Flores v. Wakefield & Associates Incorporated

• Court: District Court, D. Arizona
• Decided: January 11, 2023
• Docket: 2:21-cv-01645
• Status: Unknown

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 Antonio Flores, No. CV-21-01645-PHX-DLR

10 Plaintiff, ORDER

11 v.

12 Frost-Arnett Company,

13 Defendant. 14 15 16 Pending before the Court are Defendant’s motion for summary judgment (Doc. 41) 17 and Plaintiff’s motion for partial1 summary judgment (Doc. 42), which are both fully 18 briefed. The Court grants Plaintiff’s motion and denies Defendant’s motion. 19 I. Background 20 The following facts are undisputed. Plaintiff was injured on the job and underwent 21 several surgeries. A month after the injury, he filed a worker’s compensation claim with 22 the Industrial Commission of Arizona, which was accepted. (Doc. 42 at 80-82.) He 23 received medical treatment a few years later from Valley Anesthesiology Consultants for 24 that same injury. (Id. at 36-38.) 25 Valley Anesthesiology Consultants (“VAC”) placed that debt with Defendant for 26 collection, sending the account as a data file. (Id. at 112, 179-180.) As Defendant does with 27 all accounts sent over from VAC, it conducted a keyword search on the data file associated

28 1 Plaintiff moves for summary judgment on the issue of liability for all claims but asks the Court to reserve the issue of damages for a jury. 1 with the account from VAC created by Plaintiff’s medical treatment. (Doc. 41 at 22-23.) 2 The search detected no signs that the account was associated with a worker’s compensation 3 claim. (Id. at 23.) 4 Defendant mailed a letter to Plaintiff indicating that he owed $1,494 on the account 5 and could pay that amount with check or money order. The letter also stated: 6 Unless you notify this office within 30 days after receiving this notice that you dispute the validity of this debt or any portion 7 thereof, this office will obtain verification of the debt or obtain a copy of a judgment and amil you a copy of such judgment or 8 verification. If you request this office in writing within 30 days after receiving this notice this office will provide you with the 9 name and address of the original creditor, if different from the current creditor. 10 11 (Id. at 47.) Plaintiff received the letter and others like it but never responded. Plaintiff’s 12 deposition testimony indicates that he lost sleep over receiving the letter. (Doc. 42 at 57.) 13 Ultimately, Plaintiff sought a prescription for sleeping pills from his doctor, which cost 14 about $150. (Docs. 41 at 67; 42 at 52.) Plaintiff told Defendant that he could not pay but 15 did not dispute the validity of the debt as invited by the letter or indicate the debt was 16 related to a worker’s compensation claim. (Doc. 42 at 57.). 17 Plaintiff sued Defendant under the Fair Debt Collection Practices Act (“FDCPA”). 18 Defendant thereafter ceased attempts to collect the debt. 19 II. Standard 20 Summary judgment is appropriate when there is no genuine dispute as to any 21 material fact and, viewing those facts in a light most favorable to the nonmoving party, the 22 movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). A fact is material 23 if it might affect the outcome of the case, and a dispute is genuine if a reasonable jury could 24 find for the nonmoving party based on the competing evidence. Anderson v. Liberty Lobby, 25 Inc., 477 U.S. 242, 248 (1986). Summary judgment may also be entered “against a party 26 who fails to make a showing sufficient to establish the existence of an element essential to 27 that party’s case, and on which that party will bear the burden of proof at trial.” Celotex 28 Corp. v. Catrett, 477 U.S. 317, 322 (1986). And “conclusory allegations, unsupported by 1 facts are insufficient to survive a motion for summary judgment.” Hernandez v. Spacelabs 2 Med. Inc., 343 F.3d 1107, 1116 (9th Cir. 2003). 3 The party seeking summary judgment “bears the initial responsibility of informing 4 the district court of the basis for its motion, and identifying those portions of [the record] 5 which it believes demonstrate the absence of a genuine issue of material fact.” Celotex, 477 6 U.S. at 323. The burden then shifts to the non-movant to establish the existence of a genuine 7 and material factual dispute. Id. at 324. The non-movant “must do more than simply show 8 that there is some metaphysical doubt as to the material facts[,]” and instead “come forward 9 with specific facts showing that there is a genuine issue for trial.” Matsushita Elec. Indus. 10 Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986) (internal quotation and citation 11 omitted). 