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Alvarado v. Collect Access LLC

United States District Court, S.D. California

April 26, 2017

ISAIAS ALVARADO, Plaintiff,
v.
COLLECT ACCESS, LLC ET AL., Defendants.

          ORDER (1) DENYING IN PART AND GRANTING IN PART DEFENDANTS' MOTION TO DISMISS AND (2) DENYING DEFENDANTS' MOTION TO STRIKE

          Hon. Dana M. Sabraw United States District Judge.

         Pending before the Court are Defendants Zee Law Group, Tappan Zee, and Kimberly Barrientos's motion to dismiss Plaintiff Isaias Alvarado's Second Amended Complaint (“SAC”) pursuant to Federal Rule of Civil Procedure 12(b)(6), and motion to strike state law claims pursuant to California Code of Civil Procedure § 425.16. Plaintiff filed a response, and Defendants filed a reply. For the reasons set forth below, Defendants' motion to dismiss is granted in part and denied in part, and Defendants' motion to strike is denied.

         I. BACKGROUND

         Plaintiff, a member of the United States Navy, is currently stationed in Japan. (SAC ¶¶ 18-19.) Plaintiff has been on active duty since July 16, 1999 to the present. (Id. ¶ 19.)

         In January 2005, Plaintiff purchased a 2004 Ford Explorer with a loan secured from HSBC Auto Finance (“HSBC”). (SAC ¶ 31.) In February 2007, when Plaintiff fell behind on his payments, HSBC repossessed and sold the vehicle at an auction for $15, 080.64. (Id. ¶¶ 32-33.) The sale proceeds were not enough to satisfy the outstanding balance. (Id. ¶ 33.)

         Subsequently, HSBC assigned the deficiency balance to Glass Mountain Capital (“Glass Mountain”) for collection. (SAC ¶ 37.) In April 2008, Plaintiff negotiated an agreement with Glass Mountain to settle the alleged debt for a total of $5, 600, consisting of an initial payment of $5, 000, and six monthly payments of $100. (Id. ¶ 38.) Plaintiff made all payments and believed the debt was resolved. (Id. ¶ 39.) Glass Mountain, however, did not close Plaintiff's account, nor did it credit the payments to his account. (Id. ¶ 54.) Sometime thereafter, Cascade Receivables Management, LLC (“Cascade”) purchased Glass Mountain along with all of its rights and liabilities. (Id. ¶ 42.) Cascade likewise failed to close Plaintiff's account or to account for the payments made. (Id. ¶ 43.)

         Cascade later assigned the alleged debt to Collect Access, LLC (“Collect”) for collection. (SAC ¶ 48.) Upon acquisition of Plaintiff's account, Collect did not conduct an investigation into the account to verify its accuracy. (Id. ¶¶ 52-53.) Thereafter, Collect retained Defendants to initiate a legal action against Plaintiff to collect the alleged debt. (Id. ¶ 54.) On January 2, 2009, Collect filed a complaint against Plaintiff in the Superior Court of California, San Diego County, seeking to recover a deficiency balance of $15, 080.64, plus interest. (Id. ¶¶ 55-56.)

         While the state court action was pending, Plaintiff filed a complaint against Defendants in this Court on May 18, 2016. In the complaint, Plaintiff alleges the following five grounds for relief: (1) violation of Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq., (2) violation of Rosenthal Fair Debt Collection Practices Act (“RFDCPA”), Cal. Civ. Code §§ 1788-1788.32, (3) violation of Servicemembers Civil Relief Act (“SCRA”), 50 App. U.S.C. §§ 501- 597b, (4) negligence, and (5) negligence per se.

         II.

         MOTION TO DISMISS

         A. Legal Standard

         A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of the claims asserted in the complaint. Fed.R.Civ.P. 12(b)(6); Navarro v. Block, 250 F.3d 729, 731 (9th Cir. 2001). In deciding a motion to dismiss, all material factual allegations of the complaint are accepted as true, as well as all reasonable inferences to be drawn from them. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 338 (9th Cir. 1996). However, a court need not accept all conclusory allegations as true. Rather, it must “examine whether conclusory allegations follow from the description of facts as alleged by the plaintiff.” Holden v. Hagopian, 978 F.2d 1115, 1121 (9th Cir. 1992) (citation omitted); see Benson v. Ariz. State Bd. of Dental Exam'rs, 673 F.2d 272, 275-76 (9th Cir. 1982) (court need not accept conclusory legal assertions). A motion to dismiss should be granted if a plaintiff's complaint fails to contain “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “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, 678 (2009) (citing Twombly, 550 U.S. at 556).

