In Engelen v. Erin Capital Management, 2012 WL 12680 (S.D.Cal. 2012), Judge Benitez found applicable the debt collector’s affirmative defense of ‘bona fide’ error when the debt collector continued to collect on an obligation that already had been satisfied due to garnishment. The facts were as follows. On December 5, 2007, Erin, with Eltman acting as legal counsel, brought a lawsuit against Plaintiff in San Diego County Superior Court, entitled Erin Capital Management, LLC v. Arthur Engelen, Case No. 37–2007–00083121–CL–CL–CTL. At around that time, Erin and Eltman represented to the state court that they had properly served Plaintiff. Erin and Eltman were granted a default, then a default judgment against Plaintiff. On June 23, 2009, Defendant Law Offices of Rosen & Loeb (“Rosen & Loeb”) received notification from Erin that it was being assigned Plaintiff’s file, because Eltman had closed its California offices and Erin had to retrain new counsel to handle its pending California actions. On October 16, 2009, Rosen & Loeb substituted into the state court action as attorneys for Erin, in place of Eltman. In July 2009, Erin and Eltman began garnishing the wages of Plaintiff, to satisfy the judgment against Plaintiff. On July 23, 2009, Plaintiff satisfied the judgment by forwarding a check to the sheriff who conducted the garnishment proceedings, and Erin and Eltman stopped garnishing Plaintiff’s wages. On September 9, 2009, Erin notified Rosen & Loeb electronically that it had received payment in satisfaction of the judgment. The standard practice of Rosen & Loeb upon receiving notification of payment in full is to file a satisfaction of judgment and cease all collection activity in the account. In this case, however, Rosen & Loeb filed a writ of execution in the state court action on November 17, 2009, and began a second garnishment proceeding against Plaintiff, without giving Plaintiff credit for the funds he previously paid.
The district court found that the debt collector’s affirmative defense of ‘bona fide’ error defense applied, and granted summary judgment to the debt collector. The district court explained:
Rosen & Loeb concedes that the second garnishment of wages and the related attempt to collect fees and interest not authorized by agreement or law, violated both the FDCPA and the RFDCPA. (Def. Opp. at 9.) Rosen & Loeb, however, argues that the bona fide error defense applies to Rosen & Loeb’s second garnishment of wages and its related attempt to collect fees and interest not authorized by agree-ment or law. ¶ The bona fide error defense provides an exception to liability under both the FDCPA and the RFDCPA. See 15 U.S.C. § 1692k(c) (“A debt collector may not be held liable in any action brought under this subchapter if the debt collector shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.”); Cal. Civ.Code § 1788.30(e) ( “A debt collector shall have no civil liability to which such debt collector might otherwise be subject for a violation of this title, if the debt collector shows by a preponderance of evidence that the violation was not intentional and resulted notwithstanding the maintenance of procedures reasonably adapted to avoid any such violation.”) To establish a bona fide error defense, the defendant must prove that: (1) the error was not intentional; (2) there was in fact a bona fide error; and (3) the error occurred despite the existence of procedures designed to avoid the error. Fox v. Citicorp Credit Servs., Inc., 15 F.3d 1507, 1514 (9th Cir.1994). The bona fide error defense is an affirmative defense, for which the defendant has the burden of proof. Id. ¶ First, Rosen & Loeb must prove that the error was not intentional, which is a subjective test. See Welker v. Law Office of Daniel J. Horwitz, 699 F.Supp.2d 1164, 1171 (S.D.Cal.2010). Here, Mr. Alan Rosen, Ms. Lori Chertok, and Ms. Patricia Diaz indicated that they did not know why they failed to record the notification of payment of the judgment, but the error was unintentional. (Rosen Decl. ¶ 10; Chertok Decl. ¶ 7; Diaz Decl. ¶ 7.) In addition, when this error was discovered, Rosen & Loeb returned the money that had been garnished to Plaintiff and filed a Satisfaction of Judgment with the state court. (Rosen Decl., Exhs. 3, 4.) ¶ Plaintiff argues that the first element concerns not whether the debt collector intended to violate the law, but whether the debt collector intended to act, citing Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, –––U.S. ––––, 130 S.Ct. 1605, 176 L.Ed.2d 519 (2010), and Allen v. Checkredi of Ky., LLC, No. 09–103–DLB, 2010 U.S. Dist. LEXIS 122301 (E.D.Ky. Nov.17, 2010). These cases, however, are inapposite. Jerman and Allen involve the application of the bona fide error defense to mistakes of law, and stand for the proposition that the bona fide error defense does not apply to mistaken interpretations of the FDCPA. Jerman, 130 S.Ct. at 1611–12; Allen, 2010 U.S. Dist. LEXIS 122301, at *26–33. Here, Rosen & Loeb does not argue that it made a legal error, but rather that it made a