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Norton v. LVNV Funding, LLC

United States District Court, N.D. California

August 28, 2019

SONYA NORTON, Plaintiff,
LVNV FUNDING, LLC, et al., Defendants.



         Plaintiff Sonya Norton filed this putative class action against Defendants LVNV Funding, LLC (“LVNV”) and Law Office of Harris & Zide (“H&Z”) alleging violations of the federal Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq., and California's Fair Debt Collection Practices Act (“Rosenthal Act”), California Civil Code § 1788 et seq. Norton also seeks injunctive relief under California's Unfair Competition Law (“UCL”), California Business and Professions Code § 17200 et seq. Defendants now move to dismiss Norton's second amended complaint (Docket No. 33, “SAC”) under Federal Rule of Civil Procedure 12(b)(6). [Docket Nos. 37 (“Mot.”), 43 (“Reply”)]. Norton timely opposed. [Docket No. 38 (“Opp.”).] Having considered the parties' submissions and oral argument, and for the reasons detailed below, the court grants Defendants' motion in part and denies it in part.

         I. BACKGROUND

         A. Factual Background

         On October 21, 2008, non-party Arrow Financial Services, LLC (“Arrow”) filed a collections action against Norton in San Mateo County Superior Court, alleging that Norton failed to tender owed amounts to Arrow. See SAC ¶ 14. On December 26, 2008, the state court entered a default judgment against Norton in the amount of $3, 986.60. Id. ¶ 15.

         On February 24, 2012, H&Z filed a substitution of counsel to appear on behalf of Arrow in the state court action. SAC ¶ 16; Id., Ex. 2. On May 17, 2012, H&Z caused a writ of execution to issue from a state court in the amount of $5, 853.07. SAC ¶ 17. Norton's wages were garnished in the amount of $323.55 in August and September 2012. Id. Thereafter, Defendants sought and obtained a total of six writs of execution between December 27, 2013 and September 1, 2017. Id. ¶¶ 17-25. On November 29, 2017, Norton filed a claim of exemption in response to the garnishment of her wages. Id. at ¶ 26. Through December 2017, Defendants allegedly garnished over $1, 000 from Norton's paycheck. Id. at ¶¶ 27-28. On December 15, 2017, an attorney at Housing and Economic Rights Advocates (“HERA”) wrote a letter to H&Z on Norton's behalf stating that the wage garnishment appeared to be improper because, unbeknownst to Norton, Arrow had filed a Certificate of Cancellation with the California Secretary of State back in October 10, 2012. Id. ¶ 18; Id., Ex. 3. No other party had established itself as Arrow's assignee of record. Id. ¶ 33. H&Z subsequently filed a notice terminating the garnishment of Norton's wages. Id. at ¶ 31. Norton was “reimbursed some, but not all” of her garnished wages. Id. at ¶ 35.

         On February 13, 2018, an H&Z attorney informed Norton's attorney at HERA that H&Z represented LVNV rather than Arrow. SAC at ¶ 36. According to Norton, LVNV had acquired the judgment against her from Arrow in 2012 but did not disclose this fact to the state court or to Norton until 2018. Id. at ¶¶ 37-39. On May 11, 2018, Norton, through her current counsel, filed a motion in the state court action to quash the prior writs of execution. Id. at ¶ 40. On June 29, 2018, the court granted the unopposed motion on the grounds that “no acknowledgment of assignment of judgment has been filed as required by Code of Civil Procedure § 673.” Id. On September 7, 2018, H&Z filed an Acknowledgment of Assignment of Judgment in the state court action pursuant to California Code of Civil Procedure § 673; it acknowledges the assignment of the judgment against Norton from Arrow to LVNV. [Docket No. 37-1 (“Def. RJN”), Ex. B. (“Acknowledgement”).]

         In this lawsuit, Norton contends that Defendants were prohibited from taking judicial action to enforce the judgment without first complying with section 673. Based on this allegation, the SAC asserts individual and class claims under sections 1692e, 1692e(2)(A), 1692e(5), 1692e(10), 1692f and 1692f(1) of the FDCPA, section 1788.13(e) and 1788.17 of the Rosenthal Act, and the UCL. See SAC ¶¶ 56-76. Norton seeks to represent a class that the SAC defines as all California residents against whom:

LVNV, represented by [H&Z], took judicial action (including obtaining Writs of Execution, wage garnishment, and bank levy) after October 10, 2012 and within four years [sic] the filing date of this action, to collect a judgment based on a consumer debt obtained in a California court; Arrow was the plaintiff of record at the time the judgment was entered; and LVNV did not file an Assignment of Judgment in conformity with [section 673].

Id. at ¶¶ 44-46. The proposed subclass “consists of all members of the Class, where the judicial action was taken within one year of [the] filing of this action.” Id. ¶ 46.

         The SAC alleges that Defendants' practices of enforcing judgments without complying with section 673 “present a continuing threat to [Norton], the Class and members of the public in that on information and belief Defendants persist and continue to engage in these practices, and will not cease doing so unless and until forced to do so by this Court.” SAC at ¶ 70. The SAC seeks actual and statutory damages, and attorneys' fees and costs on behalf of Norton and the putative class. Id. at 14-15. The SAC also seeks restitution by Defendants for money obtained from the class and subclass as a result of the unlawful collection activities, and an order enjoining Defendants from future use of unfair or deceptive acts. Id. at 15.

