Court of Appeal (Cal.) Follows Pulliam, and Not Spikener, in an Unpublished Decision on the FTC Holder Rule

In Flores v. Westlake Servs., No. B308288, 2021 Cal. App. Unpub. LEXIS 7876, at *13-14 (Dec. 16, 2021), the Court of Appeal found in an unpublished decision that the FTC Holder did not cap attorneys’ fees.  The Pulliam case, on which the Court of Appeal relied, is on appeal to the California Supreme Court.

Upon considering these factors, Pulliam concluded the FTC’s Rule Confirmation was not entitled to conclusive deference. (Pulliam, supra, 60 Cal.App.5th at p. 420.) Among other things, it found that resolution of the issue was not “easily within the FTC’s substantive expertise. This is so for two reasons. (1) Resolution of the issue may turn on the particular state statute providing for attorney’s fee recovery at issue, and whether that statute is intended to be punitive against the payor or simply to make the payee whole. (2) As illustrated by the FTC’s request for comments which led to the Rule Confirmation, the FTC sought to exercise its judgment based on data regarding the effect of the rule (or any proposed rule change) on consumers and businesses. No commenter provided the FTC with data on the costs and benefits to consumers or businesses in different jurisdictions based on the availability of attorney’s fees or any limitations placed on them. Thus, the FTC’s statement regarding [*14] attorney’s fees in its Rule Confirmation was not an exercise of its substantive expertise, but simply a position taken after limited arguments were made on each side.” (Pulliam, supra, 60 Cal.App.5th at p. 420.) Further, “given the informal nature of the FTC’s consideration of the issue—one that followed a request for comments that did not mention attorneys’ fees — we are not convinced that the confirmation truly represented the ‘”fair and considered judgment” [necessary] to receive . . . deference.’ (Kisor, supra, 139 S.Ct. at p. 2416.)” (Pulliam, supra, 60 Cal.App.5th at p. 420.) Finally, “although we cannot say the position taken in the Rule Confirmation was a change in interpretation — as the FTC had not previously interpreted the rule at all — it did, in fact, address an issue never previously addressed, and undermined the existing practice in those jurisdictions in which attorney fees in excess of the cap had been, and were being, imposed as a matter of course.” (Pulliam, supra, 60 Cal.App.5th at p. 420.) Based on the above rationale, we agree with Pulliam that the Holder Rule does not limit a defendant’s liability for attorney fees, and that the FTC’s recent Rule Confirmation is not entitled to conclusive deference. We now turn to the discrete issues raised by the instant appeal.