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Robinson v. The Best Service Co., Inc.

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

April 13, 2017

JEFFERSON ROBINSON, Plaintiff,
v.
THE BEST SERVICE COMPANY, INC., Defendant.

          ORDER DENYING DEFENDANT'S MOTION FOR FINDING OF BAD FAITH AND HARASSMENT AND FOR AWARD OF ATTORNEY FEES Re: Dkt. No. 38

          EDWARD J. DAVILA United States District Judge

         I. INTRODUCTION

         Plaintiff Jefferson Robinson (“Plaintiff”) alleged in this action that Defendants TransUnion, LLC and The Best Service Company, Inc. (“Best”) violated the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681s-2(b), and the California Consumer Credit Reporting Agencies Act (“CCRAA”), California Civil Code § 1785.25(a), by inaccurately reporting credit account information after the confirmation of a bankruptcy reorganization plan. In response to Plaintiff's Complaint, Best moved for dismissal or, in the alternative, for summary judgment. Dkt. No. 18. Plaintiff did not submit argument or evidence in opposition to the motion for summary judgment, and the court denied the motion to dismiss but granted summary judgment to Best on both of Plaintiff's claims. Dkt. No. 35.

         Best contends this action was initiated and maintained and in bad faith, and now moves pursuant to Federal Rule of Civil Procedure 54(d)(2)(A) for an award of attorney's fees. Dkt. No. 38. Plaintiff, unsurprisingly, disagrees and opposes the motion.

         Federal jurisdiction arises pursuant to 28 U.S.C. § 1331. Plaintiff's claims against Best were, if anything, misguided and poorly researched, and the performance of Plaintiff's counsel was less than ideal. That said, the court cannot find on this record that either Plaintiff or his attorneys engaged in sanctionable conduct. And though Plaintiff's counsel should not be comforted that this determination somehow vindicates the decision to pursue this and hundreds of other similar cases based on oftentimes questionable factual allegations and legal theories, Best's motion will be denied for the reasons explained below.

         II. DISCUSSION

         Best cites three legal bases for its request for fees: (1) 15 U.S.C. § 1681n(c) of the FCRA; (2) the “bad faith” exception to the American Rule against attorney's fees; and (3) Federal Rule of Civil Procedure 11. Each basis is discussed in turn.

         A. 15 U.S.C. § 1681n(c)

         Section 1681n(c) of the FCRA provides:

Upon a finding by the court that an unsuccessful pleading, motion, or other paper filed in connection with an action under this section was filed in bad faith or for purposes of harassment, the court shall award to the prevailing party attorney's fees reasonable in relation to the work expended in responding to the pleading, motion, or other paper.

         District courts have construed the term “bad faith” in the context of § 1681n(c) to require “either that the party subjectively acted . . . knowing that he had no viable claim - or that he filed an action or paper that was frivolous, unreasonable, or without foundation.” Ryan v. Trans Union Corp., No. 99 C 216, 2001 U.S. Dist. LEXIS 1239, at *15, 2001 WL 185182 (N.D. Ill. Feb. 26, 2001). Additionally, “[t]he statute requires a showing that a document was filed in bad faith;” it does not “impose an obligation to withdraw or revise a pleading or motion that later turned out to be baseless.” Id. at *17 (emphasis preserved); Smith v. HM Wallace. Inc., No. 08-22372-CIV, 2009 U.S. Dist. LEXIS 125885, at *5, 2009 WL 3179539 (S.D. Fla. Sept. 9, 2009).

         District courts have also held that § 1681n(c) “does not authorize the imposition of attorneys' fees on a party's counsel, ” but only on the plaintiff himself or herself. Smith, 2009 U.S. Dist. LEXIS 125885, at *5; accord Lewis v. Trans Union LLC, No. 04 C 6550, 2006 U.S. Dist. LEXIS 76242, at *7, 2006 WL 2861059 (N.D. Ill. Sept. 29, 2006); Arutyunyan v. Cavalry Portfolio Servs., No. CV 12-4122 PSG (AJWx), 2013 U.S. Dist. LEXIS 29901, at *5, 2013 WL 500452 (C.D. Cal. Feb. 11, 2013). Consequently, the scope of the § 1681n(c) inquiry is properly limited to an examination of Plaintiff's conduct, rather than conduct attributed to his counsel. See Lewis, 2006 U.S. Dist. LEXIS 76242, at *8-9; see also Arutyunyan, 2013 U.S. Dist. LEXIS 29901, at *6.

         Here, Best argues that Plaintiff knew or should have known he could not prove a FCRA or CCRAA claim against Best because it did not receive notice of Plaintiff's dispute, as required by 15 U.S.C. § 1681s-2(b) and California Civil Code § 1785.25. Although Best ultimately prevailed in this action based on that contention, it has not explained exactly how Plaintiff knew or could have known of the notice defect at the time he filed the Complaint. Plaintiff alleged that he notified the credit reporting agencies (“CRAs”) of the disputed information on his credit report. The notification triggered the CRAs' duties under 15 U.S.C. § 1681i(a)(2), requiring them - not Plaintiff - to then notify the furnishers of the dispute. Notably, Plaintiff did not allege any personal contact with Best or any of the other furnishers of credit information, and could not have otherwise known that Best did not receive notice of his dispute from the CRAs without undertaking discovery on the topic or, as eventually occurred here, receiving a communication from Best. Though Plaintiff could have made a pre-filing demand and potentially learned of the notice deficiency sooner, or could have voluntary withdrawn his claims after receiving information from Best's counsel, neither action is required to avoid a sanction under § 1681n(c). Under these circumstances, the court cannot find that Plaintiff filed the Complaint knowing that he had no viable claim against Best.

         Best also argues that Plaintiff's counsel acted recklessly by pursuing this case, relying on Thomas v. Tenneco Packaging Co., Inc., 293 F.3d 1306 (11th Cir. 2002). That case - involving sanctions imposed pursuant to the court's inherent power - is factually distinguishable and its legal standard inapposite in this particular instance. As ...


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