A District Court judge in California has denied a plaintiff’s motion for default judgment and granted a defendant’s motion to set aside default in a Fair Debt Collection Practices Act case, ruling that the defendant was not properly served and had demonstrated a meritorious defense. Judge M. James Lorenz of the District Court for the Southern District of California found that the defendant did not engage in culpable conduct, had a valid defense, and that allowing the case to proceed would not prejudice the plaintiff.
The background: The plaintiff accused the defendant of continuing to communicate with the plaintiff despite knowing that she was represented by an attorney, contacting the plaintiff after she issued a cease-and-desist request, misrepresenting the name of the creditor to whom the alleged debt was owed, and sharing information about the debt with third parties without authorization.
- When the defendant failed to respond to the complaint in a timely manner, the plaintiff sought and obtained a Clerk’s Default on January 3, 2025, and then moved for a final default judgment. The defendant responded by filing a motion to set aside the default, arguing that it had not been properly served and had a legitimate defense to the claims.
The ruling: Judge Lorenz rejected the plaintiff’s argument that the defendant had acted in bad faith by failing to respond. The judge found that the defendant had not been properly served, as the process server delivered the complaint to the wrong suite number at the defendant’s business address. The judge noted inconsistencies in the service documentation, stating that it lacked a description of the person served, which contrasted with proof of service in other cases involving the same defendant. Because the defendant did not have actual or constructive notice of the complaint, the court found no intentional failure to respond. The defendant asserted multiple defenses, including that:
- It was the rightful owner of the debt.
- It had not disclosed any of the plaintiff’s personal information to a third party, as its letter vendor was an agent.
- The plaintiff lacked standing to claim reputational harm from the alleged third-party disclosure.
- The defendant did not knowingly communicate with the plaintiff after she had retained legal counsel.
Judge Lorenz ruled that these arguments, if proven, could form a valid defense to the plaintiff’s FDCPA claims.
- The court also found that allowing the defendant to present its case would not unfairly prejudice the plaintiff. While the plaintiff argued that she had incurred legal expenses due to the delay, the judge noted that litigating a case on the merits is not considered prejudicial under the law. The ruling emphasized that simply having to proceed with litigation does not constitute undue harm.
