Fairway Collections, LLC v. Turner

540 P.3d 805

FAIRWAY COLLECTIONS, LLC, Respondents,

v.Michael I. TURNER and Jane Doe Turner, husband and wife, Appellants.

No. 85042-3-I

Court of Appeals of Washington, Division 1.

Filed December 26, 2023

Samuel Robert Leonard, Leonard Law, PLLC, 9030 35th Ave. Sw, Suite 100, Seattle, WA, 98126, Morgan Lake, Attorney at Law, 3703 S Edmunds St. #115, Seattle, WA, 98118-1728, for Appellants.

Jeffrey I. Hasson, Hasson Law, LLC, 9385 Sw Locust St., Tigard, OR, 97223-6632, for Respondents.

PUBLISHED OPINION

Chung, J.

¶1 Fairway Collections, LLC, as Arbor Health's assignee, sued Michael Turner to collect medical debt he owed to Arbor Health. Turner asserted counterclaims against Fairway for violations of the Washington Consumer Protection Act (CPA), the Washington Collection Agency Act (CAA), and the federal Fair Debt Collection Practices Act (FDCPA). Initially, the counterclaims were all based on whether the debt principal Fairway sought to collect was authorized because Turner had not been screened for charity care. After Turner was granted charity care that paid for 75 percent of his debt, Fairway accepted his payment and stipulated to the dismissal of its claim against him. Fairway moved to enforce a purported settlement agreement, and the court denied the motion.

¶2 Fairway moved for summary judgment on Turner's counterclaims. Subsequently, based on information obtained during discovery, Turner sought to amend his counterclaims to add claims based on the rate and amount of Fairway's collection fee.

¶3 The trial court granted Fairway's motion for summary judgment and dismissed Turner's counterclaims. We conclude that there are genuine issues of material fact as to each counterclaim. We therefore reverse the dismissal of Turner's counterclaims, affirm the trial court's denial of Fairway's motion to enforce settlement, and remand to the trial court for further proceedings consistent with this opinion.

FACTS

¶4 Michael Turner was in a serious car accident on July 17, 2016, near Morton, Washington. He cannot recollect the accident, and his first real memory is waking up at a hospital in Seattle. On the day of the accident, unbeknownst to him at the time, Turner was first treated at Morton General Hospital,¹ the hospital nearest the scene of the accident, before transfer to Seattle for further care. Turner believed insurance had paid all his medical bills related to the accident. According to Arbor Health, it tried to collect its bill from him, though Turner claims he never received any communication from it.

¶5 On November 16, 2017, Morton General Hospital sent to Turner, "through Fairway," a "courtesy reminder" letter stating the amount due and warning, "Should it be necessary to refer this account to Fairway Collections for collections, a collection fee of 35% of the principal amount will be added." That letter does not use the words "charity care," but it states, "Financial aid is available to those who qualify."

¶6 In December 2017, Arbor Health assigned Turner's debt of $7,432.42 to Fairway, a Washington State licensed collections agency. From December 2017 to November 2020, Fairway claimed it sent four collection letters to Turner at two different addresses, and that each letter demanded the $7,432.42 principal plus collection fees of $2,972.77.² The collection fees, $2,972.77, amount to 40 percent of the principal of $7,432.42, not the 35 percent amount referenced in the November 2017 letter from Morton General Hospital. Fairway's form letters do not mention charity care or financial aid.

¶7 In January 2021, Fairway sued Turner for the debt principal and collection fees. Turner does "not recall ever receiving a collection letter or statement regarding [his] trip to the emergency room at Arbor Health." He called Fairway and learned the claimed debt was for treatment related to his July 2016 accident. Turner was "frantic" to protect his good credit and called first one attorney and then engaged another to address Fairway's complaint.

¶8 In February 2021, Turner answered Fairway's complaint³ and raised three counterclaims: (1) a per se violation of the CPA⁴ predicated on Fairway's violation of the CAA;⁵ (2) violation of the CPA, and (3) violation of the federal FDCPA, also constituting a per se CPA violation.⁶ Each of Turner's counterclaims alleged Fairway attempted to collect a debt that was not authorized because he was not screened for charity care before the debt was assigned to Fairway.⁷ The parties do not dispute that Arbor Health did not screen Turner for charity care before assigning his debt to Fairway.

