Hyde v. Midland Credit ( 2009 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
ROBERT L. HYDE; JOSHUA B. 
SWIGART; HYDE & SWIGART,
Appellants,
and No. 07-55326
DARREN DEL NERO, NICOLE SHAKER,
Plaintiffs,  D.C. No.
CV-04-01040-GPS
v. OPINION
MIDLAND CREDIT MANAGEMENT,
INC.; MRC RECEIVABLES CORP.,
Defendants-Appellees.

Appeal from the United States District Court
for the Central District of California
George P. Schiavelli, District Judge, Presiding
Argued and Submitted
October 23, 2008—Pasadena, California
Filed June 9, 2009
Before: William A. Fletcher and Richard A. Paez, Circuit
Judges, and Kevin Thomas Duffy,* Senior District Judge.
Opinion by Judge William A. Fletcher
*The Honorable Kevin Thomas Duffy, Senior United States District
Judge for the Southern District of New York, sitting by designation.
6831
HYDE v. MIDLAND CREDIT MANAGEMENT 6833
COUNSEL
Alison Buchanan, Hodge, Fenton, Jones & Appel, San Jose,
California, Robert L. Hyde, Joshua B. Swigart, Hyde & Swi-
gart, San Diego, California, for the appellants.
Stephen H. Turner, Lewis, Brisbois, Bisgaard & Smith, Los
Angeles, California, Tomio Buck Narita, Jeffrey A. Topor,
Simmonds & Narita, San Francisco, California, for the appel-
lee.
OPINION
W. FLETCHER, Circuit Judge:
Plaintiff Darren Del Nero sued Defendants-Appellees Mid-
land Credit Management, Inc. (“Midland”) and MRC Receiv-
ables Corporation (“MRC”) for violations of the Fair Debt
Collection Practices Act (“FDCPA”) and California Business
and Professions Code § 17200. Appellants Robert L. Hyde,
Joshua B. Swigart and their law firm Hyde & Swigart (collec-
6834 HYDE v. MIDLAND CREDIT MANAGEMENT
tively “Hyde & Swigart”) represented Del Nero. Del Nero lost
his suit on the merits.
The district court awarded attorney’s fees and costs to Mid-
land and MRC under the FDCPA, 15 U.S.C. § 1692k(a)(3),
holding Del Nero and Hyde & Swigart jointly and severally
liable for the award. Hyde & Swigart appeal the award of
attorney’s fees and costs. We reverse.
I. Background
On February 17, 2004, Del Nero and his mother Nicole
Shaker sued Midland and MRC alleging violations of the
FDCPA and California Business and Professions Code
§ 172000. Attorney Robert Stempler represented both Del
Nero and Shaker. Stempler subsequently withdrew and was
replaced by Del Nero’s sister. Shaker settled with Midland
and MDC before trial, and her claims were dismissed with
prejudice. Three months before trial, Hyde & Swigart
replaced Del Nero’s sister as his counsel.
The case was tried to the court. At the close of plaintiff’s
case, Midland and MRC moved for judgment on partial find-
ings under Federal Rule of Civil Procedure 52(c). The court
granted the motion in part, dismissed all of Del Nero’s claims
against MRC and his § 17200 claim against Midland. The
trial then continued on Del Nero’s remaining FDCPA claims
against Midland. After the close of evidence, the court ruled
for Midland.
The district court awarded attorney’s fees and costs to Mid-
land and MRC against plaintiff Del Nero and his attorneys
Hyde & Swigart jointly and severally. In support of its award,
the district court wrote that “Plaintiff’s only supporting wit-
ness was wholly without credibility.” It wrote further, “The
record of the present case as well as Plaintiff’s pattern of fil-
ing apparently frivolous cases asserting debt collection viola-
tions establish that the present case was brought in bad faith
HYDE v. MIDLAND CREDIT MANAGEMENT 6835
and for the purpose of harassment as defined in 15 U.S.C.
§ 1692k(a)(3).” The court awarded attorney’s fees and costs
of $155,979.09 against Del Nero under § 1692k(a)(3). It
awarded the same amount against Hyde & Swigart under
§ 1692k(a)(3) and Federal Rule of Civil Procedure 11.
