Falls v. Hunt & Henriques CA4/1 ( 2015 )

Filed 4/13/15 Falls v. Hunt & Henriques CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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or ordered published for purposes of rule 8.1115.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
RONALD FALLS, D065796
Plaintiff, Cross-Defendant and
Respondent,
(Super. Ct. No. 37-2013-00053402-
v. CL-BT-CTL)
HUNT & HENRIQUES,
Defendant, Cross-Complainant and
Appellant.
APPEAL from an order of the Superior Court of San Diego County, Timothy B.
Taylor, Judge. Affirmed.
Simmonds & Narita, Michael R. Simmonds and Tomio B. Narita for Defendant,
Cross-Complainant and Appellant.
Recordon & Recordon, Stephen G. Recordon; Law Offices of Clinton Rooney,
Clinton J. Rooney; The Christison Law Firm and Randall B. Christison for Plaintiff,
Cross-Defendant and Respondent.
Plaintiff and respondent Ronald Falls (Falls) brought a complaint for damages
against defendant and appellant Hunt & Henriques (Hunt), a law firm, and its former
client Midland Funding, LLC (Midland; not a party to this appeal), seeking to recover
under two debtor protection statutory schemes. As against Hunt, Falls claims it violated
the Fair Debt Collections Practice Act (FDCPA), title 15 United States Code section 1692
et. seq.1 Falls alleged Midland, a debt collector, violated the same provisions, and it
additionally acted improperly under the related state scheme, the Rosenthal Fair Debt
Collection Practices Act (Civ. Code, § 1788 et seq.; the RFDCPA). Previously, Midland
was legally represented by Hunt when it sued Falls in San Diego Superior Court to
recover money he owed to a bank on a consumer credit card, after the bank closed out his
account in 2009 and referred the matter to collection. (Midland Funding v. Falls (Super.
Ct. San Diego, 2012, No. 37-2012-00078442-CL-CL-SC) (the underlying action).)
Falls responded by filing the current lawsuit, claiming improper FDCPA
procedures were followed (e.g., § 1692f ["A debt collector may not use unfair or
unconscionable means to collect or attempt to collect any debt"]). Hunt brought a special
motion to strike the claims against it pursuant to the anti-SLAPP statutory scheme, Code
of Civil Procedure section 425.16.
Hunt appeals from the denial of its motion to strike. Although the trial court
agreed with Hunt that the conduct complained of "arose" from actions in furtherance of
protected litigation conduct, the trial court ruled against Hunt on the second prong of the
1 All further section references are from the FDCPA, title 15 United States Code
section 1692 et seq., unless otherwise stated.
2
inquiry. (Code Civ. Proc., §425.16, subd. (b)(1); Navellier v. Sletten (2002) 29 Cal.4th
82, 88-89 (Navellier).) The trial court concluded Falls had adequately demonstrated
" ' "that the complaint is both legally sufficient and supported by a sufficient prima facie
showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff
is credited." ' " (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 820
(Oasis).) The court ruled that inferences could be drawn from the evidence that Hunt had
engaged in unlawful means of attempting to collect a debt, and that it cannot be decided
as matters of law if its affirmative defenses have merit. No attorney fees were awarded.
On appeal, Hunt agrees the trial court correctly found the anti-SLAPP statutory
scheme was applicable to its protected conduct, but argues the court erred as a matter of
law in the second part of the analysis, by finding that Falls had sufficiently shown a
probability of prevailing. According to Hunt, de novo review of the record will only
support a conclusion that the complaint against it should be disposed of on the strength of
its affirmative defenses, one of which claims that Falls had unclean hands when he failed
to keep his address updated with the bank. (Civ. Code, § 1788.21 [RFDCPA duties of
debtor].)2 Hunt further asserts that any inaccuracies in its choice of venue were only
bona fide errors, and it is therefore entitled to assert an FDCPA statutory defense as a
matter of law. (§ 1692k(c).)
