District Court (Cal.) Uses Plaintiffs’ FDCPA Trick Against Them; Holds That You Can’t Say “Plaintiff Takes No Position on Validity of the Debt” Yet Claim Debt Collector’s Suit on Debt Was False

In a trio of cases, Benedict v. CACH, LLC, 2012 WL 5382255 (S.D. Cal. 2012), Odish v. CACH, LLC, 2012 WL 5382260 (S.D. Cal. 2012), and Jackson v. CACH, LLC, 2012 WL 5382257 (S.D.Cal. 2012), Judge Battaglia held that a frequently-used Plaintiff’s trick stating that “Plaintiff takes no position on the validity of the debt” in support of Plaintiff’s FDCPA claim negated Plaintiff’s claim that a state court complaint was a false and misleading statement.   In all three cases, the Plaintiff contended that Defendants violated Sections 1692d, 1692f, 1692f(1), 1692e, and 1692e(10) of the FDCPA by commencing a debt collection proceeding in state court that has no legal grounds, using false and deceptive means to try to collect a debt that was not owed by the Plaintiff, and engaging in behavior meant only to cause financial hardship to Plaintiff. The Court found that the Plaintiff failed to state a claim.

Accordingly, because the complaint in the State Court Action was referenced in Plaintiff’s Complaint, [Compl. ¶ 22], and the Court granted Defendants’ unopposed request for judicial notice, the facts as alleged in the state court complaint will be considered in ruling on the instant motion. In doing so however, the Court is not ruling on the veracity of the facts as alleged in the State Court Action. Rather, the Court is only considering the facts in the State Court Action to determine whether the underlying allegations support Plaintiff’s instant federal cause of action under the FDCPA. ¶  An account stated is “a writing which exhibits the state of account between parties and the balance owing from one to the other, and when it assented to … becomes the new contract.” See Gardner v. Watson, 170 Cal. 570, 574 (1915). An account stated claim has three elements: “(1) previous transactions between the parties establishing the relationship of debtor and creditor; (2) an agreement between the parties, express or implied, on the amount due from the debtor to the creditor; and (3) a promise by the debtor, express or implied, to pay the amount due.” Zinn v. Fred R. Bright Co., 271 Cal.App.3d 597, 600 (1969). “When a statement is rendered to a debtor and no reply is made in a reasonable time, the law implies an agreement that the account is correct as rendered .” Maggio Inc. v. Neal, 196 Cal.App.3d 745, 753 (1987). Numerous federal courts throughout California have rejected “the notion that an action for unpaid credit card debt must be for breach of an original credit card agreement rather than for an account stated.” Shubin v. Midland Credit Mgmt., Inc., 2008 WL 5042849, *5 (C.D.Cal.2008) (granting summary judgment in favor of defendant on FDCPA claim based upon complaint seeking to recover unpaid credit card debt asserting account stated claim); see also, Greenberg v. Hunt & Henriques, 2011 U.S. Dist. LEXIS 116992, *9 n. 2 (C.D.Cal.2011) (noting that the Court’s independent research did not find any support for the proposition that common counts cannot form the basis of a lawsuit to recover an unpaid credit card account). ¶  Here, Plaintiff’s misunderstanding of the account stated cause of action ultimately necessitates dismissal. The complaint in the State Court Action alleges that there were previous transactions between Bank of America and Plaintiff, whereby a relationship of debtor and creditor was established. When Plaintiff subsequently fell behind on payments, demand was made to Plaintiff on the outstanding amount due. Plaintiff never contested the validity of the debt or the total amount owed. Thus, Plaintiff implicitly assented to the terms of the account stated by failing to respond in a reasonable time. See Maggio Inc. v. Neal, 196 Cal.App.3d 745, 753 (Cal.App.4th Dist.1987); See Crofts & Anderson v. Johnson, 101 Cal.App.2d 418, 421 (1950) (finding that an account stated claim requires a statement sent to the debtor setting forth the amount owed, and the debtor either explicitly admitting the correctness of the claim or acquiescing to the amount by failing to object). Therefore, the Court finds the state court pleadings do not, as currently alleged, form a sufficient basis for Plaintiff’s federal FDCPA cause of action. ¶ Furthermore, to state a claim under the FDCPA, Plaintiff must show that Defendants’ “state court complaint could have misled a hypothetical debtor.” Velazquez v. Arrow Fin. Servs. LLC, 2009 U.S. Dist. LEXIS 77650, *6 (S.D.Cal.2009). Courts in the Ninth Circuit apply a “least sophisticated debtor” standard to claims under Section 1692e. Wade v. Reg’l Credit Ass’n, 87 F.3d 1098, 1100 (9th Cir.1996). A debt collector violates Section 1692e when its actions “are likely to deceive or mislead a hypothetical least sophisticated debtor.” Id. (quotation omitted); Guerrero v. RJM Acquisitions LLC, 499 F.3d 926, 934 (9th Cir.2007); Donohue v. Quick Collect, Inc., 592 F.3d 1027, 1033 (9th Cir.2010) (finding that statements from debt collectors improperly classifying the payment due between principal and interest were not actionable material misleading statements).  Here, Plaintiff has not shown that Defendants’ state court complaint could have misled such a hypothetical debtor. Plaintiff alleges that Defendants sought to collect a debt not actually owed, but fails to substantiate these allegations with something more than conclusory or evasive allegations that he “cur-rently takes no position as to the validity of the alleged debt.” [Compl. ¶ 20.] Furthermore, Plaintiff fails to indicate how a hypothetical debtor would be misled by the institution of an account stated claim based on a deficient account he never alleges is false. Velazquez v. Arrow Fin. Servs. LLC, 2009 U.S. Dist. LEXIS 77650, *6 (S.D.Cal.2009) (granting dismissal where Plaintiff alleged that state court complaint “sought to collect a debt not actually owed” and classifying allegation as conclusory allegation not entitled to assumption of truth.) This is further supported by the fact that Plaintiff does not explicitly contest any of the facts pled in the State Court Action. For example, Plaintiff does not allege that he did not receive a statement of account from Bank of America—the original creditor—or that he objected to that statement within a reasonable amount of time. Accordingly, Plaintiff has not alleged sufficient facts to set forth a plausible claim under either Section 1692e or 1692e(10).