Hyde & Swigart timely appealed the award of attorney’s
fees and costs. Del Nero has not appealed. The parties to the
appeal agree that the district court erred in awarding attor-
ney’s fees and costs under Rule 11 by not following the rule’s
requirements. See Fed. R. Civ. P. 11(c)(1)(A) (2007) (requir-
ing a 21-day safe harbor period for a party to withdraw or cor-
rect its offending statements before the court can issue
sanctions on a party’s motion); 11(c)(1)(B) (2007) (requiring
the court to “enter an order describing the specific conduct
that appears to violate [Rule 11] and directing an attorney,
law firm, or party to show cause why it has not violated [Rule
11]”).
For purposes of this appeal, we assume without deciding
that Del Nero’s “action . . . was brought in bad faith and for
the purpose of harassment” within the meaning of
§ 1692k(a)(3). The question presented to us is thus whether
attorney’s fees and costs may be awarded against a plaintiff’s
attorney under § 1692k(a)(3).
II. Standard of Review
We review de novo the legal question whether attorney’s
fees and costs may be awarded against a plaintiff’s attorney
under § 1692k(a)(3). See Benson v. C.I.R., 560 F.3d 1133,
1135 (9th Cir. 2009). Assuming attorney’s fees and costs are
available against an attorney under § 1692k(a)(3), we review
for abuse of discretion the district court’s decision to award
attorney’s fees and costs. Guerrero v. RJM Acquisitions LLC,
499 F.3d 926, 933 (9th Cir. 2007); Ferland v. Conrad Credit
Corp., 244 F.3d 1145, 1148 (9th Cir. 2001). “The district
court’s finding on the issue of bad faith and harassment is
6836 HYDE v. MIDLAND CREDIT MANAGEMENT
reviewed for clear error.” Guerrero, 499 F.3d at 933 (citing
Swanson v. S. Or. Credit Serv., Inc., 869 F.2d 1222, 1229 (9th
Cir. 1989)).
III. Discussion
[1] Section 1692k(a)(3) provides in relevant part, “On a
finding by the court that an action under [the FDCPA] was
brought in bad faith and for the purpose of harassment, the
court may award to the defendant attorney’s fees reasonable
in relation to the work expended and costs.”
[2] Whether attorney’s fees and costs may be awarded
under § 1692k(a)(3) against an attorney of an unsuccessful
abusive plaintiff is an issue of first impression in this circuit.
The district court relied in part on Terran v. Kaplan, 109 F.3d
1428 (9th Cir. 1997), but we decided Terran under Rule 11.
109 F.3d at 1434-35. It is therefore inapposite to the appeal
now before us. For the reasons that follow, we hold that
§ 1692k(a)(3) does not authorize the award of attorney’s fees
and costs against a plaintiff’s attorneys.
[3] We begin by analyzing the text of the statute. Section
1692k(a)(3) is silent as to who should pay attorney’s fees and
costs, merely stating that “the court may award to the defen-
dant attorney’s fees reasonable in relation to the work
expended and costs.” The FDCPA’s legislative history reveals
little more than the text. Congress stated only that it included
the fee shifting provision “to protect debt collectors from nui-
sance lawsuits.” S. Rep. No. 95-382, at 5 (1977).
[4] In Pfingston v. Ronan Engineering Co., 284 F.3d 999(9th Cir. 2002), we held that a similar provision in the False
Claims Act (“FCA”) did not authorize attorney’s fees against
an attorney. Id. at 1006. The FCA provides, “[T]he court may
award to the defendant its reasonable attorneys’ fees and
expenses if the defendant prevails in the action and the court
finds that the claim of the person bringing the action was
HYDE v. MIDLAND CREDIT MANAGEMENT 6837
clearly frivolous, clearly vexatious, or brought primarily for
purposes of harassment.” 31 U.S.C. § 3730(d)(4). In support
of our holding, we noted that Congress had purposefully bor-
rowed the language of the FCA from 42 U.S.C. § 1988, which
does not allow fee awards against attorneys. Pfingston, 284
F.3d at 1006 n.4 (citing S. Rep. No. 99-345, at 29 (1986)
(“[The False Claims Act] standard reflects that which is found
in section 1988 . . . .”)).
The legislative history of the FCA’s fee shifting provision
indicated Congress’s strong desire to deter bad faith actions
under the FCA:
The Committee added this language in order to
create a strong disincentive and send a clear message
to those who might consider using the private
enforcement provision of this Act for illegitimate
purposes. The Committee encourages courts to
strictly apply this provision in frivolous or harass-
ment suits as well as any applicable sanctions avail-
able under the Federal Rules of Civil Procedure.
