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People v. Persolve, LLC

California Court of Appeals, Fifth District

August 15, 2013

THE PEOPLE, Plaintiff and Appellant,
v.
PERSOLVE, LLC. et al., Defendants and Respondents.

APPEAL from a judgment of the Superior Court of Kern County Super. Ct. No. CV-269263, Stephen D. Schuett, Judge.

Lisa S. Green, District Attorney, and John T. Mitchell, Deputy District Attorney, for Plaintiff and Appellant.

Ellis Law Group, Mark E. Ellis and Andrew Steinheimer for Defendants and Respondents.

OPINION

LEVY, Acting P.J.

Appellant, the People of the State of California, through the Kern County District Attorney (the People), filed a civil law enforcement action against respondents, Persolve, LLC (Persolve), a debt collection company, and Persolve’s attorneys, Alaine Patti-Jelsvik and Edit Alexandryan. The People alleged that respondents repeatedly violated California’s Rosenthal Fair Debt Collection Practices Act (California Act) and the Federal Fair Debt Collection Practices Act (Federal Act). (Civ. Code, § 1788 et seq.; 15 U.S.C. § 1692 et seq.) Based on these allegations, the People set forth one cause of action for violation of California’s Unfair Competition Law. (Bus. & Prof. Code, § 17200 et seq.)

The issue on appeal is whether the People’s complaint against Persolve and its lawyers is barred by the litigation privilege. (Civ. Code, § 47, subd. (b).) The trial court concluded that it was because the conduct alleged to be unlawful consisted of communications and communicative acts related to judicial proceedings. Accordingly, the trial court sustained respondents’ demurrer to the complaint without leave to amend and dismissed the action.

The People contend the litigation privilege does not bar the complaint because the unfair competition law cause of action is predicated on violations of federal and state debt collection laws. According to the People, an exception to the litigation privilege should be recognized here because the California Act and the Federal Act are more specific than the privilege and would be significantly or wholly inoperable if the privilege applied.

We agree with the People insofar as the conduct at issue is specifically prohibited by the California Act and/or the Federal Act. The People’s unfair competition law claims that are based on such specifically prohibited conduct are not barred by the litigation privilege. Therefore, the judgment will be reversed.

BACKGROUND

Since the appeal is from the sustaining of a demurrer without leave to amend, the facts are derived from the complaint. This court must give the complaint a reasonable interpretation and assume the truth of all material facts properly pleaded. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.) The operative pleading is the third amended complaint.

Persolve is a debt collection company. Persolve purchases old, defaulted debt in batches of 1, 000 or more accounts at a time, for which it pays pennies on the dollar. Thereafter, Persolve sends a letter to the debtors demanding payment. These letters are sent to the debtors by Persolve’s attorneys, Patti-Jelsvik and Alexandryan.

According to the People, the letters Persolve sends to debtors are misleading, unlawfully threaten postjudgment remedies to which respondents are not entitled, and fail to make full disclosures required by the California Act and the Federal Act. Specifically, the People allege that Persolve: violated the Federal Act’s prohibition against false and misleading representations by failing to accurately apprise debtors of the total amount required to settle the account (15 U.S.C. § 1692e); violated the verification requirement by specifying conflicting time periods of both 30 and 10 days for the debtors to respond to letters and by threatening legal action before the expiration of the required 30-day period (15 U.S.C. § 1692g(a)); and violated provisions of the California Act and the Federal Act by threatening to obtain attorney fees that Persolve was not entitled to (15 U.S.C. § 1692e; Civ. Code, § 1788.17). The People further allege that when Persolve filed collection actions in the trial court, it published personal information about the debtors, including social security numbers and driver’s license numbers, in violation of the California Act and the Federal Act.

Based on these alleged violations of the state and federal debt collection acts, the People set forth a single cause of action for violation of the unfair competition law against respondents.[1] The People sought an injunction restraining respondents from violating the California Act and Federal Act and orders requiring respondents to pay civil penalties and restitution.

Respondents demurred to the complaint on the ground that every claim comprising the cause of action for violation of the unfair competition law was barred by the litigation privilege. The trial court agreed and sustained the demurrer without leave to amend. The trial court noted the parties did not dispute that the complaint was based solely on communications and communicative acts ...


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