The opinion of the court was delivered by: Lucy H. Koh United States District Judge
United States District Court For the Northern District of California
ORDER GRANTING MOTION TO DISMISS
Defendant Rickenbacker Collection, dba Rickenbacker Group
("Rickenbacker"), moves to
dismiss Plaintiff's Fair Debt Collection Practices Act ("FDCPA")
claim with prejudice. Pursuant 19 to Civil Local Rule 7-1(b), the
Court finds that this motion is appropriate for determination without
20 oral argument and vacates the motion hearing. Having considered the
submissions of the parties 21 and the relevant law, the Court GRANTS
Defendant's motion to dismiss Plaintiff's FDCPA claim 22 with
prejudice. The Court will hold a Case Management Conference, as
scheduled, on February
This action arises out of the reporting by Defendant Rickenbacker of a
debt allegedly owed
by Plaintiff Zhixun Samuel Sun. On April 29, 2009, Plaintiff
applied for a primary home loan at
Wells Fargo Bank. First Amended Complaint ("FAC") at 2. In the process
of applying for this 28 loan, Plaintiff learned that his credit report
indicated that he owed a debt of $8,810. Id. Plaintiff
alleges that Defendant placed the debt on Plaintiff's credit report
without any initial 2 communication or written notice to Plaintiff,
and that Defendant never verified the debt or 3 provided Plaintiff
with the address of the original creditor. Id. When Plaintiff disputed
Defendant allegedly responded with a letter purporting to verify the
debt and suggested that it was 5 in Plaintiff's interest to pay the
account immediately. Id. At some point later, Defendant allegedly 6
increased the debt reported to $8,861.21. Id. at 3
score. Id. On December 3, 2009, Defendant sent a notification of
closure of the collection account 9 to Plaintiff, and on December 10,
2009, Defendant notified Plaintiff that it was initiating removal 10
of the debt from his credit report. Id. Plaintiff alleges, however,
that Defendant failed to promptly
Eventually Plaintiff hired two lawyers to help him dispute the debt
and restore his credit
expunge the negative credit reporting, and as a result Plaintiff's
credit score remained
United States District Court
For the Northern District of California
approximately 54 points lower than it should have been. Id. at 4.
Plaintiff claims that because of 13 the low credit score, he qualified
only for a Federal Housing Administrating home loan or a Bank 14 of
America home loan with a higher interest rate than he would otherwise
have been charged. Id.
Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq., and the
Fair Credit Reporting Act, 15 17
20 sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732
(9th Cir. 2001). In considering 21 whether the complaint is sufficient
to state a claim, the court must accept as true all of the factual 22
allegations contained in the complaint. Ashcroft v. Iqbal, 129 S.Ct.
1937, 1949 (2009). However, 23 the court need not accept as true
"allegations that contradict matters properly subject to judicial 24
notice or by exhibit" or "allegations that are merely conclusory,
unwarranted deductions of fact, or 25 unreasonable inferences." St.
Clare v. Gilead Scis., Inc. (In re Gilead Scis. Sec. Litig.), 536 F.3d
1049, 1055 (9th Cir. 2008). While a complaint need not allege detailed
factual allegations, it "must 27 contain sufficient factual matter,
accepted as true, to 'state a claim to relief that is plausible on its
28 face.'" Iqbal, 129 S.Ct. at 1949 (quoting Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570
Plaintiff alleges that Defendant's conduct in attempting to collect
the purported debt violated the
U.S.C. § 1681 et seq.
