District Court (Cal.) Finds Plaintiff States FDCPA Claims Against Law Firm, Not Creditor

In Makreas v. Moore Law Group, A.P.C., 2012 WL 359710 (N.D.Cal. 2012), Judge Chesney found that the Plaintiff stated certain claims against a debt collection attorney, but not against the creditor whose debt the attorney was collecting.  In the context of evaluating a previous Rule 68 offer, the District Court confirmed that the Rosenthal Act and FDCPA penalties are “per lawsuit” and not “per claim”. 

The Court agrees with Moore that $1000 is the maximum recovery Makreas could obtain on his FDCPA claim, see 15 U.S.C. § 1692k(a)(2)(A) (providing for $1000 maximum amount of statutory damages “in the case of any [ FDCPA] action by an individual”), and that the maximum recovery Makreas could obtain on his Rosenthal Act claim likewise is $1000, see Cal. Civil Code § 1788.30(b) (providing “debt collector” who “willfully and knowingly” violates Rosenthal Act is liable to debtor for “a penalty” of not more than $1000); Marseglia v. JP Morgan Chase Bank, 750 F.Supp.2d 1771, 1180 (holding “statutory damages under the Rosenthal Act are limited to $1,000 per plaintiff, not per violation”; collecting cases).  Nonetheless, and even assuming the maximum recovery Makreas could obtain on his FCRA and § 17200 claims was, at the time the offer was made, zero, Moore’s offer was not equal to or in excess of the maximum amount Makreas could recover herein, because the offer conditioned entry of judgment on Makreas’s obtaining less than a full recovery of his costs.

The District Court found that the Defendant law firm was not exempt from liability under the Rosenthal Act.

the Court finds Makreas has sufficiently alleged that Moore, through its employee “Adriana,” violated § 1692e(11). Moore argues, however, that because the definition of a “debt collector” under the Rosenthal Act excludes “an attorney or counselor at law,” see Cal. Civil Code § 1788.2(c), Moore, a law firm, cannot be held liable under the Rosenthal Act. In support of this argument, Moore relies on two decisions, which, according to Moore, hold that a “law firm” defendant, as a matter of law, is not a “debt collector” for purposes of the Rosenthal Act. (See Def.’s Mot, filed November 21, 2011, at 16 (citing Owings v. Hunt & Henriques, 2010 WL 3489342, *2 (S.D.Cal.2010); Carney v. Rotkin, Schmerin & McIntyre, 206 Cal.App.3d 1513, 1526, 254 Cal.Rptr. 478 (1988).)  ¶  The cases on which Moore relies, however, are distinguishable from the instant case, at least at the pleading stage. Unlike the plaintiffs in the decisions on which Moore relies, Makreas does not allege that the employee who engaged in the assertedly unfair debt collection activity is an attorney. See Owings, 2010 WL 3489342 at *3 (claim based on false statement made by “partner at [law firm]”); Carey, 206 Cal.App.3d at 1522, 254 Cal.Rptr. 478 (claim based on false statement by “attorney”). Rather, the SAC is silent as to whether “Adriana (unintelligible last name)” (see SAC ¶ 42) is or is not an attorney. Consequently, the Court finds it premature to decide whether Moore is entitled to rely on the “attorney” exception set forth in the Rosenthal Act.FN6  [FN6. To the extent Owings can be read as holding that a law firm is entitled to the “attorney” exception irrespective of whether the caller is himself/herself an attorney, see Ownings, 2010 WL 3489342 at *2, the Court notes that other district courts have found to the contrary. See, e.g., Reimann v. Brachfeld, 2010 WL 5141858, *3 (N.D.Cal.2010) (holding “law firms are not shielded from liability under the Rosenthal Act”; declining to follow Ownings ). Without knowing more about the individual who allegedly made the calls to Makreas and the circumstances surrounding the calls, the Court is not in a position to decide such issue as a matter of law.]. 

The Court also found that the UCL is not typically a proper vehicle to with which to bring an embedded Rosenthal Act claim because the debtor lacks standing. 

In the Third Cause of Action, Makreas alleges Moore violated § 17200 of the California Business & Professions Code. As pleaded, the Third Cause of Action is derivative of the First and Second Causes of Action. (See SAC ¶¶ 52, 70–71.) As relief for such violation(s), Makreas seeks “restitution.” (See SAC ¶¶ 52, 80.)  ¶  In its October 11, 2011 order, the Court dismissed Makreas’s § 17200 claim, as alleged in the FAC, for the reason Makreas had failed to allege any facts to support his entitlement to restitution. See Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134, 1144–45, 131 Cal.Rptr.2d 29, 63 P.3d 937 (2003) (holding, order of restitution, for purposes of § 17200, is order “compelling a [§ 17200] defendant to return money obtained through an unfair business practice to those persons in interest from whom the property was taken, that is, to persons who had an ownership interest in the property”) (internal quotation and citation omitted).

The District Court also found that the creditor could not be vicariously liable for the acts of the debt collection attorney, explaining:

As set forth above, Makreas alleges Moore violated the Rosenthal Act by failing to comply with § 1692e(11). Makreas asserts that Citibank is vicariously liable for any violation of the Rosenthal Act by Moore. Specifically, Makreas alleges Citibank “placed]” an “account” with Moore for “collection activity” (see SAC ¶ 28) and “authorized” Moore’s conduct (see SAC ¶ 60). In its motion, Citibank argues Makreas has failed to plead any facts to support a claim asserting Citibank’s liability for any violation by Moore.  ¶  Under California law, “a person can be held vicariously liable for the acts of his agents.” See Garcia v. W & W Community Development, Inc., 186 Cal.App.4th 1038, 1049, 112 Cal.Rptr.3d 394 (2010) (citing cases). In order to establish an agency relationship exists, the plaintiff must establish “the person for whom the work is performed has the right to control the activities of the alleged agent.” See Fenton v. Freedman, 748 F.2d 1358, 1361–62 (9th Cir.1984) (applying California law; holding in claim for breach of fiduciary duty, plaintiffs failed to establish defendant was their “agent,” where defendant “acted independently of any client’s control in performing her services”; noting “only degree of control exercised by [plaintiffs] was to reject or accept [defendant’s] recommendations”); see also, e.g., Garcia, 186 Cal.App.4th at 1049, 112 Cal.Rptr.3d 394 (holding “[o]ne who renders services for a specified recompense for a specified result, under the control of his principal as to the result of his work only, and not as to the means by which such result is accomplished[,] is an independent contractor”; further holding “[a]n independent contractor … is not an agent”) (internal quotation and citation omitted).  ¶  Here, Makreas alleges no facts to support a finding that an agency relationship exists or existed between Citibank and Moore. Specifically, Makreas alleges no facts to support a finding that Citibank, having entered into an agreement with Moore under which Moore would attempt to collect a debt assertedly owed by Makreas to Citibank, had the right to control the activities of Moore. See Fenton, 748 F.2d at 1361–62.  ¶  Accordingly, the Second Cause of Action is subject to dismissal to the extent it is based on a claim that Citibank is vicariously liable for Moore’s alleged violation of the Rosenthal Act by reason of a failure to comply with § 1692e(11).