         B. Younger Abstention

         Defendants move to dismiss the SAC on the ground that all of Plaintiff's claims are barred by Younger abstention. Defendants argue abstention applies because Plaintiff is attempting to circumvent the pending state action by litigating in this Court. Plaintiff responds abstention does not apply because “[t]he matters before the San Diego Superior Court relate only to the adjudication of the alleged debt, not whether Defendants violated federal and state laws in their effort to collect on the alleged debt.” (Opp'n to Mot. at 13.)

         Younger abstention requires a federal court to abstain from granting injunctive or declaratory relief that would interfere with pending state judicial proceedings. Younger v. Harris, 401 U.S. 37, 40-41 (1971). Pursuant to Younger, abstention is required when the following four elements are satisfied: (1) “there is an ongoing state judicial proceeding, ” (2) “those proceedings implicate important state interests, ” (3) “there is an adequate opportunity in the state proceedings to raise constitutional challenges[, ]” and (4) “[t]he requested relief must seek to enjoin-or have the practical effect of enjoining-ongoing state proceedings.” ReadyLink Healthcare, Inc. v. State Comp. Ins. Fund, 754 F.3d 754, 758 (9th Cir. 2014) (citations and internal quotations marks omitted). Younger abstention, however, does not extend to “all parallel state and federal proceedings” that satisfy the four elements, even “where a party could identify a plausibly important state interest.” Sprint Commc'ns, Inc. v. Jacobs, 134 S.Ct. 584, 593 (2013). Rather, Younger abstention is limited to “only three exceptional categories” of state proceedings: (1) “state criminal prosecutions, ” (2) “civil enforcement proceedings, ” and (3) “civil proceedings involving certain orders that are uniquely in furtherance of the state courts' ability to perform their judicial functions.” Id. at 588 (quoting New Orleans Pub. Serv., Inc. (“NOPSI”) v. Council of City of New Orleans, 491 U.S. 350, 367- 68 (1989)); see Potrero Hills Landfill, Inc. v. Cty. of Solano, 657 F.3d 876, 882 (9th Cir. 2011) (“Though recognizing ‘important state interests' in a wide variety of civil proceedings, neither we nor the Supreme Court has held Younger to apply generally to ordinary civil litigation.”).

         Here, Defendants argue abstention is required because three of the four Younger elements are satisfied. This is insufficient to warrant abstention. The Ninth Circuit has expressly held abstention under Younger is proper “only if all four Younger requirements [are] strictly satisfied.” AmerisourceBergen Corp. v. Roden, 495 F.3d 1143, 1149 (9th Cir. 2007). Indeed, even if the three Younger elements are satisfied, abstention is not appropriate because the last Younger element is not satisfied. Plaintiff does not seek to enjoin the pending state action nor does the requested relief have the practical effect of enjoining the pending state action.

         Moreover, even if the Court were to find all four Younger elements satisfied, abstention is not warranted because the pending state action does not fall within any of the “three exceptional categories” of cases identified in Sprint and NOPSI. The pending state action is certainly not a state criminal prosecution nor is it a civil enforcement action. It also does not appear to be a civil proceeding involving “orders that are uniquely in furtherance of the state courts' ability to perform their judicial functions.” NOPSI, 491 U.S. at 368; cf. Marshall v. Marshall, 547 U.S. 293 (2006) (prohibiting federal courts from adjudicating rights that would interfere with the state probate court's administration of a decedent's estate); Juidice v. Vail, 430 U.S. 327, 336 n.12 (1977) (civil contempt order); Pennzoil Co. v. Texaco Inc., 481 U.S. 1, 13 (1987) (requirement for the posting of bond pending appeal). Therefore, Younger abstention does not apply to the present action. Accordingly, Defendants' motion to dismiss the SAC based on Younger abstention is denied.

