District Court (Cal.) Finds No Misrepresentation under FDCPA for Suing in State Court for Causes of Action for Common Counts and for Account Stated

In O’Bryne v. Portfolio Recovery Associates LLC, 2013 WL 1223590 (S.D.Cal. 2013), Judge Gonzales found that a debt collector’s lawsuit alleging claims for account stated and for common counts did not misstate the debt in violation of the Rosenthal Act and FDCPA.   Plaintiff moved for summary judgment as to its first cause of action for violation of the FDCPA on several different grounds. First, Plaintiff argues that “[b]y alleging an account stated in its state [court] complaint, [Defendant] misrepresented the legal status of the debt” in violation of § 1692e(2)(A). Second, Plaintiff contended that “[b]y alleging that [Plaintiff] owed contractual fees and interest under other common counts,” Defendant violated § 1692f(1). [Id. at 10 .]

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; (3) a promise by the debtor, express or implied, to pay the amount due.” Zinn v. Fred R. Bright Co., 271 Cal.App.2d 597, 600 (1969). “The action upon an account stated is not upon the original dealings and transactions of the parties. Inquiry may not be had into those matters at all. It is upon the new contract by and under which the parties have adjusted their differences and reached an agreement.” Gardner v. Watson, 170 Cal. 570, 574 (1915). ¶ . . . Plaintiff argues that Defendant falsely represented the legal status of the debt by suing under a theory of account stated, when in fact an account stated never existed. [Doc. No. 18, FAC.] Plaintiff argues that an account stated requires the parties negotiate a new, replacement contract, and that the parties never did in this case. [Doc. No. 27–1, Pl.’s Mot. at 5–6.] Plaintiff states that he never formed a new contract with Capital One, other than the modified, written contract in March 2005. [Id . at 6; Doc. No. 27–6, Decl. of O’Bryne ¶¶ 20–30.] Plaintiff also states that Capital One “[did] not dispute that there was no further modification after March 2005 and further testifie[d] that the March 2005 written contract was in effect at the time of charge off in November 2009.” [Doc. No. 27–1, Pl.’s Mot. at 6; Doc. No. 27–8, Decl. of Richard Napolitano, Senior Extended Operations Associate, Capital One Bank (USA) N.A. (“Napoli-tano”) at 52, 57–58.] Therefore, Plaintiff argues that “[w]ith no intent by [Plaintiff] or Capital One to form a new contract, it is impossible for an account stated to have formed between [Plaintiff] and Capital One.” [Doc. No. 27–1, Pl.’s Mot. at 6.] Plaintiff argues that, therefore, Defendant misrepresented the legal status of the debt in violation of the FDCPA. [Id.] ¶  However, other courts, on similar facts, have found that there was in fact an account stated and dismissed the plaintiff’s claims. Benedict v. CACH, LLC, 2012 WL 5382255, at *5 (S.D.Cal. Nov. 1, 2012); Odish v. CACH, LLC, 2012 WL 5382260, at *5 (S.D.Cal. Nov. 1, 2012); Jackson v. CACH, LLC, 2012 WL 5382257, at *5 (S.D.Cal. Oct. 31, 2012); Hashimi v. CACH, LLC, 2012 WL 3637383 (S.D.Cal. Aug. 22, 2012). ¶  Similarly, the elements of an account stated claim are satisfied in the instant case. Plaintiff does not dispute that there was a relationship between himself and Capital One of debtor and creditor. Capital One’s sending of the final billing statement [Doc. No. 27–8, Ex. A, Account Statement at 84] and Plaintiff’s implicit acceptance of it by not timely objecting constitute an agreement by the parties of the amount due, and an implicit promise by Plaintiff to pay the amount on the final billing statement.

As to the common counts claim, the District Court also found no claim.

Plaintiff also seeks summary judgment that Defendant’s actions to collect contractual fees and interest “under a number of common law theories that do not allow for the collection of these contractual fees and interest” violate the FDCPA. [Doc. No. 27–1, Pl.’s Mot. at 10.] Plaintiff argues that “[t]hese causes of action only allow for recovery of restitution damages; that is, no contractual interest or fees.” ¶ . . . Under California law, “[a] common count is not a specific cause of action …; rather, it is a simplified form of pleading normally used to aver the existence of various forms of monetary indebtedness, including that arising from an alleged duty to make restitution under an assumpsit theory.” Avidor v. Sutter’s Place, Inc., 151 Cal.Rptr.3d 804, 13 Cal. Daily Op. Serv. 871 (2013) (quoting McBride v. Boughton, 123 Cal.App. 4th 379, 394 (2004)). California law permits the use of common counts to recover unpaid credit card debt. See, e. g., HSBC Bank Nev., N.A. v. Aguilar, 205 Cal.App. 4th Supp. 6 (2012). ¶ . . .“Where the obligation to pay interest arises out of a contract to pay interest the interest is part of the debt, it is an accretion to the principal. In such a case any payment less than the aggregate of the principal and interest constitutes nothing more than a payment on account and does not extinguish the right to interest on the principal.” Id. However, “[w]here interest is recoverable only as damages and payment of the principal is accepted as such, interest cannot be recovered because payment of the debt extinguishes the right to recover interest thereon.” Id. (quoting Nelson v. Chicago Mill & Lumber Corp., 76 F.2d 17, 22–23 (8th Cir.1935)). Therefore, California courts have permitted a plaintiff to recover interest when it is aggregated to principal under actions in assumpsit, contrary to what Plaintiff argues. ¶ Plaintiff’s arguments that Kawasho is inapplicable to the present case are not persuasive. . . .¶ Both parties also confirmed during oral argument that interest and fees were aggregated to the principal balance. Because interest and fees were aggregated to the principal balance, Defendant was permitted to recover these fees under a theory of assumpsit. See Kawasho, 152 Cal.App.3d at 794–95. Accordingly, the Court DENIES Plaintiff’s motion for summary judgment asking the Court to find that attempting to recover fees and interest under theories of money lent; goods, wares, and merchandise; and unjust enrichment violates the FDCPA.