Lee v. American Agencies

 

 

 

 

 

 

 

 

Filed 7/2/13  Lee v. American Agencies CA1/4

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>NOT TO BE PUBLISHED IN OFFICIAL REPORTS

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California
Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or
relying on opinions not certified for publication or ordered published, except
as specified by rule 8.1115(b).  This
opinion has not been certified for publication or ordered published for
purposes of rule 8.1115.

 

 

 

 

IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

 

FIRST
APPELLATE DISTRICT

 

DIVISION
FOUR

 

 
>

FREIDA LEE,             Plaintiff and Appellant, v. AMERICAN AGENCIES, et al.,             Defendants and Respondents.

A133016, A133752         (Alameda County       Super. Ct. No. RG09477598)

 

            Plaintiff
Freida Lee appeals a judgment and attorney fee award entered after the trial
court granted summary judgment to
defendants American Agencies, American Credit Agencies, Inc. (ACA, Inc.), and
ACA Receivables Co., LLC (ACA Receivables) in this purported class action for
unfair debt collection practices.  She
contends the trial court erred in granting summary judgment on her claims under
the Rosenthal Fair Debt Collection Act (Civ. Code, § 1788 et seq.) and the
federal Fair Debt Collection Practices Act (15 U.S.C. § 1692 et seq.)
(FDCPA) and in awarding attorney fees to defendants.  We shall reverse the award of attorney fees
and otherwise affirm the judgment.

I.      
 BACKGROUND

A.    
The
Allegations of the Complaint

            Plaintiff
alleged in the operative complaint
that on or about September 24, 2008,
defendant American Agencies sent her an initial debt collection letter claiming
she owed $831.06 on a past due bill from a third party and stating American
Agency had purchased the debt from another debt collector.  The letter said nothing about how or when the
debt was incurred.  In response,
plaintiff sent a letter disputing the debt and requesting the original name and
address of the creditor and verification of the debt.  She alleged American Agencies did not respond
to the request for verification and that it continued to attempt to collect the
debt.  This attempt, according to the
complaint, included reporting plaintiff’s debts to consumer credit reporting
agencies.  According to plaintiff, defendants
had a practice of not validating or verifying debts upon consumer request, but
instead continuing to call purported debtors and failing to ensure adverse
credit reporting was discontinued. 
Plaintiff also alleged both that defendants were either parents and
subsidiaries of each other and that they were in reality one company. 

            Plaintiff
asserted causes of action for violation of the Rosenthal Fair Debt Collection
Practices Act (Civ. Code, § 1788.17; see also 15 U.S.C. § 1692g),
violation of California’s unfair
competition law (Bus. & Prof. Code, § 17200), and declaratory and
injunctive relief.

B.    >Motion for Summary Judgment

            Defendants
moved for summary judgment, arguing that (1) they were not obligated to verify
the debt if they discontinued collection efforts; (2) they did not continue
collection efforts after plaintiff requested verification of the debt; and (3)
they did not report the debt to credit bureaus after plaintiff requested
verification.

            The
evidence submitted in support of the motion for summary judgment included the
original letter from American Agencies demanding payment of a debt, the
original creditor of which was “PACIFIC BELL TEL/dba SBC:CALIF.”  The letter, which was dated September 24, 2008,
notified plaintiff that “the above account, which was previously purchased, has
now been assigned to this office for collection by Asset Acceptance, LLC,” and
stated, “If you notify this office in writing within 30 days from receiving
this notice that you dispute this debt, or any portion thereof, this office
will obtain verification of the debt or obtain a copy of a judgment and mail
you a copy of such judgment or verification. 
If you request in writing within 30 days after receiving this notice, this
office will provide you with the name and address of the original creditor if
different from the current creditor.” 

            In
a letter to American Agencies dated October
3, 2008, plaintiff responded: 
“I dispute the above purported debt. 
I request the original name and address of the original creditor and
verification of the debt.  I specifically
request any document that shows I have any such obligation.  [¶] If you have any question, do not
hesitate to call.”

