Mary Yazo v. Law Enforcement Systems, Inc. et al
Filing
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ORDER Court grants defendants motion to dismiss with leave to amend 5 . After the hearing, LES filed a request for an evidentiary hearing, or in alternative, conversion of its motion to dismiss the complaint to a motion for summary judgment. In light of the Courts ruling on the motion to dismiss, the Court vacates that Request as moot 15 by Judge Dean D. Pregerson (lc)
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 v. LAW ENFORCEMENT SYSTEMS, INC., a New York corporation, Defendants. ___________________________ MARY YAZO, an individual on behalf of herself and all others similarly situated, Plaintiff, ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No. CV 08-03512 DDP (AGRx) ORDER GRANTING MOTION TO DISMISS [Motion to Dismiss filed on September 3, 2008; Request for Evidentiary Hearing filed October 21, 2008] UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA
This matter comes before the Court on Defendant Law Enforcement Systems, Inc.'s motion to dismiss Plaintiff Mary Yazo's Complaint. Law Enforcement Systems ("LES") moves to dismiss Yazo's Fair Debt Collection Practices Act and state unlawful business practices claims. After reviewing the materials submitted by the
parties and hearing oral argument, the Court grants the motion to dismiss with leave to amend. I. BACKGROUND Plaintiff Mary Yazo ("Yazo") filed this action behalf of herself and all others similarly situated on May 29, 2008. The Complaint alleges that Yazo, a resident of Riverside, California,
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incurred debt on the 91 Express Lanes for failure to pay toll road fees. Compl. ¶¶ 6, 11. The 91 Express Lanes, operated by Orange County Transit Authority, are a four-lane ten-mile road in the median of California's Riverside Freeway (State Route 91). Id. ¶ 11. Yazo's debt was originally the property of the 91 Express Lanes, but was transferred to LES for collection. Id. ¶ 12. Yazo received a letter demanding payment for the outstanding debt. Id. ¶ 13. Yazo alleges that the letter was deficient in that it (1) failed to afford Yazo the requisite validation of debt, id. ¶ 15, and (2) failed to inform Yazo that LES was attempting to collect a debt and that information would be used for that purpose, id. ¶ 16. Additionally, Yazo alleges that, in a response to a letter from counsel, 91 Express Lanes provided no information regarding the amount of the debt owed and instead instructed Plaintiff's counsel to contact LES. Id. ¶ 18. Yazo alleges that, by including in its correspondence its full name, "Law Enforcement Systems, Inc.," LES "falsely and deceptively invoke[d] affiliation with federal or state law enforcement agencies." Id. ¶ 23. The use of the name, Yazo alleges, "implicitly threatens arrest or criminal prosecution for failure to pay the debt." Id. Yazo alleges that the letter, and LES's subsequent contact with Yazo, violated the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692, et seq. Compl. ¶¶ 21-27. Yazo also claims that LES committed unlawful business practices in violation of California Business and Professions Code § 17200 et seq. LES brings this motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), failure to state a claim. In its Motion
to Dismiss, LES argues that the FDCPA does not apply to fines 2
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imposed by state law or those imposed as a result of automotive infractions, but rather only to consensual consumer transactions. Because LES was attempting to collect a fine imposed by the California Vehicle Code, the FDCPA does not apply to LES's attempts to collect those fines. Additionally, LES argues, there could be no consensual transaction in this case. II. DISCUSSION A. Legal Standard
Federal Rule of Civil Procedure Rule 12(b)(6) allows a plaintiff's complaint to be dismissed for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). Under
Rule 12(b)(6), a complaint may be dismissed for failure to state a claim if, after accepting the complaint's material allegations and facts, it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim which would entitle the plaintiff to relief. See Branch v. Tunnell, 14 F.3d 449, 455 (9th Cir. 1994). B. "Debt" Under the FDCPA
Yazo's complaint alleges violations of 15 U.S.C. §§ 1692e1692g. Compl. ¶¶ 23-26. Each of these sections depends on the meaning of the term "debt." Here, the central issue whether the obligation LES seeks to collect is a "debt" for the purposes of the FDCPA. Not all obligations to pay are considered "debts" under the FDCPA. Bass v. Stolper, Koritzinsky, Brewster & Neider, S.C., 111 F.3d 1322, 1324 (7th Cir. 1997); see Charles v. Lundgren & Assocs., P.C., 119 F.3d 739, 740-42 (9th Cir. 1997) (adopting the reasoning and approach of the Seventh Circuit in Bass). The FDCPA defines "debt" as: 3
