Johnson v. Jp Morgan Chase Bank Dba Chase Manhatt.

Page 1207

536 F.Supp.2d 1207

Delores JOHNSON, Plaintiff, v. JP MORGAN CHASE BANK DBA CHASE MANHATTAN, et al, Defendants.

No. CV-F-008-0081 LJO SMS.

United States District Court, E.D. California.

March 12, 2008.

Michael. R. Simmonds, Tomio B. Narita, Simmonds & Narita LLP, San Francisco, CA, for defendant, Unifund.

ORDER ON UNIFUND'S MOTION TO DISMISS (Doc. 14)

LAWRENCE J. O'NEILL, District Judge.

INTRODUCTION

Defendant Unifund CCR Partners ("Unifund") moves to dismiss Plaintiff Delores Johnson's ("Ms.Johnson's") first, third through fifth, seventh and eighth causes of action pursuant to Fed.R.Civ.P.12 (b)(6)¹ by notice on January 22, 2008. Ms. Johnson opposed the motion on February 8, 2008. Unifund filed, a reply on, February 19, 2008. This matter was submitted on the pleadings without oral argument pursuant to Local Rule 78-230(h). For the reasons discussed below, this Court grants in part and denies in part Unifund's motion.

FACTUAL BACKGROUND

In 2004, Ms. Johnson was the subject of collection activities instituted by some of her creditors. Ms. Johnson alleges that she received a letter from Lake Valley Retrievals on August 10, 2004, demanding payment for an outstanding credit card debt purportedly sold to Lake Valley Retrievals by Defendant Chase Bank USA, N.A. ("Chase").² Specifically, Lake Valley Retrievals sought to collect a principal sum of $2,075.76, with $139.50 in accrued interest. Ms. Johnson alleges that she contacted Lake Valley Retrievals to dispute the ;debt, because she alleges that she never had a Chase account.

On August 27, 2004, Unifund, as an assignee for Lake Valley Retrievals, initiated a state court debt collection action ("collection action") against Ms. Johnson to collect the unpaid debt. Although she had no record of the Chase account, Ms. Johnson alleges that she did not respond to the collection action, because she thought that Chase must have acquired one of her other accounts to give rise to the purported debt. Ms. Johnson alleges that she based her wrongful belief on the "insistent representations by Lake Valley Retrievals." Despite her initial dispute of the claim, Ms. Johnson alleges that Unifund continued the litigation against her and made false reports to credit reporting agencies based on false information. Ms. Johnson further alleges that on December 20, 2004, Unifund obtained judgment against her based on false affidavits. After obtaining default judgment against Ms. Johnson, Unifund transferred its rights and interests in the case back to Lake Valley Retrievals.³ Ms. Johnson's wages were garnished $100 each month, pursuant to the earnings withholding order in the collection action.

Two years later, Ms. Johnson alleges that she received notice from Chase that, upon investigation, Chase had determined that the credit account for which she had been sued was based on fraudulent transactions. Ms. Johnson alleges further that in the letter, dated December 27, 2006, Chase advised Ms. Johnson that she was not responsible for the debt. Ms. Johnson alleges that she notified "Chase and its assignees ... including ... Unifund" that the underlying debt was based on fraudulent transactions, but they refused to cease collection efforts and continued to garnish Ms. Johnson's wages.

On August 9, 2007, the state court set aside the default judgment hi the collection action and allowed Ms. Johnson to respond to the complaint. The court recalled and quashed the earnings withholding order. Ms. Johnson answered the complaint and asserted defenses alleging the "fraudulent nature of the transactions" giving rise to the alleged debt on August 29, 2007. The collection action is ongoing.

Procedural Background

On December 26, 2007, Ms. Johnson filed this action in the Superior Court, County of Fresno (Case No. 07CECG04298), alleging the following eight causes of action against Defendants:

1. Violations of Cal. Civil Code section 1788 et seq, California's Rosenthal Fair Debt Collection Practices Act ("Rosenthal Act");

2. Violations of 15 U.S.C. § 1692 et seq., the Fair Debt Collection Practices Act ("FDCPA"); 3. Defamation;

4. Fraudulent Misrepresentation;

5. Negligent Misrepresentation;

6. Violations of 18 U.S.C. § 1961 et seq ("RICO");

7. Unfair Competition-California Business and Professions Code section 17200 et seq.; and

8. Intentional Infliction of Emotional Distress.

Unifund removed the action to this Court on January 15, 2008. Having considered the moving, opposition, and reply papers, as well as the Court's file, the Court issues the following order.

