District Court (Cal.) Finds Rosenthal Act Does Not Cover “Fines”; Rejects Application of Litigation Privilege to FDCPA Claim

In Herrera v. AllianceOne Receivable Management, Inc., 2015 WL 3796123, at *1 (S.D.Cal.,2015), Judge Moskowitz found that a debt collector’s collection of traffic fines from the wrong person were not protected by the litigation privilege, but were not subject to the Rosenthal Act.

Defendant was assigned to collect several unpaid traffic fines by the San Diego County Superior Court assessed against Gilberto G. Herrera. Doc. 19–2, ¶ 2. Defendant used “skiptracing” to locate Gilberto G. Herrera by searching his last name and an address associated with the fines. Id. at ¶ 3. The search produced four results associated with the address, and one was Plaintiff Gilverto Herrera. Id. at ¶ 4. In January 2012, Plaintiffs received a Demand for Payment–Court Ordered Debt Collection (“Demand”) notice from the Franchise Tax Board (“FTB”), seeking $1,496 to satisfy three outstanding orders for traffic fines. Compl. at ¶ 2. Plaintiffs learned that Defendant had submitted the Demand to the FTB as result of unpaid traffic fines, which the state court had issued to another person with a similar name but a different birth date. Id. at ¶ 3. In February 2012, Plaintiffs presented Defendant and the FTB with proof of their identities, and filed reports of potential identity theft with their creditors, banks, and the police department. Id. at ¶¶ 4–5. Plaintiffs allegedly contacted Defendant in person and by telephone in an effort to clear up the error. Id. Plaintiffs’ state income tax refund was then seized in March 2012 and $564.62 was sent to the FTB. Compl. at ¶¶ 2, 6

The District Court found no Rosenthal Act liability because the debt collected did not trigger the Act.

On December 31, 2014, Defendant filed a motion for partial summary judgment on Plaintiffs’ first two causes of action, arising under the Rosenthal Act and the FDCPA (the “Acts”). Defendant argues that the Acts regulate only the collection of “debts,” and that traffic fines do not arise out of a consensual transaction and don’t constitute “debts” under the Acts. For the same reasons, Defendant opposes the addition of three new causes of action (13–15) arising under the Acts in Plaintiffs’ proposed First Amended Complaint. The Court finds that Plaintiffs’ claims under the Acts do not survive Defendant’s motion.  The FDCPA defines debt as “any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes …” 15 U.S.C. § 1692a(5); see also Bloom v. I.C. Sys. Inc., 972 F.2d 1067, 1068–69 (9th Cir.1992) (explaining that the FDCPA applies to debt incurred for personal rather than commercial reasons). The FDCPA defines consumer as “any natural person obligated … to pay any debt.” 15 U.S.C. § 1692a(3). While the FDCPA does not define transaction, the Ninth Circuit has stated that “the statute is limited in its reach ‘to those obligations to pay arising from consensual transactions, where parties negotiate or contract for consumer-related goods or services .’ “ Turner v. Cook, 362 F.3d 1219, 1227 (9th Cir.2004) (quoting Bass v. Stolper, Koritzinsky, Brewster & Neider, S.C., 111 F.3d 1322, 1326 (7th Cir.1997)). Similarly, the purpose of the Rosenthal Act is “to prohibit debt collectors from engaging in unfair or deceptive acts or practices in the collection of consumer debts and to require debtors to act fairly in entering into and honoring such debts …” CCC § 1788.1(b). The Rosenthal Act defines consumer debt as “money, property or their equivalent, due or owing or alleged to be due or owing from a natural person by reason of a consumer credit transaction.” CCC § 1788.2(f).  In this case, the undisputed character of the “debts” as unpaid traffic fines defeats the FDCPA and Rosenthal Act causes of action. Traffic fines do not result from consensual consumer transactions, and are therefore not “debts” within the meaning of the Acts. See Gulley v. Markoff & Krasny, 664 F.3d 1073, 1075 (7th Cir.2011) (municipal fines not debts under FDCPA); Stubbs v. City of Ctr. Point, Ala., 988 F.Supp.2d 1270, 1276 (N.D.Ala.2013) (traffic ticket not a “debt” under the FDCPA because it’s not the product of a consumer transaction); see also Turner, 362 F.3d at 1227 (FDCPA is limited to obligations arising from consensual transactions for consumer goods or services); Slenk v. Transworld Sys., Inc., 236 F.3d 1072, 1076 (9th Cir.2001). Plaintiffs don’t address the character fo the debt, but argue the purpose of the Acts is to protect mistakenly identified non-debtors who are subjected to harassing debt collection. Doc. 28, at 7 (citing Beck v. Maximus, 457 F.3d 291, 294 (3rd Cir.2006); see also Wright v. Finance Services, 22 F.3d 647, 649 (6th Cir.1993); Dutton v. Wolhar, 809 F.Supp. 1130, 1134 (D.Del.1992)). Plaintiffs also rely on Davis v. Midland Funding, 41 F.Supp.3d 919 (E.D.Cal.2014), which held that the FDCPA encompasses claims brought by individuals subjected to collection efforts for obligations they are falsely alleged to owe.  Plaintiffs’ reliance on Beck, Wright, and Dutton, is unpersuasive because those cases did not address whether the monetary obligations at issue fell within the FDCPA’s definition of “debts.” Similarly, Davis is distinguishable on its facts because the plaintiff-debtor could not prove the consumer character of the debt since he did not know the nature of its underlying transaction. 41 F.Supp.3d at 922. By contrast, in this case, though Plaintiffs did not incur the debt at issue, by their own efforts they discovered that it is a non-consumer obligation for unpaid traffic fines.  Therefore, Defendant’s motion is GRANTED and the first and second causes of action are DISMISSED. Additionally, Plaintiffs are DENIED leave to add causes of action numbers 13, 14, and 15, which also arise under the Acts.

