Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_13-cv-02019/USCOURTS-cand-5_13-cv-02019-18/pdf.json

Nature of Suit Code: 480
Nature of Suit: Consumer Credit
Cause of Action: 15:1692 Fair Debt Collection Act

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

ELLEN ANNETE GOLD,

Plaintiff,

v.

MIDLAND CREDIT MANAGEMENT, 

INC., et al.,

Defendants.

Case No. 13-cv-02019-BLF 

ORDER GRANTING IN PART 

DEFENDANTS’ MOTION TO STRIKE 

EXPERT TESTIMONY; GRANTING 

DEFENDANTS’ MOTIONS FOR 

SUMMARY JUDGMENT; DENYING 

PLAINTIFF’S MOTION FOR 

SUMMARY JUDGMENT

[Re: ECF 81, 82, 90, 96]

In 1977, Congress enacted the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 

1692 et seq., “to eliminate abusive debt collection practices by debt collectors, to insure that those 

debt collectors who refrain from using abusive debt collection practices are not competitively 

disadvantaged, and to promote consistent State action to protect consumers against debt collection 

abuses.” 15 U.S.C. § 1692(e). This class action lawsuit tests whether a debt collector transgresses 

the FDCPA and California’s Rosenthal Fair Debt Collection Practices Act (“Rosenthal Act”), Cal. 

Civ. Code. § 1788 et seq., when it states in a debt collection letter that it can reduce a debtor’s 

“past due balance with” the original creditor. Before the Court are the parties’ respective Motions 

for Summary Judgment, as well as Defendants’ Motion to Strike Expert Report. The Court heard 

argument on all motions on January 8, 2015. 

After careful consideration of the parties’ respective written submissions and oral 

argument, the Court GRANTS IN PART Defendants’ Motion to Strike Expert Report, DENIES 

Plaintiff’s Motion for Summary Judgment, and GRANTS Defendants’ Motions for Summary 

Judgment for the reasons stated herein. 

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I. BACKGROUND

A. Factual History

Named plaintiff Ellen Annete Gold (“Plaintiff”) owes a financial obligation, “namely a 

consumer credit account issued by HSBC Bank Nevada, N.A,” that was at some time prior to this 

lawsuit “consigned, placed or otherwise transferred” to defendants Midland Funding, LLC 

(“Midland Funding”) and Midland Credit Management, Inc. (“MCM,” together with Midland 

Funding, “Defendants”) for collection. Compl. ¶¶ 13-14, ECF 1. The subject of this action is a 

May 3, 2012 collection letter (“Letter”) and accompanying educational brochure (“Brochure”) that 

MCM sent to Plaintiff, which are attached as an appendices to this order. See also id. ¶¶ 15-17, 

Exh. 1. From May 2, 2012 to the present, 43,942 of these letters were sent to persons with 

California addresses regarding a financial obligation originally owed to HSBC Bank Nevada, N.A.

(“HSBC”). See Decl. of Fred W. Schwinn ISO Pl.’s Mot. Exh. B., ECF 84-6 (Am. Resp. to 

Interrog. 1). 

The troublesome Letter is written on MCM letterhead and is addressed to Plaintiff. In the 

top right corner of the letter, in distinctive text, is the statement “We can help you reduce your past 

due balance with HSBC Bank Nevada, N.A. and get your finances back on track.” The body of 

the Letter occupies about two-thirds of the page and offers varying discounts on Plaintiff’s debt if 

she pays it in full within a certain amount of time. In a column to the right of the body are a 

number of bullet points that summarize the offers, including one that states: “Your credit report 

will be updated with each payment made, and once you’ve completed your agreed-upon payments 

to settle the account, your credit report will be updated as ‘Paid in Full’!” This right-hand column 

of the Letter concludes with a section that discloses the amount of Plaintiff’s current balance, 

identifies the “Original Creditor” as HSBC, provides the original account number, and indicates 

that the “Current Owner” is Midland Funding LLC with a “MCM Account No.” for reference. 

Enclosed with the Letter is the Brochure titled “Why paying your bills is so important to a good 

credit report.” The Brochure states: “Having a good credit report is important . . . We can help 

you get your finances back on track.” See Compl. ¶¶ 19, 21, 23; see generally id. Exh. 1. 

It is undisputed that Midland Funding, not HSBC, is the current owner of Plaintiff’s debt. 

