Maclean v. Collection Bureau of America, LTD.

[7] 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA [10] 11 BRENNAN R. MACLEAN, Case No.: 3:20-cv-00426-JLS-DEB [12] Plaintiff, ORDER GRANTING DEFENDANT’S 13 MOTION TO DISMISS v. [14] COLLECTION BUREAU OF (ECF No. 4) 15 AMERICA, LTD., 16 Defendants. [17] 18 Presently before the Court is Defendant Collection Bureau of America’s Motion to 19 Dismiss Plaintiff’s Complaint pursuant to Federal Rules of Civil Procedure 12(b)(6) and 8 20 (“Mot.,” ECF No. 4). Plaintiff filed an Opposition to the Motion (“Opp’n,” ECF No. 6), 21 and Defendant filed a Reply in Support of the Motion, (“Reply,” ECF No. 7). The Court 22 decides the matter on the papers submitted and without oral argument pursuant to Civil 23 Local Rule 7.1(d)(1). Having carefully considered the Parties’ arguments and the relevant 24 law, the Court GRANTS Defendant’s Motion to Dismiss. 25 BACKGROUND 26 Plaintiff Brennan Maclean alleges that on or about October 28, 2019, Defendant sent 27 Plaintiff a collection letter attempting to collect on a consumer debt. Complaint (“Compl.”) 28 ¶ 11, ECF No. 1. The subject debt stems from purportedly past due payments Plaintiff 1 owed to East Municipal Utility District. Id. ¶ 10. The collection letter outlined the total 2 amount Plaintiff owed through the following itemization: 3 PRINCIPAL: $296.90 4 INTEREST: $7.64 5 FEES: $0.00 6 TOTAL AMOUNT DUE: $304.54 7 Id. ¶ 13. The collection letter also stated that “[a]s of the date of this letter, you owe 8 $304.54. Because of interest, late charges, and other charges that vary from day to day, 9 the amount due on the day you pay may be greater. Hence, if you pay the amount shown 10 above, an adjustment may be necessary after we receive your check.” Id. ¶ 14. The 11 itemization of “Fees” stated “$0.00.” Id. ¶ 15. 12 Plaintiff filed suit for violations of the Fair Debt Collection Practices Act 13 (“FDCPA”) under 15 U.S.C. §§ 1692 et seq. (Count I) and the Rosenthal Fair Debt 14 Collection Practices Act (“RFDCPA”) pursuant to Cal. Civ. Code § 1788 (Count II). See 15 generally Compl. Plaintiff brings three claims against Defendant based on these 16 allegations: (1) Defendant violated 15 U.S.C. § 1692 (e), e(2)(A), e(5), and e(10) through 17 the false and deceptive representations as to the potential future accrual of “fees” in 18 connection with the subject debt; (2) Defendant violated § 1692f and f(1) when it unfairly 19 suggested that it could collect “fees” in connection with the subject debt; and (3) Defendant 20 engaged in deceptive and noncompliant conduct in its attempt to collect a debt from 21 Plaintiff in violation of RFDCPA. See id. ¶¶ 30, 33, 39 (citations omitted). On May 11, 22 2020, Defendant filed this instant motion to dismiss Plaintiff’s Complaint pursuant to 23 Federal Rules of Civil Procedure 8 and 12(b)(6). 24 LEGAL STANDARD 25 Federal Rule of Civil Procedure 12(b)(6) permits a party to raise by motion the 26 defense that the complaint “fail[s] to state a claim upon which relief can be granted,” 27 generally referred to as a motion to dismiss. The Court evaluates whether a complaint 28 states a cognizable legal theory and sufficient facts in light of Federal Rule of Civil 1 Procedure 8(a), which requires a “short and plain statement of the claim showing that the 2 pleader is entitled to relief.” Although Rule 8 “does not require ‘detailed factual 3 allegations,’ . . . it [does] demand more than an unadorned, the-defendant-unlawfully4 harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. 5 Corp. v. Twombly, 550 U.S. 544, 555 (2007)). In other words, “a plaintiff’s obligation to 6 provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and 7 conclusions, and a formulaic recitation of the elements of a cause of action will not do.” 8 Twombly, 550 U.S. at 555 (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). A 9 complaint will not suffice “if it tenders ‘naked assertion[s]’ devoid of ‘further factual 10 enhancement.’” Iqbal, 556 U.S. at 677 (citing Twombly, 550 U.S. at 557 ). 