         B. Procedural Background

         Defendants filed a motion to dismiss Norton's first amended complaint on October 12, 2018. [Docket No. 12.] The court held a hearing on February 14, 2019. Ruling from the bench, the court granted in part Defendants' motion to dismiss, specifically on the basis that Norton had failed to adequately allege that her debt constituted a “consumer debt” under the FDCPA and Rosenthal Act. See Docket No. 32, Transcript of hearing held February 14, 2019 (“Tr.”). Norton was granted leave to amend in order to address the deficiencies identified on the record, and she filed the SAC on March 18, 2019. Defendants then filed this second motion to dismiss.


         A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the claims alleged in the complaint. See Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). When reviewing a motion to dismiss for failure to state a claim, the court must “accept as true all of the factual allegations contained in the complaint, ” Erickson v. Pardus, 551 U.S. 89, 94 (2007) (per curiam) (citation omitted), and may dismiss a claim “only where there is no cognizable legal theory” or there is an absence of “sufficient factual matter to state a facially plausible claim to relief.” Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010) (citing Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009); Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001)) (quotation marks omitted). A claim has facial plausibility when a plaintiff “pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citation omitted). In other words, the facts alleged must demonstrate “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 554, 555 (2007) (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)); see Lee v. City of L.A., 250 F.3d 668, 679 (9th Cir. 2001), overruled on other grounds by Galbraith v. Cty. of Santa Clara, 307 F.3d 1119 (9th Cir. 2002).


         Both parties filed a Request for Judicial Notice (“RJN”). As a general rule, a court may not consider “any material beyond the pleadings” when ruling on a Rule 12(b)(6) motion. Lee, 250 F.3d at 688 (citation and quotation marks omitted). However, “a court may take judicial notice of ‘matters of public record, '” id. at 689 (citing Mack v. S. Bay Beer Distrib., 798 F.2d 1279, 1282 (9th Cir. 1986)), and may also consider “documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading, ” without converting a motion to dismiss under Rule 12(b)(6) into a motion for summary judgment. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994), overruled on other grounds by Galbraith, 307 F.3d at 1121. The court need not accept as true allegations that contradict facts which may be judicially noticed. See Mullis v. U.S. Bankr. Ct., 828 F.2d 1385, 1388 (9th Cir. 1987).

         A. Plaintiff's RJN

         Plaintiff requests that the court take judicial notice of the complaint filed on October 21, 2008 in the matter of Arrow Financial Services v. Sonya Norton, San Mateo County Superior Court Case No. CLJ477648. [Docket No. 39.] While a court “may take notice of proceedings in other courts, both within and without the federal judicial system, if those proceedings have a direct relation to matters at issue, ” the court did not rely on or reference the complaint in the underlying collections case in order to rule on this motion. See U.S. ex rel. Robinson Rancheria Citizens Council v. Borneo, Inc., 971 F.2d 244, 248 (9th Cir. 1992). Accordingly, Plaintiff's RJN is denied as moot.

         B. Defendants' RJN

         Defendants' RJN asks the court to take judicial notice of three documents: (1) a copy of the transcript from the hearing held in this case on February 14, 2019; (2) a filed copy of the September 7, 2018 Acknowledgment that was filed in the San Mateo County Superior Court action; and (3) a copy of the online docket for that action. Def. RJN at 1.

         As for the first document, “[i]t is . . . well established that a court can take judicial notice of its own files and records under Rule 201 of the Federal Rules of Evidence.” Centurion Med. Liab. Protective Risk Retention Grp. Inc. v. Gonzalez, 296 F.Supp.3d 1212, 1216 (C.D. Cal. 2017). Accordingly, the court takes judicial notice of the February 14, 2019 transcript. The other exhibits are part of the state court action, which can be judicially noticed as proceedings in other courts. See Borneo, 971 F.2d at 248. Therefore, the court takes judicial notice of these three documents. Defendants' RJN is granted.


         Defendants make three arguments that the SAC fails to state a claim under Rule 12(b)(6). First, they assert that Norton continues to fail to adequately allege that the debt at issue is a “consumer debt” under the FDCPA and Rosenthal Act. Second, Defendants contend that all of Norton's claims are untimely. Third, Defendants argue that Norton lacks standing to pursue injunctive relief on behalf of herself and the putative class because she cannot show that it is reasonably likely that she will be wronged by the same alleged unlawful conduct again.

         A.Debts” Under the FDCPA and Rosenthal Act

         “Because not all obligations to pay are considered debts under the FDCPA, a threshold issue in a suit brought under the Act is whether or not the dispute involves a ‘debt' within the meaning of the statute.” Turner v. Cook, 362 F.3d 1219, 1226-27 (9th Cir. 2004). The FDCPA defines a “debt” as “any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.” 15 U.S.C. § 1692(a)(5). The statute “is limited in its reach ‘to those obligations to pay arising from consensual transactions, where parties negotiate or contract for consumer-related goods or services.'” Turner, 362 F.3d at 1227 (quoting Bass v. Stolper, Koritzinsky, Brewster & Neider, S.C., 111 F.3d 1322, 1326 (7th Cir. 1997), as the articulation of the “consensus judicial interpretation”). Similarly, the Rosenthal Act defines a “consumer debt” as “money, property or their equivalent, due or owing or alleged to be due or owing from a natural person by reason of a consumer credit transaction, ...

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