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Castellanos v. JPMorgan Chase & Co.

June 23, 2009


The opinion of the court was delivered by: Marilyn L. Huff, District Judge United States District Court


On March 23, 2009, Plaintiff Alejandro R. Castellanos filed a first amended complaint against Defendants JPMorgan Chase & Co. ("JPMorgan") and Chase Home Finance LLC ("CHF," and collectively "Defendants"), sued as Doe 1 Defendant and erroneously sued as Chase Home Finance, Chase, and Chase Mortgage Home Loans, in California Superior Court, in and for the County of San Diego. (Doc. No. 1, Ex. 1 pp. 50-91 ("FAC").) On May 6, 2009, Defendants removed the action on federal question grounds to this Court. (Doc. No. 1.) On May 13, 2009, Defendants filed a motion to dismiss Plaintiff's first amended complaint for failure to state a claim. (Doc. No. 3.) Plaintiff filed a response in opposition on June 8, 2009. (Doc. No. 4.) Defendants filed a reply on June 15, 2009. (Doc. No. 6.)

The Court, pursuant to its discretion under Local Rule 7.1(d)(1), determines this matter is appropriate for resolution without oral argument and submits it on the parties' papers. For the reasons set forth below, the Court grants in part Defendants' motion to dismiss.


Plaintiff's complaint alleges that Plaintiff incurred a consumer debt with Defendants. (FAC ¶ 21.) Plaintiff retained Doan Law Firm, LLP to represent him with respect to such debt in August 2007. (Id. ¶ 22.) On August 13, 2007, Doan Law Firm, LLP sent a cease and desist letter to Defendants, informing some Defendants that Plaintiff had retained an attorney to represent him, providing the attorney's contact information, and requesting that Defendants end all communications with Plaintiff on the debt. (Id. ¶ 26, Ex. A.) Plaintiff alleges that he continued to be contacted by Defendants, including collection letters and numerous phone calls in October and November of 2007. (Id. ¶¶ 27-29, 41, 46.) Defendants also repeatedly contacted Plaintiff's brother-in-law. (Id. ¶ 92.) Plaintiff alleges that he verbally informed Defendants of his representation by counsel. (Id. ¶¶ 46, 93.)

Plaintiff filed suit against Defendants asserting causes of action for violations of California's Rosenthal Fair Debt Collecting Practices Act, the federal Fair Credit Billing Act, invasion of privacy, and a tort claim. (FAC.) Defendants move to dismiss Plaintiff's FAC for failure to state a claim. Defendants also request the Court to take judicial notice of various documents.


I. Motion to Dismiss Pursuant to 12(b)(6)

A motion to dismiss a complaint under Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of the claims asserted in the complaint. Navarro v. Black, 250 F.3d 729, 731 (9th Cir. 2001). A complaint generally must satisfy only the minimal notice pleading requirements of Federal Rule of Civil Procedure 8(a)(2) to evade dismissal under a Rule 12(b)(6) motion. Porter v. Jones, 319 F.3d 483, 494 (9th Cir. 2003). Rule 8(a)(2) requires that a pleading stating a claim for relief contain "a short and plain statement of the claim showing that the pleader is entitled to relief." The function of this pleading requirement is to "give the defendant fair notice of what the... claim is and the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47 (1957). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1964--65 (2007). A complaint does not "suffice if it tenders 'naked assertion[s]' devoid of 'further factual enhancement.'" Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting id. at 556). "Factual allegations must be enough to raise a right to relief above the speculative level." Twombly, 127 S.Ct. at 1965 (citing 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp. 235--36 (3d ed. 2004)). "All allegations of material fact are taken as true and construed in the light most favorable to plaintiff. However, conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss for failure to state a claim." Epstein v. Wash. Energy Co., 83 F.3d 1136, 1140 (9th Cir.1996); see also Twombly, 127 S.Ct. at 1964--65. "Generally, a district court may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion." Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n.19 (9th Cir.1990). The court may, however, consider the contents of documents specifically referred to and incorporated into the complaint. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir.1994). Additionally, the Court may take judicial notice of matters of public record. See Lee v. City of Los Angeles, 250 F.3d 668, 689--90 (9th Cir.2001). Defendants request that the Court take judicial notice of a Deed of Trust, a Substitution of Trustee, a Notice of Default and Election to Seel Under Deed of Trust, and two Notice of Trustee's Sale, all recorded in the San Diego County Recorder's Office. (Doc. No. 3, Exs. 1-5.) The Court will take judicial notice of the requested documents as matters of public record.

A. Violation of the Fair Credit Billing Act

Plaintiff's ninth cause of action is for a violation of the Fair Credit Billing Act ("FCBA"), 15 U.S.C. § 1666(b)(6). Section 1666 provides the procedure creditors must follow upon written notice by an obligor that the obligor believes an account statement contains a billing error. Section 1666(b)(6) provides that a billing error includes a "failure to transmit the statement required under section 1637(b) of this title to the last address of the obligor which has been disclosed to the creditor, unless that address was furnished less than twenty days before the end of the billing cycle for which the statement is required."

