IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
FAIRWAY COLLECTIONS, LLC, No. 85042-3-I Respondents, DIVISION ONE v. PUBLISHED OPINION MICHAEL I. TURNER and JANE DOE TURNER, husband and wife,
Appellants.
CHUNG, J. — Fairway Collections, LLC, as Arbor Health’s assignee, sued
Michael Turner to collect medical debt he owed to Arbor Health. Turner asserted
counterclaims against Fairway for violations of the Washington Consumer
Protection Act (CPA), the Washington Collection Agency Act (CAA), and the
federal Fair Debt Collection Practices Act (FDCPA). Initially, the counterclaims
were all based on whether the debt principal Fairway sought to collect was
authorized because Turner had not been screened for charity care. After Turner
was granted charity care that paid for 75 percent of his debt, Fairway accepted
his payment and stipulated to the dismissal of its claim against him. Fairway
moved to enforce a purported settlement agreement, and the court denied the
motion.
Fairway moved for summary judgment on Turner’s counterclaims.
Subsequently, based on information obtained during discovery, Turner sought to No. 85042-3-I/2
amend his counterclaims to add claims based on the rate and amount of
Fairway’s collection fee.
The trial court granted Fairway’s motion for summary judgment and
dismissed Turner’s counterclaims. We conclude that there are genuine issues of
material fact as to each counterclaim. We therefore reverse the dismissal of
Turner’s counterclaims, affirm the trial court’s denial of Fairway’s motion to
enforce settlement, and remand to the trial court for further proceedings
consistent with this opinion.
FACTS
Michael Turner was in a serious car accident on July 17, 2016, near
Morton, Washington. He cannot recollect the accident, and his first real memory
is waking up at a hospital in Seattle. On the day of the accident, unbeknownst to
him at the time, Turner was first treated at Morton General Hospital, 1 the hospital
nearest the scene of the accident, before transfer to Seattle for further care.
Turner believed insurance had paid all his medical bills related to the accident.
According to Arbor Health, it tried to collect its bill from him, though Turner claims
he never received any communication from it.
On November 16, 2017, Morton General Hospital sent to Turner, “through
Fairway,” a “courtesy reminder” letter stating the amount due and warning,
“Should it be necessary to refer this account to Fairway Collections for
collections, a collection fee of 35% of the principal amount will be added.” That
1 Lewis County Hospital District No. 1 does business as Arbor Health and was formerly
known as Morton General Hospital.
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letter does not use the words “charity care,” but it states, “Financial aid is
available to those who qualify.”
In December 2017, Arbor Health assigned Turner’s debt of $7,432.42 to
Fairway, a Washington State licensed collections agency. From December 2017
to November 2020, Fairway claimed it sent four collection letters to Turner at two
different addresses, and that each letter demanded the $7,432.42 principal plus
collection fees of $2,972.77. 2 The collection fees, $2,972.77, amount to 40
percent of the principal of $7,432.42, not the 35 percent amount referenced in the
November 2017 letter from Morton General Hospital. Fairway’s form letters do
not mention charity care or financial aid.
In January 2021, Fairway sued Turner for the debt principal and collection
fees. Turner does “not recall ever receiving a collection letter or statement
regarding [his] trip to the emergency room at Arbor Health.” He called Fairway
and learned the claimed debt was for treatment related to his July 2016 accident.
Turner was “frantic” to protect his good credit and called first one attorney and
then engaged another to address Fairway’s complaint.
In February 2021, Turner answered Fairway’s complaint 3 and raised three
counterclaims: (1) a per se violation of the CPA 4 predicated on Fairway’s
2 Fairway claims it did not retain copies of the actual letter and instead relies on a
template letter and a declaration from Gwen Turner as evidence of the contents of the letters. Gwen Turner is a member of Fairway Collections, LLC, and its Chief Operations Officer. Because she shares a surname with the appellant, Michael Turner, to avoid confusion, this opinion refers to Gwen Turner by both her first and last name. 3 Fairway filed suit in Grays Harbor County District Court, but Turner removed to Grays
Harbor County Superior Court because his answer sought injunctive relief. See RCW 4.14.010. 4 Chapter 19.86 RCW.
3 No. 85042-3-I/4
violation of the CAA; 5 (2) violation of the CPA, and (3) violation of the federal
FDCPA, also constituting a per se CPA violation. 6 Each of Turner’s
counterclaims alleged Fairway attempted to collect a debt that was not
authorized because he was not screened for charity care before the debt was
assigned to Fairway. 7 The parties do not dispute that Arbor Health did not screen
Turner for charity care before assigning his debt to Fairway.
In April 2021, Turner offered to settle with Fairway. In the meantime,
Turner had applied for charity care, and on May 10, 2021, Arbor Health notified
him he had been approved and reduced his principal debt to $1,858.11. The next
day, May 11, 2021, Fairway emailed Turner that it had authority to accept a
mutual release and would circulate a proposed settlement agreement. Turner
rejected Fairway’s proposed agreement, stating that because it was conditioned
on including a release of claims against Arbor Health, a nonparty, it was a
counteroffer.
On June 16, 2021, Fairway moved to enforce its proposed settlement
agreement. On June 18, 2021, Turner sent a check for $1,858.11 to Fairway,
thereby satisfying his debt to Arbor Health.
