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Edwards v. Equifax Information Services, LLC

United States District Court, S.D. Indiana, Indianapolis Division

March 13, 2018

DAVID M. EDWARDS, Plaintiff,
v.
EQUIFAX INFORMATION SERVICES, LLC, EXPERIAN INFORMATION SOLUTIONS, INC., PHH MORTGAGE CORPORATION, FIRST MERCHANTS BANK, Defendants.

          REPORT AND RECOMMENDATION ON DEFENDANT'S MOTION FOR SANCTIONS AND PLAINTIFF'S CROSS-MOTION FOR SANCTIONS

          Matthew P. Brookman, United States Magistrate Judge

         I. Introduction

         Defendant, Experian Information Solutions, Inc. (“Experian”) has filed a motion for sanctions against Plaintiff's counsel, Barker Hancock & Cohron (“BHC”), pursuant to 15 U.S.C. § 1681n(c), 28 U.S.C. § 1927, and this Court's inherent authority. Experian argues that BHC has abused the Fair Credit Reporting Act (“FCRA”) provision that entitles recovery to attorney's fees by bringing frivolous claims and then demanding settlement on those claims based on nothing more than the prospect of attorneys' fees. (Docket No. 43 at ECF p. 1). Experian argues that BHC has developed a habit of bringing cases with hopes of leveraging litigation costs to obtain settlement while having no intention of going forward on plaintiffs' allegations. (Docket No. 43 at ECF p. 2). BHC responds and argues that Experian's motion is baseless and requests cross sanctions for the attorney fees and costs associated with responding to its filing.[1] (Docket No. 51 at ECF p. 1). For the reasons that follow, the undersigned recommends Experian's Motion for Sanctions (Docket No. 42) be denied and recommends BHC's Cross Motion for Sanctions (Docket No. 51) also be denied.

         II. Background

         On September 6, 2017, Plaintiff brought this claim against Experian, and others, claiming violations of the FCRA based as to Experian on its reporting of debts allegedly excluded from Plaintiff's Chapter 13 bankruptcy. (Docket No. 43 at ECF p. 2). Specifically, the Complaint alleged that the “Experian credit report errantly reflects that Edwards's former obligation to PHH Mortgage was ‘Discharged through Bankruptcy Chapter 13[]'” and that “[b]ecause Edwards's former obligation to PHH Mortgage was not discharged in bankruptcy and made payments after October of 2011, the information described above was inaccurate and misleading.” (Docket No. 1 at ¶¶28-29).

         On October 2, 2017, BHC sent Experian a settlement demand, which claimed “if successful in proving his claim, Mr. Edwards would [] be entitled to statutory damages, and an award of ever growing attorney fees and costs.” (Docket No. 42-2 at ECF p. 1). On October 19, 2017, Experian responded, stating that it was not interested in settlement because “the inaccuracies alleged in the Complaint . . . are not the sort of inaccuracies for which the FCRA holds credit reporting agencies accountable.” (Docket No. 42-2 at ECF p. 1). Experian further stated that Plaintiff's claims rested on “‘the kind of legal question that credit reporting agencies are neither qualified nor obligated to answer.'” (Docket No. 42-2 at ECF p. 1) (quoting Hupfauer v. Citibank, N.A., No. 16 C 475, 2016 WL 4506798, at *7 (N.D. Ill. Aug. 19, 2016)). Experian requested that the complaint be dismissed and stated it “believe[d] Plaintiff's claims to be meritless and that continued pursuit of these claims serve[d] only to harass Experian into settling to avoid the costs of further litigation.” (Docket No. 42-2 at ECF p. 2). No further discussion occurred.

         On October 20, 2017, Experian filed a motion to dismiss. (Docket No. 23, Docket No. 24). Plaintiff sought an extension of time to respond, which was granted, making the new deadline November 17, 2017. (Docket No. 30). Despite asking for the extension, BHC did not file a response and, instead, on November 20, 2017, contacted Experian regarding the submission of a joint proposed Case Management Plan for the matter. (Docket No. 42-3). On November 21, 2017, Experian filed a Reply brief to its uncontested Motion to Dismiss, stating that “BHC [would] almost certainly dismiss this case rather than defend Plaintiff's baseless allegations[.]” (Docket No. 34). On November 28, 2017, Plaintiff filed a voluntary Motion to Dismiss Experian Information Solutions, Inc., in which Plaintiff stated that “the parties [had] reached an informal resolution.” (Docket No. 36 at ECF p. 1). Experian asserts that there were no settlement discussions after the filing of its Motion to Dismiss nor was a settlement ever reached. (Docket No. 42 at ECF p. 5).

