District Court (Cal.) Says Debt Collection Law Firm Did Not Sue on Stale Debt, Requires FDCPA Plaintiff to Show that Allegedly Erroneous Proof of Service in State Court Debt Collection Suit Was Filed in “Bad Faith”

In Rodrigo v. Barclays Bank Delaware, 2017 WL 1155373, at *4–5 (S.D.Cal., 2017), Judge Houston dismissed an FDCPA case grounded in allegedly suing on a stale debt and filing a false proof of service in the underlying action.

Construing all inferences in the light most favorable to Plaintiff, the Court finds that the state law collection action brought against Rodrigo on April 8, 2015 was timely, and therefore does not constitute a FDCPA violation. . . .It is uncontested that Barclays initiated a suit based on Common Causes of action, in California state court, against a California resident. See Doc. No. 1, Exh. 1. Under these circumstances, the Court concludes that California’s SOL applies, and that the state collection action was not time-barred. A review of the record indicates that TMLG filed the state collection action, on Barclay’s behalf, on April 8, 2015. See Doc. No. 1 at 22. Although the record is unclear as to which day Barclays closed Plaintiff’s delinquent credit card account, it is uncontested that the account was “closed and charged-off” sometime in “January 2012.” See Doc. No. 1 at 4. Thus, the subject account was closed when the collection action commenced. Accordingly, “January 2012,” the date the book account was closed, constitutes the last relevant entry and marks both the date that Barclays’s claim accrued and the date upon which the SOL began to run. R.N.C., Inc. v. Tsegeletos, 231 Cal.App.3d 967 (1991). Viewed in the light most favorable to Plaintiff, the Court finds that the SOL began running on January 31, 2012, the last day in January, 2012.  The cause of action alleged in the Complaint is Common Counts on an open book account for money due, on an account stated in writing between the parties, for money lent by plaintiff (then, Barclays) to defendant (then, Rodrigo), at defendant’s request. See Doc. No. 1-2 at 2-4. Thus, Plaintiff argues, even under California law, the collection action was time-barred when brought because Barclays’s money lent claim, plead as part of its Common Counts cause of action, was not brought within two-years of claim accrual. See Doc. No. 8 at 32-33. However, this argument overlooks that Cal. C.C.P. § 339’s two-year SOL is inapplicable here because the statute applies to oral contracts not founded upon an instrument of writing. In California, it is well settled that—”[a] mere naked receipt in writing, acknowledging the delivery of money, is not a contract, and does not import a promise, obligation, or liability, and an action upon it is therefore barred by the Statute of Limitations in two years. But a receipt or acknowledgment in writing for money, which also contains a clause stating that the money received is to be applied to the account of the person from whom received, partakes of the double nature of a receipt and contract, and shows upon its face a liability to account, and an action upon it is not barred by the Statute of Limitations until four years have expired.”  See Cal. C.C.P. § 339 California Code Commission Note 4 (Receipt for Money); accord Ashley v. Vischer, 24 Cal. 332 (1864). It is undisputed that the Cardholder Agreement Plaintiff received, and attached to her Complaint, includes an obligation to repay amounts borrowed from Barclays. See Doc. No. 1, Exh. 2. Therefore, the Court finds Cal. C.C.P. § 337’s four-year SOL, applicable to “action[s] upon any contract, obligation or liability founded upon an instrument in writing[,]” governs the timeliness issue in this case. Consequently, Barclays had until January 31, 2016 to timely file the collection action. Because the action was filed before the SOL expired, the Court finds that the claims alleged were timely brought, and that, as a matter of law, commencing the collection action did not violate the FDCPA. Plaintiff’s FDCPA claims founded upon this untimeliness theory are, therefore, DISMISSED WITH PREJUDICE.

The District Court also found that Plaintiff’s allegations of improper service of the underlying suit failed because there was no bad faith.

The Court finds that the Complaint fails to allege plausible facts permitting an inference of bad faith. In other words, the Complaint fails to allege that TMLG procured proof of service in bad faith (so-called “false proof of service”), then, “knowing[ly], willful[ly], and[/or] intentional[ly]” filed such false proof of service, in violation of the FDCPA. See Doc. No. 1 at 2.. .  Here, Plaintiff repeatedly concludes that TMLG “fil[ed] a false proof of service of summons in support of the [state court collection] action and attempt[ed] to obtain a default judgment based on that false proof[,]” and, after “being presented with evidence showing that the proof of service was false[,]” Defendants persisted with their “attempts to obtain a default judgment by resisting Plaintiff’s motion to vacate the default that was entered.” See Doc. No. 1 at ¶¶ 2, 40-43, 48, 67. These conclusions are supported by documents attached to the Complaint, which the Court also considered. Lee, 250 F.3d at 688-89. Therein, Plaintiff provides additional context; including (1) that Plaintiff resided at a different address at the time of service, [doc. no. 1-2 at 24]; (2) that Plaintiff recalls being in Solana Beach up to, and around, the time of service, [id]; (3) that after Plaintiff moved out of the Oceanside property, TMLG sent at least two letters there, addressed to Plaintiff, noticing Barclays’s intent to sue, [id at 38-39]; (4) that Plaintiff first learned about the collection suit from an attorney solicitation received on May 18, 2015, [id at 26]; (5) that Plaintiff’s attorney assisted Plaintiff in obtaining a copy of the proof of service indicating that someone accepted service on her behalf, [id]; and (6) that, on July 10, 2015, Plaintiff’s counsel sent a letter to Barclays’s counsel, Eleecia Barksdale, recounting a July 8, 2015 phone call where Barksdale declined to stipulate to vacating entry of judgment “after reviewing the file[,]” [id. at 32]. Taken together, the Court finds that Plaintiff’s bad faith allegations are but legal conclusions cast in the form of factual allegations that the Court need not accept as true, and are otherwise insufficient to state a claim. Ileto, 349 F.3d at 1200; Ashcroft, 556 U.S. at 678. The Court is mindful that accidents, inadvertent failures, or even gross negligence does not suffice to demonstrate deliberate indifference or bad faith. Thus, even if the Court found that TMLG, through its registered process server, failed to serve the correct individual, although an error that may evidence negligence, as a matter of law, that finding, on this record, would not support the inference that TMLG acted purposefully to procure proof of service in bad faith, and file an allegedly false proof of service in violation of the FDCPA. Accordingly, Plaintiff’s FDCPA claim founded upon service procured, and proof thereof filed, in bad faith, is DISMISSED WITHOUT PREJUDICE.