A California Appeals Court has upheld the vacating of a default judgment against a debt collector, ruling the circumstances under which the company failed to respond to the complaint — the company’s former attorney had effectively abandoned his position — meet the definition of a satisfactory excuse.
A copy of the ruling in the case of Antich v. Capital Recovery can be accessed by clicking here.
The plaintiff filed a lawsuit in California state court against the defendant in 2019, alleging it violated the Fair Debt Collection Practices Act along with state law in California. The plaintiff alleged she had provided documentation to the defendant that a medical debt had been paid in full, but that the defendant was still reporting the debt to the credit reporting agencies as delinquent.
The defendant failed to answer the complaint and the plaintiff was awarded a default judgment. A year later, the defendant filed a motion to set aside the default judgment. The owner of the company declared that its former in-house counsel had abandoned his job and left the company without having reported any of a number of lawsuits or defaults. The company hired an emergency counsel who uncovered the default in this case and hired an attorney in California to address the situation. The company had maintained policies and procedures to avoid credit reporting a debt that had already been paid and the trial court judge granted the motion to vacate the judgment, which the plaintiff appealed.
The plaintiff argued that the trial court abused its discretion by vacating the judgment and that the conduct of the attorney was negligence, not a mistake. That question — whether the attorney’s total failure to provide adequate legal services constituted an abandonment sufficient to absolve the defendant of responsibility — is an factual matter for the trial court judge to decide, the Appeals Court determined.
On top of that, the defendant submitted documentation and evidence that it had policies and procedures in place that would have served as a defense to the suit. “Accepting this evidence as true, it supports a legally and factually tenable bona fide error defense under the FDCPA and CCRAA,” the Appeals Court wrote. “Thus, even if Antich’s allegation was correct that Capital improperly credit reported her medical debt, Capital had a colorable statutory defense.”