A motion to dismiss for failure to state a claim under Rule 12(b)(6) tests the legal (2007)). A claim is facially plausible when it "allows the court to draw the reasonable inference 2 that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949. If a court grants 3 a motion to dismiss, leave to amend should be granted unless the pleading could not possibly be 4 cured by the allegation of other facts. Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000). 5 7 from a business transaction and therefore falls outside the scope of the FDCPA. Based on the 8 exhibits attached to Plaintiff's FAC,*fn1 it appears that the purported debt arose out of an agreement 9 between Plaintiff and Shawn Lee (also known as Xiangqun Li). FAC Ex. 2-4. In 2006, when the 10 alleged debt was incurred, Plaintiff worked as an ultrasound technician for Reassuring Ultrasound
Defendant moves to dismiss Plaintiff's FDCPA claim on grounds that Plaintiff's debt arises Imaging, Inc., in Los Angeles. Id. In May 2007, Plaintiff left to work at a hospital in northern United States District Court For the Northern District of California California and asked Lee to fill in for him. Id. According to Plaintiff, he offered to pay Lee $25 13 per hour to perform ultrasound diagnostic studies. FAC Ex. 2. Plaintiff claims that Lee performed 14 FAC Ex. 4. Lee contends that Plaintiff owes him $7,710. FAC Ex. 3. 16 17 scope of the FDCPA. The FDCPA was enacted to protect consumers from unlawful debt 18 collection practices. "Because not all obligations to pay are considered debts under the FDCPA, a 19 threshold issue in a suit brought under the Act is whether or not the dispute involves a 'debt' within 20 the meaning of the statute." Turner v. Cook, 362 F.3d 1219, 1226-27 (9th Cir. 2004). The FDCPA 21 defines "debt" as "any obligation or alleged obligation of a consumer to pay money arising out of a 22 transaction in which the money, property, insurance, or services which are the subject of the 23 transaction are primarily for personal, family, or household purposes." 15 U.S.C. § 1692a(5) 24 (emphasis added). Based on this language, the Ninth Circuit has held that the FDCPA applies only 25 to consumer debts and not to business-related debts. Bloom v. I.C. System, Inc.,972 F.2d 1067, 26
In determining whether a particular debt is covered by the FDCPA, the court must "examine the transaction as a whole, paying particular attention to the purpose for which the credit 5 was extended in order to determine whether [the] transaction was primarily consumer or 6 commercial in nature." Bloom,972 F.2d at 1068 (quotation marks and citation omitted). The fact 7 that a loan is made or payment promised in an informal manner or for personal reasons does not 8 make the debt a consumer debt under the FDCPA. See id.; Slenk v. Transworld Systems, Inc., 236 9 Bloom borrowed money from his friend Parker, apparently without telling Parker how he intended to use the borrowed money, and used the loan to invest in a software company. 972 F.2d at 1068.
Circuit held that the purpose of the loan was business-related and thus did not constitute a "debt" 14 for purposes of the FDCPA. Id.
Imaging, Inc. FAC Ex. 4 at 2. In the dispute letter Plaintiff sent to Defendant, Plaintiff represented 17 that "I asked Mr. Li to take care of my business at Los Angeles temporarily, I would pay him $25.00 per hour for the medical ultrasound diagnostic study in my customer's facilities and using 19 my ultrasound machine and my vehicle." FAC Ex. 2 at 1. Plaintiff also told Lee that if he wished 20 to buy all of his equipment and take over his business, Lee could then collect service fees directly 21 from Plaintiff's customers. Id. Based on these facts, it is clear that the payment dispute between 22
Plaintiff and Lee centered on a purely business-related transaction. There is no indication that the 23 debt Plaintiff purportedly owed Lee was used "primarily" -- or at all -- for "personal, family, or 24 household purposes." 15 U.S.C. § 1692a(5). Under Bloom, moreover, the fact that Plaintiff's 25 agreement with Lee was oral and relatively informal, FAC Ex. 4 at 2, does not transform Plaintiff's 26 business agreement into a personal transaction. Bloom, 972 F.2d at 1068. 27 28 consumer debt for purposes of the FDCPA. Accordingly, Plaintiff cannot state a claim for F.3d 1072, 1075 (9th Cir. 2001). The Ninth Circuit's decision in Bloom is instructive. In that case, 10 United States District Court For the Northern District of California Although the loan was informal in nature and Parker made the loan for personal reasons, the Ninth 13 Here, Plaintiff promised to pay Lee to work for him temporarily at Reassuring Ultrasound For these reasons, the Court agrees with Defendant that the debt at issue in this case is not a violations of the notice, validation, and unfair practices provisions of the Act, 15 U.S.C. §§1692e, 2 1692f, 1692g, and Plaintiff's FDCPA claim must be dismissed. In addition, ...