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Scally v. Ditech Financial, LLC

United States District Court, S.D. California

May 3, 2018

KENDALL SCALLY, individually and on behalf of all others similarly situated, Plaintiff,
v.
DITECH FINANCIAL, LLC, Defendant.

          ORDER

          HON. WILLIAM Q. HAYES UNITED STATES DISTRICT JUDGE.

         The matter before the Court is the motion to dismiss the third amended complaint filed by Defendant Ditech Financial, LLC. (ECF No. 35).

         I. BACKGROUND

         On August 9, 2016, Plaintiff Kendall Scally initiated this action by filing a class action complaint against Defendant Ditech Financial alleging causes of action under the Fair Debt Collection Practices Act (“FDCPA”) and the Rosenthal Fair Debt Collection Practices Act (“Rosenthal Act”). (ECF No. 1). On September 30, 2016, Plaintiff filed a first amended complaint alleging the same causes of action against Defendant. On January 26, 2017, the Court issued an Order granting a motion to dismiss and dismissing the first amended complaint without prejudice. The Court concluded that Plaintiff's claims were precluded by the Bankruptcy Code because they hinged on allegations that Defendant was attempting to collect a debt previously discharged in bankruptcy. (ECF No. 17).

         On May 30, 2017, Plaintiff filed a second amended class action complaint against Defendant. (ECF No. 23). Plaintiff alleged a cause of action for violations of the FDCPA and a cause of action for violations of the Rosenthal Act on behalf of himself and others similarly situated. The second amended complaint did not include allegations about the bankruptcy proceedings related to the underlying debt. Id. On November 21, 2017, the Court issued an Order granting a motion to dismiss and dismissing the second amended complaint without prejudice. The Court concluded that Plaintiff failed to alleged sufficient facts to establish that he had been the object of collection activity arising from a consumer debt covered by the FDCPA, as required to state a claim under the FDCPA and Rosenthal Act. (ECF No. 28).

         On January 3, 2018, Plaintiff filed a third amended class action complaint for violations of the FDCPA and violations of the Rosenthal Act on behalf of himself and others similarly situated. (ECF No. 33). On January 17, 2018, Defendant filed a motion to dismiss for failure to state a claim. (ECF No. 35). On February 12, 2018, Plaintiff filed a response in opposition. (ECF No. 36). On February 16, 2018, Defendant filed a reply. (ECF No. 37).

         II. ALLEGATIONS OF THE COMPLAINT

Plaintiff is a natural person allegedly obligated to pay a consumer debt to Defendants, alleged to have been due and owing, and is therefore both a “consumer” as that term is defined by 15 U.S.C. § 1692a(3) of the FDCPA, and is also therefore a “debtor” as that term is defined by California Civil Code § 1788.2(h) of the Rosenthal Act.

(ECF No. 33 at ¶ 9). Defendant “regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another” and is a debt collector as that term is defined by the Rosenthal Act and the FDCPA. Id. ¶¶ 11-13.

Defendant alleged that Plaintiff owed a debt that it was allegedly collecting related to money arising out of a line of credit that was issued to Plaintiff, without payment being required at the time of the line of credit having been rendered to Plaintiff, with an alleged agreement that Plaintiff would pay back the line of credit over time.

Id. ¶ 15. “[T]he money alleged to have been owed to Defendant originated from monetary credit that was extended primarily for personal, family, or household purposes, and Defendant alleged that the debt was due and owing . . . .” Id. ¶16.

         “Sometime prior to March of 2016, Plaintiff is alleged to have incurred certain financial obligations with HFC Company, LLC, whereby he received a line of credit for his use within his personal life for everyday purposes.” Id. ¶ 23.

The agreement was for Plaintiff to receive the line of credit, for him to use within his personal life for everyday purchases, which did not require any payment from Plaintiff at the time, but instead was an agreement whereby Plaintiff would repay the amount used by him over time in the future, with interest.

Id. ¶ 24. “Sometime after March 25, 2016, Plaintiff received a collection notice, dated, March 25, 2016, from Defendant. The March 25, 2016 [collection notice] stated that Plaintiff owed a debt in the amount of $7, ...


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