Serrania v. LPH, Inc.

Serrania v. LPH, Inc., 2015 MT 113 (April 28, 2015) (Baker, J.) (5-0, aff’d & rev’d)

Issue: (1) Whether the appeal is justiciable; (2) whether the district court properly granted summary judgment to LPH on Serrania’s Fair Debt Collection Practices Act (FDCPA) claim; (3) whether the district court abused its discretion in sanctioning Serrania’s attorney, Terry Wallace.

Short Answer: (1) Serrania’s sanction and contract judgment appeals are moot, but her FDCPA claim appeal is live, and Wallace’s appeal is live; (2) yes; and (3) some sanctions are affirmed and some are reversed.

Affirmed in part, reversed in part, and remanded

Facts: Karrie Lynn Serrania went to Discovery Dental Group, PLLC (DDG) in 2009. She signed a contract agreeing to pay for treatment, services, and all collection and legal fees if necessary. In July 2011, DDG referred Serrania’s account to LPH, a collection agency, and told LPH Serrania owed $1,112.13. LPH mailed a letter notifying Serrania of the debt and explaining that if she did not dispute it within 30 days, LPH would presume its validity. After 30 days, LPH mailed Serrania a collection placement letter with charges for additional interests and collection fees. A few months later, LPH filed a complaint against her, which was dismissed after Serrania filed counterclaims that exceeded the justice court’s jurisdiction.

In July 2012, Serrania sued LPH and DDG in district court, alleging violation of the FDCPA by LPH, credit defamation by DDG, and violation of the Montana Consumer Protection Act by both defendants, and seeking $650,000 in damages. LPH and DDG counterclaimed for breach of contract and unjust enrichment.

LPH and DDG moved for partial summary judgment on their contract counterclaim, and LPH moved for partial summary judgment on the FDCPA claim. Serrania responded to the joint motion on the contract counterclaim, but did not respond to LPH’s motion on the FDCPA claim.

Serrania and her counsel, Wallace, did not attend the pretrial conference in February 2013. On LPH’s and DDG’s motion, the court ordered Wallace to pay $1,000 in sanctions each to counsel for the defendants. The court also entered summary judgment against Serrania on the contract and FDCPA claims. Serrania moved to vacate the sanctions and for relief from the judgment.

In the months that followed, LPH and DDG moved to dismiss their unjust enrichment claim, and Serrania moved for summary judgment on that claim. LPH and DDG moved for sanctions, arguing vexatious litigation. 

Procedural Posture & Holding: In December 2013, the district court held a show cause hearing on the sanctions motion, after which the court sanctioned Serrania and Wallace $42,113,32 to LPH and $32,647.94 to DDG. The court further sanctioned Wallace $10,000 for his “blatant lack of candor and his disrespectful conduct.” Serrania underwent bankruptcy and her debts from the judgment were discharged. She nonetheless appeals the sanctions orders as well as the summary judgment orders, and Wallace appeals the sanctions against him. The Supreme Court affirms in part and reverses in part.

Reasoning: (1) LPH argues that Serrania’s bankruptcy moots this appeal. Because the sanctions and contract judgments can no longer be collected against her, those appeals are moot. However, the bankruptcy trustee abandoned Serrania’s FDCPA claim against LPH, and that part of her appeal is still live.

(2) In granting summary judgment to LPH on Serrania’s FDCPA claim, the district court relied on two federal cases that held a debtor who fails to dispute a debt cannot bring a claim under the FDCPA alleging the amount of the debt was false. The 3rd and 4th Circuits have since held that the FDCPA does not impose such a requirement. This Court is persuaded by the logic of the circuit courts, and holds that the district court’s reasoning here was incorrect. However, it will uphold court orders that reach the correct result, and examines the merits of Serrania’s claim. Finding no dispute of material fact, the Court affirms summary judgment for LPH on Serrania’s FDCPA claim.

(3) The Court affirms the sanctions against Wallace for $1,000 for missing the pretrial conference, and $10,000 for disrespect and lack of candor. It reverses the sanctions against Serrania and Wallace for $24,797.24 and $41,113.32 because the suit was not entirely frivolous.