Defending a credit card lawsuit in California

Defending a credit card lawsuit in California is the topic of this blog post. 

There has been a lot of publicity lately about the "produce the note" strategy in foreclosure litigation in the United States. However, the same basic issue is involved in credit card litigation. This blog post will briefly discuss a "produce the assignment" strategy for credit card litigation in California. The main issue discussed will be the issue of whether the collection agency or other assignee is the actual and proper assignee of the credit card company or other creditor, and thus has standing to sue. The author recently worked on a case in Orange County, California where Midland Funding, LLC is the Plaintiff, while they allege in the complaint that they are the assignee of a Chase credit card account and are suing for over $9,000.00, the defendant in the lawsuit received a settlement offer in June 2010 from another collection agency offering to settle the same Chase credit card account for just over $1,800.00.

This situation raises a very important issue in California, and presumably every other state in the United States. In California the plaintiff must be the "real party in interest" with respect to the claim sued upon. Except as otherwise provided by statute, "every action must be prosecuted in the name of the real party in interest." See Code of Civil Procedure § 367; also see Dino v. Pelayo (2006) 145 Cal.App. 4th 347, 353, (citing text); and Cloud v. Northrop Grumman Corp. (1998) 67 Cal. App. 4th 995, 1004, (citing text).

The purpose of the real party in interest requirement is to assure that any judgment rendered will bar the owner of the claim sued upon from relitigating. "It is to save a defendant, against whom a judgment may be obtained, from further harassment or vexation at the hands of some other claimant to the same demand." Giselman v. Starr (1895) 106 Cal. 651, 657; Cloud v. Northrop Grumman Corp. (1998) 67 Cal. App. 4th 995, 1003, (citing text).

Clearly if there are several alleged assignees attempting to collect on the same debt, only one of them is a valid assignee. And as shown previously, in California only a valid assignee can be the "real party in interest". There cannot be more than one "real party in interest".

And the issue of standing to sue is not waived by failing to raise it by either an answer or demurrer and can be raised at any time in a lawsuit, including for the first time on an appeal.

"Contentions based on a lack of standing involve jurisdictional challenges and may be raised at any time in the proceeding." See Common Cause of Calif. v. Board of Supervisors (1989) 49 Cal. 3d 432, 438, lack of standing can be raised for first time on appeal, see Associated Builders & Contractors, Inc. v. San Francisco Airports Comm'n (1999) 21 Cal. 4th 352, 361.

If a plaintiff cannot prove they have standing to sue then the lawsuit must be dismissed. When a party lacks standing to sue, the action must be dismissed, unless the complaint can be amended by substituting a party who has standing. Cloud v. Northrop Grumman Corp. (1998) 67 Cal. App. 4th 995, 1004-1011.

Any party being sued by a collection agency or other assignee should seriously consider the "produce the assignment" strategy. If as is often the case, the credit card company has "assigned" the credit card account balance owing to several different collection agencies this may result in the lawsuit either being dismissed by the plaintiff if they cannot produce an actual assignment, or result in much more favorable settlement terms being offered.

The basic "produce the assignment" strategy in brief is as follows:

The answer to the complaint should include an affirmative defense that the plaintiff is not a valid assignee, and thus lacks standing to sue. However, if the answer has already been filed this is not critical because as previously mentioned, the issue of standing to sue can be raised at any time.

Special interrogatories and requests for production of documents should be used to force the alleged "assignee" to prove that they are in fact the "real party in interest". A demand for a bill of particulars should also be used to force plaintiff to provide the details for each and every charge that is included in their lawsuit.

The author of this article, Stan Burman, is a freelance paralegal with over 15 years of experience in California civil litigation. Visit his website at http://www.legaldocspro.com

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