Yesterday in a Fair Debt Collection Practices Act (FDCPA) case, a federal judge in California denied a plaintiff’s motion for reconsideration of the court’s prior decision and granted a defendant’s motion for sanctions for having to respond to the request for reconsideration. The case is Shepard-Hall v. Gordon and Wong Law Group PC (Case No 2:16-cv-1361, U.S.D.C., Eastern District of California).
This case highlights the cost to defend frivolous FDCPA cases and the difficulty in obtaining sanctions to fully compensate for the expense.
A copy of the court’s Memorandum and Order can be found here.
Asset Acceptance, LLC (not a party to the action) retained defendant Gordon & Wong Law Group PC (G&W) to enforce a state court judgment entered against plaintiff Shepard-Hall for the balance on a Dell Financial Services account. On February 23, 2016, G&W filed a writ of execution to garnish plaintiff’s wages, which was served on plaintiff’s employer by the Sacramento County Sheriff’s Office. On April 8, 2016, the parties agreed by phone to settle the debt for a single payment of $3,000. Plaintiff was represented by the Price Law Group, APC, (“PLG”) during these negotiations.
On April 15, 2016, G&W faxed a letter to PLG reflecting the settlement terms. PLG then called G&W, informing them that plaintiff’s wages had been garnished by $834.09 that morning, and the parties agreed to reduce the $3,000 settlement by the amount garnished. Four days later, G&W sent a new settlement letter to PLG, reflecting the new terms, and also faxed a notice to the Sacramento County Sheriff’s Office to terminate the garnishment effective immediately.
On that same day—that is, four days after the new agreement was reached—plaintiff sent G&W a signed copy of the original settlement agreement and the full $3,000, not deducting the amount garnished as specified in the new agreement.
On April 29, 2016, as a result of an error by the Sheriff’s Office (emphasis added by insideARM), plaintiff’s wages were garnished again, even though the Sheriff’s Office had been notified of the garnishment’s termination. Because the garnishments resulted in overpayment, G&W voided the check it had received from the first garnishment, and instructed the Sheriff’s Office to return the second garnishment to Plaintiff, which it did.
On May 5, 2016, G&W received a letter from PLG demanding $4,000 in order to avoid suit under the FDCPA. Defendant refused to pay the $4,000. Plaintiff, by and through its attorneys, PLG, filed a lawsuit about a month later. The suit alleged that G&W violated the FDCPA by reason of the above activity.
G&W moved for summary judgment.
Editor’s Note: A motion for summary judgment is based upon a claim by one party (or, in some cases, both parties) that contends that all necessary factual issues are settled or so one-sided they need not be tried. The summary judgment is appropriate when the court determines there no factual issues remaining to be tried, and therefore a cause of action or all causes of action in a complaint can be decided upon certain facts without trial.
On June 20, 2017, the court granted G&W’s motion for summary judgment and judgment was entered in favor of G&W. In the same order, the court also granted G&W’s motion for sanctions under Federal Rule of Civil Procedure 11, due to the frivolous nature of plaintiff’s suit. Plaintiff’s counsel (PLG) were ordered to pay G&W’s attorney’s fees associated with defending the frivolous suit in the amount of $29,507.
On June 23, 2017 plaintiff brought a motion for reconsideration of the imposition of sanctions. G&W opposed that motion and sought additional sanctions for having to respond to the motion for reconsideration.
The Court’s Order
The Honorable Morrison England, Jr. was clearly not enamored with plaintiff’s attorneys and their arguments, writing:
In sum, Plaintiff’s counsel does not address the bases for sanctions outlined in the Memorandum and Order imposing them, and accordingly has not shown that the imposition of sanctions was clearly erroneous. Accordingly, Plaintiff’s Amended Motion for Reconsideration is DENIED.
The court then discussed G&W’s request for additional sanctions. He wrote:
“Defendant claims sanctions are warranted because Plaintiff’s motion for reconsideration “simply reiterates the same arguments that the Court already rejected,” and because the motion “contains numerous false statements.”
The Court finds that Plaintiff’s motion for reconsideration is recklessly frivolous, so as to warrant sanctions under the Court’s inherent authority.”
The court goes into detail about plaintiff’s counsel’s “misstatements” in the motion for reconsideration. Judge England wrote:
“All of these misstatements are at least reckless. Furthermore, Plaintiff’s reliance on these misstatements renders Plaintiff’s motion for reconsideration frivolous, providing the “additional factor” required for the Court to impose sanction under its inherent authority when a party acts recklessly.”
However, the court only imposed additional sanctions of $500!
G&W had requested “$11,555.50 in sanctions as the attorney’s fees incurred by plaintiff’s frivolous motion.” The court felt that $500 in additional sanctions was sufficient to deter plaintiff’s counsel’s conduct.
The court’s reluctance to impose meaningful additional sanctions is frustrating. This case highlights the substantial challenges involved in defending frivolous lawsuits. G&W could have settled this case for the original demand of $4000. But, since they felt they did nothing wrong (and the judge ultimately agreed with them) they chose to defend the case. Good for them. But, it is always a tough business decision. Sometimes you have to just say “no.”
In this case the legal fees to defend the case were $29,507 to win the initial summary judgment and $11,555.50 to respond to the motion for reconsideration, for a total cost of $41,062.50. They received a sanction award to cover the initial $29,507. Assuming that amount has been paid, they are out over $11,000 in total.
insideARM maintains a FDCPA Caselaw chart. Even a cursory review of that chart will show multiple cases that highlight the challenges to recovering attorney’s fees to defend suspect FDCPA cases.