            Leticia
Holguin called plaintiff on October
16, 2008.  Plaintiff did not
answer the telephone, and Holguin
left a message.  In a declaration, she
stated:  “I attempted to contact Ms. Lee
on October 16, 2008,
pursuant to her express invitation to contact her, and solely for the purposes
of inquiring about Ms. Lee’s request for verification.  This attempt to contact Ms. Lee was not made
for collection purposes.”  >

            Plaintiff sent
another letter to American Agencies, dated December 8, 2008, stating, “On October 3, 2008, I disputed the above purported
debt, requesting the original name and address of the original creditor and
verification of the debt.  I specifically
requested any document that shows I have any such obligation.  [¶] I have heard nothing from you.  Please note the dispute and provide the
verification forthwith.  [¶] If you
have any questions, do not hesitate to call.”

            In
response to plaintiff’s December 8,
2008 letter, Holguin
tried to contact plaintiff by telephone on December 24, 2008, and January 6, 2009, in order to inquire about her request for
verification.  Plaintiff did not answer
the calls, and Holguin did not
leave a message. 

            In
her deposition, when asked if American Agencies had contacted her by telephone,
plaintiff testified that she did not know if they had contacted her, that
someone left messages on her main switchboard line, that the caller did not
leave a name, that she called back to find out who the calls were for, and that
“they couldn’t give [her] any information.”

            The
debt collection account was cancelled on April
3, 2009. 

            Craig
Impelman, the Vice President of Operations at ACA Receivables Co., LLC, dba
American Agencies, stated in a declaration that neither ACA Receivables nor
ACA, Inc. ever reported plaintiff’s alleged debt to any credit reporting
agency.href="#_ftn1" name="_ftnref1" title="">[1]  Plaintiff’s credit report showed that the alleged
debt had been reported to a credit agency by November 2007, and that plaintiff
disputed the debt.  Asset Acceptance,
Inc. was named as the creditor.

            Impelman
also declared that “ACA Receivables Company, LLC dba American Agencies is the
only entity that has ever had any involvement with Plaintiff Freida Lee’s
collection account.”  According to
Impelman, American Agencies is a fictitious business name of ACA
Receivables.  ACA, Inc. previously owned
the American Agencies fictitious business name.

            In
opposition to the motion for summary judgment, plaintiff submitted evidence
that if a customer disputed a debt and defendants decided to cease and desist
from collection, the macro “,496” should be used.  The collection notes on plaintiff’s account
do not reflect the macro “,496” to “cease and desist.”  A document American Agencies used in training
stated that if a consumer disputed the validity of a debt within 30 days of
receiving a validation notice, federal law
required the debt collector to obtain actual verification of the debt from the
creditor and mail it to the consumer, as well as the name and address of the
original creditor if requested by the consumer. 
The document also said that if the consumer disputes the debt, a debt
collector should either “abandon collection efforts and close the account,” or
“cease collection action until verification of the debt has been obtained from
the creditor and mailed to the consumer.” 
If the consumer disputed the debt within the 30-day validation period,
according to the training document, “American Agencies ceases all collection
efforts and requests ‘full backup’ on the debt from the creditor. . . .
[¶] Upon receipt, American Agencies then mails this information to the
consumer at which point collection efforts may be resumed.” 

            Plaintiff
submitted a portion of the Code of Ethics and Code of Operations of the
Association of Credit and Collection Professionals, which provides that upon
receipt of a written request for verification of a debt, a debt collector
should suspend collection activities and provide verification of the debt.  If the debt collector does not or cannot
provide verification of the debt, the debt collector should cease all
collection efforts; “[d]irect or request removal of the item from the
consumer’s credit report or report the item as disputed to the appropriate
credit reporting agency”; when closing and returning an account, notify the
credit grantor, client, or owner of the debt that collection activity was
terminated due in inability to verify the debt; and if requested by the
consumer in writing, notify the consumer that collection efforts have been
terminated.

            Plaintiff
also submitted evidence that Holguin testified in her deposition that she
called plaintiff to follow up on her dispute and left a message asking
plaintiff to return her call.  She had
been trained that when she called about a disputed account to attempt to
collect a balance, she should provide her own name, the name of the company,
and a phone number when leaving messages. 
She had been trained that in handling a disputed account, she should “go
over [the] dispute and see what they’re actually disputing so we can get the
information to them [in] a timely manner.” 
Holguin testified she could also try to settle the matter. > Plaintiff
stated in a declaration that she did not perceive American Agencies’ telephone
calls to be debt collection efforts at the time they were made, but that after
reading the depositions and discovery responses, she had concluded they were
debt collection efforts.

