Watkins v. Peterson Enterprises, Inc.

• Decision Date: 06 July 1999
• Docket Number: No. CS-96-602-FVS.,CS-96-602-FVS.
• Citation: 57 F.Supp.2d 1102
• Parties: Percy WATKINS, et al., Plaintiff, v. PETERSON ENTERPRISES, INC. d/b/a Valley Empire Collection, Defendant.
• Court: U.S. District Court — District of Washington

57 F.Supp.2d 1102

Percy WATKINS, et al., Plaintiff, v. PETERSON ENTERPRISES, INC. d/b/a Valley Empire Collection, Defendant.

No. CS-96-602-FVS.

United States District Court, E.D. Washington.

July 6, 1999.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Michael David Kinkley, Law Office of Michael D. Kinkley, Spokane, WA, Timothy W. Durkop, Durkop Law Firm, Spokane, WA, for plaintiffs.

Michael Joseph Beyer, Spokane, WA, for defendants.

ORDER GRANTING SUMMARY JUDGMENT

VAN SICKLE, District Judge.

THIS MATTER came before the Court based upon cross motions for summary judgment. The plaintiffs were represented by Timothy W. Durkop and Michael D. Kinkley; the defendant by Michael J. Beyer.

BACKGROUND

Diane Bohnet and Percy Watkins allege Peterson Enterprises, Inc. violated the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692-1692o, the Washington Collection Agency Act, RCW 19.16.100-.950, and the Washington Consumer Protection Act, RCW 19.86.010-.920. The Court has jurisdiction over the FDCPA claim pursuant to 15 U.S.C. § 1692k(d). The Court may exercise supplemental jurisdiction over the state-law claims pursuant to 28 U.S.C. § 1367.

Diane Bohnet

On June 18, 1990, Peterson secured a default judgment against Bohnet in the amount of $537.48. Thereafter, Peterson applied for, and received, six writs of garnishment. The writs are labeled "A" through "F."

Writ "A" was obtained on July 1, 1990, and served upon U.S. Bank. Writ "A" was dismissed on September 26, 1990, without payment of funds.

Writs "B" through "E" were served upon Red Lion Inn ("Red Lion"), Ms. Bohnet's employer. Writ "B" was obtained on October 3, 1990. It included costs associated with Writ "A." Red Lion answered Writ "B." However, instead of securing a judgment against Red Lion, Peterson obtained an order from a state judge directing Red Lion to pay the sum of $80.47 to the court. The parties refer to such orders as "pay orders." As it turned out, Red Lion paid nothing in response to Writ "B."

Writ "C" was obtained on May 12, 1992. The parties' statements of material fact do no indicate whether Writ "C" included costs associated with Writs "A" and "B." Writ "C" was dismissed on July 14, 1992, based upon Ms. Bohnet's agreement to make payments on an installment plan.

Writ "D" was obtained on April 26, 1994. The parties' statements of material fact do not indicate whether Writ "D" included costs associated with Writs "A," "B," or "C." Red Lion advised Peterson that Ms. Bohnet was on medical leave. Peterson took no further action with respect to Writ "D."

Writ "E" was obtained on July 24, 1995. The parties' statements of material fact do not indicate whether Writ "E" included costs associated with Writs "A," "B," "C," or "D." Red Lion answered Writ "E." Its uncontroverted answers indicated it held no funds subject to garnishment. Peterson took no further action with respect to Writ "E."

Writ "F" was obtained on February 13, 1996, and served upon First Interstate Bank. The parties acknowledge that Writ "F" included costs associated with previous writs. (Agreed Pretrial Order at 12.) First Interstate answered Writ "F." Ms. Bohnet filed an "Exemption Claim" alleging the funds in the bank account were child support payments. On May 31, 1996, Writ "F" was dismissed pursuant to an agreed order.

Percy Watkins

On April 11, 1996, Peterson obtained a default judgment against Percy Watkins in the amount of $386.02. Thereafter, Peterson applied for, and received, three writs of garnishment. The writs are labeled "A" through "C."

Writ "A" was obtained on April 29, 1996, and served upon New Hope Church ("New Hope"), which did not respond. Peterson decided not to obtain a default judgment against New Hope.

Writ "B" was obtained on September 17, 1996, and served upon Telco Credit Union ("Telco"). Writ "B" included costs and fees associated with Writ "A." Telco filed an answer. Peterson did not obtain a judgment against Telco. Instead, it secured a pay order on October 18, 1996. In response, Telco sent a check in the amount of $237.96.

Writ "C" was obtained on October 8, 1996, and served on Telco. Writ "C" included costs and fees associated with Writs "A" and "B." Telco filed an answer. Peterson did not secure a judgment. Instead, it obtained a pay order on November 16, 1996. In response, Telco sent a check in the amount of $420.18. A satisfaction of judgment was entered thereafter.