         C. FDCPA Claim

         Defendants move to dismiss the FDCPA claim, contending they are immune from civil liability pursuant to the Noerr-Pennington doctrine.[1] Specifically, Defendants argue Plaintiff's “allegations against [them] are a direct result of the judicial proceedings in the State Action, which clearly constitute protected petitioning activity under the Noerr-Pennington doctrine.” (Mem. of P. & A. in Supp. of Mot. at 19.)

         The Noerr-Pennington doctrine derives from the Petition Clause of the First Amendment, which protects an individual's right to petition the government for redress of grievances. Sosa v. DirecTV, 437 F.3d 923, 929 (9th Cir. 2006). The Noerr-Pennington doctrine provides that “those who petition any department of the government for redress are generally immune from statutory liability for their petitioning conduct.” Id. However, “the First Amendment does not shield lawyers engaged in litigation from FDCPA liability.” Hartman v. Great Seneca Fin. Corp., 569 F.3d 606, 616 (6th Cir. 2009) (citing Heintz v. Jenkins, 514 U.S. 291, 294 (1995)).

         The Supreme Court has held the FDCPA “applies to attorneys who ‘regularly' engage in consumer-debt-collection activity, even when that activity consists of litigation.” Heintz, 514 U.S. at 299. Since Heintz, many courts within the Ninth Circuit have declined to apply the Noerr-Pennington doctrine to cases similar to the present action. See, e.g., Nyberg v. Portfolio Recovery Assocs., LLC, No. 3:15-CV-01175-PK, 2016 WL 3176585, at *8 (D. Or. June 2, 2016) (“First Amendment does not confer a right upon debt collectors to petition courts in a manner that violates the FDCPA.”); Applewhite v. Anaya Law Grp., No. EDCV1400385JGBSPX, 2015 WL 11438097, at *5 (C.D. Cal. June 15, 2015) (Noerr-Pennington doctrine did not bar the FDCPA claim against a law firm acting as a third-party debt collector); Truong v. Mountain Peaks Fin. Servs., Inc., No. 3:12-CV-01681-WQH, 2013 WL 485763, at *7 (S.D. Cal. Feb. 5, 2013) (“neither the Noerr-Pennington doctrine nor California Civil Code § 47(b) shield Defendant from civil liability under the FDCPA.”); Gerber v. Citigroup, Inc., No. CIV S07-0785WBSJFMPS, 2009 WL 248094, at *5 (E.D. Cal. Jan. 29, 2009) (Noerr-Pennington doctrine does not bar actions against debt collector's attorneys under the FDCPA); Irwin v. Mascott, 112 F.Supp.2d 937 (N.D. Cal. 2000) (debt collector's attorneys were not immune from civil liability under the FDCPA and the California Unfair Business Practices Act by virtue of their participation in administrative or judicial proceedings). In light of these cases, the Court is unpersuaded by Defendants' argument that the Noerr-Pennington doctrine bars actions arising under the FDCPA.

         Defendant further argues they are not debt collectors, and therefore, they are “immune to FDCPA liability for [their] litigation related communications in the State Action under the Noerr-Pennington doctrine[.]” (Mem. of P. & A. in Supp. of Mot. at 10.) In support, Defendant relies on Satre v. Wells Fargo Bank, NA, 507 F. App'x 655, 655 (9th Cir. 2013). In Satre, the Ninth Circuit in a one page unpublished decision held that “[t]he district court properly determined that [defendant] is immune from FDCPA liability under the Noerr-Pennington doctrine because [plaintiffs'] factual allegations in their amended complaint failed to establish that [defendant], who was defending his client from litigation initiated by the Satres, was a ‘debt collector.'” Id. Contrary to the plaintiffs in Satre, Plaintiff here has properly alleged Defendants qualify as debt collectors under the FDCPA. As indicated, “a lawyer who regularly tries to obtain payment of consumer debts through legal proceedings meets the [FDCPA's] definition of “debt collector[.]” Heintz, 514 U.S. at 291. In the SAC, Plaintiff has alleged “Defendants, each of them, in the ordinary course of business, regularly, … engage in debt collection as defined by California Civil Code § 1788.2(b), and therefore [are] debt collectors as that term is defined by California Civil Code § 1788.2(c).”[2] Therefore, the Noerr-Penning doctrine does not shield Defendants from civil liability under the FDCPA. Accordingly, Defendants' motion to dismiss the FDCPA claim is denied.

         D. ...


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