The parties suspended their discovery while Fairway’s motion to enforce
settlement was pending. After the court denied Fairway’s motion to enforce in
5 Chapter 19.16 RCW. 6 15 U.S.C. § 1692. 7 State law requires hospitals to make reduced cost charity care available to low-income
patients. RCW 70.170.060. Initiation of collection efforts “shall be precluded pending an initial determination of sponsorship status”—i.e., until a person is screened for charity care eligibility. WAC 246-453-020(1).
4 No. 85042-3-I/5
October 2021, Turner subpoenaed Arbor Health for contracts between it and
Fairway. Fairway objected to producing its collection contract with Arbor Health
until the court entered a protective order. Shortly thereafter, in its own initial
responses to Turner’s discovery requests, Fairway stated it would provide the
collection contract upon entry of a stipulated protective order, and it filed a motion
for a protective order relating to the subpoena to Arbor Health. The parties
exchanged drafts and agreed to a stipulated protective order relating to the
collection contract in November. Fairway agreed to sign and file the protective
order.
Meanwhile, Arbor Health responded to Turner’s subpoena in November
2021 with a redacted copy of an earlier contract between it and Fairway. The
parties then stipulated to striking the hearing on Fairway’s motion for a protective
order relating to the subpoena to Arbor Health. However, Turner heard nothing
further regarding the stipulated protective order relating to Fairway’s discovery
responses that Fairway had agreed to file.
Instead, on January 13, 2022, Fairway filed a motion for summary
judgment. On January 24, 2022, Fairway supplemented its production to Turner,
including a heavily redacted copy of its current contract with Arbor Health. The
next day, Arbor Health supplemented its production to Turner with the same
contract but unredacted. A previously redacted part of the contract states that, for
non-Medicare accounts, “Collection fees shall be added . . . at the rate of 35% of
the principal amount assigned.”
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On February 4, Turner moved for leave to amend his counterclaims on the
basis that he had just learned that Fairway was not authorized to collect fees of
more than 35 percent. On February 17, Turner moved to strike Fairway’s
affidavits and responded to its motion for summary judgment. He argued again
that “Fairway sought to collect . . . more that it was legally allowed to collect.” He
also argued that the court should grant him a continuance to depose Fairway’s
COO, Gwen Turner, and Arbor Health’s CFO, Richard Boggess.
Fairway replied on February 23. Its reply included a third declaration from
Gwen Turner. Her declaration states that, “Due to a typographical error, the rate
for non-Medicare accounts was typed incorrectly as [redacted]%.” Fairway
argued that “[t]he amount of the collection cost is not an issue in this case”
because it “had the right to charge [Turner] a collection cost under RCW
19.16.500.” On February 22, Turner filed an amended motion for leave to amend.
He argued that “[t]he 2014 collection contract reveals . . . that Fairway
demanded . . . several hundred dollars more than . . . allowed under the
collection contract between Arbor Health and Fairway.” 8
On February 28, the trial court heard oral argument on both Turner’s
motion for leave to amend and Fairway’s motion for summary judgment on
Turner’s counterclaims. The court orally denied Turner leave to amend 9 and
granted Fairway’s motion for summary judgment. The court’s written order stated
8 A collection fee of 35 percent of the $7,432.42 principal would have been $2,601.35. 9 The court said that “leave is freely given,” but “based on the issues of undue delay and
prejudice to [Fairway], and futility, [it would] deny the motion to amend.”
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that it considered Fairway’s motion for summary judgment as to Turner’s
counterclaims, Turner’s response, and Fairway’s reply. It dismissed Turner’s
counterclaims with prejudice. 10 The court’s written order did not address the
motion for leave to amend.
Turner appeals the trial court’s denial of leave to amend his counterclaims
and its dismissal of his counterclaims. Fairway cross-appeals and assigns error
to the trial court’s denial of its motion to enforce the settlement agreement. 11
DISCUSSION
On appeal of an order granting summary judgment, we review de novo
whether “the pleadings, depositions, answers to interrogatories, and admissions
on file, together with the affidavits, if any, show that there is no genuine issue as
to any material fact and that the moving party is entitled to a judgment as a
matter of law.” Civil Rule (CR) 56(c); see Ranger Ins. Co. v. Pierce County, 164
Wn.2d 545, 552, 192 P.3d 886 (2008). “The moving party has the burden of
showing that there is no genuine issue as to any material fact.” Indoor
Billboard/Wash., Inc. v. Integra Telecom of Wash., Inc., 162 Wn.2d 59, 70, 170
P.3d 10 (2007). We view all facts and reasonable inferences in the light most
favorable to the nonmoving party. Elcon Constr., Inc. v. E. Wash. Univ., 174
Wn.2d 157, 164, 273 P.3d 965 (2012). “A genuine issue of material fact exists
where reasonable minds could differ on the facts controlling the outcome of the
10 At the same hearing, the court granted Fairway’s unopposed motion to seal the
contract between it and Arbor Health based on the parties’ stipulated protective order. 11 In May 2022, responding to the clerk of Division Two of this court, the parties stipulated
to a trial court order dismissing with prejudice all of Fairway’s claims against Turner.
