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Newton v. American Debt Services, Inc.

United States District Court, N.D. California

February 27, 2014

HEATHER NEWTON, Plaintiff,
v.
AMERICAN DEBT SERVICES, INC., et al., Defendants.

ORDER DENYING DEFENDANTS' MOTIONS TO DISMISS (Docket Nos. 209, 210)

EDWARD M. CHEN, District Judge.

Plaintiff Heather Newton ("Newton") brings an individual and class action against Defendants American Debt Services ("ADS"), Quality Support Services ("QSS"), Rocky Mountain Bank & Trust ("RMBT"), and Global Client Solutions ("GCS") (collectively "Defendants") for alleged violations of state and federal law regulating debt settlement. Currently before the Court are defendant RMBT's and GCS's motions to dismiss Newton's second amended complaint.

Having considered the parties' briefs and accompanying submissions, as well as the oral argument of counsel, the Court hereby DENIES Defendants' motions to dismiss.

I. FACTUAL & PROCEDURAL BACKGROUND

The factual background in this action is set forth more fully in the Court's order granting in part and denying in part Defendants' motions for summary judgment of certain of Plaintiffs' claim. See Docket No. 204. What follows is an abbreviated recitation of facts germane to the instant motions.

In August 2009, Plaintiff Heather Newton ("Newton") signed up online for debt settlement services with ADS. See Docket No. 206 (Second Amended Complaint, hereinafter "SAC, " at ¶ 31). Shortly thereafter, Newton received a Welcome Packet from ADS. SAC, at ¶ 34. After the Welcome Packet, Newton received and signed a Special Purpose Account Application ("Account Application") and the accompanying Account Agreement and Disclosure Statement ("Account Agreement"). Id.

ADS and QSS had contracted with GCS to create bank accounts used by clients to "accumulate and disburse funds in connection with the repayment of their debts." See SAC, ¶ 4. Accordingly, the Account Application authorized the creation of a bank account (the "Account") with RMBT, a Colorado chartered bank. See SAC, ¶ 7. It also authorized GCS to transfer funds from Newton's primary bank account to her Account with RMBT in connection with debt settlement. See id. Defendants charged Newton and others fees for their debt settlement services. See SAC, ¶ 12.

Some time after signing up, Newton stopped paying her credit card bills and ceased communications with creditors, per Defendants' instruction. See SAC, ¶ 41. In March 2010, Newton received a call from one of her creditors, Bank of America. See id. at ¶ 42. Bank of America stated she owed $2, 200. See id. at ¶ 45. Newton learned that defendants had not contacted Bank of America. See id. at ¶ 43. Newton asked defendants to pay Bank of America $1, 100 from the Account, and Defendants complied. See id. at ¶ 47.

In April 2010, Chase, another creditor, served Newton with summons and complaint in a collection action. See id. at ¶ 51. Newton subsequently settled the matter with Chase alone. See id. at ¶ 56. In June 2010, Newton sent a certified letter to ADS terminating the Account. See id. at ¶ 57. Ultimately, Newton paid a total of $4, 206.50 to Defendants, of which $70.04 was refunded to her, $2, 200 paid to Bank of America, and the balance of which Defendants kept. See id. at ¶ 60.

Newton filed the current action for alleged violations of state and federal consumer protection laws in June 2011. See Docket No. 1 (Class Action Complaint). GCS and RMBT moved for summary judgment in April 2013. See Docket Nos. 142 and 143. This Court granted in part and denied in part Defendants' motions for summary judgment. Docket No. 204. First, this Court granted the motion in favor of Defendants for alleged violations of the CROA and CLRA. See generally id. Second, this Court held that RMBT could not conspire to violate the Proraters Law and thus granted summary judgment in favor of RMBT as to Newton's UCL claim premised upon a conspiracy to violate the Proraters Law. See id. Third, this Court denied summary judgment as to the remaining claims, effectively holding that certain claims could proceed to trial - i.e., (1) RMBT could be liable for aiding-and-abetting a violation of the Proraters Law; (2) GCS could be liable for conspiring and/or aiding-and-abetting a violation of the Proraters Law.

Currently before this Court are each of Defendants' motion to dismiss Newton's remaining claims - conspiring or aiding-and-abetting violations of the Proraters Law - on Rule 12(b)(6) grounds.

II. DISCUSSION

A. Legal Standard

Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss based on the failure to state a claim upon which relief may be granted. See Fed.R.Civ.P. 12(b)(6). While "a complaint need not contain detailed factual allegations...it must plead enough facts to state a claim to relief that is plausible on its face.'" Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662 (2009); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007). ...


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