Firm Can't Shake $300K Award for Barred Lawsuit

     (CN) - A debt-collection law firm must pay a disabled former janitor $311,000 in damages because it pursued his $3,000 credit card debt long after the statute of limitations had expired, the 9th Circuit affirmed Friday.
     A Montana federal jury ordered Johnson, Rodenburg & Lauinger to pay Tim McCollough after the firm was found to have violated the federal and state fair debt laws, as well as state torts of malicious prosecution and abuse of process.
     The court found that Johnson Rodenburg filed an average of five collection lawsuits a day in Montana between January 2007 and July 2008, which amounted to about 2,700 total. On one day, the North Dakota firm filed 40 lawsuits. About 90 percent of the firm's suits end in a default judgment, one of its attorneys testified.
     McCollough claims that he and his wife fell behind in paying their credit card bills after he suffered a brain injury while working as a school custodian and his wife underwent surgery. He stopped making payments on his account with Chase Manhattan Bank in 1999 when there was an unpaid balance of about $3,000.
     A subsidiary of Collect America, which now goes by SquareTwo Financial, paid more than $3,800 to buy McCullough's account from Chase in 2001. It sued McCullough to collect the debt in 2005 but dismissed the case when McCullough replied that the five-year statute of limitations had already expired.
     After the company retained Johnson Rodenburg to pursue collection, the firm requested Collect America to provide information to extend the statute. Collect America incorrectly replied that McCullough had paid $75 on his account in 2004, effectively resetting the clock to run through 2009.
     But that 2004 activity was not a payment; it was the return of court costs to Collect America for an earlier attempt to pursue McCullough's debt. A Johnson Rodenburg lawyer never followed up to request more documentation of the activity, however, and the firm simply sued McCullough in 2007 for about $10,000.
     In a pro se answer to the complaint, McCullough again wrote that the statute of limitations had expired.
     "FORGIVE MY SPELLING I HAVE A HEAD INJURY AND WRITING DOSE NOT COME EASY," McCullough wrote, as reprinted by the court. "THE STACUT OF LIMITACION'S IS UP, I HAVE NOT HAD ANY DEALINGS WITH ANY CREDITED CARD IN WELL OVER 8½ YEARS."
     McCullough went on to say that he was disabled and received just $736 a month in Social Security. He also claimed that that Chase harassed and insulted him when his Workers' Compensation insurance ran out.
     "THEY CALLED AROUND THE CLOCK, SO I COULD NOT REST, THEY GOT ME SO WOUND UP AND CONFUSED THE HEALING OF MY HEAD INJURY STOPED!" he wrote.
     "WHEN WILL IT STOP DO I HAVE TO SUE THEM SO I CAN LIVE QUIETLY IN PAIN," he asked.
     When McCullough eventually got a lawyer, the firm fell on its sword and dismissed the suit with prejudice. McCullough then filed suit and won damages, $250,000 of which was for emotional distress. The District Court declined to reduce any part of the award or give Johnson Rodenburg a new trial.
     The 9th Circuit, which heard arguments for the case in Billings, Mont., affirmed Friday. A three-judge panel, which included retired Supreme Court Justice Sandra Day O'Conner sitting by designation, said the firm's error was its own to prevent.
     "Substantial evidence supports the jury's findings of both a lack of probable cause and malice," the 30-page decision, authored by Judge Sidney Thomas, states.
     "McCollough acknowledged his disabling pre-existing condition but characterized the impact of JRL's lawsuit on him as 'the straw that broke the camel's back,'" Thomas continued. "He thought that the lawsuit was 'frivolous' and 'an insult,' and that he was 'being shoved around.' We thus must conclude that the award was not based on speculation and guesswork, but rather on the jury's valuation of McCollough's emotional distress."