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litigation.” Ranger Ins. Co., 164 Wn.2d at 552. A “material fact” is one upon which
the outcome of the litigation depends. Jacobsen v. State, 89 Wn.2d 104, 108,
569 P.2d 1152 (1977).
The trial court granted summary judgment dismissing of all of Turner’s
counterclaims. Those counterclaims alleged, first, that Fairway’s actions violated
the CPA based on violations of the CAA or the FDCPA, and second, that the
same actions independently violated the CPA.
I. Summary Judgment Dismissal of CPA and FDCPA Claims
The CPA broadly prohibits “[u]nfair methods of competition and unfair or
deceptive acts or practices in the conduct of any trade or commerce,” RCW
19.86.020. The purpose of the CPA is to complement the body of federal law
governing restraints of trade, unfair competition, and unfair, deceptive, and
fraudulent acts and practices in order to protect the public and foster honest and
fair competition. Panag, 166 Wn.2d at 37 (citing RCW 19.86.920).
To prevail in a private CPA claim, the plaintiff must prove (1) an unfair or
deceptive act or practice, (2) occurring in trade or commerce, (3) affecting the
public interest, (4) injury to a person’s business or property, and (5) causation.
Hangman Ridge Stables, Inc. v. Safeco Title Ins. Co., 105 Wn.2d 778, 784-85,
719 P.2d 531 (1986), cited in Panag v. Farmers Ins. Co. of Wash., 166 Wn.2d
27, 37, 204 P.3d 885 (2009). A CPA claim may be predicated on either a per se
violation of a statute or on a deceptive practice unregulated by statute but
involving the public interest. Id. at 37 n.3.
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A. Per Se Violation of the CPA
A per se claim allows a plaintiff to satisfy the first three elements of the
CPA’s five-element test by proving a predicate violation of “a statute that contains
a specific legislative declaration of public interest impact.” RCW 19.86.093(2);
Hangman, 105 Wn.2d at 784-89. The CAA contains such a declaration. Panag,
166 Wn.2d at 53; see also RCW 19.16.440 (“the commission . . . of an act or
practice prohibited by RCW 19.16.250 . . . [is] declared to be unfair acts or
practices or unfair methods of competition in the conduct of trade or commerce
for the purposes of the application of the [CPA].”). A violation of the FDCPA also
constitutes a per se violation of the CPA, “reflecting the public policy significance”
of the “highly regulated field” of consumer debt collection. Panag, 166 Wn.2d at
53.
Turner alleges two different ways that Fairway violated either the CAA or
the FDCPA, and thus violated the CPA per se. First, Turner claims Fairway
attempted to collect debt principal it was not authorized to collect because he
was not screened for charity care when Fairway filed its complaint. Second, he
claims Fairway attempted to collect collection fees greater than Arbor Health
authorized it to, i.e., 40 percent instead of 35 percent.
1. Fairway’s efforts to collect the principal debt without screening for charity care
Turner alleges that Fairway attempted to collect debt principal not
authorized for collection because he was not screened for charity care before
Fairway took action to collect his debt to Arbor Health. Fairway argues that it is
9 No. 85042-3-I/10
not a hospital responsible for charity care, so it was authorized to collect the debt
principal. We agree with Turner that there is a genuine issue of material fact
about whether Fairway violated the FDCPA and, therefore, the CPA per se
because it falsely represented the character and status of the debt principal it
sought to collect.
One predicate for Turner’s per se CPA claim is a claimed violation of the
CAA. The CAA includes as a prohibited practice that no licensed debt collector
shall “[t]hreaten to take any action against the debtor which the licensee cannot
legally take at the time the threat is made.” RCW 19.16.250(16).
Turner also predicates his per se CPA claim on violations of the federal
FDCPA. 12 Similar to the CPA’s broad prohibition of “unfair or deceptive acts or
practices in the conduct of any trade or commerce,” RCW 19.86.020, § 1692e of
the federal FDCPA broadly prohibits the “use of any false, deceptive, or
misleading representation or means in connection with the collection of any
debt.” 15 U.S.C. § 1692e. It includes a nonexclusive list of sixteen practices that
are deemed to be “false, deceptive, or misleading,” one of which encompasses
the false representation of “the character, amount, or legal status of any debt[.]”
15 U.S.C. § 1692e(2)(A). Turner also claims Fairway violated FDCPA § 1692f,
which implements a sweeping ban on the use of “unfair or unconscionable
means to collect or attempt to collect any debt.” 15 U.S.C. § 1692f. Among eight
12 For a plaintiff to recover under the FDCPA, there are three threshold requirements:
(1) the plaintiff must be a “consumer”; (2) the defendant must be a “debt collector”; and (3) the defendant must have committed some act or omission in violation of the FDCPA. Robinson v. Managed Accounts Receivables Corp., 654 F. Supp. 2d 1051, 1057 (C.D. Cal. 2009). Fairway does not dispute that the first two elements are satisfied.
10 No. 85042-3-I/11
nonexclusive examples of “unfair or unconscionable means,” of relevance here,
§ 1692f(1) prohibits “[t]he collection of any amount (including any interest, fee,
charge, or expense incidental to the principal obligation) unless such amount is
expressly authorized by the agreement creating the debt or permitted by law.”
