United States District Court, E.D. Michigan, Northern Division
ORDER DIRECTING PAYMENT
L. LUDINGTON United States District Judge.
consent judgment was entered in this case on August 31, 2015.
ECF No. 26. Post-judgment proceedings continue. The
unnecessarily complex and protracted proceedings are
primarily assignable to Defendants' bad faith practice.
Plaintiff's motion for sanctions has already been
granted. The monetary amount of the award will be finalized
in this order. Additional punitive sanctions will also be
levied against Defendants and Defendants' counsel for the
reasons stated below. The factual predicate to the motion for
sanctions will be summarized here.
October 15, 2014, Plaintiff Craig Lundsted filed this action
against Defendants JRV Holdings, LLC, (“JRV”) and
Roosen Varchetti & Olivier, PLLC (“Roosen”).
ECF No 1. In his complaint, Lundsted alleged that JRV
Holdings, LLC, purchased the debt Lundsted originally owed to
U.S. Bank and ultimately obtained a judgment against Lundsted
in Michigan's 81st District Court for $11, 548.68 on
January 29, 2014. See Request and Order to Seize
Property, ECF No. 48, Ex. A. Lundsted further alleged that
Defendants violated the Fair Debt Collection Practices Act
(“FDPCA”) and the Truth in Lending Act
(“TILA”) by misrepresenting the “character,
status, or legal amount of the Debt.” Compl. at 4. On
April 24, 2015, Lundsted filed a notice that he had accepted
Defendants' offer of judgment in this case. ECF No. 22.
The parties agreed that Lundsted was entitled to a judgment
of $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. On April 24, 2015, Lundsted
filed a notice of acceptance of Defendants' offer of
judgment in the FDCPA case. 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 extending the right of setoff to
the prospective recovery of attorney fees in addition to the
judgment, 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 under the FDCPA
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
confirmed 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 FDCPA case. ECF No. 47. The
Court further found that Defendants should “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 set off 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
alleging that Defendants had purposefully disregarded the
Court's order prohibiting set off of the attorney fees.
ECF No. 47. 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. Apparently, the day after the order
determining setoff rights and granting attorney fees was
issued, Defendant Roosen secured an Order to Seize Property
(writ of execution) from the 81st District Court. Defendant
Roosen also secured a cashiers check made payable to Lundsted
for $11, 663.63, the amount of the attorney fees which this
Court ordered to be paid. Then Defendant Roosen arranged for
two court officers from Scott Hope's business to travel
to Lundsted's home on May 19, 2016. 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.
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 testified that Mr. Hope
informed him that he was entitled to the check for $11,
663.63, which Mr. Lundsted was unaware of. Id. Mr.
Hope also told Mr. Lundsted that if he 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. Plaintiff's counsel learned
of the events when he emailed Roosen explaining that
“the deadline for an appeal has come and gone, so
please let us know when we can expect payment or if you need
any logistical information from us to wrap this matter
up.” Email Correspondence, ECF No. 48, Ex. C. He was
informed the next day that “[a]s per the court order,
your client was paid the amount ordered directly.”
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. ...