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From Banking and Finance Law Daily, February 16, 2016

‘Sloppy litigation tactics,’ false evidence don’t merit attorney fee award

By Richard A. Roth, J.D.

Despite concluding that consumers and their attorney submitted evidence they knew or should have known was false, and their inclusion in a Fair Debt Collection Practices Act complaint of a clearly false allegation, a federal district court judge has refused to award the debt collector its attorney fees. The false statements were simply an extreme example of sloppy litigation tactics by the consumers’ attorney and did not merit the more than $75,000 fee award that was requested (Hamburger v. Northland Group, Inc., Feb. 10, 2016, Mariani, R.).

The suit arose from Northland Group’s efforts to collect a credit card debt apparently owed by a married couple’s son. According to the couple’s FDCPA complaint, Northland made multiple telephone calls to collect the debt from an individual named Henry. The consumers did not know anyone named Henry, their complaint alleged, and the calls continued even after they told Northland that no one named Henry lived with them.

Who’s Henry? Actually, Henry was their son.

Moreover, in an apparent effort to help his parents prove that the debt in question was a consumer debt—a requirement for a suit under the FDCPA—Henry later submitted what the judge termed an “artfully evasive affidavit” in response to a summary judgment motion. Essentially, the affidavit attempted to describe the account activity without admitting that Henry had incurred any of the debt. The judge noted that the affidavit was so deficient that its contents were excluded from use at the later trial.

Number of calls placed. The consumers’ evidence of the number of calls was lacking, the judge observed. While they claimed to have kept a log of Northland’s calls, they also said that the log had been lost. In the end, the only calls they could say with certainly had been made were those described in Northland’s own records, which they had obtained in discovery.

There were further problems, though. First, Northland’s records indicated that one of the described calls was an erroneous duplicate of a call earlier in the day and thus had not actually been placed. Nevertheless, that nonexistent call showed up in the consumers’ interrogatory answers.

Perhaps worse still, it turned out that the consumers lived in a different time zone than Northland’s office. However, the consumers’ list of calls in their interrogatory answer gave Northland’s time zone, not the time zone at the consumers’ residence where the calls would have been received.

Evidence presented at the trial did nothing to amplify the consumers’ claims, as they submitted nothing more than the consumers’ own recollections about the number of calls.

Demand for attorney fees. The jury returned a quick verdict in favor of Northland, and the company then filed a motion for an award of attorney fees. The motion gave three justifications for the fee demand:

  • The company was a prevailing defendant in an FDCPA suit that had been brought in bad faith and for purposes of harassment (15 U.S.C. §1692k(a)(3)).
  • Federal law more generally allows an award of fees if proceedings in a suit were unreasonably and vexatiously multiplied (28 U.S.C. §1927).
  • The court has the inherent power to vindicate its own authority and punish fraud.

None of these were enough to justify deviating from the “American Rule” that parties should pay their own attorney fees, the judge decided.

FDCPA. The FDCPA says that a prevailing defendant is entitled to a fee award if the suit was “brought in bad faith or the purpose of harassment,” the judge said (emphasis added). As far as he could tell, this suit had been brought by the consumers simply to redress a perceived, legitimate grievance—illegal debt collection telephone calls. The FDCPA was not intended to penalize those “who litigate honest grievances but utterly fail to prove them.”

General federal law. The consumers’ attorney had not “multiplied the proceedings,” the judge said. The suit might have been unwarranted from the very beginning, but an attorney’s “incompetence in screening, investigating, and litigating” a case did not justify sanctions.

Even the use of the arguably fraudulent call history to prevent Northland’s summary judgment did not multiply the proceedings, according to the judge. Summary judgment was refused based on an affidavit by one of the consumers claiming to remember calls other than those Northland had logged, not based on the written call log.

Court’s inherent power. Northland’s best argument for a fee award was based on the court’s inherent power to control how participants behaved, the judge said. The evidence strongly suggested that the consumers and their attorney lied when they claimed the calls they described during discovery were recounted in the consumers’ subsequently misplaced log and that the attorneys knowingly submitted false evidence. Northland had proved that the consumers and their attorney submitted evidence they knew or reasonably should have known was untrue.

But that still was not enough.

The false evidence had no effect on the proceedings, the judge decided. The case would have gone to trial even if the false call log had not been submitted. Also, the false evidence had not prejudiced Northland because the jury rejected the consumers’ claims. The fraud was only a small exaggeration about the number of calls Northland had placed—perhaps seven or eight rather than five.

The judge characterized the situation as involving “clearly established fraud” that was limited in scope and that did not affect the proceedings. A fee award would be disproportionate to the improper conduct. False statements made in a case that had been “litigated in a consistently poor manner” and that “lacked evidentiary support from its inception” demonstrated poor performance by the consumers’ attorney but did not justify a possible $75,000 fee award, the judge concluded.

The case is No. 3:13-CV-01155.

Attorneys: Craig Thor Kimmel (Kimmel & Silverman, PC) for Irene Hamburger and Howard Hamburger. Jennifer T. Root (Fineman Krekstein & Harris PC) for Northland Group, Inc.

Companies: Northland Group, Inc.

MainStory: TopStory DebtCollection PennsylvaniaNews

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