11 To survive a motion to dismiss, “a complaint must contain sufficient factual matter, 12 accepted as true, to ‘state a claim to relief that is plausible on its face.’” Id. (quoting 13 Twombly, 550 U.S. at 570 ); see also Fed. R. Civ. P. 12(b)(6). A claim is facially plausible 14 when the facts pled “allow the court to draw the reasonable inference that the defendant is 15 liable for the misconduct alleged.” Iqbal, 556 U.S. at 677 (citing Twombly, 550 U.S. at 16 556). That is not to say that the claim must be probable, but there must be “more than a 17 sheer possibility that a defendant has acted unlawfully.” Id. Facts “‘merely consistent 18 with’ a defendant’s liability” fall short of a plausible entitlement to relief. Id. (quoting 19 Twombly, 550 U.S. at 557 ). This review requires context-specific analysis involving the 20 Court’s “judicial experience and common sense.” Id. at 675 (citation omitted). “[W]here 21 the well-pleaded facts do not permit the court to infer more than the mere possibility of 22 misconduct, the complaint has alleged—but it has not ‘show[n]’—‘that the pleader is 23 entitled to relief.’” Id. 24 Where a complaint does not survive 12(b)(6) analysis, the Court will grant leave to 25 amend unless it determines that no modified contention “consistent with the challenged 26 pleading . . . [will] cure the deficiency.” DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655 , 27 658 (9th Cir. 1992) (quoting Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 28 1393, 1401 (9th Cir. 1986)). 1 ANALYSIS 2 Defendant moves to dismiss Plaintiff’s Count I and Count II claims for failure to 3 state a claim on the following grounds: (1) the alleged statement by Defendant that interest, 4 late charges, or other charges may accrue in the future is a correct representation of 5 California law; and (2) courts that have addressed similar language in collection letters 6 have found the language to be appropriate and a “safe harbor” from alleged FDCPA and 7 RFDCPA violations under Miller v. McCalla, Raymer, Padrick, Cobb, Nichols and Clark, 8 L.L.C., 214 F.3d 872 (7th Cir. 2000). See Mot. at 2 (citations omitted). In response, 9 Plaintiff first relies on Hoffman v. Keith D. Weiner & Assoc. Co., L.P. A., No. 19-C-0019, [10] 2019 WL 1746353 , at *1 (E.D. Wis. Apr. 18, 2019), to argue that even if the alleged 11 statement is a correct representation of California law, the language is still misleading. See 12 Opp’n at 7. Plaintiff secondly argues that the Miller safe harbor does not apply because 13 the statement is deceptive in the context of the collection letter. See id. at 2 . 14 Congress enacted the FDCPA “to eliminate abusive debt collection practices by debt 15 collectors, to insure that those debt collectors who refrain from using abusive debt 16 collection practices are not competitively disadvantaged, and to promote consistent State 17 action to protect consumers against debt collection abuses.” 15 U.S.C. § 1692 (e). The 18 FDCPA “regulates the conduct of debt collectors, imposing affirmative obligations and 19 broadly prohibiting abusive practices.” Gonzales v. Arrow Financial Servs., LLC, 660 F.3d 20 1055, 1060–61 (9th Cir. 2011). To state a claim under the FDCPA, a plaintiff must show: 21 (1) that he is a consumer; (2) that the debt arises out of a transaction entered into for 22 personal, family, or household purposes; (3) that the defendant qualifies as a debt collector 23 under 15 U.S.C. § 1692a(6); and (4) that the defendant violated one of the provisions of 24 the FDCPA. Freeman v. ABC Legal Servs., Inc., 827 F. Supp. 2d 1065, 1071 (N.D. Cal. 25 2011). Plaintiff is a consumer with debt originating from his obligation to pay the East 26 Bay Municipal District, a third-party debt collector, therefore only the fourth prong is at 27 issue. 