Based on the pleadings and evidentiary submissions in the record, we conclude the
trial court correctly denied the motion to strike with respect to the second prong of the
2 Civil Code section 1788.17 in the RFDCPA requires compliance with the federal
act's provisions.
3
analysis. (Code Civ. Proc., § 425.16, subd. (b)(1).) The trial court appropriately
analyzed the respective showings on the special motion to strike, by treating the
remaining disputes as requiring factual resolution of threshold issues before any statutory
or other defenses could properly be applied. We affirm the order denying the motion.
FACTUAL AND PROCEDURAL BACKGROUND
A. Background on Underlying Action
In determining whether the anti-SLAPP statutory scheme properly applies to this
set of allegations, we look to the pleadings and the respective showings on the motion.
(Navellier, supra, 29 Cal.4th 82, 88-89.) In September 2012, Hunt filed the underlying
Midland complaint against Falls for breach of contract, in San Diego County. Its process
server left the complaint at Falls's friend's home in Chula Vista (Mr. Lee Ricks), where
Falls sometimes received packages to be forwarded to him. Hunt filed a proof of service
of summons with the process server's declaration of reasonable diligence, that he was told
by Ricks that Falls received mail at this address. Hunt later sought an entry of Falls's
default in the action.
Falls learned from his friend about the filing of the underlying action, and he
notified Hunt that he left California in 1996 and had lived in Singapore since 2006. Falls
brought a motion to quash service of summons, which was granted, and the court found
that the substituted service on Falls's friend had been ineffective.
Falls filed this complaint in June 2013, seeking individual recovery against Hunt
under the FDCPA. He requested actual and statutory damages, as well as an award of
attorney fees and costs. (§ 1692k(a); Civ. Code, § 1788.30, subds. (a)-(c).) Falls asserted
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Hunt's violations of law were willful and knowing. In paragraphs 30 through 32 of the
complaint, he alleged that the underlying action was wrongfully filed in San Diego
County, the proof of service was false and the default had been sought wrongfully.
Both Hunt and Midland filed answers to this complaint.
B. Motion to Strike, Opposition and Ruling
Hunt filed its anti-SLAPP motion to strike the complaint against it, arguing that all
the allegations attacked only protected litigation conduct. Hunt provided declarations
from two attorneys, one a Hunt partner, outlining the procedures it had followed in
researching the whereabouts of Falls. They contended the search was adequate and
satisfied the terms of the FDCPA. (§ 1692k(c).)3 Hunt had learned from its client
Midland that Falls's last known address was in Chula Vista, and it obtained a San Diego
area code telephone number for Falls from an inquiry through the credit reporting firm
Experian. Hunt contended that Falls had failed to keep his creditors updated with current
addresses, and this constituted unclean hands because it violated Civil Code section
1788.21 (duties of a debtor).4
3 Section 1692k(c) provides this defense: "A debt collector may not be held liable
in any action brought under this subchapter if the debt collector shows by a
preponderance of evidence that the violation was not intentional and resulted from a bona
fide error notwithstanding the maintenance of procedures reasonably adapted to avoid
any such error."
4 Civil Code section 1788.21 requires a debtor to be responsible for notifying
creditors of any change in name, address, or employment, if the creditor has disclosed
this responsibility to the debtor.
5
In opposition, Falls contended he had presented sufficient evidence that he would
probably prevail on at least a part of his claims, as indicated by the defective nature of the
search that Hunt and Midland had conducted. Falls claimed that he could easily be found
in Singapore, that he had received credit card statements online since 2006, and Hunt had
ignored the information given to it that he lived overseas. He argued that Hunt could not
assert the affirmative defense of unclean hands, suggesting it was a common law matter
potentially preempted by federal law (but not arguing this on appeal).
