Hanrahan v. Statewide Collection, INC.

Background

Leah Hanrahan alleged that she incurred a medical debt with Mad River Hospital and that Statewide Collection, Inc. later sent her a collection letter dated January 23, 2018. The letter stated that, if a judgment were entered, it would be reported to Equifax, TransUnion, and Experian for seven years and, if unpaid, renewed for another seven years. Hanrahan alleged that these statements were false, deceptive, and misleading, and that she paid the debt after receiving the letter.

Hanrahan asserted claims under the federal Fair Debt Collection Practices Act and California’s Rosenthal Fair Debt Collection Practices Act. She moved for partial summary judgment—judgment resolving some issues without a trial—on liability and statutory damages. She also moved to strike two paragraphs of Statewide’s supplemental brief. Statewide did not respond to the motion to strike.

Liability

The court found it undisputed that the letter falsely stated that a judgment would be reported on Hanrahan’s credit report. Statewide conceded that, in July 2017, the credit-reporting agencies had stopped reporting judgments. The court rejected Hanrahan’s argument that the letter misstated the lawful reporting period, however. It explained that California judgments are enforceable for ten years and may be renewed for another ten years, and that federal law permits certain civil judgments to be reported for more than seven years when the governing limitations period is longer.

Statewide invoked the bona fide error defense. That defense can protect a debt collector from liability when the violation was unintentional and occurred despite procedures reasonably designed to prevent the particular error. The court found that the defense applies to factual mistakes as well as clerical errors, but ruled that it was unavailable to Statewide here. Although the evidence showed that Statewide did not knowingly make a false statement, there was no evidence that it had procedures reasonably adapted to prevent an incorrect statement about credit-reporting practices. The court also noted that the change in credit-reporting practices was widely reported and that Statewide did not learn of it until Hanrahan filed the lawsuit.

The court rejected Statewide’s argument that the medical debt was not covered by the Rosenthal Act. It found no dispute that Hanrahan received medical treatment in January 2016 and did not pay for it until after receiving Statewide’s collection letter. The court therefore found that Statewide violated both the federal Act and the Rosenthal Act.

Statutory damages

The court determined that Hanrahan was not barred from seeking statutory damages under all three provisions at issue: the federal Act, California Civil Code section 1788.17, and California Civil Code section 1788.30(b). The court stated that these provisions could permit a total of up to $3,000 in statutory damages.

The court did not decide that Hanrahan was entitled to the maximum amount. For damages under the federal Act and section 1788.17, the amount depended on factors including the frequency and persistence of the violation, its nature, and how intentional it was. The court found that the record left a factual dispute about the proper amount. As to section 1788.30(b), Hanrahan had not submitted evidence establishing that Statewide acted willfully and knowingly, so at most a factual dispute remained on that issue.

Disposition

The court granted Hanrahan’s motion to strike and vacated the hearing scheduled for January 8, 2021. It granted in part and denied in part Hanrahan’s motion for partial summary judgment. It granted the motion insofar as Hanrahan sought summary judgment on liability and on entitlement to seek statutory damages up to a total of $3,000. It denied the motion insofar as Hanrahan sought summary judgment on the amount of statutory damages.