Norton v. LVNV Funding, LLC

Background

Sonya Norton brought a proposed class action against LVNV Funding, LLC and the Law Office of Harris & Zide. She alleged violations of the federal Fair Debt Collection Practices Act and California’s Fair Debt Collection Practices Act. She also sought an injunction under California’s Unfair Competition Law.

Norton alleged that the defendants unlawfully collected a judgment by garnishing her wages. According to the complaint, LVNV’s predecessor had assigned the judgment to LVNV, but LVNV had not filed the acknowledgment required by California Code of Civil Procedure section 673 to become the assignee of record and enforce the judgment. Norton sought, among other remedies, repayment of money allegedly obtained from the proposed class and subclass.

Both defendants answered the third amended complaint, but neither answer included setoff as an affirmative defense. LVNV stated that its lawyers had discussed the defense with Norton’s counsel early in the case, but had inadvertently omitted it from the answer. LVNV’s counsel discovered the omission while preparing a mediation statement, and LVNV later sought Norton’s agreement to file an amended answer. Norton did not agree, so LVNV moved for permission from the court.

Legal standards

Because the motion came after the deadline in the scheduling order for adding defenses, the court first applied Federal Rule of Civil Procedure 16(b)(4). That rule permits changing a scheduling order for good cause and with the judge’s consent. The main consideration is the diligence of the party seeking the amendment, along with whether allowing it would interfere with efficient case management.

After finding good cause, the court then applied Rule 15(a). That rule generally calls for permission to amend pleadings when justice requires, unless there is a reason such as undue delay, bad faith, repeated failure to fix earlier problems, or unfair prejudice to the opposing party.

Court’s analysis

The court found that LVNV acted diligently enough to satisfy Rule 16(b)(4). LVNV discovered the omission on January 30, 2020, waited until after the February 12 mediation to ask Norton to agree to the amendment, and filed the motion shortly after Norton declined. The court also noted that discovery and dispositive-motion deadlines had not yet passed, giving Norton time to investigate and address the proposed setoff defense.

The court rejected Norton’s reliance on a prior case involving a party who ignored repeated indications that additional defendants needed to be added. The court found no similar evidence that LVNV had failed to respond to information about its omitted defense. It also concluded that allowing the amendment would not undermine efficient case management.

The court separately found that Rule 15(a) was satisfied. It found no evidence of bad faith or an improper delaying motive. The court characterized Norton’s concern that LVNV might delay discovery responses as speculation and found that there was enough time to resolve any discovery disputes. The court also noted that the setoff defense was not part of the pending class-certification motion.

Disposition

The court granted LVNV’s motion to amend its answer. LVNV was ordered to file the amended answer by June 2, 2020. The order allowed LVNV to add the defense; it did not decide whether the setoff defense is valid or whether Norton or the proposed class is entitled to any recovery.