Falls's declaration opens by stating he has not lived anywhere in California since
1996. "While living in the U.S.," he opened the subject account. He notified the bank
that issued him the card (Washington Mutual) of his change of address in 2006, when he
moved to Singapore. When another bank (Chase) took over his account in 2009, he
updated his telephone number with it. In May 2012, Hunt or Midland called his mother
in Texas to ask about his whereabouts, and she told them he never lived with her in
Texas. After the process server left the summons and complaint at his friend's Chula
Vista address, Falls called one of the Hunt attorneys and made it clear that he lived in
Singapore. However, the request for default was nevertheless filed in the underlying
action, showing that Hunt continued to pursue the case, and Falls argued this amounted to
continuing violations of the FDCPA. Falls also submitted declarations from his mother,
his friend and his attorney.
Falls's request for judicial notice attached pleadings and orders filed in the
underlying action. The court granted his request to the extent that judicial notice could
be taken of the filing of documents, and of the truth of matters represented in orders and
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judgments. (People v. Harbolt (1997) 61 Cal.App.4th 123, 126-127.) The court rejected
the evidentiary objections that Hunt filed with its reply papers, that some of Falls's
declarations contained hearsay.
In Hunt's reply, it contended that the complaint had possibly been filed in the
proper venue, based on Falls's recent admission in his declaration that he had opened the
credit card account while living in the United States, apparently between 1996 and 2006.
It thus contended that Falls could not show he had a legally and factually sufficient claim,
because Hunt's affirmative defenses were sufficient to dispose of the complaint.
At the hearing, counsel for Hunt represented that the underlying action was not
being pursued after the granting of Falls's motion to quash. The trial court heard
argument and issued an order denying the motion to strike the complaint. The court ruled
that although Hunt met the first prong of the analysis, by showing that the complaint
arises from protected speech activity, Falls had met his responsive burden of showing that
he would probably prevail. The court ruled that the evidence was susceptible of
permissible inferences that Hunt had engaged in unlawful debt collection activities, by
pursuing Falls in California when it knew or should have known of his true address in
Singapore. Assuming that an unclean hands defense was applicable, Hunt had failed to
establish the merits of one or both of its affirmative defenses as matters of law.
Hunt appeals the order. (Code Civ. Proc., § 425.16, subd. (i).) By stipulation, the
remainder of the action, including the claims against Midland and the claims by Hunt in
its cross-complaint, has been stayed pending this appeal.
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DISCUSSION
I
ANTI-SLAPP STATUTORY PROVISIONS; PRONG ONE
Well-accepted authorities establish a two-step process for applying Code of Civil
Procedure section 425.16, subdivision (b)(1): " 'First, the court decides whether the
defendant has made a threshold showing that the challenged cause of action is one arising
from protected activity. . . . If the court finds such a showing has been made, it then
determines whether the plaintiff has demonstrated a probability of prevailing on the
claim.' " (Taus v. Loftus (2007) 40 Cal.4th 683, 712 (Taus); Oasis, supra, 51 Cal.4th
811, 820.)
To establish this probability of prevailing, Falls " 'must demonstrate that the
complaint is both legally sufficient and supported by a sufficient prima facie showing of
facts to sustain a favorable judgment if the evidence submitted by the plaintiff is
credited.' [Citations.] For purposes of this inquiry, 'the trial court considers the pleadings
and evidentiary submissions of both the plaintiff and the defendant ([Code Civ. Proc.,]
§ 425.16, subd. (b)(2)); though the court does not weigh the credibility or comparative
probative strength of competing evidence, it should grant the motion if, as a matter of
law, the defendant's evidence supporting the motion defeats the plaintiff's attempt to
establish evidentiary support for the claim.' [Citation.] In making this assessment it is
'the court's responsibility . . . to accept as true the evidence favorable to the plaintiff . . . .'
[Citation.] The plaintiff need only establish that his or her claim has 'minimal merit'
8
[citation] to avoid being stricken as a SLAPP.' " (Soukup v. Law Offices of Herbert Hafif
(2006) 39 Cal.4th 260, 291 (Soukup); Navellier, supra, 29 Cal.4th at p. 89.)
