California Federal Court Awards Attorney's Fees To Defendants Under 28 U.S.C. 1927 In Consumer Case
In two related opinions issued last week, Arutyunyan v. Cavalry Portfolio Services, et al., Case No. CV-12-4122, 2013 WL 500480 (C.D. Cal. Feb. 11, 2013) and Arutyunyan v. Cavalry Portfolio Services, et al., Case No. CV-12-4122, 2013 WL 500452 (C.D. Cal. Feb. 11, 2013), the United States District Court for the Central District of California ordered a debtor's attorney to pay attorneys' fees and costs to two defendants after a lawsuit was dismissed for the attorney's failure to prosecute it. On May 11, 2012, Ashkhen Arutyunyan ("Plaintiff") filed a complaint against several defendants alleging violations of the Fair Debt Collection Practices Act ("FDCPA"), the Fair Credit Reporting Act ("FCRA") and several California state laws. Several months after the complaint was filed, attorney Arshak Bartoumian, was substituted as Plaintiff's counsel of record. Bartoumian, who has filed several similar cases in the Central District of California, effected service of process on some of the defendants but otherwise took no action. The Court dismissed the case for failure to prosecute on October 29, 2012. After the dismissal, two of the defendants, Northland Group, Inc. and Resurgent Capital Services, L.P., filed motions for attorneys' fees and costs against Plaintiff pursuant to the fee-shifting provisions in the FCRA and FDCPA. Alternatively, the defendants asked the Court to impose a sanction on Plaintiff's counsel pursuant to 28 U.S.C. 1927 for pursuing what defendants considered to be a frivolous lawsuit. The Court declined to impose attorneys' fees on the plaintiff herself under FCRA or FDCPA's fee-shifting provisions. In rejecting the defendants' claim to relief under these statutes, the Court focused on the fact that both provisions require a showing that the complaint itself was filed in bad faith. Here, the Court reasoned, the dismissal was based on plaintiff's counsel's dilatory conduct, not on any bad faith actions by Plaintiff. Accordingly, the Court declined order Plaintiff to pay attorneys' fees under FCRA or FDCPA. The Court was not quite as gentle on Plaintiff's attorney though. Bartoumian did not respond at all to the defendants' motions, and the Court took Bartoumian's silence as an admission of the alleged misconduct. Acting pursuant to 28 U.S.C. 1927, a statute that permits a court to impose costs and attorneys' fees upon an attorney who "unreasonably and vexatiously" multiplies a proceeding, the Court ordered Plaintiff's counsel to pay Resurgent $9,186.50 and Northland Group $4,092.00 in attorneys' fees. For more information on consumer finance litigation topics, please contact one of the Burr & Forman team members for assistance. We are happy to answer any questions or concerns you may have.