Davis v. Hollins Law

Citations: 942 F. Supp. 2d 1004; 2013 U.S. Dist. LEXIS 36350; 2013 WL 1091221Docket: No. CIV. S-12-3107 LKK/GGH

Court: District Court, E.D. California; March 15, 2013; Federal District Court

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Michael Davis, the plaintiff, has filed a lawsuit against Hollins Law, a Professional Corporation, claiming violations of the Fair Debt Collection Practices Act (FDCPA) and California’s Rosenthal Fair Debt Collection Practices Act. The defendant has moved to dismiss or strike the second cause of action related to the Rosenthal Act. The initial hearing was scheduled for March 11, 2013, but the decision has been made based on submitted papers.

The FDCPA, enacted in 1977, aims to eliminate abusive debt collection practices, while the Rosenthal Act was established to prohibit unfair or deceptive practices in debt collection. The Rosenthal Act was amended in 1999 to incorporate FDCPA provisions, making violations of these federal provisions also violations of state law.

Davis alleges that the defendant contacted him via telephone, leaving a voicemail that did not indicate it was from a debt collector, constituting violations of the FDCPA (specifically 15 U.S.C. 1692e, 1692e(10), and 1692e(11)) and, by reference, the Rosenthal Act (Cal. Civ. Code. 1788.17). The defendant's motions include a dismissal under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim, an alternative dismissal under California’s anti-SLAPP law, and a motion to strike the count under Rule 12(f).

Under Rule 12(b)(6), the complaint must include a "short and plain statement" of the claim, providing the defendant fair notice of the allegations and supporting factual allegations. The court is required to accept the factual allegations as true while disregarding legal conclusions or conclusory statements, which do not receive a presumption of truth.

Iqbal and Twombly establish a two-step process for assessing motions to dismiss. First, courts identify non-conclusory factual allegations. Then, they determine if these allegations, when accepted as true and viewed favorably for the plaintiff, plausibly suggest entitlement to relief. The concept of "plausibility" does not imply a likelihood of success by the plaintiff but rather whether the factual allegations allow for a reasonable inference of the defendant's liability. The plausibility standard exceeds mere possibility of unlawful action by the defendant. A complaint may be dismissed if it lacks a viable legal theory or sufficient factual support for a recognized legal theory.

In evaluating whether a defendant is subject to the Rosenthal Act, the court disagrees with the defendant's argument that it cannot be held liable under the Act. The California Civil Code explicitly excludes attorneys from the definition of "debt collector." The defendant asserts that this exclusion inherently includes law firms, referencing the California Court of Appeals case Carney v. Rotkin, Schmerin, McIntyre. While some federal judges have supported the view that the Act does not apply to law firms based on Carney, a significant number have ruled otherwise. These judges argue that the California legislature's exclusion of individual attorneys but silence regarding law firms indicates an intention to include the latter under the Rosenthal Act. The Carney case involved employees of a debt collection law firm who misrepresented legal actions against a plaintiff to compel payment.

Plaintiff filed suit against a law firm, a secretary, an attorney, and an original creditor for emotional distress, abuse of process, and violations of the Rosenthal Act. The trial court dismissed the complaint after sustaining the defendants' demurrer. The appeals court partially reversed this decision, determining that the defendants' actions were not protected by the litigation privilege under Cal. Civ. Code § 47 and that the plaintiff adequately stated claims for both intentional and negligent infliction of emotional distress.

The court addressed the plaintiff's fourth cause of action, which alleged violations of the Fair Debt Collection Practices Act (FDCPA) based on misleading statements about potential arrest for non-payment of debt. However, the court noted that the FDCPA applies only to "debt collectors" and explicitly exempts attorneys, concluding that the defendant attorney did not qualify as a "debt collector." Consequently, the trial court correctly sustained the demurrer to this cause of action without leave to amend. The court clarified that the Carney opinion did not establish that law firms are included within the definition of "debt collector," and it was unclear if a Rosenthal Act claim was made against the law firm or solely against the attorney.

Further, the court emphasized the principles of statutory construction as outlined by the California Supreme Court, highlighting the importance of ascertaining legislative intent and using the statute's plain meaning unless ambiguity exists. Ambiguities may be clarified by examining legislative history and public policy.

Determining the interpretation of a statute involves examining its legislative history and background. The term "law firm" is not defined in common lay dictionaries, but Black's Law Dictionary defines "attorney" as a legal agent and "law firm" as a collective of lawyers practicing together, which highlights the distinction between a single attorney and a law firm. Under California law, "attorney" and "lawyer" are largely synonymous, with the California Rule of Professional Conduct defining "law firm" as a group of two or more lawyers sharing profits and responsibilities, or as a business entity employing multiple lawyers. The distinction is further supported by California Business and Professions Code sections addressing legal advertising and financial services, which clarify that "lawyers" and "law firms" are separate concepts.