On appeal, we assess the trial court's rulings by reviewing the record de novo,
including the determinations made about the sufficiency of a litigant's showing on
liability or defenses in his pleadings and affidavits. (Oasis, supra, 51 Cal.4th 811, 820.)
Those sufficiency rulings present legal questions and issues of law. (Soukup, supra, 39
Cal.4th at p. 269, fn. 3; Damon v. Ocean Hills Journalism Club (2000) 85 Cal.App.4th
468, 474.)
As did the trial court, we accept that the allegations in this complaint "arise" from
protected statements and conduct. We next consider whether Falls has shown his
probability of prevailing on any part of his claim, thus establishing his cause of action has
some merit and is entitled to further adjudication. (Oasis, supra, 51 Cal.4th 811, 820;
Mann v. Quality Old Time Service, Inc. (2004) 120 Cal.App.4th 90, 106 (Mann).)
II
FALLS'S PROBABILITY OF PREVAILING; PRONG TWO
A. Scope of Legally Sufficient Issues Presented by Complaint
Remedial statutes enacted for public protection, such as the RFDCPA, should be
interpreted broadly to effectuate their purposes. (Komarova v. National Credit
Acceptance, Inc. (2009) 175 Cal.App.4th 324, 340; Civ. Code, § 1788.17 [federal law
incorporated into RFDCPA].) We first inquire whether Falls demonstrated that the
complaint is legally sufficient, for purposes of showing he will probably prevail in this
action. (Navellier, supra, 29 Cal.4th 82, 88-89; Taus, supra, 40 Cal.4th 683, 714.)
9
The parties dispute whether the complaint is broadly pled enough to encompass
two types of statutory violations, beyond section 1692f, which prohibits the use of "unfair
or unconscionable means" to collect debts. Falls's complaint also includes allegations
that Hunt's filing the complaint in an improper venue under section 1692i, and then
continuing to prosecute it, show its use of unfair or unconscionable means of debt
collection. (§ 1692f.)
Hunt claims its decision to file the complaint in the underlying action in San Diego
was legally defensible, based on the information it had (and it thus asserts the bona fide
error defense, § 1692k(c)). Hunt seeks to have stricken at least those portions of the
current complaint that challenge its decision on where to file the underlying complaint, in
a similar procedure to the way that other courts have treated "mixed" causes of action in
the anti-SLAPP context.
The anti-SLAPP case law debates whether the courts should properly strike a
complaint's allegations that attack a defendant's protected activity, if they are presented
within a "mixed" cause of action that alleges both protected or unprotected conduct.
(Cho v. Chang (2013) 219 Cal.App.4th 521, 526.) This approach would allow any of the
plaintiff's unprotected theories to survive for adjudication. (E.g., Haight Ashbury Free
Clinics, Inc. v. Happening House Ventures (2010) 184 Cal.App.4th 1539, 1554 [see conc.
& dis. opn. of Needham, J., at p. 1557 on distinction between "claim" and "cause of
action"]; Wallace v. McCubbin (2011) 196 Cal.App.4th 1169, 1199; City of Colton v.
Singletary (2012) 206 Cal.App.4th 751, 772-773; Burrill v. Nair (2013) 217 Cal.App.4th
357, 378 [views expressed that are contrary to City of Colton majority opinion].) Hunt
10
thus contends its affirmative defenses should have been deemed sufficient to dispose of
part of the complaint, at least, by showing that the pleading is legally and factually
insufficient as to the venue allegations.
To the extent Falls attacks the Hunt decision to file the complaint in San Diego, he
now seems to be arguing that Hunt's factual claims about venue were raised only in its
reply papers and/or on appeal. Falls thus argues that Hunt is seeking to impermissibly
expand the evidence in the record, by focusing on potential evidence that would support a
conclusion that San Diego Superior Court was in fact the proper venue (i.e., Falls's
admission in his declaration that he opened the subject credit card account while living in
the United States, apparently between 1996 and 2006; see § 1692i [venue provisions]).5
At this point, the record contains only exemplar credit card contracts, and it does not
establish where and when Falls signed one. The bottom line is that the record is not yet
clear on this subject.
