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Ross v. RJM Acquisitions Funding

December 4, 2006


The opinion of the court was delivered by: Magistrate Judge Geraldine Soat Brown


Plaintiff Delisa Ross ("Ross") filed suit alleging that Defendant RJM Acquisitions Funding LLC ("RJM") violated the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq. [Dkt 1.] Both Ross and RJM moved for summary judgment. [Dkt 22, 27, 36.] On March 16, 2006, this Court granted RJM's motion for summary judgment and awarded RJM its costs pursuant to 28 U.S.C. § 1920(2). [Dkt 58.] RJM subsequently filed a motion for sanctions against Ross' attorneys pursuant to 28 U.S.C. § 1927 and for attorneys' fees pursuant to 15 U.S.C. § 1692k(a)(3). [Dkt 60.] RJM also filed its Bill of Costs. [Dkt 66.] Ross has filed an objection to the Bill of Costs. [Dkt 68.] Before the Court now is RJM's motion for sanctions and Ross' objection to RJM's Bill of Costs. The parties have consented to the jurisdiction of a United States Magistrate Judge pursuant to 28 U.S.C. § 636(c). [Dkt 12, 13.] For the reasons set forth below, RJM's motion for sanctions is denied, and Ross' objection to RJM's Bill of Costs is also denied.


On October 12, 2004, Ross filed a complaint alleging that RJM attempted to collect a debt from her that had been discharged in bankruptcy, in violation of the FDCPA. (Compl. ¶ 15.) In a letter dated November 16, 2004, RJM's counsel advised Ross' attorneys of RJM's belief that the claim was without merit pursuant to the bona fide error defense provided by 15 U.S.C. § 1692k(c). (Def.'s Mot. Ex A at 1.) RJM's attorney explained that RJM uses a firm named "Finn Solutions" to conduct bankruptcy searches and those searches are performed "upon its initial purchase of each debt and every business day thereafter while the debt is in its system." (Id. at 2.) The letter cited an affidavit by Samir Shah, RJM's CFO, which was not enclosed with the letter. (Id.; Def.'s Mot. at 3.) Ross' counsel, in response, stated that he could not evaluate RJM's bona fide error defense without all of the exhibits that were referenced in RJM's letter, and that he would need copies of the account histories for Ross that were maintained by RJM and Plaza Associates (RJM's debt collector), as well. (Def.'s Mot. Ex. B at 1.)

On November 29, 2004, RJM's counsel sent the exhibits that had been omitted from her previous letter, except that she substituted the affidavit of Scott Matte, RJM's President, for the affidavit of Mr. Shah referenced in her previous letter. (Def.'s Mot Ex. C at 1.) Mr. Matte's affidavit stated that RJM conducts ongoing bankruptcy searches every day, but Mr. Matte did not make any reference to "Finn Solutions," the entity that purportedly conducted the bankruptcy searches for RJM. (Def.'s Mot. Ex. C, Matte Aff. ¶ 7.) Shortly thereafter, RJM's counsel again requested that Ross dismiss the suit, reiterating that RJM conducted bankruptcy searches regarding Ross' account. (Def.'s Mot. Ex. D at 1.) In that letter, RJM's counsel also enclosed RJM's collector notes, presumably in response to Ross' attorney's request for Ross' account histories. (Id.) In a response to that letter, Ross' counsel stated that Mr. Matte's statement that "RJM conducts ongoing and continual bankruptcy checks everyday" was not sufficient to prove the bona fide error defense. (Def.'s Mot. Ex. E at 2.) Ross' counsel also identified several problems he perceived with the evidence provided by RJM's counsel thus far in support of the defense. (Id.) Specifically, he indicated that he still had not received the affidavit of Mr. Shah which had been omitted from RJM's November 16th letter; that he found no evidence of a "Finn Solutions"; and that the single page of collector notes provided fell "far short of the complete account histories [] requested." (Id.) Ross' counsel concluded by requesting a complete account of the daily bankruptcy searches RJM claimed to conduct. (Id. at 3.) On December 20, 2004, RJM's attorney advised Ross' attorney that her failure to provide Mr. Shah's affidavit was an "oversight" and that she had submitted Mr. Matte's affidavit in its place after concluding that Mr. Matte was more knowledgeable about the facts of the case. (See Def.'s Mot. Ex. G at 3.)*fn2