As to Turner’s claims based on collection letters sent by Fairway, the
evidence before the trial court included Turner’s declaration that he could not
recall receiving any letter from Fairway or Arbor Health and did not know he was
ever a patient at Arbor Health. According to Arbor Health’s CFO, Richard
Boggess, its former billing service provider destroyed billing statements sent
during 2016-2017 but on “information and belief,” he believes the letters Arbor
Health sent Turner would have included information about charity care. Fairway
also provided evidence that it sent a letter to Turner in 2016 stating it would add
a collection fee of 35 percent, as well as a letter in 2017 and three more in 2018.
Fairway did not maintain copies of those letters, but Gwen Turner provided a
template and attested to how the template’s blank fields would have been filled
in.
The record also contains unrebutted evidence that Arbor Health properly
assigned its debt to Fairway. Turner provided no evidence as to the content of
the letters, as he claimed not to have received them. Thus, the only evidence at
summary judgment was that Arbor Health included charity care information in the
letters it sent, even if Turner did not receive them. Without any competent
evidence of a letter or bill sent to Turner prior to the filing of its lawsuit that failed
to apprise him that he could seek charity care to reduce the amount of his debt
11 No. 85042-3-I/12
principal, there is no genuine issue of material fact as to whether such letters
violated the CAA or the FDCPA. Thus, the trial court properly dismissed Turner’s
claims for per se CPA violations based on letters sent in 2016, 2017, 2018, and
2020. 13
Turner also claims the complaint in the present lawsuit 14 violated the CPA,
CAA, and/or the FDCPA 15 because in it, Fairway failed to account for his
eligibility for charity care and, thus, sought to collect debt principal that it was not
authorized to collect. There is no dispute that, at the time Fairway filed its suit
against him, Turner had not been screened for charity care. The charity care act
requires that “[a]n initial determination of [charity care] sponsorship status shall
precede collection efforts directed at the patient.” RCW 70.170.060(10)(c). The
record evidence shows that when Turner subsequently applied for charity care in
May 2021, he was awarded 75 percent sponsorship. When Fairway learned that
Arbor Health awarded Turner charity care, as Gwen Turner attested, “Fairway
credited the balance, accepted the payment for the remaining balance from
Defendant’s attorney and dismissed the collection case based on the payment of
the charity care amount.”
13 Turner’s counterclaims also alleged the content of collection letters Fairway declared it
sent him violated RCW 19.16.250(28) & (29). Below, Turner conceded those claims. 14 The FDCPA’s statute of limitations is one year. 15 U.S.C. § 1692k(d). Thus, Turner
acknowledges that only his claim regarding the complaint with which Fairway initiated its lawsuit is within the FDCPA statute of limitations, not the content of any letters Fairway sent to Turner before it filed suit. Because Turner first became aware of Fairway’s collection efforts when it sued him, the FDCPA’s statute of limitations accrued as of the date Fairway filed its suit, which was January 4, 2021. See Naas v. Stolman, 130 F.3d 892, 893 (9th Cir. 1997). 15 A lawsuit can be a communication subject to the CPA and FDCPA. Donohue v. Quick
Collect, Inc., 592 F.3d 1027, 1031-32 (9th Cir. 2010) (“We decide this issue and conclude that a complaint served directly on a consumer to facilitate debt-collection efforts is a communication subject to the requirements of §§ 1692e and 1692f.”).
12 No. 85042-3-I/13
However, the FDCPA is a strict liability statute, Clark v. Cap. Credit &
Collection Servs., Inc., 460 F.3d 1162, 1175 (9th Cir. 2006), meaning that debt
collectors are “liable for violations that are not knowing or intentional,” Reichert v.
Nat’l Credit Sys., Inc., 531 F.3d 1002, 1005 (9th Cir. 2008). In determining
whether a debt collector’s conduct violates § 1692e or f, a court “undertake[s] an
objective analysis” and asks “whether the ‘least sophisticated debtor would likely
be misled by a communication.’ ” Stimpson v. Midland Credit Mgmt., Inc., 944
F.3d 1190, 1196 (9th Cir. 2019) (quoting Gonzales v. Arrow Fin. Servs. 660 F.3d
1055, 1061 (9th Cir. 2011)). “This is a legal, not a factual, determination.” Id.
Under this standard, a debtor need not show that he has “actually been misled or
deceived by the debt collector’s representation; instead, liability depends on
whether the hypothetical ‘least sophisticated debtor’ likely would be misled.”
Tourgeman v. Collins Fin. Servs., Inc., 755 F.3d 1109, 1117-18 (9th Cir. 2014). 16
Further, the FDCPA punishes only material false statements. Donohue v.
