Kniley v. Citibank, N.A. et al

Filing 53

ORDER DENYING MOTION FOR SANCTIONS AND VACATING HEARING by Hon. William Alsup [denying 41 Motion for Sanctions].(whasec, COURT STAFF) (Filed on 4/22/2015)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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JULIET KNILEY,

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For the Northern District of California

United States District Court

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Plaintiff,
v.
CITIBANK, N.A., THE MOORE LAW GROUP,
A Professional Corporation, and HUNT &
HENRIQUES,

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ORDER DENYING MOTION
FOR SANCTIONS AND
VACATING HEARING

Defendants.
/

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No. C 14-05294 WHA

INTRODUCTION
In this motion for sanctions, defendant accuses plaintiff’s counsel of filing a frivolous

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lawsuit. In her opposition, plaintiff accuses defendant’s counsel of the same (for the sanctions

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motion). For the reasons stated below, both requests for sanctions are DENIED and the hearing

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is VACATED.

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STATEMENT
Plaintiff Juliet Kniley was sued by defendant Citibank, N.A., in state court over defaulted

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consumer credit card debt, first in 2013 and then in 2014, with the assistance of co-defendants

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The Moore Law Group and Hunt & Henriques, debt-collection law firms. Plaintiff in turn filed

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claims against defendant and its lawyers in federal court, alleging violations of the Fair Debt

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Collection Practices Act. This court granted defendant Citibank’s motion to dismiss on April 2,

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2015. Before dismissal, defendant moved for sanctions, and plaintiff responded in her

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opposition with an equal request. Both claim the other side has filed frivolous lawsuits.

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This order follows full briefing.

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ANALYSIS
Defendant asks for sanctions under Rule 11. “Rule 11 sanctions are reserved for the rare

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and exceptional case where the action is clearly frivolous, legally unreasonable or without legal

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foundation, or brought for an improper purpose.” Unigard Security Insurance Co. v. Lakewood

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Engineering & Manufacturing Corp., 982 F.2d 363, 370 (9th Cir. 1992) (internal citation

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omitted). A filing is frivolous if it is both baseless and made without a reasonable and competent

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inquiry. Holgate v. Baldwin, 425 F.3d 671, 676 (9th Cir. 2005).
Defendant claims that plaintiff’s counsel should be sanctioned for filing a complaint

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For the Northern District of California

United States District Court

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against Citibank, alleging it could be held liable under the Fair Debt Collection Practices Act.

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Defendant claims that it is “black letter law” that a creditor, like Citibank, cannot be held liable

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as a “debt collector” under the FDCPA (Br. 4). Not so. Our court of appeals has rejected that

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per se argument, which originated in other circuits, and has never definitively ruled that a

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creditor may never be held vicariously liable under the FDCPA (Dkt. No. 44 at 6). Although the

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undersigned judge granted defendant’s motion to dismiss, this order declines to hold that

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plaintiff’s argument on the matter was unwarranted “by existing law or by a nonfrivolous

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argument for extending, modifying, or reversing existing law or for establishing new law.”

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Rule 11(b)(2).

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Next, defendant contends that plaintiff’s counsel should be sanctioned for making

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the argument that Citibank violated the FDCPA by filing its contract-dispute claim under

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common-count theories instead of a theory of breach of contract. Plaintiff’s argument was this:

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By filing under common counts, Citibank denied plaintiff certain rights under their contract,

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specifically reciprocal attorney’s fees and arbitration rights, and, according to plaintiff, this was

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a deceptive practice under the FDCPA. It is factually true that Citibank filed common counts

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instead of a breach of contract claim. The problem is that under California law, filing common

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counts does not void the parties’ rights under a contract that forms the basis of the dispute (Dkt.

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No. 44 at 4). Objectively, then, this argument in the complaint was legally baseless.
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Although it is a borderline case, this order holds that sanctions are not merited here.

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Despite the argument’s legal failures, it is apparent that counsel did some inquiry and simply

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became confused as to the state of the law. Counsel did not do a perfect job, but this order does

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not hold that he did a sanctionable less than “reasonable and competent inquiry” before filing.

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In the oppositions to defendant’s motion to dismiss and motion for sanctions, plaintiff’s counsel

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cited to several decisions that describe an “account stated” (one of the common counts originally

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asserted by Citibank) as a new contract based on an agreement between the parties as to the

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amount owed (Opp. 12, 10). If that were the end of the story, plaintiff’s FDCPA claims would

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not have been totally unreasonable. Plaintiff’s counsel’s mistake was in not realizing that further
implications and interpretations exist in relation to this area of the law. Although regrettable,

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For the Northern District of California

United States District Court

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this mistake does not merit the “rare and extraordinary” imposition of sanctions. The motion is

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DENIED.

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Plaintiff’s request for sanctions against defendant’s counsel under 28 U.S.C. 1927 is also

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DENIED. Section 1927 imposes sanctions against any attorney who “multiplies the proceedings

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in any case unreasonably and vexatiously.” There is little to indicate that Citibank’s counsel

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requested sanctions unreasonably, much less with a vexatious purpose.

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CONCLUSION
For the foregoing reasons, Citibank’s motion for sanctions is DENIED. The hearing set
for May 7, 2015 is VACATED.

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IT IS SO ORDERED.

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Dated: April 22, 2015.

WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE

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