            The
trial court granted the motion for summary judgment.  As to defendant American Agencies, it
accepted the evidence that American Agencies was a fictitious business name
owned by ACA Receivables, and ruled that plaintiff’s claims lay only against
the owner of the fictitious business name. 
In granting summary judgment as to ACA, Inc., the trial court relied on
the evidence that ACA, Inc.. sold the name “American Agencies” to ACA
Receivables in 2005 and that it did not engage in debt collection.  The court found that defendants did not have
an independent duty to provide verification of the debt if they did not
continue collection activities, and that they did not engage in collection
activity after plaintiff requested verification of the debt.  The court denied plaintiff’s request for a
continuance to obtain additional discovery to oppose the motion. >

C.   
Attorney
Fees

            Defendants moved for attorney fees
under Civil Code section 1788.30, subdivision (c), which authorizes an
award of attorney fees “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.”  The trial court awarded fees against
plaintiff in the amount of $66,818.00.

II.   
 DISCUSSION

A.    
Standard
of Review on Summary Judgment

            “We review a grant
of summary judgment de novo. 
[Citation.]  In performing our de
novo review, we employ a three-step analysis. 
‘First, we identify the issues raised by the pleadings.  Second, we determine whether the movant
established entitlement to summary judgment, that is, whether the movant showed
the opponent could not prevail on any theory raised by the pleadings.  Third, if
the movant has met its burden, we consider whether the opposition raised
triable issues of fact.’ 
[Citations.]  . . . Any evidence
we evaluate is viewed in the light most favorable to the plaintiff as the
losing party; we strictly scrutinize the defendant’s evidence and resolve any
evidentiary doubts or ambiguities in the plaintiff’s favor.  [Citation.]” 
(Barber v. Chang (2007) 151
Cal.App.4th 1456, 1462–1463.)

            In
opposing a motion for summary judgment, plaintiffs “ â€˜may not rely upon
the mere allegations or denials of [their] pleadings,’ but must ‘set forth the
specific facts showing that a triable issue of material fact exists.’  [Citation.] 
‘The party opposing the summary judgment must make an independent
showing by a proper declaration or by reference to a deposition or another
discovery product that there is sufficient proof of the matters alleged to
raise a triable question of fact if the moving party’s evidence, standing
alone, is sufficient to entitle the party to judgment.  [Citation.] 
To avoid summary judgment, admissible evidence presented to the trial
court, not merely claims or theories, must reveal a triable, material factual
issue.  [Citation.]  Moreover, the opposition to summary judgment
will be deemed insufficient when it is essentially conclusionary, argumentative
or based on conjecture and speculation.’ 
[Citation.]”  (>Trujillo v. First American Registry, Inc.
(2007) 157 Cal.App.4th 628, 635.)

B.    >Duty to Verify Debt

            We
first examine whether there is any legal merit to plaintiff’s contention that
defendants had a statutory obligation
to verify the validity of the debt after they determined not to proceed with
collection.  Civil Code section 1788.17
provides in pertinent part, “every debt collector collecting or attempting to
collect a consumer debt shall comply with the provisions of Section 1692b to
1692j, inclusive, of, and shall be subject to the remedies in Section 1692k of,
Title 15 of the United States Code.”  Our
state statute thus incorporates portions of the FDCPA.

            Plaintiff
alleged defendants violated the state statutes by failing to comply with the
provisions of the FDCPA requiring verification of debts and by continuing to
collect disputed debts.  The FDCPA,
specifically section 1692g of title 15 of the United States Code
(hereinafter § 1692g) requires a debt collector, with certain exceptions,
to send to the consumer a written notice containing, inter alia, (1) “a
statement that unless the consumer, within thirty days after receipt of the
notice, disputes the validity of the debt, or any portion thereof, the debt
will be assumed to be valid by the debt collector;” (2) “a statement that if the consumer notifies the debt collector in writing
within the thirty-day period that the debt, or any portion thereof, is
disputed, the debt collector will obtain verification of the debt or a copy
of a judgment against the consumer and a copy of such verification or judgment
will be mailed to the consumer by the debt collector;” and (3) “a statement
that, upon the consumer’s written request within the thirty-day period, the
debt collector will provide the consumer with the name and address of the
original creditor, if different from the current creditor.”  (§ 1692g, subd. (a), italics added.) 

