Monday, August 21, 2017
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Ninth Circuit Holds:
Typographical Errors in Complaint Can Lead to Liability
Reverses Summary Judgment in Favor of Law Firm That, Through Inadvertence, Sued Debtor for $29,916.08 Rather Than $26,916.08; Says Error Was ‘Material’
By a MetNews Staff Writer
A law firm’s error, through inadvertence, in suing a man on behalf of a credit union for $29,916.08, when he actually owed $26,916.08, and misstating slightly the applicable rate of interest, can subject the firm to liability under the federal Fair Debt Collection Practices Act, the Ninth U.S. Circuit Court of Appeals held Friday.
The opinion, by Judge Richard R. Clifton, strips the Anaya Law Group of a summary judgment on a cause of action under the FDCPA granted by District Court Judge R. Gary Klausner of the Central District. It affirms summary judgment in favor the law firm and its client, the Los Angeles Federal Credit Union (under California’s Rosenthal Act because rectification was made within 15 days after discovery of the error.
The FDCPA proscribes use by debt collectors of “any false, deceptive, or misleading representation or means in connection with the collection of any debt.”
The plaintiff, Robel A. Afewerki, acknowledged that the misstatements of the principal amount, as well as the interest (stated as 9.965 percent when it actually was 9.65 percent) were “typographical errors”; that an attorney for Anaya Law Group, in preparing the response to a request for a bill of particulars, on June 16, 2014, spotted the inaccuracies; that “Notice of Errata” was filed two days later.
(Los Angeles Superior Court Judge Michael Vicencia awarded the credit union a judgment in the corrected amount.)
Klausner’s Ruling
Klausner on Aug. 14, 2015 declared that “Plaintiff Robel A. Afewerki takes nothing on his First Amended Complaint, and that this action is dismissed on the merits.” He held that the errors in the complaint were not material, explaining:
“[J]udgment on default in California requires either proof by legal documents or a prove-up hearing. Therefore, even if Afewerki had not defended the action, the numbers misstated in the complaint would not have resulted in an award greater than legally allowed.”
In seeking reconsideration, Afewerki’s attorney, Sara Khosroabadi, argued that under Code of Civil Procedure §585(a), in an action upon a contract for recovery of money damages, the clerk, upon a request for default, inserts in the judgment the amount sought by the complaint.
Khosroabadi asserted:
“Consequently, and contrary to this court’s ruling, no “prove-up hearing” is required when granting a default judgment in these state court actions….
“Further, even if such a prove-up hearing was required, this issue does not address the fact that here Afewerki incurred actual damages by having to retain counsel to successfully convince the defendants to stop pursuing the $29,000.00 and 9.965% in interest, both false and inflated figures, that the defendant asserted was owing in their state action. In reality, and as the defendants admit, the actual figure was far less.”
Errors Were Material
In his opinion reversing Klausner as to the cause of action under the FDCPA, Clifton declared that “the incorrect statement of the principal due in the state court complaint, which was further inflated by the incorrect interest rate, was material.”
He explained that whether a misstatement in a particular case is “material” turns on “how the least sophisticated debtor could have reacted” to that misstatement.
Among “circumstances in which the errors in the complaint Anaya Law Group filed might have impacted the least sophisticated debtor,” Clifton said, is that hypothesized by Klausner, of the debtor failing to answer the complaint. He wrote:
“Contrary to Anaya Law Group’s argument, it is not certain that [the credit union] would have been required to submit copies of its accounts or otherwise would have proved that the amount it sought was correct prior to entry of a default judgment. The Appellate Division of the Los Angeles County Superior Court has held that a credit card company attempting to collect a debt from a customer need not submit documentary evidence in order to obtain a clerk’s default judgment for a definite sum….This decision could have guided proceedings in the Los Angeles County Superior Court had Afewerki’s case proceeded to default judgment. Thus, the least sophisticated debtor in Afewerki’s position might not only have been misled as to the amount owed, but could also have had a judgment for an inflated amount entered against him.”
Clifton also pointed out:
“[T]he least sophisticated debtor in Afewerki’s position, concerned that he had been sued, may well have simply paid the amount demanded in the complaint and would have overpaid by approximately $3,000.”
The judge pointed to a defense the credit union might take on remand. He said, in a footnote, that there is generally strict liability under the FDCPA, “the statute provides for a bona fide error defense,” which has not been invoked.
In another footnote, he said that inasmuch as there was exculpation from liability under the Rosenthal Act by making a correction within 15 days, “we do not consider Defendants’ contention that law firms are not ‘debt collectors’ subject to the Rosenthal Act.”
The case is Afewerki v. Anaya Law Group, No. 15-56510.
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