Court of Appeal (Cal.) Affirms Anti-SLAPP Motion; Says Rosenthal Act Incorporates Federal FDCPA’s Materiality Standard and Should Be Interpreted Based on Current FDCPA Jurisprudence

In Aguilar v. Mandarich Law Grp., LLP, No. H049860, 2023 Cal. App. LEXIS 22 (Ct. App. Jan. 17, 2023), the California Court of Appeal found that the Rosenthal Act incorporated the federal FDCPA’s materiality standard, and affirmed an anti-SLAPP motion filed by a debt collector.

Whether the nature of the relationship between OneMain Financial and OneMain Financial Issuance Trust is such as might satisfy the “reasonably identify” standard set out in section 1788.58(a)(6) is a factual question that we need not resolve for purposes of this appeal. Instead, even if we assume, without deciding, that the verified discovery response from the collection action is sufficient to establish a prima facie violation of section 1788.58(a)(6)’s charge-off creditor disclosure requirement, we are not persuaded that the asserted CFDBPA violation supports a Rosenthal Act violation for false or misleading statements in connection with collection of a debt, as stated in the federal FDCPA. CA(12) (12) As noted ante, whether debt collection efforts are false, deceptive, or misleading for purposes of the federal FDCPA requires an objective analysis that “‘takes into account whether the “least sophisticated debtor would likely be misled by a communication.”’” (Tourgeman, supra, 755 F.3d 1109 at p. 1119.) This inquiry “does not ask the subjective question of whether an individual plaintiff was actually misled by a communication. Rather, it asks the objective question of whether the hypothetical least sophisticated debtor would likely have been misled.” (Afewerki, supra, 868 F.3d at p. 775.) A logical “‘corollary’ to the least sophisticated debtor standard” under the FDCPA is the [*26]  requirement that a misrepresentation must be material to be actionable. (Ibid.) The Ninth Circuit Court of Appeals in Afewerki explained the materiality requirement, which other federal circuits have also adopted: “‘[F]alse but non-material representations are not likely to mislead the least sophisticated consumer and therefore are not actionable under [15 U.S.C.] § 1692e.’” (Ibid.) Put another way, “A statement directed to consumers is designed to provide information that helps them choose intelligently, ‘and by definition immaterial information neither contributes to that objective (if the statement is correct) nor undermines it (if the statement is incorrect).’” (Tavernaro, supra, 43 F.4th at p. 1068.) Here, assuming that Aguilar has established that OneMain Financial was not the charge-off creditor at the time of charge off and, as a result, the collection action complaint was incorrect and did not “reasonably identify” the charge-off creditor in violation of section 1788.58(a)(6), there is no support for his contention that this translates into a de facto “false representation of” the “character, … or legal status of the debt” under title 15 United States Code section 1692e(2)(A). The purported misidentification of the charge-off creditor does not implicate the debt’s “character, amount, or legal status.” (15 U.S.C. § 1692e(2)(A).) To the contrary, the collection action complaint accurately alleged the character of the debt (a credit account issued by OneMain Financial), the amount (a debt balance of $5,214.02 after the last date of payment on June 17, 2016), and the legal status (the debt was charged-off and purchased by CACH, the debt buyer and sole owner of the debt). (Ibid.) Nor do we perceive in what manner the misidentification of the charge-off creditor—under the circumstances presented here—constitutes use of a “false representation or deceptive means to collect or attempt to collect” a debt under title 15 United States Code section 1692e(10). CA(13) (13) Aguilar has not shown how the purported misrepresentation of the charge-off creditor is a material misrepresentation under the standard applicable to alleged federal FDCPA violations, let alone how it would be likely to mislead the hypothetical least sophisticated debtor. (See Tourgeman, supra, 755 F.3d at p. 1119; Afewerki, supra, 868 F.3d at p. 775.) To the contrary, unlike the identity of a consumer’s original creditor, whose “false identification in a dunning letter would be likely to mislead some consumers in a material way” (Tourgeman, at p. 1121), a hypothetical debtor receiving CACH’s collections complaint would recognize OneMain Financial as the creditor that issued and serviced  the credit account until nonpayment on the account, charge-off, and sale to the debt buyer bringing the collections suit. The misidentification of the charge-off creditor in this instance (OneMain Financial instead of OneMain Financial Issuance Trust) falls squarely within the category of “mere technical falsehoods that mislead no one.” (Donohue, supra, 592 F.3d at p. 1034.) Insofar as section 1788.17 “incorporates the FDCPA, so that a violation of the FDCPA is per se a violation of the Rosenthal Act” (Best, supra, 64 Cal.App.5th at p. 576), we conclude the inverse is also true: A misrepresentation that is immaterial and thus not actionable under the FDCPA fails to support a prima facie violation of section 1788.17. In drawing this conclusion, we reject Aguilar’s assertion that materiality is not a proper consideration under the Rosenthal Act. Aguilar observes that although section 1788.17 of the Rosenthal Act incorporates specified provisions of the federal FDCPA as per se violations under state law, the alleged violation—and any resulting liability under the Rosenthal Act—remains a state claim. He further argues that state law and federal law are, in this respect, distinct, and the concept of materiality, as developed by the federal circuit courts, does not bind California courts applying state law. It is true that a claim under section 1788.17 that is based on conduct prohibited by the FDCPA remains a state claim. (Alkan, supra, 336 F.Supp.2d at p. 1065.) CA(14) (14) It is also true that federal circuit opinions interpreting federal law, like Tourgeman and Afewerki, though persuasive, are not binding on state courts. (See People v. Memro (1995) 11 Cal.4th 786, 882 [47 Cal. Rptr. 2d 219, 905 P.2d 1305]; Raven v. Deukmejian (1990) 52 Cal.3d 336, 352 [276 Cal. Rptr. 326, 801 P.2d 1077].) On the other hand, in the absence of some countervailing state interest, where the federal courts’ interpretation of the law is uniform, persuasive, and applies equally to the state statute, we are aware of no proscription against adopting that reasoning, or at least acknowledging its relevance to the claim under state law.  Aguilar points out that the Rosenthal Act was amended to add section 1788.17, which in its current form took effect on January 1, 2001. (Stats. 2000, ch. 688, § 1.) HN17 The statute’s incorporation of specified sections of the FDCPA is expressly tied to the federal code provisions “as they read January 1, 2001.” (§ 1788.17.) Aguilar argues that at that time, the concept of materiality had not arisen with respect to FDCPA liability, and since section 1788.17 is expressly limited to the federal FDCPA as it read in 2001, any federal district or circuit court decisions since that time “are necessarily less persuasive than any that published before [s]ection 1788.17 came into effect.” Aguilar further relates the development of the materiality standard in FDCPA jurisprudence to a perceived narrowing of opportunity to obtain relief on the statutory claim in federal court—a development he submits state courts should decline to follow. . . .