On February 15, 2005, Ross' counsel apparently requested additional documentation from RJM (see Def.'s Mot. Ex. F at 2), and RJM's counsel provided several documents in response, including: a "Fingerhut Statement for: Lisa Ross" and an affidavit by Todd Feige, the Vice President of Phin Solutions (not "Finn" Solutions, as stated in the November 16th letter), who testified about the bankruptcy searches performed on the Ross account. (Id. at 1, 2.)*fn3 In the letter enclosing those documents, RJM's counsel reiterated her argument that RJM was entitled to the bona fide error defense, stating that "RJM has reasonable procedures in place to avoid collecting on an account in which the debtor has filed bankruptcy." (Id. at 1.) RJM's counsel cited the case of Hyman v. Tate, 362 F.3d 965 (7th Cir. 2004), in support. (Id.)

The exchange of information and arguments continued into March and April 2005. In a letter dated March 29, 2005, RJM's counsel provided the Asset Purchase Agreement between RJM and Fingerhut which outlined two of the procedures RJM was relying on to support its bona fide error defense. (Def.'s Mot. Ex. G at 1.) Specifically, the Agreement stated that Fingerhut would not sell any accounts that had been discharged in bankruptcy, and would notify RJM if it received notice of any claim that might affect RJM. Ross, 2006 WL 752953 at *3; see also Def.'s Mot. Ex. G at 2. That letter also outlined RJM's agreement with Plaza to handle bankruptcy notices on RJM accounts, including Plaza's agreement to forward all bankruptcy notices on RJM accounts to RJM. (Def.'s Mot. Ex. G at 2.) In addition, RJM's counsel provided more detailed information regarding the bankruptcy search that had been conducted on the Ross account. (Id.)

On April 4, 2005, Ross' attorney again requested Ross' entire account history (stating that the collector notes were "clearly incomplete"), and identified additional claimed deficiencies with the evidence provided by RJM in support of its defense, such as the fact that the Asset Purchase Agreement referenced exhibits which had not been included with the Agreement. (Pl.'s Resp. Ex. A at 1.) He also argued that the affidavits provided by RJM in support of its defense were self-serving and contained false statements and inadmissible hearsay. (Id.)

In June 2005, Ross filed a motion for summary judgment, and in July 2005, RJM filed a motion for summary judgment.*fn4 Attached to RJM's motion for summary judgment was a supplemental affidavit by Mr. Matte stating that RJM has an internal policy of ceasing all collection efforts upon learning of a bankruptcy filing. (Def.'s Mem. Supp. Summ. J. Ex. I [dkt 28, 38]; see also Def.'s Reply at 9 [dkt 81].) The Court granted summary judgment in favor of RJM based on its conclusion that RJM was entitled to the bona fide error defense. See Ross, 2006 WL 752953 at *7-9. In deciding the motion, the Court noted five procedures reasonably adapted by RJM to avoid collecting on a debt subject to a bankruptcy proceeding. Id. at *3.

RJM has now filed a motion for sanctions. In its motion, RJM argues that Ross' attorneys multiplied the proceedings in this lawsuit unreasonably and vexatiously in violation of 28 U.S.C. § 1927 by pursuing a meritless lawsuit and violating their duty of candor. (Def.'s Mot. at 5-12.) RJM argues that it is also entitled to its attorneys' fees and costs pursuant to § 1691k(a)(3) based on Ross' pursuit of the lawsuit in bad faith and for purposes of harassment.*fn5 (Id. at 5-6, 12-13.) In addition, RJM has filed its Bill of Costs, to which Ross has filed an objection.


I. RJM's Motion for Sanctions

A. 28 U.S.C. § 1927

Section 1927 provides that "[a]ny attorney . . . who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct." Section 1927 is punitive and thus must be construed strictly. Knorr Brake Corp. v. Harbil, Inc., 738 F.2d 223, 226 (7th Cir. 1984). The Seventh Circuit recently stated that a court has discretion to impose ยง 1927 sanctions when: an attorney has acted in an 'objectively unreasonable manner' by engaging in 'serious and studied disregard for the orderly process of justice,' pursued a claim that is 'without a ...

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