United States District Court, E.D. Michigan, Northern Division
ORDER DIRECTING SUBMISSION OF FEE
L. LUDINGTON United States District Judge.
December 2, 2017, the Court granted Plaintiff Lundsted's
motion for sanctions and directed Lundsted's counsel to
submit an affidavit summarizing the expenses incurred in
bringing the motion. The factual predicate to the motion for
sanctions, as described in the order granting sanctions, will
be reproduced here.
October 15, 2014, Plaintiff Craig Lundsted filed this action
against Defendants JRV Holdings, LLC, and Roosen Varchetti
& Olivier, PLLC. ECF No 1. In his complaint, Lundsted
alleged that Defendants violated the Fair Debt Collection
Practices Act (“FDPCA”) and the Truth in Lending
Act (“TILA”). Id. Roosen, Varchetti,
& Oliver, PLLC, and JRV Holdings, LLC then filed an
answer. ECF No. 12. On April 24, 2015, Lundsted filed a
notice that he had accepted Defendants' offer of
judgment. ECF No. 22. The parties agreed that Lundsted was
entitled to a judgment for $1, 000.00 in statutory damages,
exclusive of reasonable attorney fees and costs. Id.
Defendants' offer of judgment provided for
“judgment to be entered against [the Defendants] and in
favor of Plaintiff in the amount of $1000, plus a reasonable
attorney fee, costs and interests, if any, to be determined
by the court. This offer is made without regard to and does
not impact JRV's rights to set-off the judgment it holds
against Plaintiff.” Id. Defendants had
obtained a prior judgment in state court of $11, 548.68
against Lundsted on January 29, 2014. See Request
and Order to Seize Property, ECF No. 48, Ex. A. On April 24,
2015, Lundsted filed a notice of acceptance of
Defendants' offer of judgment. ECF No. 24. On August 31,
2015, the Court entered a consent judgment of $1, 000.00 in
favor of Lundsted, not including attorney fees, interpreting
the setoff language as providing that the judgment was not
meant to enlarge or diminish JRV's right to set off under
existing law and thus unnecessary to the judgment. ECF No.
26. That consent judgment provided that a motion for attorney
fees and a bill of costs was to be furnished by Plaintiff
within twenty-one days of judgment, but did not include the
set off language quoted above.
September 1, 2015, Defendants filed a motion to vacate the
consent judgment, arguing that because the consent judgment
did not include the language retaining the right of setoff,
Defendants had not agreed to its terms. ECF No. 27. On
November 30, 2015, the parties attended a status conference
with the Court. ECF No. 35. At the conference, the parties
agreed that the right of setoff applied to the amount of the
$1, 000 judgment but disputed whether the attorney fees that
Plaintiff was entitled to recover could be set off against
Defendants' state court judgment. Accordingly, the
parties furnished briefing on that issue. On April 27, 2016,
the Court issued an opinion which found that the state court
judgment could be set off against the $1, 000.00 statutory
judgment, but not against the attorney fees awarded in the
federal case. ECF No. 47. The Court further ordered
Defendants to “compensate Plaintiff Craig Lundsted $11,
663.63 for costs and fees incurred” in the case.
Id. at 15.
concluding that Lundsted's award of reasonable attorney
fees was not subject to setoff against Defendants' state
court judgment, the Court mentioned several factors. The
Court noted that “[u]nlike set off of the statutory
penalty, allowing set off of attorney fees would chill future
FDCPA actions and discourage attorneys from taking FDCPA
cases.” Id. at 7. In support, the Court
discussed the hypothetical scenario where “the setoff
would swallow the FDCPA award and leave the FDCPA
plaintiff's attorney without any compensation for
reaching a successful result.” The Court further
emphasized that, under Michigan law, attorneys obtain a lien
against the proceeds of a judgment when the attorney is
retained, and that the attorney lien in this case would have
priority over the offset claim. Id. at 8. Finally,
the Court discussed the relevance of the fact that Lundsted
and his attorney had a contingency fee arrangement:
A contingency fee agreement does to some degree favor setoff
because a portion of the attorney's fees obtained
(perhaps a good majority) will remain with Lundsted. But this
alone is insufficient to overcome the other three factors
that do not favor offset. Further, to the extent Lundsted
retains any portion of the fee award, it is money in his
possession that he will apply to his expenses, including debt
expenses. While this result does border on the very problem
that setoff seeks to avoid (A paying B for B to pay A),
setoff remains an equitable remedy and the equities favor not
allowing setoff to apply to attorney's fees.
August 11, 2016, Lundsted filed a motion for sanctions. On
October 19, 2016, the Court held a hearing on the motion for
sanctions. That hearing was continued on November 9, 2016. On
October 19, 2016, Mr. and Mrs. Lundsted both testified about
the events in question. Oct. 19 Hearing Tr., ECF No. 53. Mrs.
Lundsted testified that a court officer rang her doorbell on
the morning in question. Id. at 32. The man, later
identified as Scott Hope, told Mrs. Lundsted that he had a
court order to seize property. Id. Mrs. Lundsted
told the officers that her husband was golfing and would be
home later in the day. Id. at 33. Mr. Hope testified
that he talked cordially with Mrs. Lundsted for a while
Lundsted testified that his wife called him while he was
golfing and informed him of Mr. Hope's visit.
Id. at 13. After Mr. Lundsted finished his round of
golf, he returned home. Several hours later, Mr. Hope
arrived. Id. at 14. Another individual, later
identified as Chris Lackney, was also present, but Mr.
Lundsted testified that he never interacted with Mr. Lackney.
Id. at 15. Mr. Lundsted testifies that Mr. Hope
informed Mr. Lundsted that he was entitled to a check.
Id. Mr. Hope also stated that if Mr. Lundsted
endorsed the check over in satisfaction of the state court
judgment, the debt would be canceled. Id. at 16. Mr.
Lundsted testified that Mr. Hope represented that, if Mr.
Lundsted did not sign over the check, Mr. Hope would seize
Mr. Lundsted's property, including his vehicles.
Id. at 15-17. Mr. Lundsted endorsed the check.
Lundsted repeatedly asserted at the hearing that he was
“scared senseless” by the encounter and did not
understand the significance of the check. Id. at
18-19; 23-25. Mr. Lundsted also testified that Mr. Hope was
wearing an outfit that resembled a uniform, including a state
of Michigan patch. Id. at 20. Mrs. Lundsted's
account substantially corroborates her husband's version
November 9, 2016, Mr. Hope testified about the events in
question. He explained that the encounter with Mr. and Mrs.
Lundsted seemed friendly and non-confrontational for the most
part. Mr. Hope acknowledged that he mentioned the check as a
way for Mr. Lundsted to avoid seizure of any other property.
He also acknowledged that he told Mr. Lundsted that he would
seize property to collect the judgment if he did not endorse
Court granted Lundsted's motion for sanctions and
directed Lundsted's counsel to file an affidavit listing
the costs incurred. Lundsted's counsel has filed that
affidavit, but Defendants now argue that they should not be
ordered to pay those costs.
order granting sanctions, the ...