            Under
section 1692g, if the consumer notifies the debt collector within 30 days that
a debt is disputed, or requests the name and address of the original credit, “>the debt collector shall cease collection of
the debt, or any disputed portion thereof, until the debt collector obtains
verification of the debt or a copy of a judgment, or the name and address
of the original creditor, and a copy of such verification or judgment, or name
and address of the original creditor, is mailed to the consumer by the debt
collector. . . .”  (§ 1692g,
subd. (b), italics added.)  Plaintiff contends
this language imposes upon collection agencies the duty to verify the disputed
debt whether or not they continue with debt collection efforts.href="#_ftn2" name="_ftnref2" title="">[2]  Three federal appellate courts have
considered this issue, and each has rejected the position plaintiff espouses. 

            A
panel of the Ninth Circuit considered this question in Guerrero v. RJM Acquisitions LLC (9th Cir. 2007) 499 F.3d 926, 940
(Guerrero).  It agreed with the reasoning of >Jang v. A.M. Miller & Associates
(7th Cir. 1997) 122 F.3d 480, 482–483 (Jang),
stating:  “In Jang, consumer plaintiffs claimed that defendants, two debt
collection agencies, violated the Act because they never verified the alleged
debts after plaintiffs disputed them. 
[Citation.]  The Seventh Circuit,
affirming the district court’s grant of defendants’ motion to dismiss, noted
correctly that the Act ‘does not require debt collectors to actually provide
validation.  Rather, it requires that the
debt collector cease all collection activity until it provides the requested
validation to the debtor.’ 
[Citation.]  [¶] A collector,
notified that a debt is disputed, thus has a choice.  As the court in Jang put it, the collector ‘may provide the requested validations
and continue their [sic] debt
collection activities, or [it] may cease all collection activities.’  [Citations.] 
It would make little sense to impose an independent obligation to verify
an alleged debt on a collector who, for example, decides that a disputed debt
is not worth the effort and chooses to close or sell the account.  Or, as the court in Jang noted, on a collector who, upon receiving a dispute notice,
realizes the consumer does not in fact owe the debt and so abandons all costly
collection efforts.”  (>Guerrero, supra, 499 F.3d at p. 940.)

            The
Sixth Circuit reached a similar result in Smith
v. Transworld Systems, Inc. (6th Cir. 1992) 953 F.2d 1025, 1031 (>Smith), stating that because the
defendant there ceased collection activities after receiving a cease and desist
letter, “defendant was not obligated to send a separate validation of the debt
to plaintiff.”  Similarly, the court in >Sanchez v. United Collection Bureau, Inc.
(N.D. Ga. 2009) 649 F.Supp.2d 1374, 1381 (Sanchez),
stated, “When a consumer requests validation of a debt pursuant to the FDCPA,
the debt collector is required to cease collection of the debt until it
provides verification of the debt to the consumer.  A debt collector is not required to verify
the debt, but instead may cease all collection activity on the account.”   (Accord, Sambor
v. Omnia Credit Services, Inc. (D. Haw. 2002) 183 F.Supp.2d 1234, 1242,
1243 (Sambor) [because debt collector
ceased collection activities, it did not violate FDCPA by failing to verify
debt]; Zaborac v. Phillips and Cohen
Associates, Ltd. (N.D. Ill. 2004) 330 F.Supp.2d 962, 966.)href="#_ftn3" name="_ftnref3" title="">[3]

             Plaintiff argues that if the debt collector is
not required to verify the debt, “the result of simply ceasing [collection
efforts] may not be ceasing at all [but] the sale or assignment of the debt and
continued collection efforts and roundelays of disputing and sale/assignment ad
infinitum.”  The court in >Jang considered a similar argument and
rejected it, noting first that there was no indication any such thing had
happened in the case before it—as there is no indication it has happened here—and
second, that “it is for Congress, and not the courts, to close this alleged
loophole in the FDCPA.”  (>Jang, supra, 122 F.3d at p. 484.) 

