In an unpublished memorandum, the United States Court of Appeals recently upheld an award of attorneys’ fees in favor of defendants in an action by a debtor alleging violations of the Fair Debt Collection Practices Act (“FDCPA”). The Appellate Court affirmed the trial court’s finding that the debtor brought the lawsuit in bad faith and for the purpose of harassment. (Ceresko v. LVNV Funding, LLC, Slip Copy, 2012 WL 1943683, (Not Selected for publication in the Federal Reporter), C.A.9 (Ariz.), May 30, 2012).
Christopher Ceresko brought a lawsuit in federal court against LVNV Funding, LLC, Gurstel, Staloch & Chargo, PA, and Ruth A. Fischetti (collectively, “LVNV”) alleging violations of the FDCPA. The federal District Court awarded attorneys’ fees and costs to LVNV on the ground that Ceresko brought his FDCPA action in bad faith and for the purpose of harassing LVNV. The District Court found that Ceresko’s allegations in his lawsuit failed to establish an FDCPA violation. It further found that Ceresko’s attorney “‘suffered the same result in three previous lawsuits . . . involving different plaintiffs making the same claim: that an allegation or prayer for relief of costs and fees in a state court collection action is a false statement in violation of the FDCPA.’” Ceresko failed to provide the District Court with a single citation to a case anywhere in the country where a plaintiff had successfully asserted the same FDCPA claim.
The FDCPA at 15 U.S.C. § 1692k(a)(3), provides that “[o]n a finding by the court that an action under this section was brought in bad faith and for the purpose of harassment, the court may award to the defendant attorney’s fees reasonable in relation to the work expended and costs.” The Court of Appeals held that the District Court did not clearly err in finding that Ceresko brought his FDCPA lawsuit in bad faith and for the purpose of harassment.
The District Court had already concluded that Ceresko failed to establish an FDCPA violation and Ceresko did not appeal or otherwise dispute the conclusion that his allegations were without merit. The Court of Appeals found that Ceresko’s handling of the underlying action demonstrated that his action lacked merit and was pursued in bad faith and for the purposes of harassment. After LVNV answered the FDCPA complaint, Ceresko never served discovery requests on LVNV or otherwise pursued his case. Ceresko alleged that LVNV violated the FDCPA by filing a collection complaint that alleged a right to attorneys’ fees. In its Arizona collection complaint, LVNV stated that “[p]ursuant to the terms and conditions” and Arizona statutory law, “the prevailing party will be entitled to an award of all costs and . . . reasonable attorneys’ fees incurred in pursuing this action.” Ceresko did not dispute or otherwise deny this provision of the collection complaint during the underlying state court collection matter. Ceresko also did not dispute or otherwise deny that he owed the debt or the amount of the debt in the underlying collection matter. Furthermore, Ceresko did not timely respond to LVNV’s motion for summary judgment in the underlying collection matter.
Ceresko’s attorney previously made similar arguments regarding violations of the FDCPA. In those two Arizona cases, “the court decided that an allegation or prayer for relief for costs and attorneys’ fees in a state court collection complaint did not violate the FDCPA.” The underlying action here centered on the essentially the same argument that had been unsuccessful in the two prior cases.
Also, Ceresko failed to identify any legal authority that was favorable to his allegation that LVNV violated the FDCPA. Based on these factors, the Court of Appeals held the District Court did not abuse its discretion in awarding attorneys’ fees in favor of LVNV.
In so holding, the Court of Appeals rejected Ceresko’s argument that LVNV had not established that Ceresko, rather than his attorney, demonstrated bad faith and a harassing purpose in filing the lawsuit. The amicus brief by the National Association of Retail Collection Attorneys argued that such a standard would never be met as the plaintiff debtor would always attest that he or she relied upon plaintiff’s attorney as to the filing of the FDCPA Complaint.
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June D. Coleman | 916.321.4500