Esther Hoffman v. Transworld Systems, Inc. ( 2020 )

FILED
NOT FOR PUBLICATION
MAR 19 2020
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
ESTHER HOFFMAN; et al., No. 19-35058
Plaintiffs-Appellants, D.C. No. 2:18-cv-01132-JCC
v.
MEMORANDUM*
TRANSWORLD SYSTEMS, INC.; et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the Western District of Washington
John C. Coughenour, District Judge, Presiding
Argued and Submitted March 2, 2020
Seattle, Washington
Before: IKUTA, R. NELSON, and HUNSAKER, Circuit Judges.
Esther Hoffman, Sarah Douglass, Anthony Kim, Daria Kim, and Il Kim
(collectively, the “Plaintiffs”) appeal the district court’s dismissal of their claims
under the Washington Consumer Protection Act (“CPA”), RCW 19.86 et seq.,
against Transworld Systems, Inc. (“TSI”), Patenaude & Felix, LLC (“P&F”), and
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Matthew Cheung (collectively, the “Defendants”). We have jurisdiction under 28
U.S.C. § 1291, and we affirm in part and reverse in part.1
We reject the Defendants’ argument that the Plaintiffs’ complaint does not
survive a motion to dismiss because it failed to make plausible allegations that the
Defendants used false affidavits and did not possess assignment documentation to
support their collection actions. Reading the complaint in the light most favorable
to the Plaintiffs, see Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), the consent order
that TSI entered into with the Consumer Financial Protection Bureau (“CFPB”)
makes it plausible that the affidavits filed by the Defendants in the collection
actions against the Plaintiffs were false and that the supporting documentation was
lost or missing. We also reject the Defendants’ argument that they are immune
from liability for any court filing under Washington’s litigation privilege, which
protects witnesses from incurring liability for defamation. See Wynn v. Earin, 181
P.3d 806, 810 (Wash. 2008) (en banc); Twelker v. Shannon & Wilson, Inc., 564
P.2d 1131, 1133 (Wash. 1977). Because the witnesses in this case were individual
1
Because the district court granted the Defendants’ motion to dismiss, its
order “dispensed with all of [the Plaintiffs’] claims,” and was a “full adjudication
of the issues” that was “sufficiently final” for the panel’s de novo review. Applied
Underwriters, Inc. v. Lichtenegger, 913 F.3d 884, 892 n. 5 (9th Cir. 2019) (citation
omitted). Thus, the district court’s subsequent order dismissing all claims with
prejudice had no effect on the standard of review. See id. at 890.
2
TSI employees who signed the allegedly false affidavits (rather than TSI itself),
and the Defendants are not being sued for defamation, the privilege does not apply.
We disagree with the district court’s conclusion that the Plaintiffs’ per se
CPA claims based on a violation of the Fair Debt Collection Practices Act
(“FDCPA”), 15 U.S.C. § 1692 et seq., are barred by the FDCPA’s one-year statute
of limitations.2 Per se CPA claims are governed by the CPA statute of limitations.
See Walker v. Wenatchee Valley Truck & Auto Outlet, Inc., 229 P.3d 871, 877
(Wash. Ct. App. 2010); Mackey v. Maurer, 220 P.3d 1235, 1237–38 (Wash. Ct.
App. 2009). Therefore, even though the Plaintiffs’ FDCPA claims have become
“stale,” Anderson v. Wells Fargo Home Mortg., Inc., 259 F. Supp. 2d 1143, 1147
n.3 (W.D. Wash. 2003), the Plaintiffs’ per se CPA claims based on violations of
the FDCPA are governed by the CPA’s four-year statute of limitations, see
RCW 19.86.120, and are not time-barred. We therefore reverse the district court’s
dismissal of the per se CPA claims based on violations of 15 U.S.C.
§§ 1692e(2)(A), (10).
We also reverse the district court’s dismissal of the Plaintiffs’ CPA claims
based on violations of 15 U.S.C. § 1692f. Taking the well-pleaded factual
2
Because the parties do not dispute whether a violation of the FDCPA may
satisfy the first three elements of the CPA, we assume without deciding that this is
a correct statement of Washington law.
3
allegations of the complaint as true, see Iqbal, 556 U.S. at 678, the Defendants’
attempts to collect debts with false affidavits and without the necessary
documentation to prove their claims plausibly alleged the use of “unfair or
unconscionable means to collect or attempt to collect any debt.” 15 U.S.C. § 1692f.