28 /// 1 I. Whether Plaintiff Failed to State a Claim for a Violation of § 1692(e) 2 Under § 1692e, “[a] debt collector may not use any false, deceptive, or misleading 3 representation or means in connection with the collection of any debt.” Section 4 1692e(2)(A) specifically identifies “[t]he false representation of—the character, amount, 5 or legal status of any debt” as conduct that violates § 1692e. Sections 1692e(5) and 6 1692e(10) prohibit “[t]he threat to take any action that cannot legally be taken or that is not 7 intended to be taken” and “[t]he use of any false representation or deceptive means to 8 collect or attempt to collect any debt or to obtain information concerning a consumer.” In 9 the Ninth Circuit, “liability under § 1692e of the FDCPA is an issue of law.” Gonzales, 10 660 F.3d at 1061. Determining whether conduct violates § 1692e “requires an objective 11 analysis that takes into account whether the ‘least sophisticated debtor would likely be 12 misled by a communication.’” Donohue v. Quick Collect, Inc., 592 F.3d 1027, 1030 (9th 13 Cir. 2010) (quoting Guerrero v. RJM Acquisitions LLC, 499 F.3d 926, 934 (9th Cir. 2007)). 14 Furthermore, the FDCPA “does not ordinarily require proof of intentional violation, and is 15 a strict liability statute.” Gonzales, 660 F.3d 1055 (citing McCollough v. Johnson, 16 Rodenburg & Lauinger, LLC, 667 F.3d 939, 948 (9th Cir. 2011)). To constitute a violation 17 of the FDCPA, the Ninth Circuit, following the Seventh Circuit, requires that a false or 18 deceptive statement must be “material.” Donohue, 592 F.3d at 1033 ; see Hahn v. Triumph 19 Partnerships LLC, 557 F.3d 755, 757 (7th Cir. 2009) (“Materiality is an ordinary element 20 of any federal claim based on a false or misleading statement. . . . [B]y definition immaterial 21 information neither contributes to that objective (if the statement is correct) nor undermines 22 it (if the statement is incorrect).” (citations omitted)). 23 Plaintiff does not dispute that the itemization of the debt, accrued interest, and fees 24 stated in the collection letter were correct. Opp’n at 3. Defendant is expressly authorized 25 by law to collect costs upon a prejudgment interest. See California Code of Civil Procedure 26 § 1032(b) (“Except as otherwise expressly provided by statute, a prevailing party is entitled 27 as a matter of right to recover costs in any action or proceeding.”). Plaintiff also admits 28 that California recognizes prejudgment interest. Opp’n at 4. Therefore, as Plaintiff 1 requests, the Court will solely analyze whether the itemization of “fees” as $0.00 and the 2 statement that “other charges may vary from day to day” is deceptive and misleading under 3 the FDCPA. 4 Defendant contends that the language included in the collection letter is appropriate 5 and is nearly identical to the language relied on by multiple circuits as “safe harbor” 6 language that a debt collector should use in a collection letter. Mot. at 5. Defendant argues 7 Hutton v. Law Offices of Collins & Lamore is instructive. 668 F. Supp. 2d 1251 (S.D. Cal. 8 2009); Reply at 3. The Court agrees. In Hutton, the court dismissed the plaintiff’s Fair 9 Debt Collections Act claims when the collection letter informed the plaintiff of his 10 outstanding balance and that the outstanding balance “may not include accruing interest.” [11] Id. at 1253 . The court stated that “there is no way in a dunning letter to specify an amount 12 of interest that may accrue in the future, given that the collector has no idea when, if at all, 13 the debtor will pay up.” Id. at 1258 . The Court believes the instant case presents an even 14 stronger case for dismissal than in Hutton. Here, the language in the collection letter was 15 almost identical to the safe harbor language articulated by Judge Posner in Miller. 214 16 F.3d at 876 (finding the safe harbor applies when the debt collector states: “As of the date 17 of this letter, you owe $___ [the exact amount due]. Because of interest, late charges, and 18 other charges that may vary from day to day, the amount due on the day you pay may be 19 greater.”). 20 Plaintiff alleges that because the fees were itemized as $0.00 with the safe harbor 21 statement following, Plaintiff believed that the itemized fees stating “$0.00” would fall 22 within “other charges” and could increase if the debt was not timely paid. Opp’n at 10. 