The Court concludes that Plaintiff fails to state a claim under the FCBA. Plaintiff alleges that Defendants never updated their system to reflect the new billing address after notice of the new address was set forth in the written cease and desist letter on August 13, 2007, and that the cease and desist letter constitutes the written notice of this billing error. (FAC ¶¶ 134-36, Ex. A.) However, the cease and desist letter notified Defendants of a new address to be used on future statements, does not indicate any billing error contained on past statements, and was sent to Defendants before the alleged billing errors occurred, as Plaintiff alleges that Defendants violated § 1666(b)(6) by sending statements to the old address after September 2007. (Id. ¶¶ 137-39, Ex. A.) Section 1666 applies when an incorrect statement is issued by the creditor and within 60 days the obligor sends written notice setting forth the alleged error to the creditor, triggering the creditor's duties under § 1666. The billing statements attached to the FAC are dated October 11, 2007 and November 10, 2007 and are addressed to Plaintiff's home address. (FAC Ex. B.) Plaintiff does not allege that he sent Defendants written notice of the alleged billing errors contained in the October and November statements within 60 days after having received the incorrect billing statements as required by § 1666(a). Accordingly, the Court grants Defendants' motion to dismiss Plaintiff's ninth cause of action with leave to amend.

Defendants contend that Plaintiff's claim under the FCBA fails because there is no private right of action for a violation of §1666. The Court disagrees. Section 1640(a) of the Act provides that an individual action for damages may be maintained against any creditor who fails to comply with any requirement imposed under part D of the subchapter. 15 U.S.C. § 1640(a). Part D contains § 1666 regulating the correction of billing errors by creditors. Accordingly, there is a private right of action provided for violations of the failure to correct billing errors under the FCBA.

Defendants also contend that Plaintiff's claim under the FCBA fails because a notice to Defendants to send all future billing statements to Plaintiff's attorney's office does not notify Defendants of any change in Plaintiff's address to which the billing statement must be redirected. However, the Official Staff Interpretations of Regulation Z, the implementing regulation for the Act, provide that, "[a]n attorney and his or her client are considered to be the same person for purposes of this regulation when the attorney is acting within the scope of the attorney-client relationship with regard to a particular transaction." Truth in Lending (Regulation Z), 12 C.F.R. pt. 226, Supp. I, Subpart A, 2(a)(22)(2). Therefore, notice by the attorney of a new address is notice by the obligor of a new address.

B. The Rosenthal Fair Debt Collection Practices Act

Plaintiff alleges in his first through eighth causes of action that he is entitled to statutory damages under the California Rosenthal Fair Debt Collection Practices Act (the "Rosenthal Act"), California Civil Code §§1788, et seq., including under incorporated provisions from the Federal Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§1692, et seq.

The FDCPA and the Rosenthal Act apply only to debt collectors. 15 U.S.C. § 1692a(4, 6); Cal. Civ. Code § 1788.2(c). The FDCPA does not apply to creditors. 15 U.S.C. § 1692a(4, 6) ("[T]he term [debt collector] does not include (A) any officer or employee of a creditor while, in the name of the creditor, collecting debts for such creditor."). The definition of "debt collector" found in the state statute is broader than that contained in the FDCPA, however. The Rosenthal Act defines a "debt collector" as "any person who, in the ordinary course of business, regularly, on behalf of himself or herself or others, engages in debt collection." See Cal. Civ. Code § 1788.2(c). The FDCPA provides that it does not preempt state law unless the federal law and state law are inconsistent. 15 U.S.C. § 1692n. The FDCPA further provides that, "[a] State law is not inconsistent with this subchapter if the protection such law affords any consumer is greater than the protection provided by this subchapter." Id. Therefore, the Rosenthal Act's enlargement of the pool of entities who can be sued is not inconsistent with the FDCPA because it merely provides greater protection to consumers than that afforded by the FDCPA. Accordingly, creditors can be found to be debt collectors for purposes of the Rosenthal Act.

Plaintiff has alleged that Defendants are debt collectors under the Rosenthal Act.

Plaintiff alleges that he is a debtor from whom Defendants sought to collect a consumer debt which was due and owing from Plaintiff. (FAC ¶ 7.) Plaintiff alleges that Defendants, in the ordinary course of business, regularly engage in debt collection and that Defendants are debt collectors as that term is defined by § 1788.2(c). (Id. ¶ 15.) Plaintiff further alleges that this case "involves money, property or their equivalent, due or owing or alleged to be due or owing from a natural person by reason of a consumer credit transaction," as this action "arises out of a 'consumer debt' and 'consumer credit' as those terms are defined by" § 1788.2(f). (Id. ¶ 20.) Plaintiff has attached financial statements from CHF from October 11 and November 10, 2007, indicating payments past due and late charges on a mortgage loan. (Id. Ex. B.) Plaintiff has also attached a letter from JPMorgan Chase Bank, N.A. indicating that Plaintiff's loan account is past due, that it could impact Plaintiff's ability to obtain credit in the future with Chase, and stating that "this is an attempt to collect a debt." (Id. Ex. B.) Plaintiff's FAC also includes a letter from CHF stating that Plaintiff's account is "seriously delinquent," that a "minimum of three monthly payments totaling $2,454.12 may allow us to suspend foreclosure proceedings," and that "Chase Home Finance LLC is attempting to collect a debt." (Id. Ex. B.)

Defendants' argument that Plaintiff's Rosenthal Act causes of action fail because foreclosing on a property is not a "debt collection" under the acts is better suited to a motion for summary judgment. Plaintiff's FAC alleges that Defendants attempted to collect money, not attempted to foreclose on a security interest, allegedly owed by Plaintiff on some type of mortgage loan with CHF. (See Doc. No. 1, Ex. B to FAC.) Defendants request the Court to consider documents outside of the FAC to support their position that the communications were lawful attempts to foreclose on a security interest. Such arguments, beyond the pleadings, are more suited for ...

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