            Plaintiff
also points to the language of section 1692g, subdivision (a), which requires a
debt collector to notify the consumer that if the consumer disputes the debt,
the debt collector “will obtain verification of the debt or a copy of the
judgment” and a copy of the verification or judgment “will be mailed to the
consumer.”  This statutory language, she
argues, indicates the debt collector must provide verification even if it
ceases collection efforts after receiving notice of the dispute.  The court in Jang rejected a similar argument, stating, “After requiring debt
collectors to promise verification upon request, the statute allows debt
collectors to sidestep this requirement by ceasing all collection
activities.  Although the statute might
be more informative for debtors if it required a notice that the debt collector
would either provide the requested verification or cease all collection
activities, it is not our job to rewrite the statute.”  (Jang,
supra, 122 F.3d at p. 484.) 

            Finally,
Plaintiff argues that defendants’ own policies and procedures show they
understood they were required to provide verification.  The issue here, however, is what is required
by the state and federal statutes.  None
of plaintiff’s arguments persuade us to depart from the rule of >Jang, Smith, and Guerrero.  We agree with the trial court that defendants
were not required to verify plaintiff’s debt if they ceased collection efforts.

C.    >Continued Collection Efforts

            We
next address plaintiff’s argument that defendants wrongfully continued
collection efforts after receiving plaintiff’s dispute letter, as shown both by
defendants’ failure to ensure that the debt was removed from her credit reports
and by Holguin’s calls to plaintiff.

>1.     
Credit
Reporting

            It
is undisputed that credit reporting may constitute debt collection.  (See Davis
v. Trans Union, LLC (W.D.N.C. 2007) 526 F.Supp.2d 577, 586–587.)  Here, however, there is no evidence that
defendants reported the debt to any credit agencies; rather, plaintiff
acknowledged below that the debt was reported by Asset Acceptance in 2007,
before it was assigned to defendants.  
Moreover, the credit report in the record shows the debt as disputed.href="#_ftn4" name="_ftnref4" title="">[4]  Plaintiff draws our attention to no authority
suggesting that a debt collector who does not arrange for a prior creditor to
remove a debt from a credit report thereby engages in collection activity.  The court in Shimek v. Weissman, Nowack, Curry & Wilco, P.C. (N.D. Ga. 2003)
323 F.Supp.2d 1344, 1350, rejected a similar contention.  The defendant there had already forwarded
liens to a county clerk by the time the plaintiffs received debt collection
letters.  The clerk recorded the liens
after the plaintiffs had requested verification of the debt, but before the
defendant provided verification.  The
plaintiff argued the defendant “was obligated to ‘take positive action’ to
prevent the Clerk from recording the liens once Plaintiffs requested
verification of the debt.”  (>Ibid.) 
The court ruled otherwise, stating, “[t]he plain language of Section
1692g(b) . . . requires only that Defendant ‘cease collection of the
debt’ once verification is requested,” and the defendant was not required to
prevent the liens from being recorded during the verification period.  (Ibid.)  Similarly here, we find no statutory basis to
conclude defendants were obliged to take steps—even if they had authority to do
so—to have a debt previously reported by a third party removed from plaintiff’s
credit report.

>2.     
Telephone
Calls

            Plaintiff
contends summary judgment was inappropriate because there is a factual dispute
about whether the telephone calls Holguin made constituted collection activity.  Pursuant to section 1692g, subdivision (b),
if the consumer notifies the debt collector within the 30-day period that a
debt is disputed, “the debt collector shall cease collection of the debt, or
any disputed portion, thereof,  until the
debt collector obtains verification of the debt or a copy of the judgment
. . . .”

            In
ruling the telephone calls did not constitute collection activity, the trial
court applied the “ â€˜least sophisticated debtor’ standard.”  As explained in Martin v. Sands (D. Mass. 1999) 62 F.Supp.2d 196, 199, “When
considering whether a particular collection notice violates the FDCPA, courts
usually look to whether the objective ‘least sophisticated debtor’ would find
the notice improperly threatening or misleading.”  “[T]he ‘least sophistical debtor’ standard is
‘ “lower than simply examining whether particular language would deceive or
mislead the reasonable debtor.” ’ 
[Citations.]  . . . ‘The
basic purpose of the least-sophisticated-consumer standard is to ensure that
the FDCPA protects all consumers, the gullible as well as the shrewd.’ ”  (Wilson
v. Quadramed Corp. (3d Cir. 2000) 225 F.3d 350, 354.)  However, “although this standard protects
naïve consumers, it also ‘prevents liability for bizarre or idiosyncratic
interpretations of collection notices by preserving a quotient of
reasonableness and presuming a basic level of understanding and willingness to
read with care.’ â€  (>Id. at pp. 354–355.)