clerical error. In regards to clerical errors, “[a] debt collector need only show that its FDCPA violation was unintentional, not that its actions were unintentional.” Kort v. Diversified Collection Servs., Inc., 394 F.3d 530, 537 (7th Cir.2005). Rosen & Loeb has shown that the error was unintentional. ¶ Second, Rosen & Loeb must prove that the error was a genuine mistake rather than a contrived error, which is an objective test. See Kort, 394 F.3d at 538; Welker, 699 F.Supp.2d at 1171. As discussed above, Mr. Rosen, Ms. Chertok, and Ms. Diaz indicated that they did not know why they failed to record the notification of payment of the judgment, but the error was unintentional. (Rosen Decl. ¶ 10; Chertok Decl. ¶ 7; Diaz Decl. ¶ 7.) In addition, as soon as this error was discovered, Rosen & Loeb returned the money that had been garnished to Plaintiff, and filed a Satisfaction of Judgment with the state court. (Rosen Decl., Exhs. 3, 4.) ¶ Plaintiff argues that Rosen & Loeb cannot meet its burden of proof on this element because Rosen & Loeb does not know why the error ocurred. Plaintiff, however, does not cite any authority for this proposition. There is no requirement that a defendant must establish why an error occurred to satisfy the second element. In addition, Rosen & Loeb can explain how the error occurred: Erin notified Rosen & Loeb electronically that Plaintiff had paid the amount owed on the judgment, Ms. Chertok downloaded that information and gave it to Ms. Diaz to be entered into the accounting system, and Ms. Diaz failed to enter the information into the ac-counting system. (See Diaz Decl. ¶¶ 5–7.) Rosen & Loeb has shown that the error was a genuine mistake. ¶ Third, Rosen & Loeb must prove that it had implemented procedures that were reasonably adapted to avoid the error at issue, which is an objective test. Reichert v. Nat’l Credit Sys., Inc., 531 F.3d 1002, 1006 (9th Cir.2008); Welker, 699 F.Supp.2d at 1171. The bona fide error defense “does not require debt collectors to take every conceivable precaution to avoid errors; rather, it only requires reasonable precaution.” Kort, 394 F.3d at 539. ¶ Here, Rosen & Loeb had a written policy in place describing how payment notifications were to be handled. (Rosen Decl. ¶ 4; Chertok Decl. ¶ 4; Diaz Decl. ¶ 4.) Rosen & Loeb assigned Ms. Chertok and Ms. Diaz, who were experienced employees, to the task of obtaining and entering payment notifications from clients such as Erin. (Chertok Decl. ¶¶ 2, 5–6; Diaz Decl. ¶ ¶ 2, 5.) Ms. Chertok would download the payment notifications, print them out, and give them to the bookkeeper, Ms. Diaz, to apply the payments to the appropriate consumer accounts. (Chertok Decl. ¶ 5.) Ms. Chertok would periodically check Ms. Diaz’s work to ensure that the payment entries were properly entered. (Id. ¶ 6.) Rosen & Loeb trained Ms. Chertok and Ms. Diaz in regards to debt collection laws. (Rosen Decl. ¶ 3; Chertok Decl. ¶ 3; Diaz Decl. ¶ 3.) This training included “monthly meetings to update employees on new procedures with new or existing clients and periodic written exams on FDCPA and RFDCPA rules and regulations with follow-up training as necessary based on the result of the examination.” (Rosen Decl. ¶ 3; Chertok Decl. ¶ 3; Diaz Decl. ¶ 3.) In addition, Mr. Rosen testified that in the twenty years his law firm used these procedures to process payment notifications, this is the only time the error occurred. (Johnson Decl., Exh. 3 [Rosen Depo.], at 27–28.) ¶ Plaintiff argues that Rosen & Loeb did not have procedures in place to prevent the type of error that occurred here. Specifically, Plaintiff points to Mr. Rosen’s Deposition, in which Mr. Rosen establishes that Rosen & Loeb receives an electronic data transfer—rather than a physical case file—when it is first retained as attorney for a given client. (Pl. Reply, Exh. R [Rosen Depo.], at 10–14.) In addition, Plaintiff points to Mr. Rosen’s testimony that it is not Rosen & Loeb’s regular practice to request copies of judgments from the court, in addition to the electronic data transferred from former attorneys. (Id. at 15–16.) Plaintiff also argues that Rosen attempted to pass on the responsibility for checking for errors to the Clerk of the Court, by testifying that the Clerk should reject a second writ of execution if the judgment in a given case has already been paid. (Id. at 22.) ¶ The deposition testimony cited by Plaintiff, however, does not concern the error in accounting that in fact occurred. The error at issue here was Rosen & Loeb’s failure to enter Plaintiff’s payment of the judgment into its accounting system, resulting in Rosen & Loeb undertaking a second garnishment proceeding rather than filing a satisfaction of judgment. (See Rosen Decl. ¶ 8.) Rosen & Loeb has shown that it had implemented procedures that were reasonably adapted to avoid the error at issue, as described above.
Accordingly, the Court denied Plaintiff’s motion for summary judgment on the debt collector’s liability, and granted the debt collector’s motion as to its affirmative defense.