DATE: February 17, 2015
TIME: 9:00 a.m.
DEPT.: 21

PROF. COLLECTION CONSULTANTS v. CRYSTAL LAURON
Case No.: 1-11-CV-213127

The Court has before it what amounts to three separate motions: a motion for summary judgment by Plaintiff Professional Collection Consultants (“PCC”) only on its form Complaint (filed by the Law Offices of Clark Garen); a joint motion for summary judgment by PCC as a Cross-Defendant along with the other Cross-Defendants directed at Defendant/Cross-Complainant Lauron’s First Amended Cross-Complaint (“FACC”); and a motion for summary adjudication of five purported “issues” by PCC as both Plaintiff and Cross-Defendant and by the other Cross-Defendants.

Plaintiff and Cross-Defendants’ joint request for judicial notice is granted as follows: Notice of exhibits 1-3 is granted pursuant to Evid. Code §452(d) (as court records). Notice of exhibits 4-8 is granted pursuant to Evid. Code §451(a) (“decisional law” of this state and of the United States). Notice of exhibit 9 is granted pursuant to Evid. Code §452(a) (“decisional law” of a sister state) and notice of exhibit 10 is granted pursuant to Evid. Code §451(a) (statutory law of this State).

The pleadings limit the issues present for summary judgment, and a motion for summary judgment cannot be granted or denied on issues not raised by the pleadings. See Nieto v. Blue Shield of Calif. Life & Health Ins. (2010) 181 Cal App 4th 60, 73 (“the pleadings determine the scope of relevant issues on a summary judgment motion.”). The moving party bears the initial burden of production to make a prima facie showing that there are no triable issues of material fact. Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850. A summary adjudication motion must completely dispose of the cause of action, defense, damage claim, or duty issue to which it is directed. See McClasky v. California State Auto. Ass’n (2010) 189 Cal App 4th 947, 975 (“If a cause of action is not shown to be barred in its entirety, no order for summary judgment—or adjudication—can be entered.”)

The moving party’s declarations and evidence will be strictly construed in determining whether they negate or disprove an essential element of a plaintiff’s claim “in order to resolve any evidentiary doubts or ambiguities in plaintiff’s (or opposing party’s) favor.” Johnson v. American Standard, Inc. (2008) 43 Cal 4th 56, 64, parentheses added. While the same standards of admissibility govern both, the opposition declarations are liberally construed while the moving party’s evidence is strictly scrutinized. Saelzler v. Advanced Group 400 (2001) 25 Cal 4th 763, 768.

1) Motion for Summary Judgment on PCC’s Complaint
Where a plaintiff (or cross-complainant) seeks summary judgment, the burden is to produce admissible evidence on each element of a ‘cause of action’ entitling him or her to judgment. CCP §437c(p)(1); See Hunter v. Pacific Mechanical Corp.(1995) 37 Cal App 4th 1282, 1287, disapproved on other grounds in Aguilar. “This means that plaintiffs who bear the burden of proof at trial by a preponderance of evidence must produce evidence that would require a reasonable finder of fact to find any underlying material fact more likely than not. ‘Otherwise, he would not be entitled to judgment as a matter of law.’ Aguilar, supra at 851; LLP Mortgage v. Bizar (2005) 126 Cal App 4th 773, 776 (burden is on plaintiff to persuade court there is no triable issue of material fact). At that point, the burden shifts to defendant (or cross-defendant) ‘to show that a triable issue of one or more material facts exists as to that cause of action.’ CCP §437c(p)(1). It is not part of plaintiff’s initial burden to disprove affirmative defenses and cross-complaints asserted by defendant. See CCP §437c(p)(1); Consumer Cause, Inc. v. SmileCare (2001) 91 Cal App 4th 454, 468.

Plaintiff PCC’s MSJ is DENIED for failure to meet its initial burden to establish that there are no triable issues of material fact and that it is entitled to judgment on both causes of action in its Complaint. PCC has failed to show that its action is not time-barred under applicable law. The Court is not bound by PCC’s characterization of the claims in its form complaint as common counts; account stated and open book account respectively. “‘To determine the statute of limitations which applies to a cause of action it is necessary to identify the nature of the cause of action, i.e., the “gravamen” of the cause of action.’ The nature of the cause of action and the primary right involved, not the form or label of the cause of action or the relief demanded, determine which statute of limitations applies.” Carter v. Prime Healthcare Paradise Valley LLC (2011) 198 Cal.App.4th 396, 412, internal citations omitted. This is plainly an action to recover a debt incurred under a written contract, the credit card agreement Ms. Lauron entered into with Cross-Defendant Chase USA, N.A. (“Chase”), a Delaware corporation. See Lauron’s Exhibit P. PCC is simply the last in a string of entities who have been assigned Chase’s rights under that contract. “The assignment merely transfers the interest of the assignor. The assignee ‘stands in the shoes’ of the assignor, taking his rights and remedies, subject to any defenses which the obligor has against the assignor prior to the notice of the assignment.” 1 Witkin, Summary of California Law, Contracts, §735, p. 819. It would be absurd to find that an assignee of the rights of a party to a contract governed by express conditions was not bound by those express conditions to the same extent as the assignor.