FAIR DEBT COLLECTION PRACTICES ACT

The FDCPA prohibits debt collectors from falsely representing the amount of any debt, 15 U.S.C. § 1692e(2), from collecting any amount not permitted by law, 15 U.S.C. § 1692f(1), and from harassing debtors, 15 U.S.C. § 1692d. After Watkins v. Peterson Enterprises, Inc., 137 Wash.2d 632, 648-49, 973 P.2d 1037 (1999), it is clear creditors are not permitted to recover costs and fees associated with "unsuccessful" writs of garnishment. Nor are creditors permitted to use "pay orders" to obtain money from garnishee defendants. Id. at 647, 973 P.2d 1037.¹ As a result, the plaintiffs move for summary judgment on the following issues: (1) Whether Peterson misrepresented the amounts they owed in violation of § 1692e by serving writs of garnishment that included costs and fees associated with prior unsuccessful writs; (2) whether Peterson attempted to collect amounts to which it was not entitled in violation of § 1692f by serving writs of garnishment that included costs and fees associated with prior unsuccessful writs; (3) whether Peterson employed unfair means to collect debts in violation of § 1692f by using pay orders instead of obtaining judgments against garnishee defendants; (4) whether Peterson harassed them in violation of § 1692d by serving multiple unsuccessful writs of garnishment; and (5) whether Peterson harassed them in violation of § 1692d by effectively freezing sums of money in excess of the amounts they owed.

A. Statute of Limitations

FDCPA claims are subject to a one-year statute of limitations. 15 U.S.C. 1692k(d). The limitations period runs from the date of the offending act. See Naas v. Stolman, 130 F.3d 892, 893 (9th Cir.1997). Since the plaintiffs filed suit on November 1, 1996, the only acts for which Peterson may be held liable under the FDCPA are those that occurred after November 1, 1995. The one-year limitations period has no impact on Mr. Watkins' claims, but it does have an impact on Ms. Bohnet's. Of the six writs served by Peterson, only Writ "F" was served after November 1, 1995. Thus, Ms. Bohnet's FDCPA claim is limited to Writ "F."

B. Bona Fide Error Defense

The FDCPA provides, "A debt collector may not be held liable in any action brought under this subchapter if the debt collector 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). In an effort to invoke the bona fide error defense, Peterson has submitted an affidavit stating not only that its collection practices were based upon the advice of counsel, but that they were accepted by courts throughout the state.

The plaintiffs maintain Peterson may not rely upon § 1692k(c). As a threshold matter, they note Peterson neither pleaded the defense in its answer nor referred to § 1692k(c) in the pretrial order. Moreover, according to the plaintiffs, even if Peterson has not waived the defense, § 1692k(c) does not apply to the types of violations Peterson committed.

1. Waiver

The bona fide error defense is an affirmative defense. Fox v. Citicorp Credit Servs., Inc., 15 F.3d 1507, 1514 (9th Cir.1994). Ordinarily, a defendant waives the defense by failing to include it in a pretrial order. Northwest Acceptance Corp. v. Lynnwood Equip., Inc., 841 F.2d 918, 924 (9th Cir.1988). However, a pretrial order may be modified to prevent manifest injustice. Fed.R.Civ.P. 16(e). Four factors are relevant: (1) the degree of prejudice to the moving party if the pretrial order is not modified; (2) the degree of prejudice to the nonmoving party if the order is modified; (3) the impact of modification on the orderly and efficient conduct of the case; and (4) any degree of willfulness, bad faith, or inexcusable neglect on the moving party. United States v. First Nat'l Bank of Circle, 652 F.2d 882, 887 (9th Cir.1981). See also Byrd v. Guess, 137 F.3d 1126, 1132 (9th Cir.1998). Here, several events have occurred since the pretrial order was entered. For one thing, the trial was stricken and a question of state law was certified to the Washington Supreme Court. Its decision has had a profound impact on this case. For another, the plaintiffs have been allowed to move for summary judgment although the dispositive motion deadline has passed. Given those circumstances, it would be unjust to refuse Peterson permission to raise the bona fide error defense.

2. Use of Pay Orders

Peterson's effort to invoke § 1692k(c) faces a significant obstacle. As the plaintiffs point out, "[r]eliance on advice of counsel or a mistake about the law is insufficient by itself to raise the bona fide error defense. `[Section] 1692k(c) does not immunize mistakes of law, even if properly proven.'" Baker v. G.C. Services Corp., 677 F.2d 775, 779 (9th Cir.1982) (emphasis added). Indeed, in Baker, the Court of Appeals rejected a debt collector's attempt to raise a bona fide error defense, saying, "Appellant only presented evidence that, at best, might show it had been mistaken about the law. This is insufficient by itself to support the bona fide error defense pursuant to 15 U.S.C. § 1692k(c)." Id. (emphasis added).

Peterson submits the plaintiffs are wrong in asserting that a mistake of law can never constitute a bona fide error. According to Peterson, the fact the Baker decision twice employs the phrase "by itself" is significant. To Peterson's way of thinking, the circuit court's repeated use of that phrase implies there...