Raquel Olson sued Dr. Frank Coufal and La Jolla Neurological Associates (LJNA) for unlawful debt collection under the Rosenthal Fair Debt Collection Practices Act, claiming they were "debt collectors" due to alleged excessive billing and phone calls regarding payments for services rendered to her deceased husband. The trial court granted summary judgment for the defendants, concluding they did not qualify as "debt collectors" under the Act. Olson's complaint did not mention the third-party billing service or assert vicarious liability for its actions. In their defense, Dr. Coufal and LJNA argued they were not debt collectors and had not engaged in debt collection activities, as LJNA utilized third-party services for billing after medical services were provided. Dr. Coufal confirmed that his practice focused solely on patient care and that LJNA did not bill patients directly for amounts owed by insurers. The appellate court affirmed the trial court's judgment, agreeing with the defendants' position.
In March 2018, WRS issued an invoice for $1,713.54 to Mr. Olson for medical services, basing the amount on information from LJNA. The invoice, which included LJNA's return address and stated 'Payment Due Upon Receipt' and 'PLEASE PAY,' did not indicate it was from WRS. In April 2018, LJNA received unsigned correspondence from 'The Olson Family' indicating that inquiries for Mr. Olson should be directed to Medicare Part I and the VA Medical Center but lacking identifying information. Additional correspondence with varying handwritten messages continued to arrive from 'The Olson Family,' including one stating Mr. Olson 'doesn't exist anymore' and filled with unorthodox annotations regarding marital status and his employer.
In June 2018, WRS sought LJNA's help in obtaining Mr. Olson's insurance information. LJNA's employee left a voicemail for the Olson household, requesting this information, but did not discuss the outstanding balance. Mrs. Olson returned the call, informing them of her husband's death and that charges were covered by the VA. By September 2018, the insurance paid the outstanding bill, and Olson filed a lawsuit the following month.
In opposition to a summary judgment, Olson contended that Dr. Coufal and LJNA were 'debt collectors' under the Rosenthal Act, asserting attempts to collect a 'consumer debt' and claiming vicarious liability for their employees' actions and WRS's actions under agency theory. Olson did not argue agency based on apparent authority or ratification. Although Olson attempted to introduce exhibits opposing the summary judgment, they were initially rejected but later considered upon reconsideration. During his deposition, Dr. Coufal acknowledged using third-party billing services, including WRS, selected based on advertising and interviews, but indicated that LJNA had ceased using WRS due to inefficiencies in their software and a lack of specialization in neurosurgery billing, as confirmed by LJNA's operations manager, Sarah Ince.
LJNA provided a third-party billing service with CPT codes for patient procedures, indicating time spent, complexity, and diagnoses. The billing service determined billing amounts and communicated with insurance companies. LJNA accepted co-payments at its office and allowed patients to pay invoices directly, which LJNA would relay to the billing service. WRS, the billing service, sent invoices to Mr. Olson in early 2018, but these were generated by WRS, not LJNA.
The trial court initially granted summary judgment in favor of LJNA and Dr. Coufal, ruling they were not debt collectors under the Rosenthal Act. A judgment was recorded on January 8, 2021, indicating zero amounts due, but lacked a corresponding filed document. Subsequently, an ex parte application to correct the judgment to reflect both names of Dr. Coufal was granted on February 17, 2021. Olson filed a motion for reconsideration on February 8, 2021, which the court granted on July 16, 2021, but determined the additional exhibits did not alter the summary judgment outcome. The court reaffirmed that neither LJNA nor Dr. Coufal engaged in debt collection in their ordinary business of providing neurosurgical care.
Olson appealed without specifying a date but was informed to obtain a final judgment. The court issued a final judgment against Olson on August 23, 2021. The appellate court sought supplemental briefs to evaluate whether the clerk's January 8, 2021, notation could serve as a valid judgment without a filed document and if it affected the trial court's jurisdiction for reconsideration, ultimately concluding that the notation alone was not a valid judgment.