ANALYSIS & DISCUSSION

A. Rule 12(b)(6) Motion To Dismiss Standards

A motion to dismiss pursuant to Rule 12(b)(6) (for failure to state a claim upon which relief can be granted) is a challenge to the sufficiency of the pleadings set forth in the complaint. A motion to dismiss for failure to state a claim should not be granted unless it appears beyond doubt that plaintiff can prove no set of facts in support of the claim that would entitle him to relief. See Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984)(citing Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)); see also Palmer v. Roosevelt Lake Log Owners Assn., 651 F.2d 1289, 1294 (9th Cir.1981). A Rule 12(b)(6) dismissal is proper where there is either a "lack of a cognizable legal theory" or "the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir.1988).

In resolving a Rule 12(b)(6) motion, the court must (1) construe the complaint in the light most favorable to the plaintiff; (2) accept all well-pleaded factual allegations as true; and (3) determine whether plaintiff can prove any set of facts to support a claim that would merit relief. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-338 (9th Cir.1996). Although courts assume the facts alleged as true, courts do not "assume the truth 4 legal conclusions merely because they are cast in the form of factual allegations." Western Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir.1981). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the `grounds' of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, ___ U.S. ___, ___ _ ___, 127 S.Ct. 1955, 1964-65, 167 L.Ed.2d 929 (2007) (internal citations omitted).

B. Litigation Privilege

Unifund argues that Ms. Johnson's state law causes of action fail, because they are based on alleged communications made by Unifund in connection with the ongoing collection action. California Civil Code section 47(b)(2) provides in relevant part: "A privileged publication or broadcast is one made ... in any judicial proceeding." The litigation privilege "applies to any publication required or permitted by law in the course of a judicial proceeding to achieve the objects of litigation, even though publication is made outside the courtroom and no function of the court or its officers is involved." Silberg v. Anderson, 50 Cal.3d 205, 212, 266 Cal. Rptr. 638, 786 P.2d 365 (1990). "The usual formulation is that the privilege applies to any communication: (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action." Id. The litigation privilege has been described as "absolute, regardless of malice and extending even to perjury." Jacob B. v. County of Shasta, 40 Cal.4th 948, 956, 56 Cal.Rptr.3d 477, 154 P.3d 1003 (2007).

1. Rosenthal Act

Unifund argues that Ms. Johnson's Rosenthal Act claim is barred by the litigation privilege, because Ms. Johnson's allegations of false, misleading, and deceptive misrepresentations were made in connection with the collection action. Ms. Johnson argues that California's litigation privilege does not apply to her Rosenthal Act claims, because application of the litigation privilege would "render the protections [the Act] affords meaningless." Opposition, 4 (quoting Oei v. N. Star Capital Acquisitions, LLC, 486 F.Supp.2d 1089 (C.D.Cal.2006)). Ms. Johnson asserts farther that her complaint alleges non-litigation conduct, activities not subject to the litigation privilege, which are not barred by the litigation privilege.

The Court notes that while there is no California authority directly on point, the federal district courts are split on the question of whether the litigation privilege and the Rosenthal Act are irreconcilable. Compare Butler v. Resurgence Fin., LLC, 521 F.Supp.2d 1093 (C.D.Cal.2007) (finding that the Rosenthal Act overrides the litigation privilege), Oei v. N. Star Capital Acquisitions, 486 F.Supp.2d 1089 (C.D.Cal. 2006) (same where plaintiff claims defendant called incessantly and verbally harassed plaintiff), and Mello v. Great Seneca Fin. Corp., 526 F.Supp.2d 1020 (N.D.Cal.2007) (adopting Oei ruling) with Nickoloff v. Wolpoff & Abramson, L.L.P., 511 F.Supp.2d 1043 (C.D.Cal.2007) (finding that the Rosenthal Act does not trump the litigation privilege where plaintiff contests sufficiency of documentary evidence in debt collection action) and Taylor v. Quall, 458 F.Supp.2d 1065 (C.D.Cal.2006) (same). See also, Reyes v. Kenosian & Miele, LLP, 525 F.Supp.2d 1158 (N.D.Cal.2007) (holding that the litigation privilege and the Rosenthal Act are not irreconcilable where the plaintiff made no allegations of wrongful conduct outside of the filing of a state court complaint). Ms. Johnson urges this Court to follow the Oei, Butler, and Mello rulings, whereas Unifund urges this Court to follow the Nickoloff, Taylor and Reyes rulings.

Where the Rosenthal Act and the litigation privilege conflict, then the Rosenthal Act, as the more specific stat...