Quick Collect, Inc., 592 F.3d 1027, 1033 (9th Cir. 2010). Material false
statements are “those that could ‘cause the least sophisticated debtor to suffer a
disadvantage in charting a course of action in response to the collection effort.’ ”
Afewerki v. Anaya Law Grp., 868 F.3d 771, 773 (9th Cir. 2017) (quoting
Tourgeman, 755 F.3d at 1121). In contrast, “immaterial statements, by definition,
16 The hypothetical least sophisticated debtor is “distinguished from the ordinary,
reasonable person by being financially unsophisticated,” and “is comparatively uninformed and naive about financial matters and functions as an ‘average consumer in the lowest quartile . . . of consumer competence.’ ” Stimpson, 944 F.3d at 1196 (quoting Evory v. RJM Acquisitions Funding L.L.C., 505 F.3d 769, 774 (7th Cir. 2007)); see also Evon v. Law Offices of Sidney Mickell, 688 F.3d 1015, 1027 (9th Cir. 2012) (the hypothetical least sophisticated debtor is “uninformed, naive, and gullible”).
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do not affect a consumer’s ability to make intelligent decisions” because they are
“mere technical falsehoods that mislead no one.” Donohue, 592 F.3d at 1034.
Fairway’s complaint alleging Turner owed $7,432.42 of debt principal is
material for the purposes of the FDCPA because such a complaint filed in court
and served on a consumer would likely mislead the hypothetical least
sophisticated debtor. As amended, Fairway’s complaint describes Turner’s debt
as follows:
Defendants became indebted to ARBOR HEALTH for an account receivable which was incurred in the ordinary course of ARBOR HEALTH’s business, consisting of certain goods and medical services rendered to Defendant Michael I. Turner, which ARBOR HEALTH is duly licensed to render, for the principal assigned amount of $7432.42 plus collections costs per RCW 19.16.500 (Government) of $2972.97 for the goods and services provided on or about July 17, 2016 and on or about July 22, 2016, no part of which has been paid, despite demand being made for those sums. 17
The complaint does not include any mention of charity care or advise Turner that
he may be eligible. 18
Fairway argues that any obligation to provide information about charity
care did not apply to it, but rather, only to Arbor Health. It is true that the charity
care law at the time Turner was hospitalized placed only on hospitals the
obligation to make "every reasonable effort to determine . . . [t]he existence or
17 The amount of collection costs is stated as either $2,972.97 or $2,972.77. The twenty-
cent difference has no legal significance here. 18 The original complaint, for an “account stated” rather than an “account receivable,”
states the same amounts due as debt principal and collection fees and specifies that no pre- judgment interest, late fees, handling fees, or treble damage amounts are owed. Like the amended complaint, it does not include any mention of charity care or advise Turner he may be eligible.
14 No. 85042-3-I/15
nonexistence of private or public sponsorship which might cover in full or part the
charges for care rendered by the hospital to a patient.” Former RCW
70.170.060(10)(a) (2018). But by the time Fairway filed the lawsuit seeking to
collect the debt, the charity care law had been amended to create broader
obligations relating to medical debt, beyond the hospital. Effective October 1,
2018, the law requires the following:
(8)(a) All hospital billing statements and other written communications concerning billing or collection of a hospital bill by a hospital must include the following or a substantially similar statement prominently displayed on the first page of the statement in both English and the second most spoken language in the hospital’s service area: You may qualify for free care or a discount on your hospital bill, whether or not you have insurance. Please contact our financial assistance office at [website] and [phone number].
RCW 70.170.060 (emphasis added).
The law has no deadline by which a former patient must apply for
charity care. As Turner’s experience shows, a patient may seek screening
for charity care even after the bill has gone into collection. Even though
the obligation to screen for charity care applies to Arbor Health, not
Fairway, Fairway is responsible for including a notice about charity care
when seeking to collect on a hospital bill under the plain language of RCW
70.170.060. Additionally, Fairway accepted this duty to notify debtors as a
contractual obligation; its contract with Arbor Health states, “Client [Arbor
Health] assigns all rights and claims to collect the account on its behalf”
and, further, that “Fairway shall comply with all applicable laws and
regulations relating to debt collections . . . .”
15 No. 85042-3-I/16
One purpose of the 2018 amendments to the charity care law is
that patients are informed they may be eligible for charity care so they will
inquire about their eligibility. But Fairway’s complaint did not include that
information. Instead, Turner was obliged to investigate and obtain
assistance from counsel to seek a reduction of Arbor Health’s bill.
Thus, the issue is not whether Fairway screened Turner. And it is
immaterial whether Turner was eventually screened and deemed eligible
for charity care, even though his ultimately successful application
establishes that he was. 19 Rather, focusing the inquiry on the content of
Fairway’s complaint, there is a question of fact as to whether Fairway
falsely represented the character, amount, or legal status of debt it sought
to collect. See 15 U.S.C. § 1692e(2)(A) (“The false representation of the
character, amount, or legal status of any debt [is a violation.]”). And a
violation of the FDCPA is a per se violation of the CPA. Panag, 166 Wn.2d
at 53.
Therefore, the record before the trial court establishes a genuine
issue of material fact about whether, at the time Fairway filed its suit, it
falsely represented the character, amount, and legal status of the debt it
19 “Although the FDCPA is a strict liability statute, it excepts from liability those debt
collectors who satisfy the ‘narrow’ bona fide error defense.” McCollough v. Johnson, Rodenburg & Lauinger, LLC, 637 F.3d 939, 948 (9th Cir. 2011) (citing Reichert v. Nat’l Credit Sys., Inc., 531 F.3d 1002, 1005 (9th Cir. 2008) (quotation omitted)). A debt collector cannot be held liable under the FDCPA if it “shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.” 15 U.S.C. § 1692k(c). But Fairway does not raise this affirmative defense; it simply asserts that it is not a hospital so the charity care act cannot apply to it.
