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Long v. Nationwide Legal File & Serve, Inc.

United States District Court, N.D. California, San Jose Division

July 23, 2014

NATIONWIDE LEGAL FILE & SERVE, INC., a California Corporation; NATIONWIDE LEGAL, LLC, a Delaware limited liability company; CEASAR ERIC RAILEY, individually and in his official capacity; and DOES 1 through 10, inclusive, Defendants.


LUCY H. KOH, District Judge.

Before the Court is Plaintiffs Grady Vernon Long's, Ismail Isa's, and Warren Jeremiah Spies' (collectively, "Plaintiffs") Motion for Attorney's Fees and Costs following an action brought under the federal Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § § 1692 et seq. ECF No. 90. Plaintiff's counsel is Fred Schwinn and Raeon Roulston of Consumer Law Center, Inc, as well as the Center's law clerk, Matthew Salmonsen. Id. at 5. Pursuant to Civil Local Rule 7-1(b), the Court finds this matter appropriate for determination without oral argument. Accordingly, the hearing set for July 24, 2014, at 1:30 p.m. is VACATED. For the reasons discussed below, the Court hereby GRANTS IN PART AND DENIES IN PART Plaintiffs' Motion.


A. Facts

This case arose out of Plaintiffs' allegations that Defendants engaged in "sewer service, " a practice whereby a proof of service is filed in court stating that a party has been served when in reality no service has occurred. As a result of the falsified proof of service, default and default judgment are entered against the unaware party. Plaintiffs alleged that each of them was a victim of Defendants' "sewer service." Plaintiffs were each alleged debtors against whom the law firm Nelson & Kennard filed debt collection actions on behalf of various clients. See ECF No. 1 ("Compl.") Exs. 1, 2, 3. In each case, Nelson & Kennard used the services of Defendant Nationwide Legal File & Serve, Inc. ("NLFS") to serve process on Plaintiffs. See Compl. Exs. 1, 2, 3. NLFS, in turn, allegedly relied on the services of Railey, a registered process server, to serve Plaintiffs. ECF No. 52-2 (NLFS's Resp. to Pl. First Set of Interr.) at 10-11; Compl. Exs. 1, 2, 3.

Nelson & Kennard filed a debt collection action against Plaintiff Long for consumer debt originating from an HSBC credit card. ECF No. 50-1 (Long Decl.) ¶¶ 4-5; Kennard Decl. ¶¶ 2, 3. On July 11, 2011, Railey completed and signed a proof of service of summons attesting that he had personally served Long. ECF No. 50-8. Long stated he never received service, personally or otherwise. Long Decl. ¶ 6. Because Long had no notice of the action and thus failed to appear, default judgment was entered against him. Id. ¶ 5. Long only found out about the existence of the action against him through a lien notice received in November 2011. Id. Judge Barbara Kronlund, sitting in the San Joaquin County Superior Court, issued a tentative ruling setting aside Long's default and default judgment and noting that evidence supported Long's statement that he had not been served. ECF No. 50-9.

On July 20, 2011, Railey completed and signed a proof of service of summons attesting that he had personally served Plaintiff Isa. ECF No. 50-10. The proof of service described Isa as "Black, Male, 35 Years Old, Black Hair, Brown Eyes, 5 Feet 9 Inches, 180 Pounds." Id. According to the copy of the driver's license that Isa submitted, Isa was 68 years old at the time of service and is East Indian. ECF No. 50-2 (Isa Decl.) Ex. A; Isa Decl. ¶ 8. Isa also stated he had not lived at the address Railey noted on the proof of service for almost a year at the time of service. Isa Decl. ¶ 7. After Isa learned of the default judgment entered against him through an earnings withholding order, Isa retained an attorney and successfully challenged the proof of service. Isa Decl. ¶¶ 5, 10. Isa's default judgment was set aside. Isa Decl. ¶ 10.