¶9 In April 2021, Turner offered to settle with Fairway. In the meantime, Turner had applied for charity care, and on May 10, 2021, Arbor Health notified him he had been approved and reduced his principal debt to $1,858.11. The next day, May 11, 2021, Fairway emailed Turner that it had authority to accept a mutual release and would circulate a proposed settlement agreement. Turner rejected Fairway's proposed agreement, stating that because it was conditioned on including a release of claims against Arbor Health, a nonparty, it was a counteroffer.

¶10 On June 16, 2021, Fairway moved to enforce its proposed settlement agreement. On June 18, 2021, Turner sent a check for $1,858.11 to Fairway, thereby satisfying his debt to Arbor Health.

¶11 The parties suspended their discovery while Fairway's motion to enforce settlement was pending. After the court denied Fairway's motion to enforce in October 2021, Turner subpoenaed Arbor Health for contracts between it and Fairway. Fairway objected to producing its collection contract with Arbor Health until the court entered a protective order. Shortly thereafter, in its own initial responses to Turner's discovery requests, Fairway stated it would provide the collection contract upon entry of a stipulated protective order, and it filed a motion for a protective order relating to the subpoena to Arbor Health. The parties exchanged drafts and agreed to a stipulated protective order relating to the collection contract in November. Fairway agreed to sign and file the protective order.

¶12 Meanwhile, Arbor Health responded to Turner's subpoena in November 2021 with a redacted copy of an earlier contract between it and Fairway. The parties then stipulated to striking the hearing on Fairway's motion for a protective order relating to the subpoena to Arbor Health. However, Turner heard nothing further regarding the stipulated protective order relating to Fairway's discovery responses that Fairway had agreed to file.

¶13 Instead, on January 13, 2022, Fairway filed a motion for summary judgment. On January 24, 2022, Fairway supplemented its production to Turner, including a heavily redacted copy of its current contract with Arbor Health. The next day, Arbor Health supplemented its production to Turner with the same contract but unredacted. A previously redacted part of the contract states that, for non-Medicare accounts, "Collection fees shall be added ... at the rate of 35% of the principal amount assigned."

¶14 On February 4, Turner moved for leave to amend his counterclaims on the basis that he had just learned that Fairway was not authorized to collect fees of more than 35 percent. On February 17, Turner moved to strike Fairway's affidavits and responded to its motion for summary judgment. He argued again that "Fairway sought to collect ... more that it was legally allowed to collect." He also argued that the court should grant him a continuance to depose Fairway's COO, Gwen Turner, and Arbor Health's CFO, Richard Boggess.

¶15 Fairway replied on February 23. Its reply included a third declaration from Gwen Turner. Her declaration states that, "Due to a typographical error, the rate for non-Medicare accounts was typed incorrectly as [redacted]%." Fairway argued that "[t]he amount of the collection cost is not an issue in this case" because it "had the right to charge [Turner] a collection cost under RCW 19.16.500." On February 22, Turner filed an amended motion for leave to amend. He argued that "[t]he 2014 collection contract reveals ... that Fairway demanded ... several hundred dollars more than ... allowed under the collection contract between Arbor Health and Fairway."⁸

¶16 On February 28, the trial court heard oral argument on both Turner's motion for leave to amend and Fairway's motion for summary judgment on Turner's counterclaims. The court orally denied Turner leave to amend⁹ and granted Fairway's motion for summary judgment. The court's written order stated that it considered Fairway's motion for summary judgment as to Turner's counterclaims, Turner's response, and Fairway's reply. It dismissed Turner's counterclaims with prejudice.¹⁰ The court's written order did not address the motion for leave to amend.

¶17 Turner appeals the trial court's denial of leave to amend his counterclaims and its dismissal of his counterclaims. Fairway cross-appeals and assigns error to the trial court's denial of its motion to enforce the settlement agreement.¹¹

DISCUSSION

¶18 On appeal of an order granting summary judgment, we review de novo whether "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Civil Rule (CR) 56(c) ; see Ranger Ins. Co. v. Pierce County, 164 Wash.2d 545, 552, 192 P.3d 886 (2008). "The moving party has the burden of showing that there is no genuine issue as to any material fact." Indoor Billboard/Wash., Inc. v. Integra Telecom of Wash., Inc., 162 Wash.2d 59, 70, 170 P.3d 10 (2007). We view all facts and reasonable inferences in the light most favorable to the nonmoving party. Elcon Constr., Inc. v. E. Wash. Univ., 174 Wash.2d 157, 164, 273 P.3d 965 (2012). "A genuine issue of material fact exists where reasonable minds could differ on the facts controlling the outcome of the...