16 No. 85042-3-I/17
sought to collect in violation of FDCPA § 1692e. This same evidence
establishes a question of fact as to Turner’s claim of a per se CPA
violation because a violation of the FDCPA constitutes a per se violation of
the CPA. 20 Id. at 53.
2. Fairway’s efforts to recover collection fees
Turner also claims that Fairway violated the CAA, and therefore the CPA
per se, because it charged collection fees of 40 percent of the debt principal
when its contract with Arbor Health allowed it to charge only 35 percent.
Procedurally, Fairway disputes that this claim was encompassed by Turner’s
initial counterclaims and argues the court properly denied Turner leave to amend
to add this claim. On the merits, Fairway claims that there was a clerical error in
the contract as to the proper amount Fairway could charge.
Lewis County Hospital District No.1 d/b/a Arbor Health is a public entity,
and the CAA allows collection agencies to charge a collection fee when collecting
debts for public entities in an amount “left to the agreement of the governmental
entity and its collection agency or agencies.” RCW 19.16.500(1)(b). The CAA
defines as “reasonable” a contingent fee of up to 50 percent of the first $100,000
20 Because the record creates a genuine issue of material fact as to Turner’s claim of a
violation of the FDCPA § 1692e, and thus the CPA per se, we need not determine whether the same actions by Fairway also separately violated the CAA, RCW 19.16.250(16), by threatening to take an action it could not legally take. The CAA is Washington’s counterpart to the FDCPA, and “the CPA is intended to provide broader protection than exists under the common law or statute.” Panag, 166 Wn.2d at 54. Also, we need not separately address whether Fairway’s complaint’s failure to mention charity care violates FDCPA § 1692f, because § 1692f is a “catch-all” provision that applies only to unfair conduct that does not violate any other section of the FDCPA. See, e.g., Baker v. Allstate Fin. Servs., Inc., 554 F. Supp. 2d 945, 953 (D. Minn. 2008) (“Congress enacted Section 1692f to catch conduct not otherwise covered by the FDCPA.”); Scott v. Portfolio Recovery Assocs., LLC, 139 F. Supp. 3d 956, 969 (S.D. Iowa 2015) (dismissing § 1692f claim because garnishing wages without authorization falls under § 1692(e)(5)).
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and up to 35 percent over $100,000 of unpaid debt. RCW 19.16.500(1)(b).
However, the CAA states that it is a prohibited practice for a licensed collection
agency to
(21) Collect or attempt to collect in addition to the principal amount of a claim any sum other than allowable interest, collection costs or handling fees expressly authorized by statute, and, in the case of suit, attorney’s fees and taxable court costs. A licensee may collect or attempt to collect collection costs and fees, including contingent collection fees, as authorized by a written agreement or contract, between the licensee’s client and the debtor, in the collection of a commercial claim. The amount charged to the debtor for collection services shall not exceed thirty-five percent of the commercial claim.
RCW 19.16.250(21) (emphasis added).
After Arbor Health produced an unredacted version of its contract with
Fairway, which showed that their 2014 contract stated the amount Fairway could
collect as a collection fee was 35 percent of the principal balance, Turner sought
leave to amend his counterclaims based on this newly produced evidence. The
court denied the request for leave to amend in an oral ruling, and Turner assigns
error to that ruling. However, we need not address whether the court abused its
discretion in denying the motion to amend, because the summary judgment
record considered by the court included the unredacted 2014 contract, and the
briefing and oral argument by both parties addressed the issue of the correct
amount of Fairway’s collection fee. 21 “When issues not raised by the pleadings
21 Along with his motion for leave to amend, Turner filed a declaration attaching the
unredacted 2014 contract that Arbor Health provided in response to his subpoena showing the 35 percent collection fee. Turner’s response to Fairway’s motion for summary judgment includes argument that the 2014 contract with Arbor Health did not support a 40 percent fee and refers to the unredacted 2014 contract. Fairway’s reply brief on summary judgment included a supplemental declaration from Gwen Turner admitting that the 2014 contract produced by Arbor
18 No. 85042-3-I/19
are tried by express or implied consent of the parties, they shall be treated in all
respects as if they had been raised in the pleadings.” CR 15(b).
Turning to the merits of the collection fee issue, the summary judgment
record before the trial court included this evidence:
• The November 16, 2017, letter from Morton General Hospital addressed to Turner that was sent “through Fairway,” stating that if the bill were sent to collections, Fairway would add a collection fee of 35 percent.
• Arbor Health’s unredacted 2014 contract with Fairway stating that, “pursuant to . . . RCW 19.16.500,” “[c]ollection fees shall be added . . . at the rate of 35% of the principal amount assigned.”
• Fairway’s amended complaint seeking $2,972.97 in collection fees on debt principal of $7,432.42, which amounts to collection fees at the rate of 40 percent, not 35 percent.
