Opinion
No. C 04-04312 JW.
May 16, 2005
ORDER STAYING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS
I. INTRODUCTION
Plaintiff Craig Uyeda ("Uyeda" or "Plaintiff") sued defendants CACV of Colorado, LLC ("CACV"), its attorney, J.A. Cambece, and his law firm, J.A. Cambece Law Office, P.C. ("Cambece, P.C.") (collectively "Defendants") for violating the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq. and the California Unfair Competition Law ("UCL"), CAL. BUS. PROF. CODE § 17200 et seq. Plaintiff's Second Amended Complaint seeks certification to proceed as a class action. Defendants, however, challenge the propriety of the suit by filing this Amended Motion to Dismiss. Based on all papers filed to date, the Court stays in part and denies in part Defendants' Motion to Dismiss.
II. BACKGROUND
Plaintiff's Second Amended Class Action Complaint ("Complaint") alleges the following facts. Plaintiff incurred an alleged debt for personal, family or household purposes in the amount of $5,497.04. (Compl. ¶ 12.) After that debt went into default, defendant CACV purchased it for pennies on the dollar. (Compl. ¶ 13.) CACV hired defendants J.A. Cambece and Cambece, P.C. to collect the debt by leveraging the latter's weight and authority as a law firm, but not by filing a lawsuit. (Compl. ¶ 14.)J.A. Cambece and Cambece, P.C. began a campaign of mailing mass-produced demand letters to Plaintiff. (Compl. ¶ 16-26.) The second such letter was mailed on July, 9, 2003 and it cautioned:
As you know from our first letter, we represent [CACV]. If you continue to ignore this matter, we may have no option but to recommend to our client that it exhaust whatever measures are available to collect this debt through local counsel in your state. We regret having to take this step but your failure to pay this bill has left us essentially with no other option.
Please call our office immediately. The toll free number is. . . .
As required by law, you are hereby notified that this firm's client may submit a negative credit report reflecting on your credit record to a credit reporting agency if you fail to fulfill the terms of your credit obligation.
(Compl. ¶ 18,22.)
Plaintiff contends that although the letter contained a facsimile signature of a J.A. Cambece above the title "Attorney at Law" (Compl. ¶ 19), no attorney was meaningfully involved in reviewing Plaintiff's account. (Compl. ¶ 20.) Moreover, despite the admonitions contained in the letter, neither Cambece, P.C. nor J.A. Cambece immediately recommended or intended to recommend CACV to exhaust its available measures. (Compl. ¶ 27.) CACV never sued Uyeda, and Defendants never reported Uyeda's debt to the credit reporting agencies. (Compl. ¶ 23.) In fact, Defendants do not actually report debts. (Compl. ¶ 23.) Defendants did, however, send Plaintiff letters identical to the July 9 letter on August 27, 2003, again on October 24, 2003 and yet again on February 26, 2004. (Compl. ¶¶ 24-26.)
On September 8, 2004, Defendants mailed a sixth letter that contained new language. It read:
After further review of your account our client has decided to approve you for a temporary minimum monthly payment arrangement. Hopefully, this arrangement will give you the time you need temporarily to pay the above referenced account on a monthly basis. Our client hopes this will help you get back on our [sic] feet again.
This offer may expire soon. Please contact this office immediately to make arrangement for your first monthly installment payment.
(Compl. ¶ 29.)
As with the previous letters, Plaintiff alleges that this letter was not meaningfully reviewed by J.A. Cambece even though it closed with his facsimile signature. (Compl. ¶¶ 30,33.)