12 III. Analysis 13 A. Standing 14 Defendant argues that Plaintiff has not shown that he suffered an injury in fact and 15 thus lacks standing to bring this suit. An injury in fact is an injury that is “‘concrete and 16 particularized’ and ‘actual or imminent, not conjectural or hypothetical.’” Spokeo, Inc. v. 17 Robins, 578 U.S. 330, 338 (2016) (“Spokeo II”) (quoting Lujan v. Defs. of Wildlife, 504 18 U.S. 555, 560 (1992)). Plaintiff has provided evidence that he spent $150 on sleeping pills 19 as a result of the stress from receiving Defendant’s letter. Defendant counters that Plaintiff 20 sought sleeping pills for loss of sleep beginning before the letter, creating a disputed fact 21 that precludes summary judgment in its favor. 22 B. The FDCPA violation 23 “In order for a plaintiff to recover under the FDCPA, there are three threshold 24 requirements: (1) the plaintiff must be a ‘consumer’; (2) the defendant must be a ‘debt 25 collector’; and (3) the defendant must have committed some act or omission in violation 26 of the FDCPA.” Robinson v. Managed Accts. Receivables Corp., 654 F. Supp. 2d 1051, 27 1057 (C.D. Cal. 2009). It is undisputed Plaintiff is a consumer and Defendant is a debt 28 collector. (Docs. 42 at 6-8; 46 (failing to dispute).) Only the third element—whether 1 Defendant committed a violation of the FDCPA—is at issue. 2 The FDCPA prohibits collectors from using any “false, deceptive, or misleading 3 representation or means” in collecting a debt, including “misrepresenting the legal status 4 of the alleged debt[.]” 15 U.S.C. §§ 1692e, 1692e(2)(A). Whether a collector’s conduct is 5 false, deceptive, or misleading is an objective inquiry that considers whether the “least 6 sophisticated debtor” would likely be misled. Donohue v. Quick CCollect, Inc., 592 F.3d 7 1027, 1030 (9th Cir. 2010). “[T]he least sophisticated debtor is reasonable and functional, 8 but lacks experience and education regarding financial matters.” Stimpson v. Midland 9 Credit Mgmt., Inc., 944 F.3d 1190, 1196 (9th Cir. 2019). 10 Defendant’s letter indicated that Plaintiff owed $1,494 on an account placed with 11 Defendant by VAC, who had provided medical treatment to Plaintiff. (Doc. 42 at 255). The 12 letter also included a section that Plaintiff could cut off and return in an envelope along 13 with a “check or money order” for the $1,494. Although Defendant argues it did not know 14 it at the time, it is undisputed that the debt it attempted to collect was connected to a 15 worker’s compensation claim, which makes it uncollectable in Arizona. See A.R.S. § 23- 16 1062.01(D). 17 Lacking “experience and education regarding financial matters,” the least 18 sophisticated debtor would likely be misled by this letter into thinking he owed the $1,494 19 while his worker’s compensation claim was being processed. Defendant argues that 20 Plaintiff could not have recognized the letter as a debt collection letter because he could 21 not read English. But Plaintiff’s individual capacity to understand the letter to Defendant’s 22 satisfaction is irrelevant: the “least sophisticated debtor” test is an objective one, not a 23 subjective one. A reasonable juror could only conclude it is likely that when presented with 24 this letter—which announced that the recipient has a balance due of $1,494—the least 25 sophisticated debtor would be misled into believing he legally owed the debt. 26 Defendant nevertheless argues that the Court should construe the worker’s 27 compensation debt as “an allegedly invalid identify theft debt,” considering that 28 “communications regarding that [sort of] debt are not deemed false, misleading or 1 deceptive” under the FDCPA. (Doc. 41 at 11 (citing Story v. Midland Credit Funding, LLC, 2 No. 15-cv-194-AC, 2015 WL 7760190, at *7 (D. Or. Dec. 2, 2015).) Defendant cites no 3 controlling authority for this argument. Plaintiff cites contrary, non-controlling authority. 4 The FDCPA is a strict liability statute, holding collectors liable for “violations that 5 are not knowing or intentional.” Reichert v. Nat’l Credit Sys., Inc., 531 F.3d 1002, 1005 6 (9th Cir. 2008). The Ninth Circuit has not carved out an identity-theft loophole. Instead, 7 the FDCPA, allows creditors to avoid liability only by successfully employing the bona 8 fide error defense, an affirmative defense upon which an asserting defendant bears the 9 burden of proof. See 15 U.S.C. § 1692k. To that end, Defendant’s argument that it should 10 be immune from violations because “it cannot know what it cannot know” is beside the 11 point: strict liability means that Defendant’s knowledge is irrelevant. Reichert, 531 F.3d at 12 1005. Besides, Defendant concedes that identity theft cases “can be factually distinguished 13 from the case at bar[.]” (Doc. 48 at 8.) 14 Because the FDCPA is a strict liability statute, the identity theft argument fails. 15 Defendant violated 15 U.S.C. § 1692eby misrepresenting the debt as one personally owed 16 by Plaintiff when it was, in fact, an uncollectable worker’s compensation debt.2 17 C. The bona fide error defense 18 Both parties move for summary judgment on Defendant’s bona fide error 19 affirmative defense.3 “The bona fide error defense requires a showing that the debt