The Court of Appeal also rejected the contention that the Rosenthal Act’s incorporation of the federal FDCPA also only incorporated it, and its jurisprudence, that existed at the time section 1788.17 was enacted.

That those federal decisions applying the materiality standard postdate the California Legislature’s enactment of section 1788.17 renders them no less persuasive, because the relevant statutory language of the federal FDCPA has not changed since 2001. Moreover, though the concept of “materiality” may be absent from earlier FDCPA cases, its underpinnings (consisting of the least sophisticated consumer standard, balanced against a baseline of reasonableness in reading collection notices) have long been applied to the FDCPA. (See, e.g., Clomon v. Jackson (2d Cir. 1993) 988 F.2d 1314, 1318 [articulating the “widely accepted test for determining whether a collection letter violates § 1692e” using “an objective standard based on the ‘least sophisticated consumer’”]; id. at p. 1319 [balanced against “the concept of reasonableness”].) Absent some basis in law requiring a different understanding, the express incorporation of enumerated FDCPA violations into section 1788.17 makes federal authority interpreting and defining the scope of those FDCPA violations relevant to the determination of a section 1788.17 violation premised on those FDCPA provisions. Unsurprisingly, the Ninth Circuit has held that “[t]o the extent that a Rosenthal Act claim is derivative of a 15 U.S.C. § 1692e claim, … false statements are also subject to the materiality requirement for purposes of the Rosenthal Act claim.” (Afewerki, supra, 868 F.3d at p. 776.) We agree.