The opinion of the court was delivered by: Honorable Janis L. Sammartino United States District Judge
ORDER: GRANTING IN PART AND DENYING IN PART DELL MOTIONS TO DISMISS FINANCIAL SERVICES (ECF Nos. 165, 166)
Presently before the Court are two motions to dismiss Plaintiff's third amended complaint (TAC). The first is brought by Defendants Collins Financial Services, Inc.; Collins Financial Services USA, Inc.; and Paragon Way, Inc. (collectively, Collins). (Collins Mot., ECF No. 165.) The second is brought by Defendant Nelson & Kennard. (N&K Mot., ECF No. 166.) Also before the Court are Plaintiff's oppositions and Defendants' respective replies. (Opp'n to Collins Mot., ECF No. 175; Opp'n to N&K Mot., ECF No. 176; Collins Reply, ECF No. 179;*fn1 N&K Reply, ECF No. 180.) Having considered the parties' arguments and the law, the Court GRANTS IN PART and DENIES IN PART Defendants' motions.
On or about November 19, 2001, Plaintiff purchased a Dell computer for shipment to his parents house on Port Renwick in Chula Vista, California. (TAC ¶ 16, ECF No. 157.) At the time-and at all times relevant to this litigation-Plaintiff resided in Mexico. (Id. ¶¶ 5, 16.) Defendant Dell Financial Services, L.P. (DFS) arranged for Plaintiff to finance the purchase through CIT Online Bank (CIT). (Id. ¶ 17.) Thereafter, Plaintiff made payments as required under the financing agreement and paid the obligation in full before the maturity date. (Id. ¶¶ 17--18.) According to Plaintiff, however, DFS "failed to implement a system for receipt of payments, failed to process payments properly and accurately, and failed to properly indicate when an obligation had been paid in full. As a result of its failure to process payments properly, DFS falsely indicated that Plaintiff owed approximately $1,145." (Id. ¶ 18.)
In approximately July 2006, DFS sold a portfolio of 85,292 charged-off debts-including Plaintiff's purported debt-to Collins Financial Services, Inc. (Collins Financial). (Id. ¶¶ 20--22.) As part of the sales process, DFS provided Collins Financial with a blank exemplar loan agreement that identified American Investment Bank, N.A. (AIB) as the original creditor for every account in the portfolio. (Id. ¶ 21.) According to Plaintiff, Collins Financial did nothing to verify the original creditors for the debts contained in the portfolio. (Id. ¶ 22.)
Collins Financial then placed the debts with its sister company, Paragon Way, Inc., which also did not attempt to verify the original creditors for the debts contained in the portfolio. (Id. ¶ 23.) Paragon Way sent a validation letter to Plaintiff's parents' house on Port Renwick, despite that DFS identified Plaintiff's last known address as Parker Mountain Road in Chula Vista. (Id. ¶ 24.) According to Plaintiff, the validation letter stated that Plaintiff owed Collins Financial $1,619.52 and identified AIB as the original creditor. (Id.)
A few months later, Paragon Way referred Plaintiff's account to Nelson & Kennard. (Id. ¶ 25.) Like Collins Financial and Paragon Way, Nelson & Kennard did nothing to verify the original creditors for the debts contained in the portfolio. (Id. ¶ 26.) Nelson & Kennard also sent Plaintiff a validation letter that identified AIB as the original creditor. (Id. ¶ 27.) According to Plaintiff, Nelson & Kennard sent the letter to an address on J Street in San Diego, California. (Id.)
About a month later, Nelson & Kennard ran a credit bureau inquiry regarding Plaintiff, which was reviewed by the non-lawyer account representative handling Plaintiff's account for the firm. (Id.¶ 28.) According to Plaintiff, the inquiry (1) identified a debt to "DFS/CIT" in the amount that DFS charged off, (2) identified Parker Mountain Road as Plaintiff's current address, and (3) did not identify any debts to AIB. (Id.)
Undeterred by the result of the credit bureau inquiry, Nelson & Kennard filed a lawsuit against Plaintiff on Collins Financial's behalf on or about August 2, 2007. (Id. ¶ 29.) The complaint averred that Plaintiff entered into a financing agreement with AIB, and a copy of the blank exemplar AIB loan agreement that Collins Financial received from DFS was attached to the complaint. (Id.) Nelson & Kennard's process server served a copy of the summons and complaint on Plaintiff's father at his residence on Lawn View Drive in Chula Vista. (Id. ¶ 31.) According to Plaintiff, the process server then filed a proof of service falsely stating that Plaintiff had been personally served. (Id.)