• Gwen Turner’s declaration stating that Arbor Health’s contract contained a “typographical error.” 22
Because Turner’s counterclaim depends on whether Arbor Health’s
contract authorized it to collect fees of 40 percent, the amount of collection fees
Health contained a different amount for the fee, but claiming it was a “typographical error.” And at oral argument on the summary judgment motion, both parties argued the issue of the correct amount of Fairway’s collection fee. Thus, the unredacted contract showing a 35 percent agreed to collection fee and Turner’s claims based on the allegation that Fairway charged more than 35 percent were before the court on summary judgment. 22 On appeal, Turner argues that Gwen Turner’s February 22, 2022, declaration is not
admissible because “[e]xtrinsic evidence is not admissible to contradict the plain language of a contract.” Turner misapplies the parol evidence rule. The issue here is not the formation of a contract or the meaning of a term. Instead, Gwen Turner’s February 22 declaration is admissible evidence because it is a sworn declaration made on personal knowledge about whether Arbor Health’s unredacted contract stating 35 percent contains a typographical error. CR 56(e). Fairway argues the same declaration is “undisputed evidence that the collections costs [it] demanded w[ere] proper” because “Turner failed to present any evidence that the collection costs were inflated.” Although Turner challenged Gwen Turner’s declaration below, he does not assign error to any issue regarding its admissibility on appeal. But his failure to challenge it does not mean Gwen Turner’s declaration is the only evidence regarding this issue. The 2014 contract itself, which states the collection fee was 35 percent, was part of the summary judgment record, as Turner’s attorney attested in his declaration that Arbor Health had provided it in response to a subpoena.
19 No. 85042-3-I/20
authorized by the contract is a material fact. Viewing the evidence in the light
most favorable to Turner, there is a genuine issue of material fact because the
letter, the contract, Fairway’s complaint, and the declaration cannot be reconciled
with one another. If Gwen Turner’s February 22 declaration is correct and Arbor
Health’s contract contains a typo, then Fairway had contractual authority to seek
40 percent in fees, but the November 16 letter Fairway sent to Turner is
incorrect. 23 If, on the other hand, Arbor Health’s unredacted contract is correct
and Fairway could collect 35 percent for non-Medicare accounts, then the letter
Fairway sent for Arbor Health is correct, but the amount of fees Fairway sought
to collect was not authorized and Gwen Turner’s February 22 declaration is not
correct.
Reasonable minds could differ on these facts, so a genuine issue exists.
Ranger Ins. Co., 164 Wn.2d at 552. We thus conclude the summary judgment
evidence established genuine issues of material fact regarding Turner’s
counterclaims alleging a violation of the CAA as to the collection fees and, thus,
a per se CPA violation.
B. Injury and Causation Elements of CPA Claim
If there is sufficient proof regarding the violations of the FDCPA as to debt
principal and the CAA as to collection fees as discussed above, this evidence
establishes a per se CPA violation. See Panag, 166 Wn.2d at 53. A per se
violation establishes the first three elements of the Hangman test for a violation
23 We note RCW 19.16.250(21) caps collection fees at 35 percent.
20 No. 85042-3-I/21
of the CPA. 105 Wn.2d at 784-89. Thus, to survive summary judgment dismissal
of his CPA claims, Turner must also point to evidence sufficient to establish injury
and causation, the fourth and fifth elements of the Hangman test. Id. at 785.
A “violation of the CPA requires some causal relationship between the
unfair or deceptive trade practice and the alleged injury to support a private right
of action.” Panag, 166 Wn.2d at 61. “The issue is whether the plaintiff was
wrongfully induced to pay money on a debt not owed ‘or to incur expenses that
would not otherwise have been incurred.’ ” Id. at 62 (quoting Wiginton v. Pac.
Credit Corp., 2 Haw. App. 435, 444-45, 634 P.2d 111 (1981)). “Consulting an
attorney to dispel uncertainty regarding the nature of an alleged debt is distinct
from consulting an attorney to institute a CPA claim,” so “[i]nvestigation expenses
and other costs resulting from a deceptive business practice sufficiently establish
injury.” Panag, 166 Wn.2d at 62.
Here, the evidence showed that, when Fairway served its complaint on
Turner, he was “frantic” to protect his good credit, so he called one attorney and
then engaged another to manage Fairway’s claim. Turner thus incurred costs to
investigate the lawsuit filed by Fairway. This evidence is sufficient to establish a
genuine issue of material fact as to causation and damages, the fourth and fifth
elements of Turner’s CPA claim. Therefore, as there are also genuine issues of
fact regarding the first three elements through evidence of per se CPA violations,
21 No. 85042-3-I/22
the trial court erred by dismissing Turner’s counterclaims under the CAA, the
FDCPA and the CPA. 24
II. Motion to Enforce Settlement Agreement
Fairway cross-appeals and assigns error to the trial court’s order denying
its motion to enforce a settlement agreement between the parties. Turner argues
that Fairway never agreed to his terms and he never agreed to its terms, so there
never was a settlement agreement for the court to enforce. We agree with
Turner.
