Case Name: Alberto Alvarez, et al. v. P.W. Stephens Environmental, Inc., et al.
Case No.: 17CV309822

I. Factual Background

This limited jurisdiction action arises from purported forum abuse perpetrated by defendant P.W. Stephens Environmental, Inc. (“Defendant”) against plaintiffs Alberto Alvarez and Maria Castillo (collectively “Plaintiffs”).

As alleged in the Second Amended Complaint (“SAC”), Plaintiffs – senior citizens who reside in San Jose – were approached by an agent of Defendant who induced them to enter into a contract for the removal and disposal of asbestos in their home. (SAC, ¶ 9.) That same day, Defendant performed the asbestos removal but did not request payment from Plaintiffs at that time. (Id. at ¶¶ 11-12.) This was consistent with Defendant’s standard procedure of mailing billing statements to residential customers after the asbestos removal was completed. (Id. at ¶ 13.)

A few months later, Defendant filed an action against Plaintiffs in the small claims division of the Orange County Superior Court seeking payment for the asbestos removal services (“Underlying Lawsuit”). (Id. at ¶ 14.) In its complaint, Defendant knowingly misrepresented that Orange County was “where the buyer signed the contract, lives now, or lived when the contract was made.” (Id. at ¶ 18.) At all relevant times, Plaintiffs resided in Santa Clara County and the contract was also consummated there. (Ibid.) About two months after the Underlying Lawsuit commenced, Plaintiffs notified the Orange County court of these facts, informed it of their inability to afford travel to Orange County, and requested a change of venue. (Id. at ¶ 18.) In response, Defendant sent Plaintiffs a letter asserting that venue in Orange County was proper because the contract between them contained a provision specifying Orange County as the venue for any litigation. (Id. at ¶ 19.) This venue selection clause is unenforceable. (Ibid.)

Despite being fully aware it was engaging in forum abuse, Defendant proceeded to obtain a judgment against Plaintiffs in the Underlying Lawsuit. (Id. at ¶ 20.)

The SAC asserts two causes of action against Defendant for: (1) violations of the Rosenthal Fair Debt Collection Practices Act (“Rosenthal Act” or the “Act”); and (2) violations of the Consumer Legal Remedies Act (“CLRA”).

Currently before the Court is Defendant’s demurrer to both causes of action, which Plaintiffs oppose.

II. Demurrer

Defendant demurs to the first and second causes of action on the ground of failure to state facts sufficient to constitute a cause of action. (See Code Civ. Proc., §§ 430.10, subd. (e); 92, subd. (a).)

A. First Cause of Action

The first cause of action is for violations of the Rosenthal Act, which is codified at Civil Code section 1788, et seq. As relevant here, Civil Code section 1788.15, subdivision (b) (“Section 1788.15”) prohibits unfair debt collection practices, including attempts to collect a consumer debt by means of a judicial proceeding in a county other than the county in which the debt was incurred or the debtor resided when the proceeding was instituted. Further, Civil Code section 1788.17 (“Section 1788.17”) of the Act incorporates provisions of the federal Fair Debt Collection Practices Act which proscribe similar practices and, among other things, making false representations in debt collection efforts.

Plaintiffs allege Defendant violated Sections 1788.15 and 1788.17 of the Act by filing a collection action against them in Orange County, and falsely representing in the Underlying Action and its correspondence to them that Orange County was the proper venue and the venue selection clause in the contract was enforceable.

Defendant argues no cause of action has been stated because Plaintiffs fail to plead facts establishing the transaction at issue involved a “consumer debt” governed by the Rosenthal Act. This argument was previously raised in connection with Defendant’s demurrer to the original complaint, which was sustained on that basis. The Court (Hon. Folan) held that the general allegation of a “consumer debt” was insufficient because, as a statutory cause of action, a Rosenthal Act claim must be pled with specificity. Though Plaintiffs have since amended their complaint to allege additional facts regarding the transaction between the parties, Defendant asserts the SAC still lacks sufficient particularity because there is no allegation it agreed to perform work for Plaintiffs on credit.

In opposition, Plaintiffs argue that to sufficiently allege a “consumer debt” within the meaning of the Act, they do not need to allege there was an agreement that work would be done for them on credit. Rather, they assert they only need to plead they acquired something of value from Defendant without immediately paying for it, i.e. on credit, relying on Gouskos v. Aptos Vill. Garage, Inc. (2001) 94 Cal.App.4th 754 (“Gouskos”) and Davidson v. Seterus, Inc. (2018) 21 Cal.App.5th 283 (“Davidson”). This argument is well-taken.