Implying an exception for law firms within the statute would contradict the legal principle of "expressio unius est exclusio alterius," which maintains that specified exceptions should not lead to presumed exclusions. Consequently, the definitions suggest that section 1788.2(c) includes law firms within its definition of "debt collector." Legislative history related to the Rosenthal Act does not clarify the inclusion of law firms under "attorney," but a related statute, Cal. Bus. Prof. Code. 6077.5, indicates a distinction by requiring attorneys and their debt collection employees to comply with both the Rosenthal Act and specific debt collection practices, with violations subject to State Bar discipline.

Section 6077.5 aims to ensure attorney compliance with fair debt collection practices, resulting from negotiations between the State Bar and the collection agency industry regarding attorney exemptions under the Rosenthal Act. The exemption for attorneys does not permit unregulated practices; instead, attorneys are regulated by the State Bar of California. Exempting "law firms" would contradict the public policy outlined in California Civil Code section 1788.1(b), which seeks to prevent unfair or deceptive practices in debt collection. Consequently, the court concludes that the Rosenthal Act's "attorney" exemption does not apply to law firms, denying the defendant's motions to dismiss and strike based on that argument.

The court then addresses whether the plaintiff's Rosenthal Act claim is subject to California’s anti-SLAPP statute (Cal. Code Civ. Proc. 425.16). This statute allows for a special motion to strike claims arising from acts in furtherance of free speech or petitioning in connection with a public issue, unless the plaintiff shows a probability of prevailing on the claim. The anti-SLAPP analysis involves a two-part inquiry: the defendant must first establish that the claim arises from protected activity, after which the burden shifts to the plaintiff to demonstrate a reasonable probability of success. If the defendant fails to meet the initial burden, the court need not proceed further. 

The defendant contends that a voicemail left for the plaintiff falls under protected activity related to anticipated litigation. However, California courts have ruled that merely bringing a lawsuit after engaging in an act of free speech or petitioning does not suffice to establish that the suit arises from such activity.

A communication is considered made "in connection with" a lawsuit only if the lawsuit was genuinely "under serious consideration" at the time of the communication, as established in A.F. Brown Elec. Contractor, Inc. v. Rhino Elec. Supply, Inc. The mere threat of potential legal action does not suffice to prove that a lawsuit was under serious consideration, underscored by Welker v. Horwitz. The defendant's assertion that a letter was sent "in the course of litigation" lacks supporting evidence that litigation was actively being considered. The defendant claims that a voicemail was left to collect a debt and that such actions typically precede filing a civil action. However, the defendant's attorney's declaration does not provide specific timelines or conditions that would trigger legal action. Notably, the voicemail was left in August 2012, and as of February 19, 2013, no collection action had yet been initiated against the plaintiff. Consequently, the defendant has not demonstrated that litigation was "under serious consideration" at the time of the voicemail, failing to meet the statutory requirement for a SLAPP motion. Therefore, the court denies the defendant's motion to dismiss under the anti-SLAPP law. The conclusion includes a reference to the implications of Rule 12(b)(6) regarding dismissals based on a judge's disbelief in the allegations, the evolution of the pleading standard from Conley to Twombly, and the complexities involved in applying these standards as recognized by the Ninth Circuit.

The legal document references the case Cook v. Brewer, which applies the "no set of facts" standard to Section 1983 cases, indicating a lack of California court opinions on the matter. It notes that the California Supreme Court interprets statutes using lay and legal dictionaries, as demonstrated in In re Ethan C. The California Business and Professions Code mandates that individuals take an oath upon admission to practice law, defining "attorney" as synonymous with "lawyer," while not explicitly defining "law firm." California statutes often differentiate between "attorneys" and "law firms," suggesting that "attorney" does not encompass "law firm." The document defines a paralegal in relation to their employment with attorneys or firms and outlines the scope of contracts for legal services as including agreements with various legal entities. 

The document cites the Verizon case, which states that procedural state laws cannot conflict with Federal Rules of Civil Procedure, using California's anti-SLAPP statute as an example, while noting that such provisions are not applicable in the current case. It also references that communications violating the Rosenthal Act are not protected by the litigation privilege, with examples from case law emphasizing that applying such privilege could undermine the Act's purpose, enabling unfair debt collection practices. This perspective is supported by precedents linking anti-SLAPP provisions to the litigation privilege.