Friday, April 25, 2014

FYI: Cal App Ct Holds Consumer's Alleged Deceptive Collection Practices Lawsuit for Injunctive Relief Exempt from Anti-SLAPP Statute, Reverses Fee Award in Favor of Defendants

Thursday, January 23, 2014


The California Court of Appeal, Fourth Appellate District, recently held that a consumer's putative class and representative action for injunctive relief against a computer company and a law firm satisfied the requirements of the public interest exception to California's Anti-SLAPP (Strategic Lawsuit Against Public Participation) statute, and as a result the defendants could not recover their attorney fees after the consumer voluntarily dismissed the action.  In so ruling, the California Court of Appeal reversed the trial court's judgment and award of attorney fees and costs order in favor of the defendants, and remanded the matter to the trial court with directions to deny the defendants' motion for attorney fees and costs.     

The Court's opinion can be found athttp://www.courts.ca.gov/opinions/documents/D063473.PDF.

The case involves a consumer who purchased a computer from a computer company in 2001.  The computer company arranged for the consumer to obtain financing from an online bank. 

The consumer alleged that in 2007 the law firm generated a form collection letter to the consumer that misrepresented the original creditor of the consumer's loan.  The consumer also alleged that the attorney author of the letter did not review the letter or the file before signing it and, as a result, had not been "meaningfully involved" in connection with the collection of the debt under the FDCPA.  The consumer further alleged that the law firm had sent collection letters to hundreds of consumers that falsely identified the consumer's original creditor.  The consumer brought a single claim under California's Unfair Competition Law seeking an injunction to prevent the computer company and law firm from engaging in unlawful, unfair, and/or fraudulent debt collection practices.

In response to the lawsuit, the computer company and law firm filed a special motion to strike pursuant to the anti-SLAPP statute.  The consumer subsequently dismissed his lawsuit without prejudice. 

After the dismissal, the computer company and law firm filed a motion for their attorney fees and costs pursuant to the anti-SLAPP statute.  The consumer opposed the motion, contending that the computer company and law firm were not entitled to attorney fees under the anti-SLAPP statute because they would have prevailed on their special motion to strike as a prerequisite to awarding them attorney fees under the anti-SLAPP statute, and that the action was exempt from application of the anti-SLAPP statute pursuant to the public interest exception (§425.17).  In support of his claim the exemption applied, the consumer argued that the sole remedy he had sought was injunctive relief designed to prevent other California consumers from being harmed by unfair and unlawful debt collection practices. 

The computer company and law firm responded by arguing that the 3 requirements of the public interest exception were not satisfied.   The trial court found that although the consumer only sought injunctive relive and it was unlikely he would have benefited from the requested injunction, the consumer, according to the trial court, "had not shown an important public interest that affected a large group of persons would have been vindicated by his complaint or that private enforcement was necessary and placed any financial burden on the consumer greater than his stake in this action."  The trial court awarded the computer company and law firm attorney fees in the amount of $11,581.02, and the consumer appealed.

On appeal, the defendants argued that the Court of Appeal could affirm the trial court's ruling without determining whether the anti-SLAPP exemption applied.  In other words, the defendants argued they were entitled to fees because they realized their objectives in the litigation, irrespective of whether they would have prevailed on their special motion to strike. 

The Court of Appeal rejected this argument.  "The trial court's adjudication of the merits of a defendant's motion to strike is an essential predicate to ruling on the defendant's request for an award of fees and costs."  The Court also held a determination of whether a defendant would have prevailed on its motion to strike is an essential prerequisite to an award of attorney fees and costs under the anti-SLAPP statute.

The Court of Appeal next evaluated the three requirements that need to be established in order for the public interest exception of the anti-SLAPP statute to apply. 

The anti-SLAPP statute provides that actions brought in the public interest are not subject to the anti-SLAPP statute if three criteria are met:  (1) the plaintiff does not seek any relief greater than or different from the relief sought for the general public or a class of which the plaintiff is a member;  (2) the action, if successful, would enforce an important right affecting the public interest, and would confer a significant benefit on the general public or a large class of persons; and  (3) private enforcement is necessary and places a disproportionate financial burden on the plaintiff in relation to the plaintiff's stake in the matter.  The Court, citing the legislative history, determined that the exemption was created "to prevent the use of the anti-SLAPP device against specified public interest actions" and that the exemption was designed, in part, to apply to claims brought under the Unfair Competition Law.

The Court first analyzed whether the consumer's action was generally brought "solely in the public interest or on behalf of the general public."  To determine whether the matter was brought solely in the public interest, the Court was required to rely on the allegations of the complaint and the scope of the relief sought.  Here, the consumer's complaint contained a single claim under the Unfair Competition Law for violations of the FDCPA.  The consumer did not seek damages or restitution on behalf of himself or the class or the general public.  Instead, the sole remedy he sought was injunctive relief.  Based on the allegations and the relief sought, the Court of Appeal concluded that the matter was brought solely in the public interest.

The Court next evaluated the three specific requirements under the public interest exception.  The trial court had concluded that the consumer did not seek relief greater than or different from the relief sought for the general public.  The defendants attempted to argue that the consumer had sought relief personal to himself in a federal court lawsuit.  The Court rejected the defendants' argument, holding that the language of the exception does not encompass taking into consideration other lawsuits and, instead, only focuses on the lawsuit at issue. 

As to the requirement that the action, if successful, would enforce an important right affecting the public interest and would confer a significant benefit of the general public, the Court observed that the FDCPA was designed to eliminate abusive debt collection practices by debt collectors.  Because the consumer's complaint sought to enjoin the defendants from their alleged abusive debt collection practices, the Court concluded that the second requirement of the exemption had been satisfied. 

In so ruling, the Court also rejected the defendants' argument that the consumer was required to introduce evidence to establish that his action, if successful, would benefit the public.  The Court held that the determination is made by examining the lawsuit to determine whether the complaint is of the type that seeks to vindicate public policy goals.  Because of the relief sought in the complaint, the Court held that the merits of the complaint were irrelevant.

The final element the Court analyzed was whether the private enforcement was necessary and placed a disproportionate financial burden on the consumer in relation to his stake in the matter.  The Court acknowledged that the Unfair Competition Law and the FDCPA both allow for private attorney general actions.  And because no public entity had sought to enforce the rights the consumer sought to vindicate in his complaint, the Court concluded that private enforcement was necessary to enforce the rights at issue in the consumer's complaint. 

The Court rejected the defendants' argument that there was a possibility a public entity might bring a lawsuit.  According to the Court, the "possibility" of public action is insufficient.  As to the "disproportionate financial burden" element, the Court held that because the consumer had not sought any financial benefit, that fact alone was sufficient to support a finding that the financial burden on the consumer is disproportionate to his stake in the action.  The Court continued by finding that the consumer would have likely incurred litigation costs in proving violations of the FDCPA and possibly could have been liable for an adverse award of costs, thus increasing the financial burden on the consumer. 

Holding that the consumer's action satisfied each of the requirements of the public interest exception to the anti-SLAPP statute, the Court of Appeal concluded that the consumer's action was exempt from application of the anti-SLAPP statute.  The trial court's order was reversed and the matter was remanded with directions to deny the defendants' motion for attorney fees and costs.  The Court of Appeal also awarded the consumer costs on appeal. 



Eric Tsai
McGinnis Wutscher Beiramee LLP
 
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