McCollough v. Johnson, Rodenberg & Lauinger, No. CV-07-166-BLG-CSO.

• Decision Date: 08 January 2009
• Docket Number: No. CV-07-166-BLG-CSO.
• Parties: Timothy McCOLLOUGH, Plaintiff, v. JOHNSON, RODENBERG & LAUINGER, Defendant.
• Court: U.S. District Court — District of Montana

610 F.Supp.2d 1247

Timothy McCOLLOUGH, Plaintiff, v. JOHNSON, RODENBERG & LAUINGER, Defendant.

No. CV-07-166-BLG-CSO.

United States District Court, D. Montana, Billings Division.

January 8, 2009.

COPYRIGHT MATERIAL OMITTED

John C. Heenan, Heenan Law Firm, Billings, MT, for Plaintiff.

Fred Simpson, John E. Bohyer, Bohyer Simpson & Tranel, Missoula, MT, for Defendant.

ORDER

CAROLYN S. OSTBY, United States Magistrate Judge.

Plaintiff Timothy McCollough ("McCollough") alleges that Defendant Johnson, Rodenberg & Lauinger ("JRL") violated federal and Montana law in its debt collection activities against him. Pending before the Court are:

(1) JRL's Motion for Partial Summary Judgment (Court's Doc. No. 65),

(2) McCollough's Motion for Partial Summary Judgment on JRL's bona fide error defense (Court's Doc. No. 69); and

(3) Portions of McCollough's earlier Motion for Partial Summary Judgment (Court's Doc. No. 36) on which the Court previously reserved decision. See Order (Court's Doc. No. 75) at 10-14.

I. BACKGROUND

The parties and Court are familiar with the factual background, which is set forth in the record and summarized in the Court's Order of November 21, 2008. Court's Doc. No. 75. In that Order, the Court found the following facts to be established under Fed.R.Civ.P. 56(d)(1):

(1) On April 17, 2007, JRL filed a timebarred lawsuit against McCollough.

(2) By August 6, 2007, JRL had information from its client demonstrating that the lawsuit was time-barred.

(3) JRL prosecuted the time-barred lawsuit against McCollough until December 7, 2007.

Court's Doc. No. 75 at 14. Additional facts are repeated below as necessary to explain the Court's opinion.

II. PARTIES' ARGUMENTS

A. JRL's Motion

JRL moves for partial summary judgment on four issues: (1) that service of discovery during a lawsuit does not violate the FDCPA; (2) that there is no businessconsumer relationship between JRL and McCollough for purposes of Montana's Unfair Trade Practices and Consumer Protection Act ("UTPA/CPA"); (3) that McCollough's malicious prosecution claim fails; and (4), that no abuse of process occurred. Court's Doc. No. 65.

JRL argues, first, that serving requests for admission does not violate the FDCPA because it does not involve a false or misleading representation. Br. in Support of MSJ (Court's Doc. No. 66) at 6-7. McCollough was free to deny any inaccurate requests for admission. Id. at 7. The discovery's purpose was simply to obtain information. Id. at 8.

Second, JRL argues it did not violate the UTPA/CPA because McCollough never purchased goods or services from JRL and thus is not a consumer as defined by that act. Id. at 8-10.

Third, JRL argues that McCollough cannot establish two elements of a malicious prosecution claim. McCollough cannot show lack of probable cause because JRL had a reasonable belief, when it sued McCollough, in the truth of its information indicating McCollough owed a debt within the statute of limitations. Id. at 10-14. McCollough also cannot show that JRL was actuated by malice, because JRL's only intent was to collect a credit card debt for its client. Id. at 14-15.

Finally, JRL argues that McCollough cannot establish an abuse of process claim because he cannot show that JRL had an ulterior purpose or committed a willful act in the use of process not proper in the regular conduct of the proceeding. Id. at 15-19.

McCollough responds, first, that the breadth of the FDCPA's general prohibition on deceptive or unfair collection practices proscribes JRL's use of false requests for admission in this specific context. Response to Defs MSJ (Court's Doc. No. 76) at 3-8.

Second, McCollough argues that under the UTPA/CPA, the consumer need not purchase goods or services from the defendant, and that two courts of this district have recently rejected the same argument JRL makes with respect to this act. Id. at 8-10.

Third, McCollough responds that his malicious prosecution claim is well-stated. JRL did not have probable cause to initiate its lawsuit because CACV's information was unverified and its accuracy was specifically disclaimed. Id. at 11-15. JRL also continued to prosecute the lawsuit after CACV retracted its claim that McCollough made a payment on the debt in 2004. Id. at 15. JRL's conduct was malicious because JRL showed deliberate indifference to the high probability of injury to McCollough. Id. at 15-16.

