott Decl. ¶¶ 9-12.)

At the close of discovery, defendant moved for summary judgment on all of plaintiff's remaining claims. (Docket No. 17.) The only evidence plaintiff produced were declarations filed by himself and his father, which were similar to declarations filed in the state court debt collection action. (Steinheimer Decl. ¶ 5.) The court found that there were no disputed material facts and that plaintiff had failed to produce evidence sufficient to support his allegations that defendant had violated the FDCPA and the Rosenthal Act. (Mar. 23, 2012, Am. Order at 8-17 (Docket No. 32).) Accordingly, the court granted defendant's motion for summary judgment as to all remaining claims.

Defendant now moves for reasonable attorney's fees in the amount of $24,929.29 pursuant to 15 U.S.C. § 1692k(a)(3) and California Civil Code section 1788.30(c), or for reasonable attorney's fees in the amount of $8,459.00 pursuant to California Code of Civil Procedure section 425.16(c) as the prevailing defendant on its special motion to strike.

II. Discussion

A. Attorney's Fees Pursuant to the FDCPA and the Rosenthal Act Both the FDCPA and the Rosenthal Act contain fee- shifting provisions. Under § 1692k(a)(3) of the FDCPA, "[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." 15 U.S.C. § 1692k(a)(3). To recover under this statute, there must be "evidence that the plaintiff knew that his claim was meritless and that plaintiff pursued his claims with the purpose of harassing the defendant."

Gorman v. Wolpoff & Abramson, LLP, 435 F. Supp. 2d 1004, 1013 (N.D. Cal. 2006), rev'd on other grounds, 584 F.3d 1147 (9th Cir. 2009). At a minimum, "minimally colorable" claims are not considered bad faith, Guerrero v. RJM Acquisitions LLC, 499 F.3d 926, 940 (9th Cir. 2007), and to show bad faith, a defendant must show more than mere frivilousness, Krapf v. Nationwide Credit Inc., No. SACV 09-00711, 2010 WL 2025323, at *5 (C.D. Cal. May 21, 2010).

The Rosenthal Act, in turn, provides that "reasonable attorney's fees may be awarded to a prevailing creditor upon a finding by the court that the debtor's prosecution or defense of the action was not in good faith." Cal. Civ. Code § 1788.30(c). Both statutes, therefore, limit a defendant's ability to recover attorney's fees to instances where the plaintiff has acted in bad faith in bringing his or her action. Roybal v. Trans Union, No. Civ. 2:05-01207, 2009 WL 394290, at *1 (E.D. Cal. Feb. 17, 2009).

Defendant argues that plaintiff's bad faith in bringing this action is demonstrated by the fact that plaintiff's claims lacked merit and a factual or legal basis. It notes that plaintiff produced only limited evidence in opposition to defendant's motion for summary judgment and that defendant was successful in obtaining summary judgment on all of plaintiff's claims under the FDCPA and the Rosenthal Act. It is true that the court ultimately determined that plaintiff had not demonstrated a triable issue of material fact as to his FDCPA and Rosenthal Act claims. While it might be fair to characterize plaintiff's claims as frivolous or barely colorable, there is no proof that plaintiff knew his claim was meritless, Gorman, 435 F. Supp. 2d at 1013, or other evidence to support a finding of bad faith.

It cannot be the law that any time a plaintiff loses on summary judgment, he has acted in bad faith. See id. at 1012-13 (granting defendant's motion for summary judgment on FDCPA claims, but declining to find bad faith); Walsh v. Frederick J. Hanna & Assocs., No. Civ. 2:10-2720, 2011 WL 537854, at *1 (E.D. Cal. Feb. 15, 2011) (finding no bad faith where plaintiff's FDCPA and Rosenthal Act claims were dismissed with prejudice). Defendant has not made the extra showing of bad faith. Accordingly, ...

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