         Experian points to a larger pattern of repeated BHC abuses of the FCRA, focusing on 2017 cases with a similar procedural timeline as the present case. In 2017, Experian filed motions to dismiss in seven cases, including this case, all of which were never responded to by BHC. See Wilson v. Equifax Information Services, LLC et al., 1:17-cv-00147-WTL-MJD, Dkt. 53 (S.D. Ind. Jan. 14, 2017); Pinner v. Equifax Information Services, LLC et al., 1:17-cv-00955-JMS-MPB, Dkt. 24 (S.D. Ind. Mar. 29, 2017); Edwards v. Equifax Information Services, LLC et al., 1:17-cv-02905-WTL-MJD, Dkt. 25 (S.D. Ind. Aug. 23, 2017); Powell v. Equifax Information Services, LLC et al., 1:17-cv-02985-WTL-MJD, Dkt. 35 (S.D. Ind. Aug. 23, 2017); Miller v. Equifax Information Services, LLC et al., 4:17-cv-00167-RLY-TAB, Dkt. 18 (S.D. Ind. Sept. 6, 2017). In six of these cases, despite never responding to the Motion to Dismiss, BHC moved for an extension of time to reply. Six of these seven cases included the same language that an “informal resolution” was reached. Experian asserts that no resolution was reached in any of these six cases. (Docket No. 42-4). One of the cases, Edwards v. Equifax Information Services, LLC et al., 1:17-cv-2905-WTL-MJD, was brought by David Edwards' wife and related to the same PHH Mortgage account and same Chapter 13 bankruptcy at issue in this matter.

         III. Conclusions of Law

         A. Applicable Vehicles for Sanctions

         As an initial matter, Plaintiff argues Experian did not follow Local Rule 7-1(g) and that 28 U.S.C. § 1927 is not a mechanism for awarding sanctions based on a party's failure to reasonably investigate a filing. However, Local Rule 7.1(g), by its own terms, applies only to (a) “motion[s] for attorney's fees (other than post-judgment);” (b) “motion[s] for sanctions under Fed.R.Civ.P. 11”;” and (c) “motion[s] to disqualify an attorney.” S.D. Ind. Local Rule 7-1(g). Here, Experian's Motion for Sanctions was brought after judgment was entered, does not rely upon Rule 11, and does not seek to disqualify an attorney. Accordingly, Local Rule 7-1(g) does not apply. Likewise, as Experian is not seeking sanctions under Rule 11, Experian need not have met the procedural requirements of that rule. BHC cites Kotsilieris v. Chalmers, 966 F.2d 1181, 1187-88 (7th Cir. 1992) for the proposition that a court uses Rule 11 as a backdrop in evaluating a request for sanctions pursuant to its inherent authority and thus, the Rule 11 procedural requirements must be met. However, Kotsilieris only mentions Rule 11 once to analogize a penalty principle between a Rule 11 sanction and a section 1927 sanction. See Id. at 1187-88. The court actually awarded fees pursuant to section 1927. BHC also cites Kapco Mfg. Co. Inc. v. C & O Enters., Inc., 886 F.2d 1485, 1491 (7th Cir. 1989), for this argument, but in that case the defendants expressly moved for sanctions pursuant to Rule 11. No authority was provided, nor any found based on independent research, that Rule 11 requirements be met when the Court considers a request for sanctions, in part pursuant to its inherent authority.

         Plaintiff cites no authority for its argument that, because Experian did not move for sanctions pursuant to Rule 11, it is necessarily limited to alleged bad faith post-filing conduct found to have unreasonably continued these proceedings. Case law suggests otherwise. “The Seventh Circuit . . . has held that the filing of a complaint can constitute an unreasonable and vexatious multiplication of the proceedings and therefore be sanctionable under § 1927.” Webb v. Bd. of Trustees of Ball State Univ., No. IP 97-1268-T/G, 2001 WL 548314, at *16 (S.D. Ind. Mar. 20, 2001); see also In re TCI Ltd., 769 F.2d 441, 447 (7th Cir. 1985) (quoting H.R. Conf. Rep. 96-1234, 96th Cong., 2d Sess. 8 (1980)) (“Rule 11 sets out a standard that we think applies equally to § 1927: a complaint must be ‘warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law.'”). Likewise, because § 1927 imposes a continuing duty on attorneys to dismiss claims that are no longer viable, pre-filing conduct is also relevant to whether the continued pursuit of a case is unreasonable and vexatious. See Intellect Wireless, Inc. v. Sharp Corp., 87 F.Supp.3d 817, 848-49 (N.D. Ill. 2015) (“[T]he pre-filing timeline . . . support[s] [] the court's conclusion that . . . continued pursuit of this case was vexatious and an unnecessary multiplication of the proceedings under § 1927.”). Section 1927 is a proper vehicle to assess whether the filing of a complaint was warranted.