For purposes of applying the anti-SLAPP test on legal sufficiency of the
pleadings, it is appropriate to read the complaint broadly and as a whole, as defining the
issues. This complaint alleges that different and continuing types of unfair or
unconscionable conduct allegedly occurred during the attempts to collect this debt. The
claims against Hunt are not mixed causes of action, and the trial court correctly found
(regarding prong 1) that they arose from protected activity. In any event, the
5 Under section 1692i(b), a debt collector's legal action against an individual may be
brought "only in the judicial district or similar legal entity -- [¶] (A) in which such
consumer signed the contract sued upon; or [¶] (B) in which such consumer resides at the
commencement of the action."
11
circumstance that Hunt filed an answer to the complaint suggests that Hunt had some
level of understanding of the legal sufficiency of the statutory claims against it. Under all
the circumstances, we are not required to "parse" the complaint to address the arguments
about whether some allegations should be stricken, and others permitted to survive. (See,
e.g., Cho v. Chang, supra, 219 Cal.App.4th 521, 526.)
B. Analysis: Role of Hunt's Affirmative Defenses; Falls's Prima
Facie Showing of Favorable Facts to Sustain Judgment?
We emphasize that it is not now before us whether Falls has or claims any good
defenses to the debt that was alleged in the underlying action. (See Yu v. Signet
Bank/Virginia (2002) 103 Cal.App.4th 298, 322-323 (Yu) ["the circumstances under
which a debt is incurred are irrelevant to a claim based on collection of the debt through
distant forum abuse"]; Yu v. Signet Bank/Virginia (1999) 69 Cal.App.4th 1377, 1395-
1396; cf. Baker v. G. C. Services Corp. (9th Cir. 1982) 677 F.2d 775, 777 [debtor has
standing to complain of violations of the FCPCA regardless of whether valid debt
exists].) Instead, the proper inquiry focuses on Falls's showing he will "probably" prevail
on the full scope of his cause of action against Hunt, based on his prima facie case.
(Taus, supra, 40 Cal.4th 683, 714; Oasis, supra, 51 Cal.4th 811, 820.)
As outlined above, we take the complaint on its face to be broadly alleging
different kinds of allegedly improper debt collection conduct, under one or more sections
of the FDCPA, pertaining to the place of filing and/or the later pursuit of allegedly
defective claims. The trial court took a fact specific approach and expressly ruled that
12
Falls had provided adequate evidence to support inferences that the FDCPA may have
been violated.
In comparing the respective showings made during the motion proceedings, anti-
SLAPP analysis permissibly includes consideration of the disputed effect of Hunt's
affirmative defenses upon Falls's ability to make out his prima facie case. " '[A]lthough
[Code of Civil Procedure] section 425.16 places on the plaintiff the burden of
substantiating its claims, a defendant that advances an affirmative defense to such claims
properly bears the burden of proof on the defense.' " (U.S. Western Falun Dafa Assn. v.
Chinese Chamber of Commerce (2008) 163 Cal.App.4th 590, 599; Evid. Code, § 500
[burden of proving an affirmative defense on party asserting it]; Mann, supra, 120
Cal.App.4th 90, 106-109 [discussing whether Civ. Code, § 47, subds. (b) & (c) litigation
and conditional privileges can be applied to a given set of facts as matters of law;
Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP (2005) 133
Cal.App.4th 658, 675-676 (Peregrine Funding) [some defenses such as limitations or
standing can be asserted as matters of law].) Our inquiry is limited to whether Hunt's two
forms of affirmative defenses must be deemed dispositive on this record, as matters of
law.
First, Hunt's asserted defense of unclean hands is based on the RFDCPA section
requiring a consumer to keep a lender apprised of a change in a billing address. (Civ.
