In Arutyunyan v. Cavalry Portfolio Services, 2013 WL 500452 (C.D.Cal. 2013), Judge Gutierrez found that Plaintiff’s counsel’s pleadings did not arise to the level of misconduct that would allow an award of reverse attorneys’ fees under FCRA and the FDCPA, but did under other federal law. Under FCRA, the Court explained:
As a threshold matter, § 1681n(c) imposes attorneys’ fees on the plaintiff herself, not on the plaintiff’s counsel. See Smith v. HM Wallace, Inc., No. 08–22372–CIV, 2009 WL 3179539, at *2 (S.D.Fla. Oct. 1, 2009); Lewis v. Trans Union LLC, No. 04–6550, 2006 WL 2861059, at *4 (N.D.Ill. Sept. 29, 2006). Accordingly, the Court considers only whether Northland Group is entitled to recover attorneys’ fees against Plaintiff herself based on Plaintiff’s bad faith in filing the lawsuit. In the context of attorneys’ fees, bad faith may be established based on a showing that the plaintiff’s action was unfounded from the outset, frivolous, or brought for the purpose of harassment. See Christiansburg Garment Co. v. Equal Emp’t Opportunity Comm’n, 434 U.S. 412, 421 (1978); see also Lewis, 2006 WL 2861059, at *4 (awarding attorneys’ fees pursuant to § 1681n(c) based on a showing that the plaintiff “knew of the falsity and baselessness of the allegations in the complaint when it was filed”); Mayle v. Equifax Info. Servs., Inc., No. 03–8746, 2006 WL 398076, at *2 (N.D.Ill. Feb. 14, 2006) (awarding attorneys’ fees pursuant to § 1681n(c) when the plaintiff and her attorneys had documentation that the FCRA action was frivolous when the action was filed). Courts addressing attorneys’ fees awards pursuant to § 1681n(c) have consistently concluded that fees may be awarded under this provision only when a pleading or other document was filed in bad faith, and may not be based on misconduct during the pendency of the action, such as the use of delay tactics or failure to communicate with opposing counsel. See Bagumyan, 2007 WL 1500849, at *2 (declining to award attorneys’ fees under § 1681n(c) because the defendants had argued only that the plaintiffs had engaged in bad faith in the maintenance of the lawsuit, not in the filing of the action); see also Roybal v. Trans Union, No. 05–cv–1207–MCE–KJM, 2009 WL 394290, at *1 (E.D.Cal. Feb. 17, 2009) (declining to award attorneys’ fees after finding that there was “no evidence that [the] action was brought in bad faith or for purposes of harassment”) (emphasis added)); Rogers, 514 F.Supp.2d at 52 (noting that § 1681n(c) “requires a showing that a document was filed in bad faith” (in-ternal quotation marks omitted)); Ryan v. Trans Union Corp., No. 99 C 216, 2001 WL 185182, at *5 (N.D.Ill.2001) (denying attorneys’ fees under § 1681n(c) because the defendants had failed to estab-lish that the plaintiff actually realized his core allegations were untrue when he filed his complaint). . . .None of this purported misconduct demonstrates bad faith on the part of Plaintiff such that attorneys’ fees may be awarded against her specifically. First, much of the alleged misconduct relates to Bartoumian only, such as his failure to meet pleading requirements, failure to investigate the allegations, and failure to promptly serve Defendants. Though plaintiffs are in general charged with their counsel’s negligent acts, see Cmty. Dental Servs. v. Tani, 282 F.3d 1164, 1168 (9th Cir.2002), Bartoumian’s conduct here does not show subjective bad faith on the part of Plaintiff because it does not establish that Plaintiff actually knew that the action was unfounded or frivolous at the time it was filed. See Ryan, 2001 WL 185182, at *5; cf. Lewis, 2006 WL 2861059, at *4; Mayle, 2006 WL 398076, at *2. The purported inadequacies in Plaintiff’s complaint are not an adequate basis on which to find that Plaintiff herself filed the claim in bad faith. See Christiansburg, 434 U .S. at 421 (emphasizing the high standard for a finding of bad faith and noting that courts should exercise discretion in making awards of attorneys’ fees).