23 Plaintiff contends that a consumer could, and would, equate the itemized “fees” as falling 24 into the extremely broad category of “other charges. ” Id. at 12. The Court does not find 25 the language to be misleading to the least sophisticated consumer. The statement that 26 “other charges may vary from day to day,” being separate from the itemized section where 27 fees are indicated as “$0.00,” would not cause a the least sophisticated consumer to believe 28 that if the debt was not paid that these “fees” would then accrue as “other charges.” If so, 1 Defendant would have used the terminology “fees” in the safe harbor statement as it did 2 for “interest,” which was a term present in both the itemized section and the statement that 3 followed. 4 Plaintiff asserts that providing “N/A” instead of “$0.00” or leaving “fees” off 5 entirely would not be misleading. Opp’n at 5. The Court disagrees and finds that “N/A” 6 could be misleading because Defendant does have the legal ability to collect fees in the 7 future. See Reply at 5. While Defendant could have provided additional language to clarify 8 that “fees” were not included within “other charges,” the Court does not believe this rises 9 to the level of misleading or deceptive. See Evon v. Law Offices of Sidney Mickell, 688 10 F.3d 1015 , 1027 (9th Cir. 2012) (affirming dismissal of FDCPA claim under 15 U.S.C. 11 § 1692e based on the content of the letter, stating that “[w]hile the letter could have 12 included additional clarifying language, we do not believe that the language of the letter 13 goes so far as to be considered false, deceptive, or misleading”). 14 Plaintiff also contends that Defendant never intended to collect additional fees at the 15 time it sent the collection letter. Opp’n at 6. Plaintiff relies on Hoffman to argue that a 16 representation that other charges and interest could “vary day to day” is misleading when 17 these charges could only come about in the event that a debt was reduced to a judgment. 18 Hoffman, 2019 WL 1746353 at *3. Hoffman relies on Wisconsin law where only post19 judgment interest and fees can be collected. See id. (“In this context, the debt collector 20 misleads by implying that it could, as of the date of the letter, add ‘interest and other 21 charges that may vary from day to day.’”). In contrast, under California law, prejudgment 22 interest can be collected in a collection letter. See Diaz v. Kubler Corp., 785 F.3d 1326 23 (9th Cir. 2015) (“[P]rejudgment interest under section 3287(a) becomes available as of the 24 day the amount at issue becomes calculable . . . mechanically, on the basis of uncontested 25 and conceded evidence, and it is available as a matter of right.” (citation omitted)). 26 Defendant was also lawfully able to collect late charges in the agreement. Therefore, the 27 Court finds Hoffman inapplicable and unpersuasive. 28 /// 1 Defendant contends that Plaintiff’s claims “draw[] an arbitrary line” and even if 2 found to be a misrepresentation, it is non-material and therefore not a violation under 3 FDCPA. Reply at 4–7. The Court agrees. Even if the least sophisticated consumer would 4 be misled to believe that the itemized fees could accrue, the Court does not find this alleged 5 misrepresentation to be material. Plaintiff was informed that interest, late charges, and 6 other charges could increase if the debt was not timely paid. The Court cannot reasonably 7 believe that even if the least sophisticated consumer assumed that “fees” could accrue, such 8 a perceived misrepresentation would cause the debtor to take a disadvantageous course of 9 action. See Tourgeman v. Collins Fin. Servs., Inc., 755 F.3d 1109, 1121 (9th Cir. 2014) 10 (holding material statements are those that could “cause the least sophisticated debtor to 11 suffer a disadvantage in charting a course of action in response to the collection effort”). 12 In sum, the Court finds that no part of the collection letter, standing alone or “read 13 as a whole,” violates § 1692(e). See Gonzales, 660 F.3d at 1064 . Plaintiff therefore fails 14 to state a plausible claim that Defendant violated § 1692(e), § 1692(e)(2), § 1692(e)(5), 15 and § 1692(e)(10) of the FDCPA. Accordingly, the Court GRANTS this portion of 16 Defendant’s Motion. 