There is no controlling authority on the precise limitations issue presented here and, rather than the cases cited by PCC, the Court finds persuasive the analysis on similar facts and issues in decisions such as Resurgence Financial LLC v. Chambers (2009) 173 Cal App 4th Supp. 1; McCorriston v. L.W.T., Inc. (M.D. Fla. 2008) 536 F.Supp. 2d. 1268; Lehman Bros. Holdings v. First Cal. Mortg. Corp., 2014 U.S. Dist. LEXIS 60573 (D. Colo. April 30, 2014), and; Izquierdo v. Easy Loans Corp., 2014 U.S. Dist. LEXIS 84483 (D. Nev., June 18, 2014).

The underlying credit card agreement between Chase and Lauron contains an express choice-of-law provision stating that the agreement is subject to Delaware law. Under Delaware Law actions for breach of contract and for open book account are subject to a three year statute of limitations. See 10 Del. Code §8106. Contrary to PCC’s argument (made in case the Court were to find Delaware law applicable) there is no tolling here under 10 Del. Code §8117. Such tolling can only reasonably apply to actions actually filed in a Delaware court or that could have been filed in a Delaware court. Any other construction would create the absurd result of effectively abolishing the statute of limitations in actions involving any Delaware non-resident sued in another state (or at least another state that, like California, has not adopted the Uniform Conflicts of Law Limitations Act) and of allowing indefinite tolling that would permit a debt collection claim to survive in perpetuity. See Resurgence Financial, supra, and Izquierdo, supra.

Accordingly, as this action was filed in California on Nov. 14, 2011 and admissible evidence (including PCC’s responses to requests for admissions; see Exhibits C & D to the Declaration of Defense Counsel Fred Schwinn) indicates that Lauron’s last payment on the credit card account was on October 30, 2008 and that no charges were made after Nov. 13, 2008, a triable issue clearly remains as to whether PCC’s Complaint is time-barred under Del. Code §8106’s three year statute of limitations, giving Lauron a complete defense.

California choice-of-law principles do not bar this outcome. The express choice-of-law provision in the underlying credit card agreement is a reasonable basis for choosing Delaware law. The court next determines if Delaware law in this context is contrary to a fundamental policy of California. California courts have afforded contracting parties considerable freedom to modify the length of a statute of limitations. Courts generally enforce parties’ agreements for a shorter limitations period than otherwise provided by statute, provided it is reasonable. “Reasonable” in this context means the shortened period nevertheless provides sufficient time to effectively pursue a judicial remedy. In this case, the shortened period would be three years instead of four years. This is not unreasonable. See Resurgence Financial LLC, supra.

The Court notes that even if Delaware law were not found applicable triable issues would remain and the motion would be denied. The decision in Zinn v. Fred R. Bright Co. (1969) 217 Cal App 2d 597 is distinguishable on its specific (and unusual) facts and does not accurately reflect California law. Any assignee of a contracting party can have no greater rights than the assignor. Monies due under an express written contract (such as the Chase Cardmember Agreement) “cannot, in the absence of a contrary agreement between the parties, be treated as items under an open book account so as to allow the unpaid creditor to evade or extend the statutory limitations period.” Tsemetzin v. Coast Federal Savings & Loan Assoc. (1997) 57 Cal App 4th 1334, 1343. See also Armstrong Petroleum Corp. v. Tri-Valley Oil & Gas Co. (2004) 116 Cal App 4th 1375, 1396 fn. 9. As for an account stated, the law is established in California that a debt which is predicated upon the breach of the terms of an express contract cannot be the basis of an account stated. Moore v. Bartholomae Corp. (1945) 69 Cal.App.2d 474, 477-478. Here it is clear that the debt is predicated on Lauron’s breach of the Chase Cardmember Agreement. PCC is simply Chase’s assignee, several steps removed.

2) Motion for Summary Judgment on Lauron’s FACC
“A defendant [or cross-defendant] seeking summary judgment must show that at least one element of the plaintiff’s cause of action cannot be established, or that there is a complete defense to the cause of action. … The burden then shifts to the plaintiff to show there is a triable issue of material fact on that issue.” Alex R. Thomas & Co. v. Mutual Service Casualty Ins. Co. (2002) 98 Cal.App.4th 66, 72; internal citations omitted, brackets added.

The Motion for Summary Judgment on Lauron’s two cross-claims for violation of the Federal Fair Debt Collection Act (“FDCPA”), 15 U.S.C. §§1692-1692o, and for violation of the Rosenthal Fair Debt Collection Practices Act (Civ. Code §§1788 et seq.) by PCC as a Cross-Defendant and by Cross-Defendants Todd Shields, Wireless Receivables Acquisition Group and Clark Garen is DENIED.

PCC has admitted that the financial obligation it seeks to collect from Lauron constitutes a “debt” as defined in 15 U.S.C. §1692a(5) (the FDCPA) and a “consumer debt” as defined by Civ. Code §1788.2(f) (Rosenthal Act). See Exhibits C & D to Schwinn Declaration. Because the Court finds that the Delaware statute of limitations applies here, a triable issue clearly remains as to whether Cross-Defendants knew or should have known that the debt they were seeking to collect from Lauron was time-barred. Attempting to force a debtor to pay a time-barred debt constitutes a violation of the both the FDCPA and the Rosenthal Act.