Based on Defendants' conduct, Plaintiff filed a Second Amended Class Action Complaint that sets forth two claims for relief, one under the FDCPA and another under the UCL. The Complaint correspondingly seeks to certify two classes. The first class ("the FDCPA class") is comprised of "(i) all persons who were sent at an address in Santa Clara County, (ii) a letter from Defendants concluding with a facsimile signature above the title `Attorney at Law' (iii) regarding an alleged debt which, according to the records of the defendant or its subscriber, was incurred for personal, family or household purposes." (Compl. ¶ 36.) The second class ("the UCL class") is comprised of "(i) all persons who were sent at an address in California, (ii) a letter from Defendants concluding with a facsimile signature above the title `Attorney at Law' (iii) regarding an alleged debt which, according to the records of the defendant of its subscriber, was incurred for personal, family, or household purposes." (Compl. ¶ 37.) Plaintiff has not yet filed a motion for certification of class action.
Defendants have filed this Motion to Dismiss, attacking Plaintiff's claims for relief and request for class certification.
III. STANDARDS
A complaint may be dismissed for failure to state a claim upon which relief can be granted. FED. R. CIV. P. 12(b)(6). In ruling on a motion to dismiss, this Court must accept all allegations of material fact as true and must construe those allegations in the light most favorable to the non-moving party. Western Reserve Oil Gas Co. v. New, 765 F.2d 1428, 1430 (9th Cir. 1985). Any existing ambiguities must be resolved in favor of the pleading.Walling v. Beverly Enterprises, 476 F.2d 393, 396 (9th Cir. 1973). A Rule 12(b)(6) motion must not be granted unless it appears beyond doubt that the plaintiffs can prove no set of facts in support of their claim which would entitle them to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957). A motion to dismiss for failure to state a claim is viewed with disfavor and is rarely granted. Gilligan v. Jamco Development Corp., 108 F.3d 246, 249 (9th Cir. 1997).
Whether a communication from a debt collector to a consumer violates the FDCPA is determined by analyzing it from the least sophisticated debtor's perspective. Swanson v. Southern Oregon Credit Service, Inc., 869 F.2d 1222, 1227 (9th Cir. 1988);Terran v. Kaplan, 109 F.3d 1428, 1431-32 (9th Cir. 1997).
IV. DISCUSSION
Defendants' motion challenges Plaintiff's standing to sue under the UCL law, and disputes Plaintiff's contention that the allegations in the Complaint can support a FDCPA violation claim. Defendants also argue that because Plaintiff cannot meet the requirements of FED. R. CIV. P. 23(b)(2), he should not be allowed to seek class certification under that subsection.
A. The Claims for Relief 1. Plaintiff States a Claim Under the Fair Debt Collection Practices Act.
Plaintiff contends that several provisions contained in Defendants' debt collection letters violate the FDCPA.
To state a claim for violation of the Fair Debt Collection Practices Act, a plaintiff must allege, inter alia, that the plaintiff has been the object of collection activity arising from a consumer debt, that the defendant collecting the "debt" is a "debt collector", and that the defendant has engaged in any act or omission in violation of the prohibitions or requirements of the Act. 15 U.S.C. §§ 1692a, 1692k. Section 1692e sets forth some of the FDCPA's requirements and provides in relevant part:
A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:
. . . .
(3) The false representation or implication that . . . any communication is from an attorney.
. . . .
(5) The threat to take any action that . . . is not intended to be taken.
. . . .
(10) The use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.
Subsection 1692e(3) may be violated if a debt collector uses an attorney's status to add to the force of its collection letters, unless the attorney is meaningfully involved in the collection effort. Avila v. Rubin, 84 F.3d 222, 228-29 (7th Cir. 1996). A violation is particularly likely to be found where the collection letters are mass-produced. Clomon v. Jackson, 988 F.2d 1314, 1321 (2nd Cir. 1993) (stating that "there will be few, if any, cases in which a mass-produced collection letter bearing the facsimile of an attorney's signature will comply with the restrictions imposed by section 1692e"). Subsection 1692e(5) may be violated if a debt collector threatens legal action, but does not intend to take such action. Irwin v. Mascott, 112 F. Supp. 2d 937, 950 (N.D. Cal. 2000). Subsection 1692e(10) may be violated if a debt collector "creates a false sense of urgency."Morgan v. Credit Adjustment Bd., 999 F. Supp. 803, 808 (E.D. Va. 1998); see also Romine v. Diversified Collection Servs., 155 F.3d 1142, 1143 (9th Cir. 1998).