            Both
plaintiff and defendants argue the trial court should not have applied the objective,
least sophisticated debtor standard, but should instead have applied a
subjective standard that looked to defendants’ intent in making the telephone
calls—that is, to whether the calls were made in connection with debt
collection.  According to plaintiff, the
least sophisticated debtor standard should be used only when the plaintiff has
alleged that a communication is deceptive.

            We
need not resolve the question of whether the trial court properly applied the
least sophisticated debtor standard because we conclude that, under any
standard, there was no triable issue of fact as to whether defendants continued
collection activities.  The facts show
that when plaintiff disputed the bill on October 3, 2008, she explicitly
invited American Agencies to contact her if it had any questions.  Holguin called her later that month.  Holguin stated in her declaration that she
called “solely for the purposes of inquiring about Ms. Lee’s request for
verification.”  In her deposition,
Holguin testified that she called plaintiff to follow up on the dispute, and
that she left a message asking plaintiff to return her call.  Holguin had been trained that when she
handled a disputed account, she should “go over [the] dispute and see what
they’re actually disputing so we can get the information to them [in] a timely
manner.”  She also testified she could
try to settle the matter. 

            In
a second letter, in December 2008, plaintiff told American Agencies she had
heard nothing in response to her dispute and again invited American Agencies to
call if there were any questions. 
Holguin called twice more, but plaintiff did not answer her telephone
and Holguin did not leave a message; she stated that the calls were made to
inquire about the request for verification, not for collection purposes.  On this record—particularly in light of
plaintiff’s express invitation for American Agencies to call if it had
questions about her dispute—no trier of fact could conclude defendants
continued with collection efforts after plaintiff disputed the debt.href="#_ftn5" name="_ftnref5" title="">[5]  (See Hubbard
v. National Bond & Collection Assoc., Inc. (D. Del. 1991) 126 B.R. 422,
428 [verification process of 15 U.S.C. § 1692g allows debt collector to
learn “the reasons, if any, for the debtor’s refusal to pay” and “ensures a
cost effective means by which a debtor and debt collector can exchange
information”].)

            We
are not persuaded otherwise by plaintiff’s reliance on Allen v. ATG Credit LLC (N.D. Ill. Dec. 14, 2004, No. 03-C-5971)
2004 U.S. Dist. Lexis 25304.  In response
to a letter informing her she could challenge the validity of a debt, the
plaintiff there sent a letter to a debt collector requesting verification and
documentation of the debt, and asked that future communications be made by
mail, not telephone.  (>Id. at *2–3.)  The debt collector responded by providing a
list of charges that were allegedly owed. 
It then placed five phone calls to the plaintiff’s residence, assertedly
to confirm that she had received the verification.  The plaintiff did not receive the calls, and
the debt collector did not leave a message. 
(Id. at *3.)  In the course of denying the defendant debt
collector’s motion for summary judgment on multiple grounds, the court stated,
“[Defendant’s] business records show that it telephoned [plaintiff] approximately
five times after the verification request. 
While [defendant] claims that it only attempted to contact [plaintiff]
to verify that she had received the information she requested, the Court finds
that the jury is in the better position to decipher [defendant’s]
motivation.”  (Id. at *10–11.)  Here, in
contrast, plaintiff herself invited American Agencies to call if it had any
question about her dispute, and defendants submitted uncontradicted evidence
that the calls were made in response to that invitation.

            Because
we conclude the trial court properly granted summary judgment on the ground
that there was no statutory violation,
we need not consider whether summary judgment was also proper as to American
Agencies and ACA, Inc. on the independent grounds that American Agencies is a
fictitious business name and that ACA, Inc. did not own the name American
Agencies during the times relevant to this dispute.