Code, § 1788.21, subd. (a).) In general, "[T]he equitable defense of unclean hands is
available in this state as a defense to a legal action." (Fibreboard Paper Products Corp.
v. East Bay Union of Machinists (1964) 227 Cal.App.2d 675, 728 (Fibreboard Paper).)
13
The court in Yu, supra, 103 Cal.App.4th 298, 323 addressed the sufficiency of a
complaint that the debt collector had committed "distant forum abuse," and the response
of the debt collector that the debtor had unclean hands. The court declined strict
application of that equitable doctrine in that instance, observing that "the unclean hands
doctrine is one that 'protects the court's, rather than the opposing party's, interests.' "
(Ibid.) The court in Yu restricted the use of an unclean hands defense to attack the
debtor's alleged "cavalier" bad attitude toward repayment, therefore allowing the debtor's
action to proceed and to claim forum abuse, due to the courts' "strong interest" in
deterring forum abuse. (Id. at pp. 322-323; see Peregrine Funding, supra, 133
Cal.App.4th 658, 681, citing and quoting Kendall-Jackson Winery, Ltd. v. Superior Court
(1999) 76 Cal.App.4th. 970, 978-979, 985 ["any evidence of a plaintiff's unclean hands in
relation to the transaction before the court or which affects the equitable relations
between the litigants in the matter before the court should be available to enable the court
to effect a fair result in the litigation"].)
"[A] plaintiff's burden as to the second prong of the anti-SLAPP test is akin to that
of a party opposing a motion for summary judgment. [Citation.] The causes of action
need only be shown to have 'minimal merit.' " (Yu, supra, 103 Cal.App.4th 298, 317-
318; Navellier, supra, 29 Cal.4th at p. 89.) Under this type of analysis, it is apparent that
application of the unclean hands doctrine at this stage of the proceedings would
impermissibly require a factual inquiry, as well as some kind of weighing of the relevant
policy interests. Such an approach would go well beyond the current anti-SLAPP
analytical framework. As did the trial court, we shall assume without deciding that an
14
unclean hands defense can properly be asserted here, and that resolving it on its merits
would be premature at this time.
Next, regarding whether the underlying complaint was filed in the proper venue,
this record does not properly allow resolution of a statutory defense under section
§1692k(c) (bona fide error despite protective procedures in place). We cannot determine
as a matter of law whether the terms of section 1692i, establishing venue rules, were
violated. As the record stands, Falls has provided submissions showing, on a prima facie
basis, that Hunt's investigation was inadequate or its procedures improper. Proving the
applicability of a bona fide error defense will undoubtedly require factual inquiries and
weighing of the relevant interests, which are not well suited to the anti-SLAPP rubric for
evaluating and giving credit to a plaintiff's prima facie evidentiary case. Inferences to be
drawn from all the evidence could go either way, concerning this law firm's participation
in materially unfair or unconscionable means of attempted debt collection, as defined by
one or more sections of the FDCPA. (Cf. Tourgeman v. Collins Financial Services, Inc.
(9th Cir. 2014) 755 F.3d 1109, 1119 [under § 1692e, a debt collector's use of " ' "any
false, deceptive, or misleading representation or means in connection with the collection
of any debt," ' " is forbidden if it is material, and such liability is decided as an issue of
law].)
The trial court had an adequate basis in the record to determine that a preliminary
evaluation of the available evidence does not rule out Falls as the party who will probably
prevail on the merits. (See Burrill v. Nair, supra, 217 Cal.App.4th 357, 382.) On this
record, it would not be appropriate to determine that Falls's action is wholly defeated by
15
the defenses asserted or that it lacks even minimal merit. (Oasis, supra, 51 Cal.4th at
p. 820; Code Civ. Proc., § 425.16, subd. (b)(1).)
DISPOSITION
The order is affirmed. Costs of appeal are awarded to Falls.
HUFFMAN, Acting P. J.
WE CONCUR:
HALLER, J.
AARON, J.
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