Plaintiff sufficiently states an FDCPA claim. Plaintiff alleges that he was the object of collection activity arising from a consumer debt and that Cambece, P.C., J.A. Cambece, and CACV are all debt collectors. The FDCPA applies to consumers who are targeted by debt collectors seeking to collect consumer debts. 15 U.S.C. § 1692a. The FDCPA, therefore, applies to this case. Plaintiff also alleges that Defendants violated at least three provisions of the FDCPA.
First, Plaintiff alleges that CACV compelled Cambece, P.C. to send mass-produced demand letters bearing attorney J.A. Cambece's signature even though he had not given the letters a meaningful review. (Compl. ¶¶ 19, 20, 30, 33, 35.) Debt collectors can violate § 1692e(3) by sending mass produced demand letters that bear the signature of an attorney who did not meaningfully review those letters. Avila, 84 F.2d at 228-29 (prohibiting attorneys from sending dunning letters unless they are directly and personally involved in the mailing); Irwin, 112 F. Supp. 2d at 949 (holding that "[i]f the attorney did not first conduct an individual review of the debtor's case, or if the attorney did not determine if a particular letter should be sent . . . [then] the communication from the attorney is false and misleading under § 1692e(3)").
Second, Plaintiff alleges that Defendants threatened to submit negative credits reports and to take legal action, even though they did not intend to do either. (Compl. ¶ 27.) Debt collectors who threaten to take legal action without harboring an intention of actually doing so violate § 1692e(5). Irwin, 112 F. Supp. 2d at 950.
Third, Plaintiff alleges that Defendants created a false sense of urgency. Plaintiff alleges that Defendants instructed him to call immediately or else an offer would expire, legal action may be taken, or a disparaging credit report may by given. Debt collectors violate § 1692e(10) if they create a false sense of urgency. Morgan, 999 F. Supp. at 808 (finding that a debt collection notice which creates confusion about potential legal action could violate § 1692e(10) if the least sophisticated consumer would interpret it as creating a false sense of urgency).
Defendants argue that the letters do not use deceptive language since each letter used equivocal terms such as the word "might." (Amended Mem. of P. A. in Supp. of Mot. to Dismiss at 17-19.) This argument is without merit, however, because even equivocal language can constitute an impermissible threat under § 1692e.See, e.g., Palmer v. Stassinos, 348 F. Supp. 2d 1070, 1085 (N.D. Cal. 2004) (analyzing use of the word "may" under the least sophisticated consumer standard).
Thus, in looking at the Complaint as a whole, and taking Plaintiff's allegations as true, Plaintiff states a cognizable claim for violation of the FDCPA. The allegations provide Defendants with notice of the nature of the suit. Under the federal notice-pleading requirement, Plaintiff sufficiently pleads facts to withstand Defendants' Motion to Dismiss.
2. This Court Stays the California Unfair Competition Claim in Light of the California Supreme Court's Recent Acceptance of the Cases Involving the Retroactivity of Proposition 64
Plaintiff alleges that Defendants' debt collection activities also violate the California Unfair Competition Law, which proscribes, inter alia, "any unlawful, unfair or fraudulent business act or practice." CAL. BUS. PROF. CODE § 17200 et seq. Defendants argue that Plaintiff lacks standing to sue under § 17200 because he does not allege that he has lost money or property as a result of their debt collection letters. That allegation, Defendants argue, is indispensable in light of Proposition 64's recent amendment of § 17204's standing requirements. (Amended Mem. of P. A. in Supp. of Mot. to Dismiss at 6-13.) Plaintiff argues that such an allegation is unnecessary because he filed suit before Proposition 64 became effective, and because Proposition 64 does not apply retroactively. (Opp'n to Defs.' Mot. to Dismiss at 13-21.)