Finally, McCollough argues that JRL's lawsuit against him, and JRL's acts in furtherance of that lawsuit, provide sufficient fact issues to avoid summary judgment on his abuse of process claim. Id. at 17-20.

B. McCollough's Motion

McCollough argues that, under the Ninth Circuit's recent decision on the bona fide error defense, Reichert v. National Credit Systems, Inc., 531 F.3d 1002, 1007 (9th Cir.2008), JRL must show both: (1) that it reasonably relied on its client; and (2) that it maintained reasonable preventive measures to avoid FDCPA violations. Br. in Support of Pl's MSJ (Court's Doc. No. 70) at 5-6. JRL can show neither.

McCollough first asserts that JRL did not reasonably rely on CACV's information. CACV disclaimed any warranty as to accuracy. Id. at 6-7. Second, JRL's only procedures to avoid FDCPA violations are checking that the unsubstantiated information on its computers match up with the information asserted on the complaint to be filed. Id. at 8-9.

JRL responds that Reichert requires a showing of procedures used by the debt collector which are designed to catch the particular error at issue. JRL's Response Opposing Pl's MSJ (Court's Doc. No. 87) at 10. Thus, the focus is on JRL's procedures, not whether JRL could rely on information from CACV. Id. JRL argues that the FDCPA does not require an independent investigation of the debt referred for collection. Id. at 10-13.

JRL argues it is not liable for filing a time-barred lawsuit because its pre-litigation procedures include several steps designed to prevent filing time-barred lawsuits. Id. at 13-15. Additionally, JRL is not liable for maintaining a time-barred lawsuit. JRL had procedures in place to catch such errors, and there is at least a question of fact as to whether JRL should have known its lawsuit against McCollough was time-barred in August 2007. Id. at 15-18.

III. SUMMARY JUDGMENT STANDARD

Summary judgment "should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). Material facts are those which may affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable jury to return a verdict for the nonmoving party. Id.

The party moving for summary judgment bears the initial burden of identifying those portions of the pleadings, discovery, and affidavits that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Where the moving party will have the burden of proof on an issue at trial, it must affirmatively demonstrate that no reasonable trier of fact could find other than for the moving party. But on an issue for which the opposing party will have the burden of proof at trial, the moving party need only point out "that there is an absence of evidence to support the nonmoving party's case." Id.

Once the moving party meets its initial burden, the nonmoving party must go beyond the pleadings and, by its own affidavits or discovery, "set out specific facts showing a genuine issue for trial." Fed. R.Civ.P. 56(e). If the nonmoving party fails to make this showing, "the moving party is entitled to judgment as a matter of law." Celotex Corp., 477 U.S. at 323, 106 S.Ct. 2548.

IV. DISCUSSION

The Court first addresses below the portions of JRL's motion concerning state law, and then addresses the remainder of JRL's motion and McCollough's motion, which concern the FDCPA.

A. JRL's Motion on McCollough's State Law Claims

1. Montana UTPA/CPA

The Montana UTPA/CPA prohibits "[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce[.]" Mont.Code Ann. § 30-14-103. The UTPA/CPA defines "consumer" as "a person who purchases or leases goods, services, real property, or information primarily for personal, family, or household purposes." § 30-14-102(1). It defines "trade" and "commerce" as:

the advertising, offering for sale, sale, or distribution of any services, any property, tangible or intangible, real, personal, or mixed, or any other article, commodity, or thing of value, wherever located, and includes any trade or commerce directly or indirectly affecting the people of this state.

§ 30-14-102(8).

The Montana Supreme Court has stated that statutes like the UTPA/CPA have been interpreted as "broad in scope and flexible in application so as to respond to human inventiveness." Baird v. Norwest Bank, 255 Mont. 317, 326, 843 P.2d 327, 333 (1993) (citing In re Smith, 866 F.2d 576 (3rd Cir.1989)). Accordingly, Montana's statute "should be liberally construed with a view to effect its object and to promote justice." Id. at 327, 843 P.2d 327, 843 P.2d at 333. In Baird, the court relied on these principles to find that the UTPA/CPA applied to the lending and collecting of consumer loans by banks. Id. at 328, 843 P.2d at 334.

Two recent decisions of courts in this District have held that the UTPA/CPA applies to debt collection. In Kunda v. CBB Collections, Inc., the Kundas sued CBB over actions it took, as the assignee of Billings Clinic, to collect a debt for medical services provided to the Kundas. CV-08-44-BLG-RFC, Order of August 15, 2008 (Court's Doc. No. 6) at 2, 5. Chief Judge Cebull denied CBB's motion to dismiss, finding that...