In Washington, a trial court’s authority to compel enforcement of a
settlement agreement is governed by CR 2A. Morris v. Maks, 69 Wn. App. 865,
868, 850 P.2d 1357 (1993). CR 2A states:
No agreement or consent between parties or attorneys in respect to the proceedings in a cause, the purport of which is disputed, will be regarded by the court unless the same shall have been made and assented to in open court on the record, or entered in the minutes, or unless the evidence thereof shall be in writing and subscribed by the attorneys denying the same.
At least two criteria govern whether an agreement is disputed within the
meaning of the rule. In re Marriage of Ferree, 71 Wn. App. 35, 40, 856 P.2d 706
(1993). “First, there must be a dispute over the existence or material terms of the
agreement, as opposed to a dispute over its immaterial terms.” Id. A material
term is one that goes to the “substance, gist, or legal effect” of the agreement. Id.
“Second, the dispute must be a genuine one,” meaning that the purpose of CR
24 Based on this conclusion, we do not separately address Turner’s claims of non-per se
violations of the CPA.
22 No. 85042-3-I/23
2A is served by barring the enforcement of an alleged agreement that is
genuinely disputed, “for such a dispute adds to the issues that must be tried.” Id.
at 40-41.
CR 2A “supplements but does not supplant the common law of contracts.”
Ferree, 71 Wn. App. at 39. Washington follows the objective manifestation theory
of contracts, meaning the intent of the parties is determined by their objective
manifestations rather than any unexpressed subjective intent. Condon v.
Condon, 177 Wn.2d 150, 162, 298 P.3d 86 (2013).
Summary judgment procedures apply to a motion to enforce a settlement
agreement under CR 2A: the moving party has the burden to prove, in the light
most favorable to the nonmoving party, that no genuine dispute exists regarding
an agreement’s existence or material terms. Id. at 161-62. We review a decision
regarding settlement enforcement de novo. Condon, 177 Wn.2d at 162; see also
id. at 161 n.4 (explaining that de novo review is appropriate despite abuse of
discretion having been the standard in the past).
In April 2021, Turner offered in writing to settle. The offer stated that he
was “not interested in negotiating this offer. It is a take it or leave it offer.” His
offer proposed “a mutual release of all claims and a mutual dismissal with
prejudice of all claims.” It required Fairway and Arbor Health not to treat
settlement as a cancellation of debt for tax purposes, and it required them to
recall any reports issued to credit reporting agencies.
The parties agreed to a May 12 deadline for Fairway’s response. On
May 11, Fairway emailed Turner that it and Arbor Health had “authority to accept
23 No. 85042-3-I/24
a mutual walk away releasing all parties by both sides.” Fairway drafted “a
proposed settlement agreement” and “circulat[ed] it on [Fairway’s] side to see if
there are any proposed changes.” Fairway’s initial draft of a settlement
agreement did not include either the tax or credit reporting terms Turner required,
although its second draft did. Fairway also added terms not in Turner’s proposal
that imposed affirmative duties on him, including a confidentiality term, a
nondisparagement term, and a requirement that he indemnify Fairway against
any claim Medicare might assert. The proposal also addressed costs and
attorney’s fees. Turner regarded Fairway’s agreement as a counteroffer.
Here, the record shows that neither Turner’s offer to Fairway nor Fairway’s
draft of a “confidential settlement agreement” memorializing settlement was
subscribed to by the other party. Rather, Fairway’s purported acceptance was a
counteroffer that added material terms: confidentiality, nondisparagement, and
indemnification. Further, Turner never signed Fairway’s settlement agreement,
and he expressly rejected it in several emails. We therefore conclude that CR 2A
is not satisfied because Fairway has not met its threshold burden to establish
that a settlement agreement exists about which there are no disputed material
terms. 25 We affirm the denial of Fairway’s motion to enforce settlement.
25 Turner also argues that Fairway’s appeal should be dismissed because it failed to
perfect the record by including a verbatim report of proceedings of the parties’ oral argument before the trial court on Fairway’s motion to enforce. While the party seeking review has the burden to perfect the record, Rhinevault v. Rhinevault, 91 Wn. App. 688, 692, 959 P.2d 687 (1998), our review here is de novo, and the record contains all the documents that were before the trial court. Moreover, the rules on appeal allowed Turner to add the transcript of oral argument to the record if he wished. RAP 9.2. Consequently, we conclude that the record on appeal is sufficient for de novo review of the errors assigned. See Favors v. Matzke, 53 Wn. App. 789, 794, 770 P.2d 686 (1989).
24 No. 85042-3-I/25
III. Fees and Costs
In Turner’s opening brief, he requests this court to “reserve for the trial
court a decision on an award of attorney fees and costs” incurred on appeal.
Turner cites the CPA’s treble damages provision, RCW 19.86.090, which also
allows “the costs of the suit, including a reasonable attorney’s fee,” as well as 15
U.S.C. § 1692k(a)(3), which likewise allows for “the costs of the action, together
with a reasonable attorney’s fee.”
Because Turner is the party that substantially prevailed on appeal, he is
entitled to recover costs under RAP 14.2. If he prevails on remand, he may
request, and the trial court may award, costs and fees based on RCW 19.86.090
and 15 U.S.C. § 1692k(a)(3).
Reversed in part, affirmed in part, and remanded for further proceedings
consistent with this opinion.
WE CONCUR: