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[Fred93]

I have been from time to time following the status of some of the lawsuits that Prosper filed against deadbeat delinquent defaulting borrowers.  In the end, it is looking like most of them are ending up in dismissal.  In other words, Prosper lost.

I don't always understand the details of what took place.  It is difficult to understand from the cryptic court records that are made public.  Perhaps some of our lawyers can comment.  Here is the public record of a typical case.  This one is from Los Angeles Superor Court http://www.lasuperiorcourt.org/  It looks to me like there were several missteps by Prosper's people.  You see entries such as "NO APPEARANCE BY OR FOR EITHER PARTY" or "SHOW CAUSE ...WHY SANCTIONS SHOULD NOT BE IMPOSED FOR FAILURE TO FILE REQUEST FOR ENTRY OF DEFAULT JUDGMENT" or "REJECT SHEET SENT TO (PROSPER MARKETPLACE) INC. FOR REJECTION OF REQUEST TO ENTER DEFAULT".  Is this sort of stuff normal?

Prosper owes us investors an explanation.


Case Number: 08C01457
PROSPER MARKETPLACE VS. DAVIS, DIANA
Status: CASE DISMISSED

Filing Date: 04/01/2008
Case Type: COLLECTIONS CASE (Limited Jurisdiction)
Filing Court: Santa Monica Courthouse

01/26/2009 DISMISSAL WITHOUT PREJUDICE FILED FOR THE ENTIRE ACTION AS
TO ALL DEFENDANT(S) AND ALL CAUSES OF ACTION(S). FILED
BY PLAINTIFF.

10/16/2008 REJECT SHEET SENT TO (PROSPER MARKETPLACE) INC. FOR
REJECTION OF REQUEST FOR DEFAULT CLERK'S JUDGMENT: A
1033(B) DECLARATION NEEDS TO BE SUBMITTED WITH REQUEST.
SUBMITTED ON 10/01/08

09/25/2008 CAUSE CALLED AT 02:00P M, IN DEPT. WED , HON. DIANA
M. WHEATLEY PRESIDING FOR HEARING RE: THE ORDER TO SHOW
CAUSE HEARING / CASE MANAGEMENT REVIEW, SET FOR 10/3/08
. THE COURT RULES AS FOLLOWS: NO APPEARANCE BY OR FOR
EITHER PARTY. ON THE COURT'S OWN MOTION, PURSUANT TO
DEPARTMENT WE-D BEING DARK ON 10/3/08, THE ORDER TO SHOW
CAUSE HEARING / CASE MANAGEMENT REVIEW SET FOR 10/3/08,
IS ADVANCED TO THIS DATE AND HELD. THE ORDER TO SHOW
CAUSE IS DISCHARGED, PURSUANT TO A PROOF OF SERVICE WAS
FILED ON 7/2/08. AN ORDER TO SHOW CAUSE RE: DISMISSAL (TO
MONITOR ENTRY OF DEFAULT JUDGMENT) IS SET FOR 3/26/09 AT
8:30 AM IN DEPARTMENT WE-D. IF A DEFAULT JUDGMENT IS
ENTERED BY 3/12/09, THE ORDER TO SHOW CAUSE WILL BE
DISCHARGED, PLACED OFF-CALENDAR, AND NO APPEARANCE

09/25/2008 ORDER TO SHOW CAUSE HEARING SIGNED AND FILED BY DIANA M.
WHEATLEY TO SHOW WHY SANCTIONS SHOULD NOT BE IMPOSED FOR
FAILURE TO FILE REQUEST FOR ENTRY OF DEFAULT JUDGMENT
PURSUANT TO CRC 3.740(F). MATTER CONTINUED FOR HEARING
ON 03/26/09 AT 08:30A M., IN DEPT. WED . CERTIFICATE
OF MAILING FILED /GIVEN TO RESPECTIVE PARTIES/ COUNSEL.

09/08/2008 REJECT SHEET SENT TO (PROSPER MARKETPLACE) INC. FOR
REJECTION OF REQUEST TO ENTER DEFAULT AND JUDGMENT: FOR
CLERK'S JUDGMENT THE MAXIMUM ALLOTTED IS 10% AND REQUEST
FOR DISMISSAL: NO DOES TO DISMISS AS BOX WAS NOT
COMPLETED ON COMPLAINT. SUBMITTED ON 08/11/08

09/05/2008 CASE FILE FORWARDED TO DEPT WED RE: 10/3/08 OSC

08/11/2008 CLERK DEFAULT JUDGMENT PACKAGE RECEIVED. LOCATED IN ROOM
116

07/02/2008 PROOF OF SERVICE RE: SUMMONS, COMPLAINT, ADR PACKAGE
FILED. SERVED AS TO (DAVIS, DIANA) BY SUBS-ERVING JOHN
DOE . COSTS OF $ 50.00 .

04/01/2008 COLLECTIONS CASE COMPLAINT FILED PURSUANT TO CRC 3.740. RN
PAID.

04/01/2008 SUMMONS ISSUED.

[aurel57]

Fred thank you for the updates. It looks like Prosper lawsuits are a joke the way they are being handled.

 I propose to start a new Court TV show like a Judge Judy but only to handle bad Prosper Loans. I think they would get a big following just from lenders watching the circus so we could get some entertainment value out of this. 

[NewHorizon]

NO APPEARANCE BY OR FOR EITHER PARTY.

Our feduciary agent at work....   

[misssalaska2000]

Dismissed w/o prejudice means Prosper can file again, right?

[xraider]

What amazing ineptitude.  The docket you posted shows that Prosper's crack collection lawyers failed to submit proper default papers (which would have gotten it a judgment) so they threw up their hands and walked away, electing to dismiss the case instead.  Nice.

[Mtnchick]

It's like a bad dream 

[HollowOak]

What amazing ineptitude.  The docket you posted shows that Prosper's _^^on_^ crack collection lawyers failed to submit proper default papers (which would have gotten it a judgment) so they threw up their hands and walked away, electing to dismiss the case instead.  Nice.

Fixed it for ya. 


On a more prosaic note. Weren't Prosper supposed to provide NAT participants with regular progress reports on the NAT issue? What was the date of the last such report? And how many reports in total does that make now?

/dripping sarcasm

It would seem that those who took the buy-out option made the right choice indeed. Regrettably. I wonder how Doug Fuller sleeps at night, that poor man must have a lot of things on his mind and adding abject failure to the list cannot be easy for someone who was previously so successful in his chosen career path.

[msava]

What's really distressing is the fact, those first cases were test cases. Hand picked to show off how well Prosper can collect. So now we know what we already suspected, if Prosper can't collect on prime loans, forget about the others.

This thread should be hidden in the bowels of .org. Borrowers must be rejoicing. The only reason to repay a Prosper loan is self-respect. The big pity is, the only role models children are getting these days are politicians and sport figures. Parents better start parenting because we are raising a nation of deadbeats.

[pioneer11]

I should have taken the $14000 at 8.7%.

[bamalucky]

I thought Doug Fuller was an expert at court cases.

[HollowOak]

I thought Doug Fuller was is an expert at court cases.

And Chris Larsen is an expert at starting Internet ventures that change the paradigm in the area of consumer finance. What's your point?

[Mtnchick]

Has anyone seen proof of Doug Fuller's success in anything besides in his own words, which we now know are worth nothing?

[NewHorizon]

Speaking of his own words....

When I talk about transparency, I mean that I am going to be very upfront with the lender community about the steps I am taking to improve collections, the reasons for taking those steps, when the change will be implemented, and when I expect to see results. I also intend to create additional reporting to help people understand what’s happening with collections – the information currently on the site is all “snapshot” data. I also want to create monthly summaries so it is possible to look back and see how many accounts were in collections at the end of August vs. the end of September, etc.

Q: Okay, so you need to decide who to sue, then what?
A: Put quite simply, my philosophy is this – if you won’t pay, but can (or will in the future) be able to pay, I’m going to sue you. If I sue you I’m going to win.

Q: That sounds kind of arrogant, can you back it up?
A: Courts in seven states have recognized me as an expert at consumer debt litigation. At Credigy, if a case got really nasty, I would go testify live. I refuse to lose.

Q: Really? What’s your win/lose record?
A: In my last 18 months at Credigy, I testified live at 42 trials. My record was 41-1. By the way, I fired the law firm where we lost.

[ira01]

I have been from time to time following the status of some of the lawsuits that Prosper filed against deadbeat delinquent defaulting borrowers.  In the end, it is looking like most of them are ending up in dismissal.  In other words, Prosper lost.

It's hard to know exactly what the dismissals mean, but since they are without prejudice, they aren't exactly "losses."  They could mean anything from Prosper sued the wrong defendant, to the defendant filed BK, to Prosper missed some deadline or for other tactical reason decided to dismiss and plans to refile, to the defendant convinced Prosper that he/she was the victim of ID-theft, or that Prosper screwed up the loan origination in some manner, or who knows what else.  It is also possible that the dismissals signify a settlement, although that is not highly likely (usually a dismissal would be with prejudice if the case were settled, although I have been involved in cases in which a dismissal without prejudice was filed after a settlement was reached, but before the payments were made, with a subsequent dismissal with prejudice to follow completion of payments).  Of course, Prosper owes lenders an explanation of what these dismissals mean, but has wholly failed to comply with its promise of monthly status reports.

I don't always understand the details of what took place.  It is difficult to understand from the cryptic court records that are made public.  Perhaps some of our lawyers can comment.  Here is the public record of a typical case.  This one is from Los Angeles Superor Court http://www.lasuperiorcourt.org/  It looks to me like there were several missteps by Prosper's people.  You see entries such as "NO APPEARANCE BY OR FOR EITHER PARTY" or "SHOW CAUSE ...WHY SANCTIONS SHOULD NOT BE IMPOSED FOR FAILURE TO FILE REQUEST FOR ENTRY OF DEFAULT JUDGMENT" or "REJECT SHEET SENT TO (PROSPER MARKETPLACE) INC. FOR REJECTION OF REQUEST TO ENTER DEFAULT".  Is this sort of stuff normal?

I will provide my speculation on each docket entry below, placing them in chronological order (rather than the reverse chron order they are usually listed in).  Some of the things you think are missteps probably aren't, but others certainly are.  As to whether this is "normal," that depends.  It isn't unheard of to get a document rejected due to some technical error, but that usually gets fixed immediately.  IMHO, the number of apparent errors, and the lack of prompt cures, is not "normal," especially considering that these sorts of things (service of complaints, filing proofs of service, requests for defaults, etc.) are the meat and potatoes of a collections law practice -- these cases are just run of the mill collections cases with respect to this kind of stuff, and it is rather shocking that an experienced firm appears to make so many erros on the simple stuff.

Case Number: 08C01457
PROSPER MARKETPLACE VS. DAVIS, DIANA
Status: CASE DISMISSED

Filing Date: 04/01/2008
Case Type: COLLECTIONS CASE (Limited Jurisdiction)
Filing Court: Santa Monica Courthouse

04/01/2008 SUMMONS ISSUED.

04/01/2008 COLLECTIONS CASE COMPLAINT FILED PURSUANT TO CRC 3.740. RN
PAID.

07/02/2008 PROOF OF SERVICE RE: SUMMONS, COMPLAINT, ADR PACKAGE
FILED. SERVED AS TO (DAVIS, DIANA) BY SUBS-ERVING JOHN
DOE . COSTS OF $ 50.00.

08/11/2008 CLERK DEFAULT JUDGMENT PACKAGE RECEIVED. LOCATED IN ROOM
116

So far, so good.  Prosper filed the complaint, got it served, and filed the POS.  Then after the Defendant failed to respond to the complaint on time (by filing an Answer), Prosper filed the paperwork seeking a default.

09/05/2008 CASE FILE FORWARDED TO DEPT WED RE: 10/3/08 OSC

This is just court housekeeping.  It appears that the 10/3/08 OSC was simply the one that is automatically set early in the case as a "tickler" to make sure that cases don't fall through the cracks and linger in limbo forever.  More on this below in reference to the first 9/25/08 docket entry.

09/08/2008 REJECT SHEET SENT TO (PROSPER MARKETPLACE) INC. FOR
REJECTION OF REQUEST TO ENTER DEFAULT AND JUDGMENT: FOR
CLERK'S JUDGMENT THE MAXIMUM ALLOTTED IS 10% AND REQUEST
FOR DISMISSAL: NO DOES TO DISMISS AS BOX WAS NOT
COMPLETED ON COMPLAINT. SUBMITTED ON 08/11/08

Propsper filed paperwork seeking a default judgment against the defendant from the clerk, but the clerk rejected that paperwork because the interest rate was too high.  It isn't clear to me if the problem was an error in Prosper's paperwork (such as seeking postjudgment interest at a rate higher than the legal rate of 10%), or simply that loans with rates >10% can't be handled by the clerk, but requires a judge.  Either way, this should have been easily and promptly corrected by Prosper.  As to the second part, about the Doe dismissal, that doesn't really matter.  Apparently Prosper's paperwork sought dismissal of the "Doe" defendants (who are commonly named in complaints as placeholders in case it turns out later that other defendants should also have been named), but that in this case there were no Doe defendants to dismiss because Prosper hadn't properly included them originally.  More sloppyness, but no big deal. 

09/25/2008 CAUSE CALLED AT 02:00P M, IN DEPT. WED , HON. DIANA
M. WHEATLEY PRESIDING FOR HEARING RE: THE ORDER TO SHOW
CAUSE HEARING / CASE MANAGEMENT REVIEW, SET FOR 10/3/08
. THE COURT RULES AS FOLLOWS: NO APPEARANCE BY OR FOR
EITHER PARTY. ON THE COURT'S OWN MOTION, PURSUANT TO
DEPARTMENT WE-D BEING DARK ON 10/3/08, THE ORDER TO SHOW
CAUSE HEARING / CASE MANAGEMENT REVIEW SET FOR 10/3/08,
IS ADVANCED TO THIS DATE AND HELD. THE ORDER TO SHOW
CAUSE IS DISCHARGED, PURSUANT TO A PROOF OF SERVICE WAS
FILED ON 7/2/08. AN ORDER TO SHOW CAUSE RE: DISMISSAL (TO
MONITOR ENTRY OF DEFAULT JUDGMENT) IS SET FOR 3/26/09 AT
8:30 AM IN DEPARTMENT WE-D. IF A DEFAULT JUDGMENT IS
ENTERED BY 3/12/09, THE ORDER TO SHOW CAUSE WILL BE
DISCHARGED, PLACED OFF-CALENDAR, AND NO APPEARANCE

09/25/2008 ORDER TO SHOW CAUSE HEARING SIGNED AND FILED BY DIANA M.
WHEATLEY TO SHOW WHY SANCTIONS SHOULD NOT BE IMPOSED FOR
FAILURE TO FILE REQUEST FOR ENTRY OF DEFAULT JUDGMENT
PURSUANT TO CRC 3.740(F). MATTER CONTINUED FOR HEARING
ON 03/26/09 AT 08:30A M., IN DEPT. WED . CERTIFICATE
OF MAILING FILED /GIVEN TO RESPECTIVE PARTIES/ COUNSEL.

As noted above, the court had automatically set an OSC hearing for 10/3/08 when the case was filed, which would have come into effect had Prosper not completed service and filed a POS on time.  Because Prosper did timely complete service and file a POS, the OSC was discharged.  The reason there was "no appearance by or for either party," was that the OSC was scheduled for 10/3, but the court discharged the OSC on 9/25 (so neither party would have known to appear that date instead).  It did so in order to spare the parties from appearing at an unecessary hearing (and also because the courtroom was going to be closed on 10/3).  The court then set a new "tickler" OSC, this one to make sure that Prosper timely obtained a default judgment, for 3/26/09.  The second 9/25 docket entry is that actual OSC being filed (the first entry was the minutes of the 9/25 proceeding, indicating, among other things, that the court would be filing the OSC).

10/16/2008 REJECT SHEET SENT TO (PROSPER MARKETPLACE) INC. FOR
REJECTION OF REQUEST FOR DEFAULT CLERK'S JUDGMENT: A
1033(B) DECLARATION NEEDS TO BE SUBMITTED WITH REQUEST.
SUBMITTED ON 10/01/08

Here's another apparent screw-up by Prosper.  This time, its paperwork seeking a default judgment (presumably version 2, correcting the interest rate problem that caused the first rejection above) was rejected because it failed to include a necessary declaration.  California Civil Procedure Code s. 1033(b) requires a declaration in support of a request for court costs in a limited jurisdiction case, that among other things states (under penalty of perjury) that before filing suit, the plaintiff informed the defendant in writing that it would be suing and seeking court costs.  You would think that an experienced collections firm would know that.  In any event, this could and should have been promptly fixed.

01/26/2009 DISMISSAL WITHOUT PREJUDICE FILED FOR THE ENTIRE ACTION AS
TO ALL DEFENDANT(S) AND ALL CAUSES OF ACTION(S). FILED
BY PLAINTIFF.

And here Prosper calls it quits, for unknown reasons.  Maybe Prosper finally heard from the defendant, or maybe it didn't.  Who knows?

[ira01]

NO APPEARANCE BY OR FOR EITHER PARTY.

Our feduciary agent at work....   

Although there's plenty to blame Prosper and its collections firm for, this isn't one of those things.  There was no appearance because the court decided on its own initiative to "hold the hearing" a week and a half early, almost certainly without notifying the parties in advance (which was not necessary due to what the court planned to do).