After Plaintiff received a copy of the summons and complaint, he retained counsel to obtain information about the lawsuit. (Id. ¶ 32.) Plaintiff's counsel contacted Nelson & Kennard and informed it of the defective service and other defects in the complaint. (Id.) Unable to withdraw the original proof of service, Nelson & Kennard allegedly directed its process server to prepare an amended proof of service indicating that it had executed substituted service on Plaintiff at Plaintiff's father's residence. (Id. ¶ 33.)
Plaintiff's counsel spent the next several months attempting to persuade Nelson & Kennard to dismiss the suit or provide media showing that Plaintiff did in fact owe the debt. (Id. ¶ 34.) According to Plaintiff, only after his counsel threatened to sue Nelson & Kennard for violating the Fair Debt Collection Practices Act (FDCPA) did Nelson & Kennard dismiss its suit. (Id.)
On July 31, 2008, Plaintiff filed the present action against, inter alia, Collins Financial, Nelson & Kennard, and DFS alleging violations of the FDCPA and the California Rosenthal Act, invasion of privacy, and negligence. (Compl., ECF No. 1.) After multiple rounds of motions and extensive discovery, the Court granted Plaintiff's contested motion for leave to file the operative third amended complaint. (Order, 22, 2010, ECF No. 156.) In addition to the original complaint's claims, the TAC accuses Defendants of violating California Business and Professions Code section 17200 and contains class allegations. (TAC ¶¶ 44--53, 61--68.) The TAC also adds Collins Financial Services USA, Inc. (Collins USA) and Paragon Way as defendants. (See id. ¶¶ 7--8.)
Federal Rule of Civil Procedure 12(b)(6) permits a party to raise by motion the defense that the complaint "fail[s] to state a claim upon which relief can be granted," generally referred to as a motion to dismiss. The Court evaluates whether a complaint states a cognizable legal theory and sufficient facts in light of Federal Rule of Civil Procedure 8(a), which requires a "short and plain statement of the claim showing that the pleader is entitled to relief." Although Rule 8 "does not require 'detailed factual allegations,' . . . it [does] demand more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal, ---- U.S. ----, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). In other words, "a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555 (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). "Nor does a complaint suffice if it tenders 'naked assertion[s]' devoid of 'further factual enhancement.'" Iqbal, 129 S. Ct. at 1949 (citing Twombly, 550 U.S. at 557).
"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Id. (quoting Twombly, 550 U.S. at 570); see also Fed. R. Civ. P. 12(b)(6). A claim is facially plausible if the facts pleaded "allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S. Ct. at 1949 (citing Twombly, 550 U.S. at 556). That is not to say that the claim must be probable, but there must be "more than a sheer possibility that a defendant has acted unlawfully." Id. Facts "'merely consistent with' a defendant's liability" fall short of a plausible entitlement to relief. Id. (quoting Twombly, 550 U.S. at 557). Further, the Court need not accept as true "legal conclusions" contained in the complaint. Id. This review requires context-specific analysis involving the Court's "judicial experience and common sense." Id. at 1950 (citation omitted). "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged----but it has not 'show[n]'----'that the pleader is entitled to relief.'" Id.
Although Collins's and Nelson & Kennard's motions are nominally separate, Collins and Nelson & Kennard each join in the other's motion. (See Collins Mot. 3; N&K Mot. 1.) Accordingly, the Court addresses the motions jointly.
1. FDCPA and Rosenthal Act Claims*fn4
Collins raises several arguments in support of its motion to dismiss Plaintiff's FDCPA and Rosenthal Act claims. (See Collins Mot. 7--20.) The Court addresses most of these arguments below.
Plaintiff bases his FDCPA and Rosenthal Act claims, in part, on Defendants' alleged mailing of validation letters that named the wrong original creditor on his debt.*fn5 (See TAC ¶¶ 24, 27, 39, 55(e), 55(f), 55(j).) According to Collins, however, the TAC fails to state a claim based on this conduct because (1) Plaintiff does not allege that he received the letters, (2) naming the wrong original creditor was not a "material" misstatement, and (3) the statute of limitations bars claims based on the letters. (Collins Mot. 10--16.) The Court addresses each argument in turn.
(1) Receipt of the Letters
First, Collins argues that the claims based on the validation letters fail because Plaintiff does not allege that he received the letters, and letters that are never received do not constitute "communications" necessary to trigger ...