Debt Collector Can’t Nix Suit or Recoup Legal Fees

(CN) - A couple who withdrew a state-law claim against the debt collectors they accuse of fraud do not owe attorneys' fees, a federal judge ruled.

In their original complaint, Helen and Cuong Truong asserted several causes of action against Mountain Peaks Financial Services for its pursuit of a $28,438 student loan default.

Citing California's anti-SLAPP (strategic lawsuit against public participation) statute, the debt collector quickly moved to strike a claim that it violated the state's Rosenthal Fair Debt Collection Practices Act (RFDCPA).

Less than a week later, the Truongs filed an amended complaint that omitted the challenged RFDCPA claim.

After the San Diego court found that this filing mooted the motion to strike and previously filed motion to dismiss, Mountain Peaks filed another motion to dismiss and also sought attorneys' fees related to the anti-SLAPP motion.

U.S. District Judge William Hayes refused to dismiss the case last week, and also shot down the claim for attorneys' fees.

Though Mountain Peaks said its collection efforts conformed to an October 2005 stipulation agreement that it reached after a previous default, the Truongs characterized the terms of that stipulation as "vague and ambiguous."

"Plaintiffs assert that the terms 'default' and 'cure' were not defined within the stipulation, and that plaintiffs did not understand the meanings of those terms," Hayes explained. "Plaintiffs assert that they 'interpreted defendant's stipulation drastically different than defendant,' and contend that all ambiguities must be construed against the drafter, i.e. the defendant."

In support of their claim, the Truongs said that Mountain Peaks illegally sought the full balance of the loan even though they had offered to cure the one-time payment default with a $3,150 check. They claimed that this also showed good faith since the minimum payment to cure was just $150.

Hayes agreed that these allegations represent "adequately alleged facts to show that they [the plaintiffs] would likely be misled by the stipulation."

In resolving the anti-SLAPP question, the court said Mountain Peaks had failed to show that the Truongs' federal complaint arose from the state court lawsuit that it filed in 2005 with regard to the older default.

Rather, the evidence could support that the agency's 2012 demand for the full loan balance, according to the ruling.

Follow @MariaDinzeo

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