Washington Supreme Court Sends Strong Message Regarding Consumers and Meritless Debt Collection

Posted Wednesday, August 30, 2017 by Pivotal Law Group

In its recent published opinion in Elliott Bay Adjustment Co., Inc. v. Caren Dacumos, the Washington Supreme Court confirmed the right of a debtor to collect attorneys’ fees in defending a meritless debt collection action in small claims court (i.e., in a lawsuit seeking less than ten thousand dollars). The court issued a strongly-worded opinion criticizing both the conduct of the debt collector in bringing the bogus lawsuit and the lower courts in denying the debtor’s request for attorney’s fees.

Elliott Bay sued Dacumos in small claims court over a $482.84 doctor’s bill that Dacumos had already paid. When Dacumos received the lawsuit, she immediately called Elliott Bay and told them she had already paid the bill in full. Elliott Bay told her she needed to make additional payments or Elliott Bay would obtain a judgment against her in court, garnish her wages, and pursue her for interest and attorney’s fees.

Dacumos hired a lawyer to defend the lawsuit. In the course of litigation, Elliott Bay insisted there were no factual disputes over whether Dacumos owed the doctor’s bill. Elliott Bay threatened to seek “significant” attorney’s fees from Dacumos.

After Dacumos provided the court bank statements showing she had paid the doctor’s bill, Elliott Bay acknowledged that the doctor’s office had mistakenly credited Dacumos’ payment to another patient’s account. Elliott Bay asked the court to grant a voluntary dismissal of its lawsuit against Dacumos “without prejudice.” “Without prejudice” means, in plain language, that it would be as if Elliott Bay had never sued Dacumos and Elliott Bay would be free to bring the same lawsuit again. Dacumos asked the court to instead dismiss the lawsuit with prejudice, meaning Elliott Bay could not sue Dacumos again on the debt. The court agreed with Dacumos and dismissed the case with prejudice, but refused to award Dacumos attorney’s fees.

The Washington Supreme Court reversed and ordered the lower court to grant Dacumos’ request for attorneys’ fees. The court pointed out that Washington law makes an award of attorney’s fees mandatory in cases seeking less than ten thousand dollars where one party is the “prevailing party.” Disagreeing with the lower courts, the Supreme Court concluded that Dacumos was the “prevailing party” because the lower court’s dismissal with prejudice established that Elliott Bay would never recover anything from Dacumos on the disputed doctor’s bill.

Beyond that fairly straightforward ruling, the Supreme Court sent a message to Washington’s lower courts that consumers who have to hire lawyers to defend bogus debt collection cases should recover their attorney’s fees from the debt collector. The Supreme Court criticized the lower court for “fail[ing] to appreciate that litigants have difficulty in obtaining counsel to assist in defending against collection activity when the alleged debt is small.” The court reiterated its statement in a prior case that attorney’s fee awards are important because defending debt collection cases over small amounts of money is “undesirable work to the great majority of attorneys” and many law firms would not allow a client like Dacumos through the office front door or advise her it was not economical to hire a lawyer to fight the case. The court also noted that “large corporate defendants can be uncooperative in discovery, leading to an increase in effort expended by the debtor’s attorney.”

If you are concerned about wrongful debt collection, contact Pivotal Law Group today for a free consultation.

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