D.    >Request for Continuance

            In
her opposition to the motion for summary judgment, plaintiff sought a
continuance in order to complete discovery regarding putative class members who
may have been subject to the same practices alleged by plaintiff, and about
whether defendants used the “,496” macro on the accounts of putative class
members who disputed debts.  According to
plaintiff, such discovery was relevant to the question of defendants’ intent in
making the telephone calls.  She also sought
discovery about defendants’ contract with Asset Acceptance—the assignor of the
debt—which she asserted might “show notice of obligations regarding
verification and credit reporting.”  In a
supporting declaration, plaintiff’s counsel stated that plaintiff had filed a
motion to compel discovery regarding these putative class members, and that the
court had twice issued directives indicating the discovery was not relevant to
the issues pertinent to summary judgment and suggesting that the discovery
motions be put off until after the summary judgment motion was heard.  In a supplemental declaration, plaintiff’s
counsel requested time to subpoena records of when and how the debt was
reported to credit agencies.  The trial
court denied the request for a continuance, finding, “Plaintiff has not shown
that facts essential to justify an opposition may exist or valid reasons that
those facts could not have been obtained through more diligent efforts and
presented with her opposition.” 
Plaintiff contends the trial court should have granted the continuance
to allow further discovery.

            Code
of Civil Procedure section 437c, subdivision (h), provides:  “If it appears from the affidavits submitted
in opposition to a motion for summary judgment or summary adjudication or both
that facts essential to justify opposition may exist but cannot, for reasons
stated, then be presented, the court shall deny the motion, or order a
continuance to permit affidavits to be obtained or discovery to be had or may
make any other order as may be just. . . .” 
Thus, to be entitled to a continuance, a plaintiff is “required to show,
by affidavit, that facts essential to his opposition to the summary judgment
motion existed, and the reasons why they could not be presented at the time of
the motion.”  (Bushling v. Fremont Medical Center (2004) 117 Cal.App.4th 493,
511.)  We review the trial court’s denial
of a request for a continuance for abuse of discretion.  (Cooksey
v. Alexakis (2004) 123 Cal.App.4th 246, 254.)

            We
find no abuse of discretion here.  As we
have explained, the undisputed facts show Holguin called plaintiff after
plaintiff expressly invited American Agencies to do so, that defendants engaged
in no other actions toward plaintiff after she disputed the debt, and that
defendants did not report the debt to credit bureaus.  On this record, the trial court could
reasonably conclude plaintiff did not show that discovery about other putative
class members and credit reporting would reveal facts essential to oppose the
motion for summary judgment. 

E.     >Attorney Fees

            Defendant
sought attorney fees under Civil Code section 1788.30, subdivision (c),
which authorizes an award of attorney fees “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.”  Upon defendants’
motion, the trial court awarded attorney fees against plaintiff in the amount
of $66,818.00.  Plaintiff contends this
award was made in error.

            An
award of attorney fees under Civil Code section 1788.30, subdivision (c), is
discretionary.  (Gouskos v. Aptos Village Garage, Inc. (2001) 94 Cal.App.4th 754,
764.)  The parties have not cited, and
our own research has not disclosed, any California cases discussing the
standard to be applied where a prevailing defendant seeks attorney fees under
this statute.  However, a nearly
identical attorney fee provision may be found in Civil Code section 1780,
subdivision (e), a portion of the Consumer Legal Remedies Act (Civ. Code.
§ 1750 et seq.), which provides in pertinent part:  “Reasonable attorney’s fees may be awarded to
a prevailing defendant upon a finding by the court that the plaintiff’s
prosecution of the action was not in good faith.”  This provision has been interpreted to
require a finding of subjective bad faith. 
(Corbett v. Hayward Dodge, Inc.
(2004) 119 Cal.App.4th 915, 920–924 (Corbett);
Shisler v. Sanfer Sports Cars, Inc.
(2008) 167 Cal.App.4th 1, 9.)  “When a
tactic or action utterly lacks merit, a court is entitled to infer the party
knew it lacked merit yet pursued the action for some ulterior motive.”  (Corbett,
supra, 119 Cal.App.4th at p.
928.)  “Good faith, or its absence, involves a factual inquiry into the
plaintiff’s subjective state of mind [citations]:  Did he or she believe the action was
valid?  What was his or her intent or
purpose in pursuing it?  A subjective
state of mind will rarely be susceptible of direct proof; usually the trial
court will be required to infer it from circumstantial evidence.  Because the good faith issue is factual, the
question on appeal will be whether the evidence of record was sufficient to sustain
the trial court’s finding.”  (>Knight v. City of Capitola (1992) 4
Cal.App.4th 918, 932, overruled on another point in Reid v. Google, Inc. (2010) 50 Cal.4th 512, 532, fn. 7.)