Sections 1788.15 and 1788.17 govern practices concerning the collection of a “consumer debt.” As defined by the Act, a “consumer debt” is “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.” (Civ. Code, § 1788.2, subd. (f).) A “consumer credit transaction,” in turn, is a “transaction between a natural person and another person in which property, services or money is acquired on credit by that natural person from such other person primarily for personal, family, or household purposes.” (Civ. Code, § 1788.2, subd. (e), emphasis added.) The phrase “on credit” is not defined by the Rosenthal Act but courts have held it means the acquisition of something without immediately paying for it. (See Gouskos, supra, 94 Cal.App.4th at 760; Davidson, supra, 21 Cal.App.5th at 296-97.) As such, a “consumer credit transaction” within the meaning of the Act is “a transaction…in which property, services or money is acquired [without immediate payment and with the promise to pay in the future]…for personal, family, or household purposes.” (Davidson, supra, 21 Cal.App.5th at 296-97.)

Here, Plaintiffs allege they entered into a transaction with Defendant in which they acquired services for personal, family or household purposes on credit. Specifically, they aver that, on October, 12, 2016, they obtained asbestos abatement services from Defendant without immediately paying for them. (SAC, ¶ 11.) Defendant did not demand payment from them on that day and its standard procedure was to collect payments from its customers at a later date. (Id. at ¶¶ 12-13.) These facts are sufficient to establish the parties entered into a “consumer credit transaction” for purposes of the Rosenthal Act. (See Civ. Code, § 1788.2, subd. (e); Gouskos, supra, 94 Cal.App.4th at 760; Davidson, supra, 21 Cal.App.5th at 296-97.) Defendant cites no contrary legal authority; as such, its position is unsupported.

Accordingly, the demurrer to the first cause of action on the ground of failure to state sufficient facts is OVERRULED.

B. Second Cause of Action

The second cause of action is for violations of the CLRA (Civ. Code, § 1750 et seq.), which prohibits the use of unfair or deceptive practices in consumer transactions, including “[r]epresenting that a transaction confers or involves rights, remedies, or obligations that it does not have or involve, or that are prohibited by law,” or inserting an unconscionable provision in a contract. (Civ. Code, § 1770, subds. (a)(14), (a)(19).)

Plaintiffs allege Defendant violated the CLRA by including in its contract a venue selection clause that violates subdivisions (a)(14) and (a)(19) of Civil Code section 1770 (“Section 1770”). Defendant argues no cause of action has been stated based on provisions of Code of Civil Procedure section 395 (“Section 395”).

Section 395, subdivision (a) generally provides that venue is appropriate where one or more of the defendants reside at the time of the action or, in breach of contract cases, where the contract was entered into or where it was to be performed. It further states relative to breach of contract actions that parties may contract around the statutory venue rules through a “special contract in writing to the contrary.” (Code Civ. Proc., § 395, subd. (a).) An exception to the general venue provisions of subdivision (a) is set forth in subdivision (b) which provides that, in actions arising out of consumer transactions, venue is proper where the buyer signed the contract, resided when the contract was entered into, or resided when the action was commenced. (Fontaine v. Superior Court (2009) 175 Cal.App.4th 830, 839.) The statute goes on to state that the provisions of subdivision (b) may not be waived and any attempt to do so is void and unenforceable. (See Code Civ. Proc., § 395, subd. (c).)

Defendant argues subdivision (a) of Section 395 permitted the parties to enter into a special contract in writing (i.e. the venue selection clause) circumventing the general venue rules and designating Orange County as the venue. In essence, Defendant appears to contend the clause could not be unconscionable under Section 1770, subdivision (a)(19) or prohibited by law under subdivision (a)(14) because it was allowed under Section 395. This position is based on the presumption subdivision (a) governs the transaction between the parties. However, as indicated above, subdivision (b) provides an exception for actions arising out of consumer transactions. (See Code Civ. Proc., § 395, subds. (b), (c); Fontaine, supra, 175 Cal.App.4th at 839.) Defendant cites no authority explaining why this exception should not apply here; as such, it does not substantiate its position. (See Cal. Rules of Court, rule 3.1113(b) [supporting memorandum must include a discussion of legal authority in support of the position advanced].)

Next, Defendant contends that, even if the consumer transaction exception under subdivision (b) applied, the venue selection clause would not be unconscionable but only “void and unenforceable” under subdivision (c). While not especially clear, Defendant appears to suggest that, because Section 395 uses the terms “void and unenforceable” and does not reference unconscionability, Plaintiffs cannot state a claim for violation of the CLRA based on the theory the venue selection provision is unconscionable. It references no legal authority to support this curious proposition. As such, its position is unsubstantiated.

The demurrer to the second cause of action on the ground of failure to state sufficient facts is therefore OVERRULED.