The UCL formerly allowed "any person acting for the interests of itself, its members or the general public" to bring an action under § 17200 to obtain injunctive relief. Frey v. Trans Union Corp., 127 Cal. App. 4th 986 (2005) (quoting CAL. BUS. PROF. CODE § 17204). On November 2, 2004, however, the California electorate voted in favor of Proposition 64, which amended the UCL such that a private plaintiff would have standing only if "has suffered injury in fact and has lost money or property as a result [of such unfair competition]." CAL. BUS. PROF. CODE § 17204 (2005). The amended statute also bars representative actions that cannot meet the class certification requirements imposed by § 682 of the California Code of Civil Procedure. Id. Proposition 64 became effective the day after its approval by the electorate, Cal. Const., art. II, § 10, subd. (a), but is silent on whether its provisions apply retroactively.
The meaning and scope of Proposition 64 are being hotly contest in the California state courts at this time. On April 27, 2005 the California Supreme Court granted review in five of the cases in which the Proposition 64 retroactivity question has been raised. All five cases involve published California Court of Appeal opinions: Californians for Disability Rights v. Mervyn's, LLC, 126 Cal. App. 4th 386 (2005), Cal. Supreme Court case no. S131798; Benson v. Kwikset, 126 Cal. App. 4th 887 (2005), Cal. Supreme Court case no. S132443; Branick v. Downey Sav. Loans Ass'n, 126 Cal. App. 4th 828 (2005), Cal. Supreme Court case no. S132433; Bivens v. Corel Corp., 126 Cal. App. 4th 1393 (2005), Cal. Supreme Court case no. S132695; Lytwyn v. Fry's Electronics, Inc., 126 Cal. App. 4th 1455 (2005), Cal. Supreme Court case no. S133075 (review granted on court's own motion). Accordingly, this Court stays its ruling on Plaintiff's UCL claim until the issue is resolved by the California Supreme Court, which is the proper forum for the resolution of this novel issue of state law.
B. Defendants' Attack on the Complaint's Request for Class Certification Is Premature.
Plaintiff's Complaint seeks to certify a FDCPA class and an UCL class. Plaintiff has yet to file a Motion for Certification of Class Action. Nevertheless, Defendants argue in their Motion to Dismiss that Plaintiff cannot meet the requirements of FED. R. CIV. P. 23(b)(2) and, therefore, he should not be permitted to seek class certification. (Amended Mem. of P. A. in Supp. of Mot. to Dismiss at 13-16.)
Generally, a defendant can attack the merits of a proposed class's claim in a motion to dismiss even before the plaintiff moves for class certification. 10 JUDGE WILLIAM W. SCHWARZER ET AL., CALIFORNIA PRACTICE GUIDE: FEDERAL CIVIL PROCEDURE BEFORE TRIAL, § 770, at 10-115 (The Rutter Group 2005). However, if the defendant chooses to attack a proposed class's ability to meet the prerequisites of FED. R. CIV. P. 23(a) or (b), the defendant should do so by opposing the plaintiff's motion for class certification. Id. ¶ 10:771, at 10-115 (citing Lumbermen's Mutual Casualty Co. v. Rhodes, 403 F.2d 2, 6 (10th Cir. 1969)).
Defendants' argument relates to the class' ability to satisfy the prerequisites of Rule 23(b). This argument is not proper in a motion to dismiss and should be made in an Opposition after Plaintiff files a Motion for Certification of Class Action. Id. The Court, therefore, will not address Defendants' certification argument at this time.
V. CONCLUSION
For the foregoing reasons, the Court STAYS in part and DENIES in part Defendants' Motion to Dismiss. The Court stays the Unfair Competition claim, and denies the motion to dismiss the FDCPA claim. The Court expresses no opinion on Defendants' argument against class certification because Plaintiff has not yet filed a Motion for Certification of Class Action.