In Lynaugh v. Vincent, No. CV-19-04643-PHX-DJH, 2020 U.S. Dist. LEXIS 23246 (D. Ariz. Feb. 10, 2020), Judge Humetewa found that attorneys’ fees awarded in an underlying consumer litigation was not a debt incurred on a consensual basis and, accordingly, did not arise from a “transaction” under the FDCPA.
The Court will first examine Defendants’ contention that the attorneys’ fees judgment is not consumer debt as defined under the FDCPA.1 Defendants argue that the FDCPA is inapplicable because Plaintiff’s debt, the awarded attorneys’ fees, did not arise from a consensual obligation. Defendants contend that a judgment to pay awarded attorneys’ fees cannot be consensual and highlight Plaintiff’s inability to identify what benefit she received as a result of the transaction. Plaintiff attempts to assert that the attorneys’ fees are consumer debt within the meaning of the FDCPA because the judgment being collected on is “directly attributed to the contract terms” of the Loan. (Doc. 13 at 9). However, Plaintiff does not offer any reasoning or legal authority to explain how the attorneys’ fees arose out of any consensual transaction between her and Defendants. Plaintiff only argues that the attorneys’ fees arose out a provision within the Loan and thus arose out of a Loan transaction. Plaintiff cites a single case, Jason v. Maxwell & Morgan, P.C., in support of her position. No. 16-CR-02894 SRB, 2018 U.S. Dist. LEXIS 226997, 2018 WL 6181178 (D. Ariz. July 17, 2018).2 In Jason, a law firm, acting on behalf of an association, filed suit in justice court against a homeowner to recover unpaid homeowners’ assessments. The justice court ruled in favor of the law firm, awarding the unpaid homeowners’ assessments and attorneys’ fees. When the law firm attempted to collect on the judgment, the homeowner brought suit, claiming violations of the the FDCPA. The court ruled in favor of the homeowner, finding that the law firm had violated the FDCPA. The issue of whether the court judgment was consumer debt under the FDCPA was never addressed by the court, as the law firm never raised the question. As a result, the holding of Jason is of little relevance to the issue at hand. In addition, there is a strong distinction between the underlying basis for the two court judgments. In Jason, the judgment arose from the unpaid homeowners’ assessment. The obligation to pay the homeowners’ assessment arose when the home was purchased, which is clearly a consensual transaction where the party derives a benefit. Here, the awarded attorneys’ fees only arose after BMO was forced to enforce its rights under the Loan Agreement. Thus, the obligation to pay the attorneys’ fees did not arise until after the State Court entered judgment against Plaintiff, after finding her claims were clearly groundless. See Turner, 362 F.3d at 1227; Bloom, 972 F.2d 1068. Plaintiff makes no alternative arguments of other consensual transactions from which the attorneys’ fees could have arisen. Plaintiff’s only other potential argument for a consensual transaction is the State Court’s Judgment. This is certainly not a consensual transaction where the parties contracted or negotiated for a consumer good or service. There is nothing consensual about a judgment being entered against a party. Simply put, the State Court judgment fails to satisfy any characteristics of a consensual transaction that would implicate the FDCPA. Because the attorneys’ fees did not arise out of a consensual transaction, they are not a consumer debt under the FDCPA. Plaintiff’s Amended Complaint brings claims only asserting violations of the FDCPA. Because Plaintiff fails to establish the debt is consumer debt under the FDPCA, Plaintiff’s complaint fails to state a claim upon which relief can be granted and amendment of her Complaint would be fertile. As a result, the Court will grant Defendants’ Motion to Dismiss. Accordingly, IT IS HEREBY ORDERED that Defendant’s Motion to Dismiss (Doc. 12) is GRANTED. Plaintiff’s Complaint is dismissed, with prejudice.