“[A] debt collector violates the FDCPA by using the courts to attempt to collect a time-barred debt.” McCollough v. Johnson, Rodenberg & Lauinger (D. Mont. 2009) 610 F.Supp.2d 1247, 1257; see also Phillips v. Asset Acceptance, LLC (7th Cir. 2013) 736 F.3d 1076, 1079 (suit filed “after the statute of limitations on the creditor’s claim ha[s] run” violates the FDCPA); Herkert v. MRC Receivables Corp. (N.D. Ill. 2009) 655 F.Supp.2d 870, 875 (“Numerous courts, both inside and outside this District, have held that filing or threatening to file suit to collect a time-barred debt violates the FDCPA.”); Goins v. JBC & Assocs., P.C. (D. Conn. 2005) 352 F.Supp.2d 262, 272 (“As the statute of limitations would be a complete defense to any suit, … the threat to bring suit under such circumstances [is a] violation of § 1692e.”); Kimber v. Federal Financial Corp. (M.D. Ala. 1987) 668 F.Supp. 1480, 1487 [“filing a lawsuit to collect on a debt that appears time-barred, without first determining after a reasonable inquiry that the limitations period is due to be tolled, constitutes an unfair and unconscionable practice offensive to § 1692f”].) A defendant who violates the FDCPA also violates the Rosenthal Act, which provides that “every debt collector collecting or attempting to collect a consumer debt shall comply with the provisions of Sections 1692b to 1692j, inclusive, of …Title 15 of the United States Code.” Civ. Code, § 1788.17; see also Hosseinzadeh v. M.R.S. Assocs. (C.D. Cal. 2005) 387 F.Supp.2d 1104, 1118 (“Because defendant has violated the FDCPA for the reasons stated herein, the Court concludes that defendant has also violated Cal. Civ. Code, § 1788.17.”)

Nor could the litigation privilege provide Cross-Defendants a defense to the FACC. While it is true that “[s]ome [district court] decisions have found the privilege to be applicable” to RFDCPA claims, “most have concluded that the privilege must yield in this context.” Komarova v. National Credit Acceptance, Inc. (2009) 175 Cal.App.4th 324, 337 (citing district court cases). California courts have “agree[d] with the majority of these cases that the privilege cannot be used to shield violations of the [RFDCPA].” Id.; see also People v. Persolve, LLC (2013) 218 Cal.App.4th 1267, 1277 (“unfair competition law claims that are based on conduct that is specifically prohibited by the [RFDCPA] and/or the [FDCPA] are not barred by the litigation privilege.”)

The individual cross-defendants also have not met their initial burdens on this motion to show a complete absence of triable issues or establish a complete defense. They have not established that they were not personally involved in the potentially illegal debt collection efforts. Cross-Defendant Todd Shields, identifying himself as a Vice-President, verified PCC’s Complaint in this action seeking to collect on a debt that appears time barred and verified some of PCC’s discovery responses in this matter. See Exhibit B to the Schwinn Declaration. The Compliant was filed on behalf of PCC by the Law Offices of Clark Garen, which also prepared PCC’s discovery responses. Mr. Garen, in his capacity as Managing Member of Cross-Defendant Wireless Receivables, signed the “Credit Card Account Purchase Agreement” whereby Turtle Creek Assets transferred its rights as assignee of Chase to Wireless Receivables. See Exhibit O to the Declaration of Defense Counsel Nathaniel Bigger. Mr. Garen also in that capacity signed the “Assignment of Account” transferring the contractual rights that originally belonged to Chase from Wireless Receivables to PCC. See Exhibit B to the Schwinn Declaration. The Court also notes that Garen has both signed and verified, as Vice-President and General Counsel of PCC, PCC’s responses to discovery in this matter propounded upon it by Cross-Defendant Chase. See Exhibits I & J to the Schwinn Declaration.

3) Motion for Summary Adjudication of Issues
Because this motion is expressly brought by PCC both in its capacity as Plaintiff and as Cross-Defendant and by the other Cross-Defendants to Lauron’s FACC (See Notice of Motion at 2:18-3:11) it is deemed an independent motion rather than a motion in the alternative to either of the two summary judgment motions which are confined to either the Complaint or the FACC.

Pursuant to CCP §437c(f)(1) a party may move for summary adjudication only of “one or more causes of action within an action, one or more affirmative defenses, one or more claims for damages, or one or more issues of duty . . . A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty.” Summary adjudication of general “issues” or of facts is not permitted. See Raghavan v. The Boeing Company (2005) 133 Cal App 4th 1120, 1136.

Summary adjudication of all five designated issues is DENIED. PCC and Cross-Defendants have not met their burden to show that any of the issues “completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty,” largely for the same reasons both motions for summary judgment fail. Issue no. 5, asserting that Cross-Defendant Garen did not violate Bus. & Prof. Code §6129, is not a proper subject for adjudication as no such cause of action is alleged in the FACC.