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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, whether or not such obligation has been reduced to judgment. 15 U.S.C. § 1692a(5). The parties' dispute in this motion focuses solely on whether the unpaid funds at issue arise out of a "transaction" within the definition of "debt." § 1692a(5). Congress did not define the term "transaction" in the context of the FDCPA, but courts have read the term broadly such that it is not limited to, for example, an extension of credit. See Bass, 111 F.3d at 1325-26. Rather, the touchstone seems to be that "debt" is incurred when a consumer engages in a "consensual transaction": "the FDCPA limits its reach to those obligations to pay arising from consensual transactions, where parties negotiate or contract for consumer-related goods or services." Id. at 1326; see also Hawthorne v. Mac Adjustment, Inc., 140 F.3d 1367, 1371 (11th Cir. 1998)("[A]t a minimum, a `transaction' under the FDCPA must involve some kind of business dealing or other consensual obligation."); Betts v. Equifax Credit Info. Servs., 245 F. Supp. 2d 1130, 1133 (W.D. Wash. 2003); Hansen, 280 F. Supp. 2d 1196, 1202 (W.D. Wash. 2003). In the same vein, where the transaction is not a consensual one, the resulting obligation is not "debt" within the meaning of the FDCPA. The theft of goods or services, for example, does not qualify as a consensual transaction. Bass, 111 F.3d at 1326. "Although a thief undoubtedly has an obligation to pay for the 4
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goods and services he steals," it is an obligation outside of the scope of the FDCPA. Id. Similarly, an obligation arising from the violation of a law or the commission of a tort is not the result of a consensual transaction. In Betts, for example, the plaintiff's car had been towed and impounded when it was illegally parked, and the plaintiff owed the fee for that impoundment. 245 F. Supp. 2d at 1133. The court rejected the plaintiff's contention that the fee for the impoundment was a "debt" within the meaning of the FDCPA because the event giving rise to the obligation to pay - the impoundment - was not a consensual consumer transaction, but rather a consequence imposed by a Washington state statute. Id.; see also Shorts v. Palmer, 155 F.R.D. 172 (S.D. Ohio 1994); Hawthorne, 140 F.3d at 1367 (damage awards resulting from tort liability are not "debts" under the FDCPA); Corridean v. Restore Fin. Servs., 2007 WL 1114221 (D. Or. 2007). In this case, the parties agree that Yazo's obligation constitutes two parts: the toll charges themselves and the fines imposed for her failure to pay a toll. See Opp. at 5; Reply at 3. The latter obligation the fines were incurred as a penalty authorized by California Vehicle Code § 40250. Because these are fines imposed as a result of a statutory violation, they were not incurred through a consensual transaction and fall outside the scope of the FDCPA's definition of "debt." See Betts, 245 F. Supp. 2d at 1133. The parties disagree, however, on the nature of the toll charges. Yazo argues that the toll charges are distinct from the fines, and were the result of a consensual transaction. LES contends that the toll charges are also outside the scope of the 5
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FDCPA. First, LES argues that the "collection" of the underlying toll charge is imposed by statute, not by contract. LES points to California Vehicle Code § 23301, which provides that "[e]very vehicle which enters into or upon any vehicular crossing immediately becomes liable for such tolls and other charges as may from time to time be prescribed by the California Transportation Commission." Second, LES argues that, in light of the sections of the California Vehicle Code providing when a toll is due, failing to pay a toll constitutes stealing. As a general matter, a toll charge, the charge for the use of the toll road, is a charge for services. A driver incurs the toll charge upon making his choice to utilize the toll road. But a consensual transaction does not exist in all instances where a driver uses a toll road. Rather, when a driver fails to pay the toll charge, the use of the toll road is akin to theft. California law makes clear that toll road use is only consensual in certain situations. First, pursuant to California Vehicle Code § 23302(b), certain toll roads those without toll booths are open only to those customers who "already have a transponder or other toll payment device associated with a valid Automatic Vehicle Identification account." Cal. Veh. Code § 23302(b). To the extent a driver does not have an account on a toll road that requires one as a condition for use, yet uses the toll road anyway, that use cannot be considered consensual. Second, for all toll roads, California law allows only those persons who can pay tolls at the instant they are liable for them to use the toll roads. See Cal. Veh. Code §§ 23301, 23302(a). Thus, to the extent a driver does not have intent or does not have means to pay 6