Under the FDCPA, the Court explained:
Accordingly, an award of attorneys’ fees under the FDCPA requires a showing that the action was brought in bad faith. See Lemieux v. Jensen, No. 03–CV–1666B (AJB), 2004 WL 302318, *2 (S.D.Cal. Jan. 29, 2004). For the reasons discussed above with regard to attorneys’ fees under the FCRA, the Court is not persuaded that Plaintiff’s claim was brought in bad faith: mere inartful pleading and failure to state a claim does not demonstrate that an action was brought in bad faith. Simmons v. Roundup Funding, LLC, 622 F.3d 93, 97 (2nd Cir.2010) (finding that there was no bad faith merely because “the action was meritless and properly dismissed on the pleadings”). Courts awarding attorneys’ fees based on a finding of bad faith in the filing of actions related to debt collection practices have required a higher showing than this. See Juras v. Aman Collection Service, Inc., 829 F.2d 739, 745 (9th Cir.1987) (declining to award attorneys’ fees in a FDCPA action because the plaintiff was confused about complex legal doctrine); Branco v. Credit Collections Services, Inc., No. 2:10–cv–03490–MCE–EFB, 2012 WL 1143562, *2 (E.D. Cal. April 4, 2012) (finding that although plaintiff filed a claim based on a tenuous factual foundation, this was not sufficient to show that plaintiff and her attorney had the requisite intent to harass). Further, the other allegations regarding bad faith all relate to conduct that occurred after the action was filed, and so cannot support a finding that the action was brought in bad faith. Accordingly, the Court concludes that Northland Group has not made a showing that would permit an award of attorneys’ fees pursuant to § 1692k(a)(3).
The Court did award fees under 28 U.S.C. § 1927:
In the alternative, Northland Group requests that the Court award the requested attorneys’ fees of $4,092.00 against Bartoumian directly as sanctions, pursuant to 28 U.S.C. § 1927. Under 28 U.S.C. § 1927, “[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.” 28 U .S.C. § 1927. The Ninth Circuit has interpreted “unreasonably and vexatiously” to require subjective bad faith, meaning that the attorney recklessly or knowingly raised a frivolous argument or argued a claim for the purposes of harassment. See New Alaska Dev. Corp. v. Guetschow, 869 F.2d 1298, 1306 (9th Cir.1989). In fact, a finding of subjective bad faith is “crucial,” as a frivolous argument by itself is insufficient to support an award of sanctions under § 1927. Estate of Blas Through Chargualaf v. Winkler, 792 F.2d 858, 860 (9th Cir.1986) (declining to award attorneys’ fees under § 1927 when the plaintiff’s arguments were not frivolous and, even if they had been frivolous, it was not shown that they were made in bad faith). Here, Northland Group incorporates by reference the same arguments for bad faith that it used to support its request for attorneys’ fees under the FCRA and the FDCPA. Mot. 16:18–19. Northland Group also argues that Bartoumian “unreasonably and vexatiously multiplied this frivolous proceeding when he advocated Plaintiff’s baseless claims in the individual scheduling report he filed on behalf of Plaintiff.” Mot. 16:19–22. Mr. Bartoumian failed to submit an opposition to the present motion, despite being served with the motion and being Plaintiff’s attorney of record at the time the motion was filed. The Court deems Mr. Bartoumian’s failure to oppose the motion to be a concession to the allegations of bad faith and consent to the granting of attorneys’ fees in the amount re-quested. See Ghazali v. Moran, 46 F.3d 52, 53–54 (9th Cir.1995); Khayan v. Bank of Am., No. CV 12–3520–GHK (VBKx), at *2 (C.D.Cal. Dec. 5, 2012) (imposing sanctions on Bartoumian in favor of defendant pursuant to § 1927 based on the same facts upon which Northland Group seeks sanctions in the present case). Accordingly, Northland Group’s motion for attorneys’ fees in the sum of $4,092.00 for services incurred up to and through the filing of this fee motion is GRANTED to the extent that it seeks recovery directly from Bartoumian pursuant to § 1927.
Judge Guttierrez simultaneously a similar award in favor of Resurgent Capital in Arutyunyan v. Cavalry Portfolio Services, 2013 WL 500480 (C.D.Cal. 2013). For information regarding matters such FCRA/FDCPA matters filed by Plaintiff’s counsel Bartoumian, contact Scott Hyman at sjh@severson.com or David Berkley at db@severson.com