The District Court found that Penal Code 653 created no private right of action.

The Court GRANTS Defendant’s motion as to the sixth cause of action for violation of CPC § 653m. Section 653m(b) makes it a misdemeanor to make repeated phone calls with the intent to annoy or harass. “A statute creates a private right of action only if the enacting body so intended.” See Farmers Ins. Exch. v. Superior Court, 137 Cal.App.4th 842, 849 (2006). “That intent need not necessarily be expressed explicitly, but if not it must be strongly implied.” Id at 850. Private rights of action under criminal statutes have rarely been implied, and when one has been read into a criminal statute “there was at least a statutory basis for inferring that a civil cause of action of some sort lay in favor of someone.” Chrysler Corp. v. Brown, 441 U.S. 281, 316 (1979). The Court has reviewed section 653m and finds that the statute does not include language suggesting a private cause of action is available. See Aymar v. Stassinos, 2008 WL 4838232 (E.D.Cal. Oct. 7, 2008) (holding no private cause of action under section 653m). Additionally, Plaintiffs failed to cite authority showing that the state legislature intended to create a private right of action in CPC § 653m.  Therefore, Court GRANTS Defendant’s motion in part, and the sixth cause of action is DISMISSED from Plaintiffs’ first Complaint and may not be included in the proposed First Amended Complaint. The Court DENIES Defendant’s motion as to causes of action 3, 4, 5, and 7.

The District Court found that the litigation privilege did not insulate the conduct.

The general rule is that “[t]he litigation privilege applies only to torts arising from communicative acts; it does not apply to purely noncommunicative tortious conduct.” Brown v. Kennard, 94 Cal.App.4th 40, 45 (2001); Kimmel v. Goland, 51 Cal.3d 202, 211(1990). However, a court need not reach the “communicative” analysis when the challenged conduct clearly does not further a litigation. See Silberg, 50 Cal.3d at 219–20. In this case, the Superior Court ordered Defendant to refund the monies garnished from Plaintiffs’ tax refund and to remove the debt cases from their credit record. Notwithstanding the Court Order, Defendant persisted in its debt collection efforts against Plaintiffs with the knowledge that they were not the real debtors. As such, every collection action Defendant took against Plaintiffs for the traffic fine debt after May 31, 2012 was not privileged because it was in direct contravention of the May 2012 Court Order. See Goodfriend, 212 Cal.App.4th at 1148 (litigation privilege did not apply to attorneys’ communications and actions because they did not achieve the object of the litigation). Knowingly pursuing collection action against an innocent party does nothing to further the litigation privilege’s purpose. On the contrary, extending the privilege to such action encourages contemptuous conduct and subverts the legal system.  If the allegations in the Complaint are true, then Defendant is not using the litigation privilege as a shied, but rather as a sword to injure innocent persons not parties to the litigation. Once given notice of the May 2012 Court Order, Defendant had no cause to pursue Plaintiffs and the action did not further the litigation against Gilberto G. Herrera in any way. The Court stresses that this exception from the privilege is narrow, applying only to conduct in contravention of a court order, and grounded in a similar exception to the privilege for actions for malicious prosecution. See Silberg, 50 Cal.3d at 215–216. The California Legislature has provided that persons may be criminally prosecuted, CPC § 166, and civilly liable, Cal. C. Civ. P. § 1219, for contemptuous action. Accepting Defendant’s argument would subvert these provisions and result in the privilege being used to shield all acts in furtherance of a litigation but in contempt of a court order. The litigation privilege was never designed to shield actions in contempt of court. Therefore, the Court finds that Defendant’s actions are not given protection.