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GALLI v. CRENSHAW & ASSOCIATES

October 13, 2005.

DANTI GALLI, for himself and on behalf of the general public, Plaintiff,
v.
CRENSHAW & ASSOCIATES, a business entity of unknown form, and DOES 1 through 10, inclusive, Defendants.



The opinion of the court was delivered by: JEFFREY MILLER, District Judge

ORDER DENYING IN PART AND GRANTING IN PART DEFENDANT'S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF'S CROSS-MOTION FOR PARTIAL SUMMARY JUDGMENT
Factual Background
In November 2000, Plaintiff Dante Galli contracted with Protect America, Inc. for home security services. Plaintiff allegedly defaulted on the account and the account was assigned to Defendant Anderson Crenshaw & Associates for collection in November 2002. Defendant made a written demand on Plaintiff on April 28, 2003 for $1,482.75. Plaintiff disputed the debt and provided Defendant with supporting documents on May 5, 2003. Defendant claims to have verified the debt and to have sent Plaintiff a second demand letter on May 14, 2003, demanding $498.25 as a full settlement. Plaintiff alleges that prior to his receipt of the May 14 letter, an employee of Defendant called Plaintiff, offered to settle the debt for $539, and informed him that Defendant would have a mechanics lien placed on his home if he did not pay. The parties agree that Defendant made no further collection attempts after sending the May 14 letter. Procedural History

On September 15, 2003, Plaintiff filed a lawsuit against Protect America which settled in December 2003 for $3,000. On December 1, 2003, Plaintiff filed suit in San Diego Superior Court against Defendant, alleging violations of 15 U.S.C. §§ 1692 et seq (the federal "Fair Debt Collection Practices Act" or "FDCPA"), California Civil Code §§ 1788 et seq. (the "California Fair Debt Collection Practices Act" or the "Rosenthal Act"), and California's Unfair Competition Law, California Business and Professions Code § 17200 ("California UCL"). The case was removed to the Southern District of California on February 18, 2004. All three claims are based on the same factual allegations.*fn1

  On June 18, 2004, Defendant filed a motion to dismiss under Rule 12(b)(6) on the grounds of res judicata. This Court denied the motion, finding that the claims against Defendant were not based on the same set of primary rights as those against Protect America and that the claims against Defendant were premised on a different set of facts. Plaintiff attempted to file a Second Amended Complaint on November 19, 2004, which the Court rejected for failure to seek leave of the Court. The Court refused to grant leave to amend the complaint.

  On August 10, 2005, Defendant moved for summary judgment or summary adjudication on all claims. On August 25, 2005, Plaintiff filed a motion for partial summary judgment on the issue of whether Defendant's practice of calculating collection fees violates the FDCPA and the Rosenthal Act.

  Federal Fair Debt Collection Practices Act

  A. Standing

  Defendant argues that Plaintiff has not suffered any actual damages or mental anguish and, thus, lacks standing to bring a claim. Defendant further argues that Plaintiff is not entitled to the $1000 in statutory damages, as provided under Section 1692k(2)(A), because Plaintiff has already received a settlement from Protect America for $3,000 that should be set-off against any damages owed by Defendant. Plaintiff argues that he is not barred from receiving statutory damages and argues that the collateral source rule prevents Defendants from introducing evidence of the settlement with Protect America. Additionally, Plaintiff argues that the settlement with Protect America was for a different set of claims based on different facts and, therefore, is irrelevant.

  As an initial matter, a party may recover statutory damages under the FDCPA without alleging actual damages. See Baker v. G.C. Services Corp., 677 F.2d 775, 780 (9th Cir. 1982) ("The statute clearly specifies the total damage award as the sum of the separate amounts of actual damages, statutory damages and attorney fees. There is no indication in the statute that award of statutory damages must be based on proof of actual damages."). The fact that Plaintiff has settled claims with Protect America is irrelevant. Plaintiff's claims against Protect America arose out of a different set of facts and involved different rights. In Defendant's Reply to Plaintiff's Opposition to Defendant's Motion for Summary Judgment, Defendant lists various ways in which Plaintiff's claims against Protect America are linked, in Plaintiff's mind, to the claims against Defendant. However, Congress has given debtors certain rights and remedies against debt collectors that are specifically separate from rights vis-a-vis creditors. Defendant does not cite any authority that states that a plaintiff cannot pursue separate actions against creditors and debt collectors for separate claims even where it stems from the same string of events. Accordingly, the Court finds that Plaintiff has standing to seek statutory damages under the FDCPA.

  B. Definition of Debt Collector

  Defendant argues in its opposition to Plaintiff's motion for partial summary judgment that, based on Plaintiff's admissions, Defendant is not a "debt collector" within the meaning of 15 U.S.C. § 1692a(6). Plaintiff filed a Declaration of Dante Galli in Support of Plaintiff's Motion for Partial Summary Judgment in which Galli declares that his account with Protect America was not in default. Defendant argues this Court must construe this fact in its favor and find that it is not liable under the FDCPA. See 15 U.S.C. § 1692a(6)(F)(iii) (excluding persons attempting to collect debts not in default at the time obtained from the coverage of the statute).

  The Seventh Circuit addressed and rejected this same argument in Schlosser v. Fairbanks Capital Corp. 323 F.3d 534 (7th Cir. 2003). The court acknowledged that the plain language of Section 1692a(6)(F)(iii) excluded from the Act persons attempting to collect debts not in default. However, the court refused to accept the argument that the exclusion applied where the debt was "acquired as a debt in default, and its collection activities were based on that understanding." Id. at 537. The critical distinction in the statute is whether the activity aimed at the consumer is "servicing or collecting." Id. at 538. The statute is more concerned with the activities of debt collectors because there is no on-going relationship to temper behavior. Accordingly, "if the parties to the assignment are mistaken about the true status, that status will not determine the nature of the activities directed at the consumer." Id. The Ninth Circuit has not yet addressed this question as directly as in Schlosser. However, in Baker v. G.C. Services Corp., the court described the FDCPA as "designed to protect consumers who have been victimized by unscrupulous debt collectors, regardless of whether a valid debt actually exists." 677 F.2d 775, 777 (9th Cir. 1982) (emphasis added).

  C. Collection Fees

  Plaintiff is moving for summary judgment on his claim that Defendant violated the FDCPA by increasing the amount of the debt by charges, fees, costs or penalties not permitted by law or contract. See 15 U.S.C. § 1692f(1). Plaintiff argues that the present case is similar to Ballard v. Equifax Check Services, Inc., 158 F.Supp.2d 1163 (C.D.Cal. 2001). In Ballard, the court held that a collection agency could not "apportion[] all of its collection expenses among the accounts it successfully collected." Id. at 1174; see Bondanza v. Peninsula Hospital and Medical Center, 23 Cal.3d 260 (1979). Plaintiff argues that Defendant employs this practice and notes that the size of the fee varies with the size of the debt rather than the actual cost of collecting the debt.

  Defendant argues in its own motion for summary judgment that it is entitled to the collection fees because they were calculated based on actual costs and agreed to by Plaintiff in the subscription agreement with Protect America. Defendant does not cite any case law that specifically approves their fee calculation method, but seeks to distinguish Ballard and Bondanza on the grounds that Defendant is ...


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