         Experian has only moved for an order of sanctions and award of attorney's fees against BHC, and not Mr. Edwards personally, pursuant, in part, to 15 U.S.C. § 1681n(c). However, Section 1681n(c) does not explicitly provide that a party's attorney may be compelled to pay his opponent's attorney's fees. Experian has cited nothing in the statute's legislative history, nor has this Court's independent search found anything, indicating that Congress intended to authorize a court to impose fees against an attorney. A case Experian itself cites supports this fact. See Ryan v. Trans Union Corp., et al., 2001 WL 185182, *5 (N.D. Ill. Feb. 26, 2001). When an attorney's fee statute that permits recovery by a prevailing party is silent as to who may be required to pay the award, the statute has consistently been read to permit a fee award only against a party, not against the party's attorney. See, e.g., Hamer v. Cty. of Lake, 819 F.2d 1362, 1370 (7th Cir. 1987) (42 U.S.C. § 1988); Corneveaux v. CUNA Mutual Ins. Grp., 76 F.3d 1498, 1508-09 (10th Cir. 1996) (42 U.S.C. § 2000e-5(k)); Brown v. Borough of Chambersburg, 903 F.2d 274, 276 (3d Cir. 1990) (42 U.S.C. § 1988) (citing cases); Quiroga v. Hasbro, Inc., 934 F.2d 497, 504 (3d Cir. 1991) (42 U.S.C. § 2000e-5(k)). See generally Roadway Express, Inc. v. Piper, 447 U.S. 752, 761 (1980) (indicating that fees under 42 U.S.C. § 1988 may be recovered only against a party, not the party's attorney). I find that § 1681n(c) does not authorize imposition of attorney's fees upon a party's lawyer.

         B. Standard

         Under 28 U.S.C. § 1927, “[a]ny attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof 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. Specifically, the Seventh Circuit has held that “[i]f a lawyer pursues a path that a reasonably careful attorney would have known, after appropriate inquiry, to be unsound, the conduct is objectively unreasonable and vexatious.” Boyer v. BNSF Ry. Co., 824 F.3d 694, 708 (7th Cir. 2016), opinion modified on reh'g, 832 F.3d 699 (7th Cir. 2016), and cert. denied, 137 S.Ct. 391, 196 L.Ed.2d 296 (2016) (quoting In re TCI Ltd., 769 F.2d 441, 446 (7th Cir. 1985)). “[C]ases in which [the Seventh Circuit] has upheld section 1927 sanctions have involved situations in which counsel acted recklessly, counsel raised baseless claims despite notice of the frivolous nature of these claims, or counsel otherwise showed indifference to statutes, rules, or court orders.” Kotsilieris, 966 F.2d at 1184-85.

         The FCRA provides that “on a finding by the court that an unsuccessful pleading, motion, or other paper filed in connection with an action under this section was filed in bad faith or for purposes of harassment, the court shall award to the prevailing party attorney's fees reasonable in relation to the work expended in responding to the pleading, motion, or other paper.” 15 U.S.C. §§ 1681n(c); 1681o(b). Courts in the Seventh Circuit have held that “bad faith” in this context “requires a showing either that the party subjectively acted in bad faith-knowing that he had no viable claim-or that he filed an action or paper that was frivolous, unreasonable, or without foundation.” Ryan v. Trans Union Corp., 2001 WL 185182, at *5 (N.D. Ill. Feb. 26, 2001).

         The federal courts' “inherent authority to rectify abuses to the judicial process also authorizes sanctions for [] violations.” Dotson v. Bravo, 321 F.3d 663, 667 (7th Cir. 2003). Specifically, “[s]anctions meted out pursuant to the court's inherent power are appropriate where the offender has willfully abused the judicial process or otherwise conducted litigation in bad faith.” Salmeron v. Enter. Recovery Sys., Inc., 579 F.3d 787, 793 (7th Cir. 2009).

         C. Experian's Motion for Sanctions (Docket No. 42)

         Turning to the substantive portion of Experian's Motion to Dismiss, Experian argues that Plaintiff's complaint against it was frivolous and without foundation. (Docket No. 43 at ECF p. 9). Defendant contends it was filed in subjective and objective bad faith.

         “[A] violation of § 1927 occurs when an attorney intentionally or recklessly ‘file[s] . . . a claim that lacks a plausible legal or factual basis.'” Fisher v. Samuels, No. 84 C 3385, 1988 WL 107362, at *2 (N.D. Ill. Oct. 13, 1988) (citations omitted) (alterations in original). Plaintiff's complaint, as to Experian, alleges that it willfully and recklessly failed to comply with two provisions of the FCRA: Section 1681e(b), which requires credit reporting agencies to follow reasonable procedures to assure maximum accuracy of credit reports, and Section 1681i, which requires them to conduct a proper and reasonable investigation of allegedly inaccurate information included in credit reports. (Docket No. 1 at ECF p. 8). Experian's alleged violations of Section 1681e(b) arise from Plaintiff's ...


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