S. Rep. No. 99-345, at 29 (1986). Despite Congress’s clearly
expressed intent to deter bad faith actions, we refused to allow
awards of attorney’s fees against attorneys under the FCA
given “the absence of any indication that Congress intended
a different result.” Pfingston, 284 F.3d at 1006. Indeed, there
is a general “presumption that an attorney is generally not lia-
ble for fees unless that prospect is spelled out.” Heckethorn
v. Sunan Corp., 992 F.2d 240, 242 (9th Cir. 1993).
[5] Just as in the FCA, Congress in the FDCPA failed to
indicate any intention to authorize the award of attorney’s
fees and costs against attorneys representing debtors. And just
as we held in Pfingston that such awards were not authorized
under the FCA, we so hold today under the FDCPA.
Midland and MRC point us to only two decisions holding
otherwise. The first case is Chaudhry v. Gallerizzo, 174 F.3d
6838 HYDE v. MIDLAND CREDIT MANAGEMENT
394 (4th Cir. 1999), in which a prevailing defendant in a
FDCPA case sought sanctions against the unsuccessful plain-
tiffs and their attorney under 15 U.S.C. § 1692k(a)(3), Rule
11, and 28 U.S.C. § 1927. The district court awarded $5,000
in “sanctions” against the plaintiffs and $10,000 against the
attorney. Chaudhry, 174 F.3d at 410. The Fourth Circuit
affirmed the award under all three provisions without analyz-
ing them separately.
It is clear from the Fourth Circuit’s opinion that the
$10,000 sanction against the attorney was fully justified under
either Rule 11 or § 1927. We strongly suspect that if the
Fourth Circuit had been compelled to justify the award of
attorney’s fees under § 1692k(a)(3) standing alone, and had
thus been compelled to focus its analysis on that section, it
would have come to a different conclusion with respect to
§ 1692k(a)(3).
Rule 11 and § 1927 are not specific to any particular stat-
ute. Rather, they apply to any civil suit in federal district
court. Further, each explicitly provides for remedies against
offending attorneys. See Rule 11(c) (1998) (“Sanctions. If,
after notice and a reasonable opportunity to respond, the court
determines that [Rule 11(b)] has been violated, the court may
. . . impose an appropriate sanction upon the attorneys, law
firms, or parties that have violated [Rule 11(b)] or are respon-
sible for the violation.”) (emphasis added); § 1927 (“Any
attorney . . . 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 attorney’s
fees reasonably incurred because of such conduct.”) (empha-
sis added). Finally, each gives discretion to the district court
to determine the amount of the sanction depending on the
nature of the conduct.
By contrast, § 1692k(a)(3) is specific to the FDCPA. Fur-
ther, it nowhere specifically authorizes an award against an
“attorney.” Finally, it does not authorize an award of a “sanc-
HYDE v. MIDLAND CREDIT MANAGEMENT 6839
tion” of an indeterminate amount in the discretion of the dis-
trict court; rather, it provides for an award of the entire
amount of “reasonable” “attorney’s fees.”
The second case is Sierra v. Foster & Garbus, 48 F. Supp.
2d 393 (S.D.N.Y. 1999), in which the district court awarded
attorney’s fees against the plaintiff’s attorney in a FDCPA
case. The court did so without considering the question
whether the award should run against the plaintiff and not
against his attorney.
[6] We are not persuaded by the limited analysis in Chaud-
hry and Sierra that an award of attorney’s fees under
§ 1692k(a)(3) against plaintiffs’ attorneys is proper. Based on
the text and legislative history of § 1692k(a)(3), on our deci-
sion in Pfingston under the FCA, and on the presumption
against awarding attorney’s fees against attorneys, we believe
that the better analysis of § 1692k(a)(3) is that it authorizes
attorney’s fees and costs only against the offending plaintiff
or plaintiffs.
Conclusion
[7] We hold that 15 U.S.C. § 1692k(a)(3) does not autho-
rize the award of attorney’s fees and costs against a plaintiff’s
attorneys. We reverse the district court’s award of attorney’s
fees and costs against Hyde & Swigart.
REVERSED.