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for use of the toll road, yet uses the toll road anyway, that use constitutes theft, and is not a consensual transaction that gives rise to "debt" under the FDCPA. Cf. Bass, 111 F.3d at 1326 (discussing Zimmerman v. HBO Affiliate Group, 834 F.2d 1163 (3d Cir. 1987)); Shorts, 155 F.R.D. at 175-76. The Complaint alleges that Yazo's obligation to pay toll charges arose from a failure to pay toll road fees on the 91 Expressway. See Compl. ¶ 11. Because the 91 Express Lanes is a toll road, see Compl. ¶ 11, in light of §§ 23301 & 23302, a transaction in which a driver fails to pay fees on the 91 Express Lanes is not consensual. As noted above, "[a]lthough a thief undoubtedly has an obligation to pay for the goods and services he steals," it is an obligation outside of the scope of the FDCPA. See Bass, 111 F.3d at 1326. Yazo has not pled facts showing a consensual contractual or business dealing for the use of the toll road services. Rather, taking Yazo's allegation that she failed to pay toll charges as true, the Court cannot conclude that the obligation to pay arose out of a consensual consumer transaction, and therefore finds that it is outside the scope of "debt" as contemplated by the FDCPA. The Court therefore dismisses the plaintiff's FDCPA cause of action with leave to amend. C. Plaintiff's Unlawful Business Practices Claim
In addition to the FDCPA claim, Yazo's Complaint also alleges a cause of action for unlawful business practices in violation of state law, California Business and Professions Code § 17200. LES argues that Yazo's unlawful business practices claim rests solely on her FDCPA claim; to the extent Yazo's FDCPA claim fails, LES argues, so must her § 17200 claim. 7
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Under § 17200, unfair competition includes "any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising," as well as false or misleading statements. Cal. Bus. & Prof. Code § 17200. A plaintiff alleging unlawful business practices under the unfair competition statutes "`must state with reasonable particularity the facts supporting the statutory elements of the violation.'" Silicon Knights, Inc. v. Crystal Dynamics, Inc., 983 F. Supp. 1303, 1316 (N.D. Cal. 1997) (quoting Khoury v. Maly's of Cal., 14 Cal. App. 4th 612, 612 (1993)). Yazo's unlawful business practices claim relies on the FDCPA claim. Yazo alleges that "by and through the conduct described [in the Complaint], Defendant LES engaged in unfair, fraudulent and unlawful practices." Compl. ¶ 33; see also id. ¶ 33 ("By and through the unfair, fraudulent and unlawful business practices described herein, Defendant LES has failed to comply with the FDCPA[.]"). Paragraph 28 of the Complaint incorporates by reference ¶¶ 1-27. Id. ¶ 28. Because the Court has dismissed Yazo's FDCPA claim, that claim cannot form the basis of a valid unlawful business practices claim. Aquino v. Credit Control Servs., 4 F. Supp. 2d 927, 930 (N.D. Cal. 1998)("The Court has already rejected plaintiff's primary FDCPA claim and it cannot serve as the basis of a claim under section 17200."). Yazo argues that "[p]aragraphs 1 through 27 of the complaint set forth, with particularity, the specific `unlawful' conduct which gives rise to the section 17200 violation." Opp. at 15. On the Court's reading of those paragraphs, the allegedly unlawful conduct is the conduct that allegedly violates the FDCPA. Indeed, 8
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Yazo's brief emphasizes her reliance on the FDCPA claims. Opp. at 16:9-27. Yazo does not identify specific paragraphs or allegations that support a § 17200 claim separate from the potential FDCPA violation. The only portion of a paragraph the Court can identify on its own is the portion of ¶ 23 that claims LES's name "falsely and deceptively invokes affiliation with federal or state law enforcement agencies." Yazo does not explain how this allegation supports an unlawful business practices claim apart from the alleged violation of § 1692e of the FDCPA. Accordingly, because the state law unfair business practices claim relies solely on the deficient FDCPA claim, the Court grants the motion to dismiss. III. Conclusion For the foregoing reasons, the Court grants the motion to dismiss with leave to amend. After the hearing, LES filed a request for an evidentiary hearing, or in alternative, conversion of its motion to dismiss the complaint to a motion for summary judgment. In light of the Court's ruling on the motion to dismiss, the Court vacates that Request as moot. IT IS SO ORDERED.
Dated: November 7, 2008
DEAN D. PREGERSON United States District Judge
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