In a victory for a Telephone Consumer Protection Act defendant, a California federal court judge granted the party’s motion to assert a breach of contract counterclaim seeking $22,000 from the plaintiff.
The case involved Cory Horton, who incurred a debt when he purchased a used GMC truck using a credit account with Navy Federal Credit Union. Calvary Portfolio Services purchased the debt and, according to Horton’s TCPA suit, made calls in violation of the statute in an attempt to collect. He filed suit and Calvary sought leave from the court to file an amended answer and counterclaim based on Horton’s outstanding $22,000 debt.
U.S. District Court Judge John A. Houston applied the standard set by the Ninth U.S. Circuit Court of Appeals, and analyzed the potential for undue delay, bad faith, futility, and prejudice to Horton. None of the factors applied, he said.
Although Horton argued the counterclaim was untimely and therefore futile, the court agreed with the defendant that the timeliness issue was a factual inquiry, particularly as Horton did not claim that prejudice would result or undue delay would occur.
Judge Houston also rejected Horton’s contention that the court lacked jurisdiction over the counterclaim. Applying the “logical relationship test,” the court found that the essential facts of the various claims were so logically connected that considerations of judicial economy and fairness dictated the issues be resolved in a single lawsuit.
“This court finds defendant’s proposed counterclaim is compulsory, in that the facts concerning plaintiff’s alleged breach of contract for failure to pay his debt and defendant’s alleged wrongful acts occurring when defendant sought to recover plaintiff’s debt clearly overlap significantly,” Judge Houston wrote. “Thus, this court finds there is a clear logical relationship between the claims, requiring this court to exercise jurisdiction over defendant’s proposed counterclaim.”
To read the order in Horton v. Calvary Portfolio Services, click here.
Why it matters: The addition of the counterclaim opens potential options for Calvary as the litigation continues, provides leverage for a settlement, and potentially complicates any future class claims.