On August 1, 2011, Railey completed and signed a proof of service of summons attesting that he successfully served Plaintiff Spies by substitute service. ECF No. 50-11. According to Spies, Spies never received service because since November 2010 Spies had not lived at the address referenced on Railey's completed proof of service document. ECF No. 50-4 (Spies Decl.) ¶¶ 8, 9. Spies stated that to the best of his knowledge, no one was living at the address where Railey purportedly served Spies at the time that Railey documented serving Spies. Id. ¶ 9. Spies first learned of the default judgment entered against him when an employee of Nelson & Kennard wrote him a letter stating that the firm had obtained a judgment against him. Id. ¶ 5.

Defendant NLFS is a California corporation that provides court filing and service of process services. ECF No. 55 (Godshall Decl.) ¶ 25-27. NLFS clients include law firms specializing in consumer debt collection. Id. NLFS hires registered process servers as independent contractors, and entrusts them with serving process in accordance with the specifications of NLFS's clients. Id. ¶¶ 28, 37. NLFS's clients supply instructions, the summons, the defendant's address, and the complaint. Id. ¶ 37. NLFS files the lawsuit and uses its contracted process servers to attempt to serve process in accordance with the client's instructions. Id.

Defendant Nationwide Legal, LLC ("Nationwide Legal") provides law firms with "attorney support services" including filing legal documents, service of process, messenger services, and assistance in document production. ECF No. 54 (Ektefaie Decl.) ¶ 9.

At the summary judgment stage of this litigation, Nationwide and NLFS argued they operate separately. Ektefaie Decl. ¶¶ 24-38; Godshall Decl. ¶¶ 7-24. They cited evidence that the entities pay separate rent for separate office space, maintain separate records for accounting, have separate insurance, and have separate employees. Godshall Decl. ¶¶ 11-14. The funds and incomes of the two businesses have never been commingled. Id. ¶¶ 14-15. Nationwide and NLFS do not share clients. Id. ¶ 10. The entities do have some ties. For example, Davoodi and Ekhaven, who co-own Nationwide, are founders with Godshall of NLFS. Godshall Decl. ¶ 6; Ektefaie Decl. ¶ 8, 23. Nationwide's general manager and chief administrative officer, Mehdi Ektefaie, serves as an officer with NLFS, advises NLFS management, assists with NLFS human resources decisions, and assisted with the licensure process for NLFS. Ektefaie Decl. ¶¶ 35-37. Ektefaei has never been on payroll at NLFS. Id. ¶ 35. Nationwide and NLFS at times share legal advice regarding service of process or human resources, and the companies pay the resulting bills in proportion to the services rendered. Id. ¶ 34. The businesses share an address, though they do not share office space. Id. ¶ 26.

In February 2011, Railey signed an independent contractor agreement with Nationwide. Ektefaie Decl. Ex. 7. Railey also was a process server for NLFS, serving in an independent contractor capacity. ECF No. 7 (Answer) at 13 ¶ 7; ECF No. 64 (Godshall Opp. Decl.) ¶ 35. Railey's assignments at NLFS included service on Plaintiffs Long, Isa, and Spies. Godshall Decl. ¶ 63; Compl. Exs. 1, 2, 3.

Based on these facts, Plaintiffs brought their complaint against NFLS, Nationwide Legal, and Railey, seeking relief under the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692 et seq.; the Rosenthal Fair Debt Collection Practices Act ("RFDCPA"), Cal. Civil Code § 1788 et seq; and California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code § 17200. Compl. ¶¶ 90-133.

B. Procedural History

On July 9, 2012, Plaintiffs filed a complaint against Railey, Nationwide Legal, and NLFS. ECF No. 1. On August 15, 2012, NLFS and Nationwide Legal filed their answer. ECF No. 7. On December 6, 2012, the Court entered default against Railey. ECF No. 21. Plaintiffs did not file a motion seeking entry of default judgment afterwards, but simply voluntarily dismissed Railey on October 15, 2013. ECF No. 86.

