Fair Debt Collection Practice: Litigation Privilege

Posted in Debt Collection Practices,Unfair Business Practices on October 11, 2009

Komarova v. National Credit Acceptance, Inc., (First District, June 25, 2009) 175 Cal.App.4th 324, 95 Cal.Rptr.3d 880, 09 Cal. Daily Op. Serv. 8174, 2009 Daily Journal D.A.R. 9455

A woman filed an action against a debt collection agency, alleging that the defendant had engaged in abuses in violation of the Robbins-Rosenthal Fair Debt Collection Practices Act (Civil Code section 1788 et seq.). Asserting causes of action for statutory violations as well as intentional infliction of emotional distress, the plaintiff alleged that the defendant had not only mistakenly pursued the wrong individual, but had engaged in debt collection abuses such as harassing phone calls, calling without disclosure of identity, unreasonably frequent harassing communications and judicial proceedings without service of process.

Appealing from a jury verdict in favor of the plaintiff, the defendant contended that the plaintiff’s claims were barred by the litigation privilege of Civil Code section 47, which affords litigants and witnesses free access to the courts without fear of being harassed subsequently by derivative tort actions. The court of appeal affirmed in part and reversed in part, holding that the litigation privilege did not apply to the cause of action under the Rosenthal Act, but did apply to the cause of action for emotional distress:

“We must nonetheless be mindful of the ease with which the Act could be circumvented if the litigation privilege applied. In that event, unfair debt collection practices could be immunized merely by filing suit on the debt. The defendants in Gerber, supra, 2009 WL 248094, page *1, for example, allegedly “ ‘kept a state court collection lawsuit secret from plaintiff and his attorney for nearly a year while supposedly communicating in good faith as to an alleged debt.’ [P]laintiff claims defendants did this ‘so they could commit aggressive and egregious violations of fair debt collection laws while retaining a hidden “hole card” for privilege….’ ” Moreover, the Act’s prohibitions of deliberate neglect of service of process (§ 1788.15, subd. (a)) and distant forum abuse (§ 1788.15, subd. (b)) would be nullified by the privilege. The Legislature presumably would not have included those protections in the Act if it intended for the privilege to apply. Further, as noted in Butler, supra, 521 F.Supp.2d at page 1096, the Act is “a remedial statute [that] should be interpreted broadly in order to effectuate its purpose.” (See People ex rel. Lungren v. Superior Court (1996) 14 Cal.4th 294, 313, 58 Cal.Rptr.2d 855, 926 P.2d 1042 [“civil statutes for the protection of the public are, generally, broadly construed in favor of that protective purpose”].) For these reasons, we conclude that the Act would be significantly inoperable if it did not prevail over the privilege where, as here, the two conflict.
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Plaintiff contends that the purposes of the litigation privilege would not be served by applying it here, but as to the cause of action for intentional infliction of emotional distress, this case is the very sort of derivative suit the privilege is meant to preclude. The privilege “seeks to encourage free access to the courts and finality of judgments by limiting derivative tort claims arising out of litigation-related misconduct and by favoring sanctions within the original lawsuit.” (Rusheen, supra, 37 Cal.4th at p. 1063, 39 Cal.Rptr.3d 516, 128 P.3d 713.) Plaintiff claims that she “could not assert her rights in the arbitration or Superior Court proceedings for the simple fact that she was not a party thereto.” However, she was served with the petition to confirm the arbitration award and could have appeared and sought sanctions in the confirmation proceeding. The privilege bars the cause of action for intentional infliction of emotional distress in this as in other cases.”