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Von Esch v. Legacy Salmon Creek Hospital

United States District Court, W.D. Washington, Tacoma

August 10, 2017

JOSEPH FANGSRUD VON ESCH, and RENNY FANGSRUD VON ESCH Plaintiffs,
v.
LEGACY SALMON CREEK HOSPITAL, et al., Defendants.

          ORDER [DKT. #S 18, 20, 24, 36, AND 37]

          Ronald B. Leighton United States District Judge.

         THIS MATTER is before the Court on the following motions: Plaintiff Fangsrud von Esch's Motion for Summary Judgment [Dkt. #18]; Defendant Legacy Salmon Creek Hospital's Motion for Summary Judgment [Dkt. #20]; Defendant Asset System's Motion for Summary Judgment [Dkt. #24]; Fangsrud von Esch's Motion for Leave to File Deposition Transcripts with Exhibits [Dkt. #36]; and Fangsrud von Esch's Motion to Amend his complaint to assert an outrage claim [Dkt. #37].

         In July 2013, Renny Fangsrud von Esch[1] had a baby at Legacy. Her insurer, Kaiser, initially refused to pay some or all of her $16, 904.46 bill. She appealed this denial. Meanwhile, Legacy continued to bill her the full amount. In December, Kaiser relented and agreed to pay the bill, minus a $400 co-pay, or “member responsibility.”

         Kaiser paid Legacy a large lump sum, or “batch payment” (some $485, 000), to pay a number of patients' bills. But the batch payment was $4931.51 less than it should have been, and, for reasons that remain unclear, the entire shortage fell on Fangsrud von Esch's account. As a result, while Kaiser and Fangsrud von Esch agreed she owed only $400, Legacy's accounting system “thought” she owed $5, 331.51. Legacy continued to bill Fangsrud von Esch this amount, plus accruing interest at the Washington statutory rate, 12%. Each bill invited her to call a toll free number if she had questions. She did not, and she apparently did not pay the $400 she agreed she owed. She claims she assumed the bill would be corrected. Legacy also called to discuss the outstanding balance but was unable to contact Mrs. (or Mr.) Fangsrud von Esch.

         In May 2014, Legacy assigned the Fangsrud von Esch account Defendant Asset Systems, a debt collector it has often used. Asset promptly notified Fangsrud von Esch about the debt. For reasons that are not explained, however, not much happened for a long time. Even Fangsrud von Esch's own attorney references only two letters that Asset sent to Fangsrud von Esch: one on January 12, 2016, and one on June 9, 2016.

         Legacy claims that it did not hear from Fangsrud von Esch until January 2016, when she called Legacy to complain that the account had been erroneously sent to collections and that Kaiser was responsible for the payment. Fangsrud von Esch also called Asset to dispute the bill several times in early 2016. In March, Fangsrud von Esch paid Asset $100. In July, she sent a letter disputing the amount of the debt that Asset was seeking to collect, as to both principal and interest.

         Legacy and Asset concede that the accounting error was not resolved for some time (partly due to Kaiser's short batch payment and erroneous “explanation of benefits, ” partly because of Legacy's accounting error, and partly because Fangsrud von Esch ignored the erroneous billings until well after the account was sent to collections).

         The Kaiser/Legacy/Fangsrud von Esch accounting discrepancy was resolved in August 2016. Legacy recalled Fangsrud von Esch's debt from Asset, refunded the $100 to Fangsrud von Esch, “wrote off” the unpaid $400 co-payment, and apologized.

         Fangsrud von Esch sued. She asserts claims under the federal Fair Debt Collection Procedures Act (FDCPA) and Washington' Consumer Protection (CPA) and related Collection Agency (CAA) Acts. She seeks actual and consequential damages, emotional distress damages, treble damages, costs and attorneys' fees, and a variety of injunctive relief. Fangsrud von Esch also seeks to amend her complaint to assert a state law “outrage” tort claim against Legacy.

         Fangsrud von Esch seeks partial summary judgment on her FDCPA claim against Asset, arguing that the FDCPA imposes strict liability where a debt collector uses “false, deceptive, or misleading means” to collect a debt. She claims that because she did not actually owe the money Asset sought, its efforts to collect that debt by claiming she did owe it were “false” as a matter of law.

         In response, Asset also seeks[2] summary judgment, on the FDCPA claim and on the CPA and WCC claims. It argues it had a right to rely on the accuracy of the account that Legacy sent to it, because Asset and Legacy had a 30 year, thousands of accounts, working relationship, and Legacy documented its accounts. It claims its collection efforts were the result of a bona fide error. Asset also argues that Fangsrud von Esch's CPA and CAA claims fail because she cannot establish that she was actually damaged by its actions.

         Legacy also seeks summary judgment on Fangsrud von Esch's[3] CPA and CAA claims against it. It argues that, as a heavily regulated health care provider, it is exempted from CPA liability, and that Fangsrud von Esch cannot establish a CPA claim in any event: the billing was a mistake, not a lie or deception, and Fangsrud von Esch has not shown she was damaged in any event. It argues that the CPA was not intended to provide a windfall to every consumer who suffers the inconvenience of a billing error.

         A. Summary Judgment Standard

         Summary judgment is proper “if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). In determining whether an issue of fact exists, the Court must view all evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in that party's favor. Anderson Liberty Lobby, Inc., 477 U.S. 242, 248-50 (1986); Bagdadi v. Nazar, 84 F.3d 1194, 1197 (9th Cir. 1996). A genuine issue of material fact exists where there is sufficient evidence for a reasonable factfinder to find for the nonmoving party. Anderson, 477 U.S. at 248. The inquiry is “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Id. At 251-52. The moving party bears the initial burden of showing that there is no evidence which supports an element essential to the nonmovant's claim. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Once the movant has met this burden, the nonmoving party then must show that there is a genuine issue for trial. Anderson, 477 U.S. at 250. If the nonmoving party fails to establish the existence of a genuine issue of material fact, “the moving party is entitled to judgment as a matter of law.” Celotex, 477 U.S. at 323-24.

         B. FDCPA

         The FDCPA prohibits the use of false or deceptive means to collect even a legitimate debt: “A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt, ” such as making a “threat to take any action that cannot legally be taken or that is not intended to be taken.” 15 U.S.C. § 1692e-(5). The test for determining whether a debt collector violated the FDCPA is objective, and does not depend on whether the debt collector intended to deceive or mislead the consumer. Clark v. Capital Credit & Collection Servs., Inc., 460 F.3d 1162, 1171 (9th Cir. 2006). Instead, the “least sophisticated” debtor standard applies, and the liability analysis turns on whether a debt collector's communication would mislead an unsophisticated but reasonable consumer. Id. Debt collectors are strictly liable for violations of the FDCPA. Donohue v. Quick Collect, Inc., 592 F.3d 1027, 1030 (9th Cir. 2010).

         Nevertheless, Asset argues that a debt collector is entitled to rely on information provided by a creditor who has provided accurate information in the past. It argues that the FDCPA does not impose on the debt collector any duty to independently investigate the claims presented to it, and, as a result, it is entitled to a bona fide error defense: essentially, if the billing error was an honest mistake, it is not liable. See Clark, supra, at 1176: “Pursuant to § 1692k(c)'s bona fide error defense, a debt collector is not liable for its violations the FDCPA if the ...


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