On September 20, a United States District judge for the Northern District of California granted defendant United Recovery System’s motion for attorneys’ fees and costs arising from its successful defense of a lawsuit based on alleged violations of the Fair Debt Collection Practices Act and the California Fair Debt Collection Practices Act, also known as the Rosenthal Act. URS sought more than $60,000 in attorneys’ fees and costs under the FDCPA, the Rosenthal Act, and 28 U.S.C. § 1927. Magistrate Judge Maria-Elena James found that attorneys’ fees and costs were warranted against plaintiff Simonett Forto’s counsel under the Rosenthal Act and 28 U.S.C. § 1927, but not the FDCPA. The case is Forto v. Capital One Bank, N.A., et al., 3:14-cv-05611-JD (N.D. Cal.).
Forto brought the FDCPA-based action in December 2014 against URS, now operating as Alltran Financial. The lawsuit arose out of a credit card debt Forto allegedly owed. After the debt became delinquent, it was referred to URS for collection. Forto and URS agreed to set up a settlement agreement with a payment plan, but URS was repeatedly denied access to the account Forto had provided to fund the payments. URS tried to contact Forto numerous times to remedy the payment situation but was unsuccessful. URS then filed a state debt collection action to recover the debt. Forto subsequently filed suit, alleging URS’ repeated attempts to collect the debt after Forto had provided her account information amounted to harassing, oppressive, and abusive conduct in violation of the FDCPA and the Rosenthal Act.
On May 17, 2017, URS filed a motion for summary judgment. The defendants argued that Forto’s failure to pay any amount towards the settlement agreement constituted a breach of the agreement and entitled URS to continue collection activities. Judge James Donato agreed with URS and, in granting the motion, stated that “defendants did nothing that even comes close to an unscrupulous debt collection practice.”
In a strongly worded opinion, Magistrate Judge James condemned plaintiff’s counsel’s pursuit of the action, in which she stated “[t]hat Plaintiff’s counsel nevertheless continued to prosecute Plaintiff’s claims, despite being presented with evidence that her claims were meritless, shows that counsel unreasonably and vexatiously multiplied these proceedings and did so in bad faith. Taken as a whole, the undersigned finds Plaintiff’s counsel’s conduct in this case amounts to harassment.” Judge James based her decision on provisions of the Rosenthal Act, which allow a successful defendant to recover attorneys’ fees and costs from a plaintiff if the court finds the plaintiff brought the lawsuit in bad faith, and 28 U.S.C. § 1927, which allows a party to recover attorneys’ fees if the court determines that opposing counsel’s actions in litigating the matter were done in bad faith or were for the purpose of harassment.
Judge James ordered URS to submit time-keeping records for the Court’s review by October 4 so that the Court could determine the reasonableness of the requested $60,793.20 in costs and fees. Forto is represented by Hyde & Swigart.
The decision is noteworthy because defendants in FDCPA-based actions rarely succeed on motions for attorneys’ fees and costs after mounting a successful defense. While this decision is unlikely to spur an increase in successful motions for fees and costs due to the fact-specific nature of these claims, it does provide potentially valuable precedent for the types of litigation activities and actions that constitute bad faith and harassment.
We will continue to monitor this case and report on further developments.