17 II. Whether Plaintiff Failed to State a Claim for a Violation of § 1692(f) 18 Under § 1692(f), “[a] debt collector may not use unfair or unconscionable means to 19 collect or attempt to collect any debt. More specifically, the Act is violated by the 20 “collection of any amount (including any interest, fee, charge, or expense incidental to the 21 principal obligation) unless such amount is expressly authorized by the agreement creating 22 the debt or permitted by law.” § 1692(f)(1). Like § 1692(e), whether conduct violates 23 § 1692(f) “requires an objective analysis that takes into account whether ‘the least 24 sophisticated debtor would likely be misled by a communication.’” Donohue, 592 F.3d at 25 1030 (quoting Guerrero, 499 F.3d at 934 ). 26 Defendant contends that the statement “[b]ecause of interest, late charges, and other 27 charges that vary from day to day, the amount due on the day you pay may be greater” was 28 legally and factually correct. Mot. at 4. Defendant correctly points out that it can lawfully 1 recover costs, accruing interest, and late charges if Plaintiff failed to pay the debt and a 2 legal proceeding was brought to collect the debt. Id. at 4–5; Cal. Code Civ. Proc. § 1032(b) 3 (“[A] prevailing party is entitled as a matter of right to recover costs in any action or 4 proceeding.”); Cal. Code Civ. Proc. § 1033.5(a)(1), (3), (4), (7), (8), (11), (14) (allowing 5 recoverable costs to include filing, motion, and jury fees, deposition fees, service fees, 6 witness fees, expert witness fees, and court reporter fees); Stimpson v. Midland Credit 7 Mgmt., Inc., 944 F.3d 1190 , 1197 (9th Cir. 2019) (“[D]ebt collectors may attempt to 8 persuade debtors to make payments, so long as the debt collector otherwise complies with 9 statutory requirements.”). Because Plaintiff fails to point to any violation of California law 10 in the collection letter, Plaintiff fails to state a claim for relief under § 1692f(1). See Akram 11 v. California Bus. Bureau, Inc., No. 15CV2538 JAH-DHB, 2016 WL 7029262 , at *4 (S.D. 12 Cal. Oct. 3, 2016) (granting defendant’s motion to dismiss under § 1692(f) and (f)(1) 13 because “[p]laintiff’s allegation [was] merely a legal conclusion and [did] not set forth facts 14 upon which the Court could make a reasonable inference that Defendant is liable for the 15 misconduct alleged”). Plaintiff therefore fails to state a plausible claim that Defendant 16 violated § 1692(f) and (f)(1) of the FDCPA. Accordingly, the Court GRANTS this portion 17 of Defendants’ Motion. 18 III. Whether the Plaintiff Failed to State a Claim for Violation of the RFDCPA 19 Plaintiff alleges that Defendant’s statements in the debt collection notice violated 20 the RFDCPA under California Civil Code § 1788.17. Compl. ¶ 39. As California’s version 21 of the FDCPA, the RFDCPA “mimics or incorporates by reference the FDCPA’s 22 requirements . . . and makes available the FDCPA’s remedies for violations.” Riggs v. 23 Prober & Raphael, 681 F.3d 1097, 1100 (9th Cir. 2012) (citing Cal. Civ. Code § 1788.17 ). 24 “[F]alse statements are also subject to the materiality requirement for purposes of the 25 Rosenthal Act claim.” Afeweriki v. Anya Law Group, 868 F.3d 771, 776 (9th Cir. 2017) 26 (citations omitted). Therefore, whether a debt collector’s conduct “violates the [RFDCPA] 27 turns on whether it violates the FDCPA.” Id. Because Plaintiff’s RFDCPA claims are 28 based on the same allegations as his FDCPA claims, the analysis above, supra Sections I– 1 || applies here and Plaintiff's RFDCPA claims also fail. Accordingly, the Court GRANTS 2 || this portion of Defendant’s Motion. 3 CONCLUSION 4 For the reasons stated above, the Court GRANTS Defendant’s Motion to Dismiss 5 ||on all causes of action. Accordingly, the Court DISMISSES WITHOUT PREJUDICE 6 || Plaintiff's Complaint. Plaintiff may file an amended complaint within thirty (30) days of 7 date on which this Order is electronically docketed. 8 IT IS SO ORDERED. 9 Dated: December 11, 2020 . tt 10 pee Janis L. Sammartino ll United States District Judge