On July 25, 2013, Plaintiffs filed a motion for summary judgment, to which Defendants filed an opposition, and Plaintiffs filed a reply. ECF Nos. 50, 62-65, 68, and 69. On July 26, 2013, Defendants filed a motion for summary judgment, to which Plaintiffs filed an opposition, and Defendants filed a reply. ECF Nos. 53-56, 67, and 71-74. On September 17, 2013, the Court granted in part and denied in part Plaintiffs' and Defendants' motions. ECF No. 79. The Court granted Defendants' motion with respect to Nationwide Legal's liability "[b]ecause Plaintiffs have not raised a triable issue of fact that Nationwide is directly liable for the actions of Railey or that Nationwide is an alter ego or joint venturer of NLFS, " but denied the motion with respect to NFLS's arguments concerning whether it could be held vicariously liable for Railey's conduct, and the bona fide error defense. Id. at 12, 15, 17. The Court granted Plaintiffs' motion as to NLFS's bona fide error defense and as to whether Plaintiffs are "consumers" obligated to pay personal debt under the FDCPA. Id. at 23. The Court denied Plaintiffs' summary judgment motion in all other respects.

On September 26, 2013, Plaintiffs filed a notice of acceptance of an offer of judgment by NFLS pursuant to Federal Rule of Civil Procedure 68. ECF No. 81. Specifically, NLFS offered to allow judgment against it in favor of Plaintiffs in the amount of statutory damages totaling $6, 000.00. See id., Ex. 1 at 2. The offer stated, "Plaintiffs will also be awarded their court costs (including reasonable attorney's fees, as determined by the Court as provided by 15 U.S.C. §1692k), those costs and reasonable attorney's fees incurred to the date of this Offer of judgment." Id. On October 15, 2013, the Court entered judgment in favor of Plaintiffs and against NLFS. ECF No. 87. On October 21, 2013, the Court also entered judgment in favor of Nationwide Legal. ECF No. 89.

On October 29, 2013, Plaintiffs filed their Motion for Attorney's Fees and Costs and supporting declarations against NLFS. ECF No. 90 ("Mot."). On November 12, 2013, NLFS filed its Opposition and supporting declarations. ECF Nos. 93-95. On November 22, 2013, NFLS filed a "supplemental memorandum as to costs." ECF No. 99 ("Supp. Memo."). On December 10, 2013, Plaintiffs filed a reply. ECF No. 100 ("Reply").


The Fair Debt Collection Practices Act ("FDCPA") directs a court to award attorney's fees to a prevailing consumer against the liable debt collector. 15 U.S.C. § 1692k(a)(3). The Ninth Circuit has held that "the FDCPA's statutory language makes an award of fees mandatory." Camacho v. Bridgeport Fin., Inc., 523 F.3d 973, 978 (9th Cir. 2008) (citation omitted). Courts in the Ninth Circuit calculate an award of attorney's fees under the FDCPA using the lodestar method, whereby a court multiplies "the number of hours the prevailing party reasonably expended on the litigation by a reasonable hourly rate." Id. "Although in most cases, the lodestar figure is presumptively a reasonable fee award, the district court may, if circumstances warrant, adjust the lodestar to account for other factors which are not subsumed within it." Ferland v. Conrad Credit Corp., 244 F.3d 1145, 1149 n.4 (9th Cir. 2001).

A party seeking attorney's fees bears the burden of demonstrating that the rates requested are "in line with the prevailing market rate of the relevant community." Carson v. Billings Police Dep't, 470 F.3d 889, 891 (9th Cir.2006) (internal quotation marks omitted). Generally, "the relevant community is the forum in which the district court sits." Camacho, 523 F.3d at 979 (citing Barjon v. Dalton, 132 F.3d 496, 500 (9th Cir. 1997)). Typically, "[a]ffidavits of the plaintiffs' attorney and other attorneys regarding prevailing fees in the community and rate determinations in other ...

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