United States District Court, D. Arizona
JAMES A. TEILBORG, Senior District Judge.
Pending before the Court is Defendant's Motion for Sanctions (Doc 74). Plaintiff's Attorney Bybee ("Bybee") opposes the motion. (Doc. 83). Defendant has replied (Doc. 85) and the Court heard oral argument on April 23, 2014.
Plaintiffs Michael Collier ("Mr. Collier") and Kim Collier-Dingman ("Ms. Collier-Dingman") sued Gurstel Chargo for violations of the Fair Debt Collection Practices Act ("FDCPA"). Mr. Collier first contacted Bybee in June of 2012 regarding collection actions taken by Defendant, particularly an alleged inflammatory phone call.
Mr. Collier, a disabled veteran, received a favorable judgment by the Maricopa County Superior Court quashing a $6, 143.88 garnishment against him obtained by Defendant. (Doc. 83-2 at 8-9). At the time of the hearing, Mr. Collier and Ms. Collier-Dingman claimed to be married and, therefore, the garnishment was not valid because that money was to be used in furtherance of Ms. Collier-Dingman's education. (Doc. 83-1 at 3). The funds were later ruled exempt from garnishment because Ms. Collier-Dingman maintained that she was the spouse of a disabled, living veteran using the funds to further education pursuant to 38 U.S.C. § 3501 (a)(1)(D)(i). (Doc 83-1 at 1-2).
After the judgment, Mr. Collier claims to have requested Gurstel Chargo release the funds and Gurstel Chargo allegedly responded that Mr. Collier would have to file a lawsuit to receive the funds. (Doc. 83-1 at 2). Mr. Collier also alleges he received a phone call from a Gurstel Chargo employee who used a series of inflammatory and particularly incendiary statements towards him. (Doc. 83-2 at 2; supra n.1). Mr. Collier called Bybee that day to notify him of what happened. (Doc. 83-1 at 1-2). A subsequent email from Mr. Collier to Bybee described, amongst other things, that Mr. Collier's disability inhibited his "written and verbal communication, comprehension, and memory." (Doc. 83-2 at 2). Bybee then scheduled a meeting for September 20, 2012. (Doc. 83-1 at 2). At the meeting, Mr. Collier referred to Ms. Collier-Dingman as his wife on multiple occasions. ( Id. at 3). Mr. Collier claimed to have written down the phone number from which the incendiary call was made although he did not provide it during the meeting. (Doc. 83 at 12-13).
Bybee then drafted a fee agreement to be signed by Mr. Collier and his supposed wife, Ms. Collier-Dingman. (Doc. 83-2 at 5-6). Mr. Collier maintained that Ms. Collier-Dingman was very busy and could not meet Bybee in person, but that he would ensure both of them signed the agreement. (Doc. 83-1 at 3). He then returned the agreement with both signatures. (Doc. 83-2 at 5-6). Ms. Collier-Dingman later denied that she signed the fee agreement. (Doc. 83-1 at 8).
On October 10, 2012, Bybee filed the Complaint (Doc. 1). (Doc. 83-1 at 4). A few days after the Complaint was filed, Bybee received a call from Mr. Collier stating that Ms. Collier-Dingman had found an error within the Complaint regarding the allegations against Mr. O'Brien, an attorney from Gurstel Chargo. ( Id. ). On October 18, 2012, Bybee, reviewed the Amended Complaint with Mr. Collier and Ms. Collier-Dingman and filed it that day. ( Id. ). Both complaints quoted the particularly incendiary alleged phone conversation. (Doc. 1 at 5-6; Doc. 7 at 5).
According to Defendant, in response to the incendiary phone call quoted in the Complaint and Amended Complaint, Gurstel Chargo received a "public outcry [after initial complaint] of threats, accusations, and vicious attacks towards Gurstel Chargo [that] were immediate and unrelenting." (Doc. 74 at 3). Mr. O'Brien, specifically identified in the initial complaint, was targeted individually. ( Id. ). As a result, Gurstel Chargo requested and was given police protection at its offices in Arizona and Minnesota. ( Id. at 9). Gurstel Chargo conducted an internal investigation while also hiring a crisis management professional and public relations firm to provide assistance. ( Id. ). Gurstel Chargo requested the date on which the call was made and the corresponding phone number. ( Id. at 10). Neither Gurstel Chargo's internal investigation nor the production of phone records during discovery revealed evidence of the phone call. ( Id. ).
In April 2013, Dr. Pitt, Defendant's medical expert, issued a psychiatric evaluation of Mr. Collier to all counsel in the case and stated that Mr. Collier and Ms. Collier-Dingman were divorced. (Doc. 74 at 17; Doc. 83-1 at 9). Later discovery revealed that the two had divorced in 2010, well before the quash order issued by the Maricopa County Superior Court. Litigation continued until July 24, 2013 when Mr. Collier and Ms. Collier-Dingman signed a stipulation to dismiss the lawsuit, "stating (1) they agree to take nothing as a result of this action, (2) that Gurstel Chargo performed no action that was in violation of the FDCPA, and (3) that the telephone call referred to in the Complaint and the central subject of this lawsuit was not made by Gurstel Chargo, any employee or affiliate of Gurstel Chargo, or anyone acting on behalf of Gurstel Chargo." (Doc.74 at 11 (internal quotations omitted)). On August 5, 2013, the Court dismissed the case with prejudice. ( Id. ). Subsequently, Defendant moved for sanctions against Bybee. (Doc. 74).
The "American Rule" states that each party bears its own attorneys' fees and litigation costs. Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 247 (1975). Defendant seeks relief under the narrow exceptions of the Court's inherent power and 28 U.S.C. § 1927.
A. Sanctions Based Upon the Inherent Power of the Court
Before awarding sanctions under its inherent powers, the court must make an explicit finding that counsel's conduct "constituted or was tantamount to bad faith." Primus Auto. Fin. Servs., Inc. v. Batarse, 115 F.3d 644, 648 (9th Cir. 1997) (quoting Roadway Exp., Inc. v. Piper, 447 U.S. 752, 767 (1980)). "[T]he narrow exceptions to the American Rule effectively limit a court's inherent power to impose attorney's fees as a sanction to cases in which a litigant has engaged in bad-faith conduct or willful disobedience of a court's orders." Chambers v. NASCO, Inc., 501 U.S. 32, 55 (1991). "Sanctions are available for a variety of types of willful actions, including recklessness when combined with an additional factor such as frivolousness, ...