In 1974, the Legislature introduced an alternative method for entering judgments under Code of Civil Procedure section 668.5, allowing counties to forgo maintaining a judgment book if certain conditions are met, such as creating a microfilm copy or entering the judgment into an electronic system before filing. San Diego County follows this statute, where the date of filing with the clerk serves as the date of judgment entry. The clerk's recording of a judgment in the register of actions does not constitute an entry unless a file-stamped judgment is present. Consequently, since no judgment was entered for the original summary judgment order in January 2021, the trial court maintained jurisdiction to reconsider it, ultimately issuing a final judgment on August 23, 2021. Although Olson filed a premature notice of appeal, it was later deemed timely as it could be construed to relate to the final judgment.
On the substantive issues, Olson contends that Dr. Coufal and LJNA are directly liable as debt collectors under the Rosenthal Act and vicariously liable for WRS's actions. However, the court found that Dr. Coufal and LJNA met their burden of proof showing they are not debt collectors, and Olson did not establish a triable issue of fact regarding agency liability. The Rosenthal Act, enacted in 1977 to prevent unfair practices in debt collection, defines 'debt collectors' and outlines their obligations under the federal Fair Debt Collections Practices Act (FDCPA). The Act characterizes debt collection as any act related to collecting consumer debts, defining consumer debt as amounts owed by individuals due to consumer credit transactions.
The Rosenthal Act defines a 'debt collector' more broadly than the federal Fair Debt Collection Practices Act (FDCPA) by including those who collect debts "on behalf of that person" as well as for others. Olson's complaint against Dr. Coufal and LJNA asserted they were liable as 'debt collectors' under the Rosenthal Act. However, Dr. Coufal and LJNA presented evidence proving they do not engage in debt collection themselves but hire third-party billing services for this purpose. The trial court acknowledged that LJNA uses such services to invoice and collect payments for neurosurgical services.
The legal question was whether a medical provider that relies solely on an unaffiliated billing service qualifies as a 'debt collector' under the Rosenthal Act. The conclusion reached was that it does not. The term 'engage in' implies direct participation in debt collection rather than merely outsourcing this function. Legislative history indicates the Rosenthal Act was designed to protect against abuses by unregulated debt collectors, particularly in-house collectors, and does not extend liability to creditors who solely utilize outside entities for debt collection.
Prior case law supports this interpretation, indicating a debt holder could be considered a 'debt collector' only if it operates with a separate entity as part of a single economic enterprise, which was not demonstrated in this case. The evidence showed that Dr. Coufal and LJNA selected third-party services independently and were not affiliated with them. Consequently, they fulfilled their burden of proof for summary judgment, and Olson did not establish any material fact that would challenge this conclusion.
Olson contended that Dr. Coufal and LJNA were vicariously liable for WRS's actions under agency theories, specifically asserting that WRS acted as LJNA's agent with actual authority. Although Olson did not include this theory in her initial complaint, the court considered it because Dr. Coufal and LJNA addressed it in their reply without objecting to its introduction. The court concluded that Olson did not establish a triable issue of fact regarding agency liability.
The analysis noted a lack of California case law on this issue but referenced federal court rulings that classify debt collectors as independent contractors under the FDCPA, which limits vicarious liability. The critical distinction between an agent and an independent contractor is the level of control exerted by the principal over the means of performance. Olson failed to provide evidence that WRS was under LJNA's control during its debt collection activities or to show the terms of the agreement between them.
The court clarified that it is not categorically ruling out the possibility of a creditor being vicariously liable for a debt collector's actions under an agency theory; such liability may exist based on the specific nature of their relationship and control. However, Olson did not demonstrate this agency relationship. Additionally, Olson raised two new theories of agency liability—apparent authority and ratification—on appeal, which she did not argue in her summary judgment opposition. The court determined that these new theories were waived since they relied on disputed facts not previously addressed. The judgment was affirmed, and respondents were awarded costs on appeal.