20 2 Plaintiff advises the Court that because a consumer need establish only one violation to recover, Kaiser v. Cascade Cap., LLC, 989 F.3d 1127, 1133 n.8 (9th Cir. 2021), 21 the Court “need not determine whether [Defendant]” committed other violations of the FDCPA “before granting Plaintiff’s motion for partial summary judgment. Accordingly, 22 the Court does not address any other alleged violations of the FDCPA. 3 Separately, Defendant argues that it cannot have violated the FDCPA because it 23 did not intend to collect an uncollectable debt and reasonably relied on the representations of the creditor who assigned the debt. Defendant asserts this argument is separate from the 24 bona fide error defense, citing Reichert, 531 F.3d at 1004 and Clark v. Capital Credit & Collection Servs., 460 F.3d, 1162, 1176 (9th Cir. 2006). But those cases explain that even 25 innocent attempts to collect an uncollectable debt under the FDCPA are considered violations. Reichert, 531 F.3d at 1004 (“[T]he FDCPA is a strict liability statute in that a 26 plaintiff need not prove that an error is intentional.”) Notwithstanding violating the FDCPA, collectors may employ the “bona fide errors[]” affirmative defense. Id. at 1005. 27 Reichert emphasized, however, that “allowing a debt collector to escape liability for unintentional violations would render the bona fide error defense superfluous.” Id. at 1006. 28 Thus, to the extent Defendant seeks to avoid liability for relying on a creditor’s information, that argument finds purchase only in the bona fide error affirmative defense. 1 collector: (1) violated the FDCPA unintentionally; (2) the violation resulted from a bona 2 fide error; and (3) the debt collector maintained procedures reasonably adapted to avoid 3 the violation.” Urbina v. Nat’l Bus. Factors Inc., 979 F.3d 758, 763 (9th Cir. 2020). Neither 4 party disputes that Defendant satisfies the first two elements. Nor do they dispute that 5 Defendant satisfies the first portion of element three by maintaining “procedures.” The 6 parties instead spar over whether those procedures were “reasonably adapted” to avoid 7 FDCPA violations. 8 Whether a collector’s procedures are “reasonably adapted to avoid [a] violation” of 9 the FDCPA is a fact-sensitive inquiry. Id. at 764. Nevertheless, the Ninth Circuit has held 10 that procedures that merely rely on a creditor to provide accurate information are 11 insufficient. Id. at 761. 12 It is undisputed that Defendant’s procedure entails running keyword searches 13 designed to detect accounts related to a worker’s compensation claim. (Doc. 41 at 22.) 14 These keywords include “wrkcmp,” “workers comp,” “worker’s comp,” “workers 15 compensation,” “workman’s compensation,” “wrkcompensation,” and others. (Id.) 16 Defendant attests that it “regularly tests this process” to ensure its accuracy. (Id. at 23.) If 17 the process indicates that a particular account is related to a workers compensation claim, 18 “the account is removed from active collections and all activity ceases.” (Id.) Otherwise, 19 “the account remains” with Defendant. (Id.) 20 As Defendant concedes, its procedure “relied on the information provided by VAC.” 21 (Doc. 41 at 11.) Indeed, the procedure will detect a worker’s compensation related debt 22 only when the creditor provides accurate information about whether the debt is related to 23 a worker’s compensation claim. If the creditor provides inaccurate information—as it did 24 here—the software scrub won’t catch the worker’s compensation related keywords. As 25 such, Defendant’s procedures are not “reasonably adapted” to avoiding an FDCPA 26 violation because, at bottom, those procedures rely on a creditor to provide accurate 27 information.4 Plaintiff is entitled to judgment on the bona fide error defense.

28 4 Defendant argues that it could not have implemented any other procedures, in part because, unlike some other jurisdictions, Arizona does not have a public-facing database 1|| IV. Conclusion 2 There is no genuine dispute of material fact that Defendant harmed Plaintiff by || violating the FDCPA and failed to maintain adequate procedures to entitle it to the bona 4|| fide error defense. Accordingly, 5 IT IS ORDERED that Defendant’s motion for summary judgment (Doc. 41) is || DENIED. Plaintiff's motion for partial summary judgment (Doc. 42) is GRANTED. The || parties will appear for a telephonic trial scheduling conference on Tuesday, January 17, 8 || 2023, at 11:00 a.m. The parties will be provided with call-in information via separate 9|| email. 10 Dated this 11th day of January, 2023. 11 12 13 {Z, 14 _—_- Ae Do . Rayes 15 United States District Judge 16 17 18 19 20 21 22 23 24 25 for worker’s compensation claims. But the Ninth Circuit in Urbana was unequivocal: a 26! collector may not qualify for the bona fide error defense when its alleged procedures utterly rely on the creditor to provide accurate information. It broached no exceptions. And here, Defendant’s procedure hangs entirely on VAC providing accurate information. Perhaps the Ninth Circuit may be willing to carve out an exception when a collector proves that it could 28] not implement procedures that relied on something beyond the creditor’s provision of accurate information, but to create such an exception is beyond the purview of this Court.

-7-