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Jesus Martinez v. Cach

June 27, 2011

JESUS MARTINEZ,
PLAINTIFF,
v.
CACH, LLC ET AL.,
DEFENDANTS.



The opinion of the court was delivered by: Hon. Dana M. Sabraw United States District Judge

ORDER DENYING IN PART AND GRANTING IN PART DEFENDANT CACH, LLC'S FIRST AMENDED COMPLAINT MOTION TO DISMISS THE

Pending before the Court is Defendant CACH, LLC's motion to dismiss the First Amended Complaint ("FAC") pursuant to Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6). (Doc. 31.) For the following reasons, the Rule 12(b)(1) motion is denied and the Rule 12(b)(6) motion is denied in part and granted in part.

I. BACKGROUND

Plaintiff is alleged to have incurred debt to Bank of America, N.A. sometime prior to December 2009. (FAC ¶ 18, Ex. B.) The debt was subsequently assigned or transferred to CACH for collection. (Id. at ¶ 21.) On December 8, 2009, CACH filed a Complaint against Plaintiff in San Diego Superior Court in an effort to collect the outstanding debt. (Id. at ¶ 22, Ex. A.) In that Complaint, CACH claimed a right to 24.50 percent annual fixed interest rate on the alleged debt. (Id. at ¶ 24, Ex. A.) Plaintiff alleges CACH violated the Fair Debt Collection Practices Act ("FDCPA") and the Rosenthal Fair Debt Collection Practices Act ("Rosenthal Act") when, as a custom and practice, it sued him and other similarly situated individuals for excessive interest rates it did not have a legal right to collect under statute or contract.

Plaintiff filed a Complaint against CACH on August 4, 2010. (Doc. 1.) The Court subsequently granted Plaintiff's motion for leave to file the FAC, which Plaintiff filed on April 4, 2011. (Docs. 28-29.) The FAC states five claims for relief on behalf of a putative class of individuals:

(1) violations of the FDCPA, (2) violations of the Rosenthal Act, (3) actual fraudulent transfer, (4) constructive fraudulent transfer, and (5) alter ego. (Doc. 29.) On April 25, 2011, Defendant CACH filed the instant motion to dismiss the FAC pursuant to Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6). (Doc. 31.) Plaintiff filed an opposition and Defendant filed a reply. (Docs. 33-34.)

II. DISCUSSION

A. 12(b)(1) Motion to Dismiss

A defendant may move to dismiss an action under Rule 12(b)(1) if the Court lacks subject matter jurisdiction over the action. On a motion to dismiss pursuant to Rule 12(b)(1), the Court "is not restricted to the face of the pleadings, but may review any evidence, such as affidavits and testimony, to resolve factual disputes concerning the existence of jurisdiction." McCarthy v. United States, 850 F.2d 558, 560 (9th Cir. 1988). Defendant moves to dismiss the action for lack of subject matter jurisdiction on two bases: (1) that the instant action was rendered moot by Defendant's unaccepted offer of judgment and (2) the Rooker-Feldman doctrine.

1. Offer of Judgment

In a class action against a debt collector for violation of the FDCPA, each named plaintiff is entitled to actual damages and additional damages in an amount of up to $1,000.00, as the court may allow. 15 U.S.C. § 1692k(a)(2)(A), (B). The court may award damages "for all other class members, without regard to a minimum individual recovery, not to exceed the lesser of $500,000 or 1 per centum of the net worth of the debt collector." Id. at § 1692k(a)(2)(B). The Rosenthal Act, as amended, expressly incorporates the remedies permitted under the FDCPA into its provisions and courts have found this includes the class action mechanism permitted under the FDCPA. Cal. Civ. Code§ 1788.17; see also, e.g., Gonzales v. Arrow Fin. Servs., LLC, 233 F.R.D. 577, 580-81 (S.D. Cal. 2006); McDonald v. Bonded Collectors, L.L.C., 233 F.R.D. 576, 577 (S.D. Cal. 2005); Palmer v. Stassinos, 233 F.R.D. 546, 547-48 (N.D. Cal. 2006). Defendant argues, however, that if the Rosenthal Act is deemed to have incorporated the class action mechanism set forth in the FDCPA, then it should also be deemed to have incorporated the limitations on damages recoverable by the class set forth in § 1692k(a)(2)(B) of the FDCPA. The Court agrees and so assumes for purposes of this motion.

Rule 68 provides that a defendant "may serve on [a plaintiff] an offer to allow judgment on specified terms, with the costs then accrued." Fed. R. Civ. P. 68(a). If accepted, the judgment is entered against the defendant. If rejected, the offer is deemed withdrawn. Importantly, if the judgment the plaintiff ultimately obtains "is not more favorable" than the defendant's offer, the plaintiff "must pay the costs incurred after the offer was made." Fed. R. Civ. P. 68(d). On January 21, 2011, CACH made an offer that would allow judgment to be taken against it in favor of Plaintiff in the amount of $2,100.00 and in favor of the putative class in the amount of $500.00, both together with reasonable fees and costs. (Johnson Decl. Ex. 1.) With the FDCPA's damages limitations in mind, CACH argues this Court lacks subject matter jurisdiction over this action because CACH's offer of judgment offered Plaintiff and the putative class all the relief they could possibly obtain in this action and was not accepted. According to CACH, the offer of $2,100.00 to Plaintiff exceeds the statutory damages he is individually entitled to under the FDCPA and the Rosenthal Act, and the offer of $500.00 to the putative class exceeds one percent of CACH's net worth, which it asserts is presently negative. CACH claims Plaintiff's failure to accept the offer renders this action moot and deprives this Court of Article III jurisdiction over the action due to the lack of a present case or controversy. Article III of the Constitution prohibits federal courts from hearing cases which are not based on "actual, ongoing cases or controversies." Wolfson v. Brammer, 616 F.3d 1045, 1053 (9th Cir. 2010)(quotation omitted). The party asserting mootness bears the burden of showing that there is no effective relief remaining for the court to provide. GATX/Airlog Co. v. U.S. Dist. Court for N. Dist. of Cal., 192 F.3d 1304, 1306 (9th Cir. 1999).

As CACH acknowledges, courts have often been hesitant to permit a defendant to render a putative class action moot by making an offer of judgment to the named plaintiff only, whether before or after the filing of a motion to certify the class. See, e.g., Deposit Guaranty Nat'l Bank v. Roper, 445 U.S. 326, 339 (1980); Weiss v. Regal Collections, Inc., 385 F.3d 337, 347-49 (3d Cir. 2004). CACH argues, however, that because it made an offer of judgment to the putative class in addition to the named Plaintiff, the present case is distinguishable from these cases. Although CACH did make an offer of judgment to the putative class in the amount of $500.00, the Court does not find the offer rendered the instant action moot. Where the amount of damages the putative class may eventually be entitled to is dependent upon the net worth of the defendant, it would be inequitable to permit a defendant to render an action in which the plaintiff alleges the defendant made fraudulent transfers of assets to an alter ego in order to falsify its net worth moot by making an offer of judgment to the class based upon ...


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