We affirm the district court’s dismissal of the Plaintiffs’ per se CPA claims
asserting that the Defendants violated 15 U.S.C. § 1692e(5), because the
Defendants did not make a “threat to take any action that cannot legally be taken or
that is not intended to be taken,” 15 U.S.C. § 1692e(5); rather, they filed a lawsuit.
We also affirm the district court’s dismissal of the Plaintiffs’ per se CPA
claims based on violations of the Washington Collection Agency Act (“CAA”),
RCW 19.16.100 et seq., because the complaint does not allege conduct that
violates the CAA. The Plaintiffs failed to state a CPA claim for violation of
section 19.16.250(16) of the Revised Code of Washington because the Defendants
filed a collection lawsuit rather than making a threat to take any further litigation
action. The Plaintiffs’ reliance on Evergreen Collectors v. Holt is misplaced
because that case involved an express verbal threat in violation of a different
provision of the CAA. 803 P.2d 10, 12 (Wash. Ct. App. 1991). The Plaintiffs’ per
se CPA claims based on the Defendants’ attempts to collect an amount they were
not legally allowed to collect in violation of section 19.16.250(21) of the Revised
4
Code of Washington also fail, both because the Plaintiffs failed to establish a
predicate violation of section 19.16.250(16) of the Revised Code of Washington,
and because the consent order with the CFPB changed TSI’s legal obligations only
with respect to the CFPB.
We reverse the dismissal of the Plaintiffs’ stand-alone CPA claims against
the Defendants.3 The complaint alleges that TSI is a debt collection agency, so its
activities occurred within trade or commerce for purposes of the CPA. See
Evergreen Collectors, 803 P.2d at 13. The complaint does not make clear whether
the Plaintiffs’ claims against P&F and Cheung are based on the performance of
legal services or debt collection activities. Although “the CPA has no application
to the performance of legal services,” Panag v. Farmers Ins. Co. of Wash., 204
P.3d 885, 899 n.14 (Wash. 2009) (en banc), and filing false affidavits is not an
“entrepreneurial aspect[] of the practice of law,” Short v. Demopolis, 691 P.2d 163,
3
P&F and Cheung do not argue Plaintiffs’ per se CPA claims based on the
FDCPA fail because legal services do not satisfy the “trade or commerce” element
of a CPA claim. To the extent an FDCPA violation may serve as the basis of a per
se CPA claim, see supra at 3 n.2, then an FDCPA violation per se satisfies the
“trade or commerce” element, along with the “unfair or deceptive” and “public
interest” elements, of the CPA. Further, regardless whether P&F and Cheung
engaged in entrepreneurial activities, they can be held liable for FDCPA violations
because the Supreme Court has held that the FDCPA applies to “attorneys who
‘regularly’ engage in consumer-debt-collection activity, even when that activity
consists of litigation.” Heintz v. Jenkins, 514 U.S. 291, 299 (1995).
5
168 (Wash. 1984) (en banc), law firms and attorneys may be liable under the CPA
where they “go[] outside the practice of law and engage[] in a commercial
enterprise” such as debt collection, see Styrk v. Cornerstone Invs., Inc., 810 P.2d
1366, 1371 (Wash. Ct. App. 1991). Here, the complaint alleges that P&F is a
licensed collection agency that is engaged in a business “the principal purpose of
which is the collection of debts” and that Cheung is engaged in a business in which
he regularly collects debts. But the complaint fails to make clear whether the
stand-alone CPA claims are based on debt collection activity or solely on the
performance of legal services. We instruct the district court to grant Plaintiffs
leave to amend their complaint to give them the opportunity to address whether
P&F’s and Cheung’s involvement in the alleged deceptive practices went beyond
legal representation and included debt-collection activities.
We also instruct the district court to grant the Plaintiffs leave to amend their
complaint to address whether they have paid money to the Defendants and thus
incurred an injury as a result of the default judgment obtained through the
allegedly false affidavits. Besides their statement at oral argument, the Plaintiffs
have not alleged an injury to business or property resulting from the default
judgments, as required to state a stand-alone CPA claim, see RCW 19.86.090;
obtaining legal counsel to defend themselves against the collections actions filed
6
against them in state court is not an actionable injury, see Sign-O-Lite Signs, Inc. v.
DeLaurenti Florists, Inc., 825 P.2d 714, 720 (Wash. Ct. App. 1992), and the
Plaintiffs have not alleged that any money has been collected from them through
implementation of a writ of garnishment or otherwise.
AFFIRMED IN PART AND REVERSED IN PART.4
4
Each party will bear its own costs on appeal.
7