            The
trial court here found plaintiff did not act in good faith in pursuing her
action.  It concluded that many of
plaintiff’s allegations “were baseless (or put another way, were not ‘minimally
colorable’).”href="#_ftn6" name="_ftnref6"
title="">[6]  The court noted that the contention that
defendants were obliged to verify the debt even if they did not continue collections
had “been firmly rejected by three Federal Courts of Appeals and accepted by
none,” and that plaintiff had not identified any sound basis for the court to
disagree with those decisions.  The court
found “[e]ven more troubling . . . Plaintiff’s repeated insistence
that the Defendants reported the debt in question to credit reporting
bureaus.”  According to the court,
“Plaintiff made this charge, ignored Defendants’ sworn declaration to the
contrary that was provided early in the case, and never obtained any evidence
to support it. . . .  And
when Defendants subpoenaed credit agencies in order to lay this issue to rest,
Plaintiff refused to consent, forcing Defendants to file a motion to obtain
credit reporting records, which confirmed that no Defendant had reported the
disputed item to any credit agency.”  
The court went on, “Plaintiff’s refusal strongly suggests an intent to
obstruct, rather than resolve, this litigation. 
Both this claim and Plaintiff’s tactics in litigating the claim were
completely meritless.”  The court also
found that plaintiff’s attempts to “recast” this claim to argue that defendants
“were obligated to attempt to remove items reported by another agency from
Plaintiff’s credit report” was legally unsupported.  The court concluded, “the circumstances in
which this case arose are not entirely above suspicion; the manner in which
Plaintiff’s counsel prosecuted the case is not admirable; and the Court cannot
find even a minimally colorable claim or position taken by Plaintiff.”

            Although
this is a close issue, and counsel’s dubious litigation tactics
notwithstanding, we conclude plaintiff had at least one colorable claim.  It is clear from the record that defendants
did not report the debt to credit bureaus, and that there is no legal basis to
conclude a debt collector has a duty to ensure that others remove a debt from a credit report.  It is also true that every federal appellate
court that has considered whether a debt collector who ceases collection
efforts has a duty to provide verification has answered that question in the
negative, and we agree that those cases are correctly decided.  (See, e.g., Guerrero, supra, 499 F3d
at p. 940; Jang, supra, 122 F.3d at pp. 482–483; Smith,
supra, 953 F.2d at p. 1031.)  However, as plaintiff points out—and as the
court in Jang, supra, 122 F.3d at p. 482 acknowledged—in addition to requiring a
debt collector to cease collection of a disputed debt “until the debt collector
obtains verification of the debt or a copy of the judgment” (§ 1692g,
subd. (b)), the FDCPA also requires the debt collector, in the notice of debt,
to include a statement that if the consumer notifies the debt collector of the
dispute in writing during the 30-day period, “the debt collector >will obtain verification of the debt or
a copy of a judgment against the consumer and a copy of such verification or
judgment will be mailed to the consumer
by the debt collector.”  (§ 1692g,
subd. (a)(4).)  Thus, there is at least
an arguable tension between the requirements of subdivision (a) of this
statute, which requires the debt collector to tell the consumer it will obtain
and mail verification, and subdivision (b), which does not impose an href="http://www.fearnotlaw.com/">independent duty actually to obtain or
send verification if the debt collector ceases collection efforts.  Although the federal appellate courts have
unanimously interpreted the statute so that a debt collector need not obtain
and mail verification if collection efforts cease, no California court has
ruled on the matter, and we cannot agree that the claim “utterly lacks merit”
or that pursuing it indicates bad faith. 
(See Corbett, >supra, 119 Cal.App.4th at p. 928.)href="#_ftn7" name="_ftnref7" title="">[7]    

            Likewise,
it does not appear to us that there was no good faith basis for plaintiff’s claim
that Holguin’s telephone calls were collection efforts.  Although the record on summary judgment
persuades us that no reasonable trier of fact could conclude the calls
constituted collection efforts, we are not persuaded that pursuing such a claim
would indicate lack of good faith—and indeed, in its attorney fee order, the
trial court did not discuss that claim.

            We
shall therefore reverse the attorney fee order.



 

 

>III. > DISPOSITION

            The
attorney fee order is reversed.  In all
other respects, the judgment is affirmed.

 

 

           

                                                                                    _________________________

                                                                                    Rivera,
J.

 

 

We concur:

 

 

_________________________

Reardon, Acting P.J.

 

 

_________________________

Humes, J.