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Decl. of Angelique Ross ¶ 3, ECF 81-2.1 As such, Plaintiff contends that the quoted passages 

misleadingly imply either that there is a debt still owed to HSBC or that Defendants can affect the 

manner in which HSBC reports the debt to credit bureaus. Compl. ¶¶ 20, 22, 24. Plaintiff thus 

asserts that the Letter violates provisions of the FDCPA and of the Rosenthal Act.

B. Procedural History

On October 7, 2014, the Court certified a class pursuant to Federal Rule of Civil Procedure 

23(b)(3) defined as:

(i) all persons with addresses in California (ii) to whom Defendants 

sent, or caused to be sent, a notice in the form of Exhibit ‘1’ 

attached to the Class Action Complaint (iii) in an attempt to collect 

an alleged debt originally owed to HSBC Bank Nevada, N.A. (iv) 

which was primarily for personal, family, or household purposes, (v) 

which were not returned undeliverable by the U.S. Post Office (vi) 

during the period one year prior to the date of filing this action.

Order re Class Cert., ECF 80. On October 31, 2014, after the filing of the instant motions for 

summary judgment, the Court inquired of the parties the status of class notice and the desirability 

of completing class notice before a decision on liability. See ECF 89. The parties jointly 

responded to indicate that they agreed to postpone completing class notification and opt-outs until 

after the Court issued a ruling on the pending motions for summary judgment. Joint Statement re 

Status of Class Notification, ECF 91.

II. DEFENDANTS’ MOTION TO STRIKE EXPERT TESTIMONY

Defendants move to strike the expert report of Evan Hendricks (“Hendricks Report”) at 

ECF 84-12, which Plaintiff filed in support of her motion for summary judgment. Def.’s Mot. to 

Strike, ECF 96. Defendants contend that Mr. Hendricks lacks the proper qualification to opine on 

the falsity of the Letter and Brochure, that his opinions on that subject are unreliable, and further 

that such opinions impermissibly tread on the province of the court to determine the ultimate legal 

question of liability under the FDCPA. Id. at 4-8. The Court agrees and GRANTS IN PART 

Defendants’ Motion to Strike.

When considering expert testimony offered pursuant to Federal Rule of Evidence 702, the 

 

1 Duplicate declaration at ECF 82-2.

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trial court acts as a “gatekeeper” by making a preliminary determination of whether the expert’s 

testimony is reliable. See Kumho Tire Co. v. Carmichael, 526 U.S. 137, 150 (1999); Daubert v. 

Merrell Dow Pharm., Inc., 509 U.S. 579, 596 (1993). Expert testimony is admissible if: (1) “the 

expert’s scientific, technical, or other specialized knowledge will help the trier of fact to 

understand the evidence or to determine a fact in issue;” (2) “the testimony is based on sufficient 

facts or data;” (3) “the testimony is the product of reliable principles and methods;” and (4) “the 

expert has reliably applied the principles and methods to the facts of the case.” Fed. R. Evid. 702.

Here, Mr. Hendricks’s curriculum vita reveals that he is unquestionably qualified to testify 

on the subjects of credit reporting and consumer fraud. See Hendricks Report at 11-23. As

Plaintiff notes, Mr. Hendricks has been qualified as an expert witness in numerous cases involving 

those subjects. Pl.’s Opp. to Mot. to Strike 3-6, ECF 101. Defendants are correct, however, in 

pointing out that this case does not involve credit reporting or consumer fraud; it concerns 

statements made in a debt collection letter, and whether those statements violate the FDCPA. 

Def.’s Mot. to Strike 4-6. The Court finds that Mr. Hendricks lacks the requisite qualifications to 

reliably opine on the latter.

Moreover, Federal Rule of Civil Procedure 26(a)(2)(B) requires an expert witness to set 

forth in his written report, among other things, the foundation for his opinions. See Fed. R. Civ. P. 

26(a)(2)(B)(i)-(ii); Phillips v. Netblue, Inc., No. C-05-4401 SC, 2007 WL 528722, at *1 (N.D. Cal. 

Feb. 13, 2007). The portion of the Hendricks Report concerning the Letter contains much in the 

way of conclusory assertions as to the Letter’s misleading nature and Defendants’ intent to 

mislead and little in the way of explanation or factual bases for those conclusions. For example, in 

the last paragraph of the section titled “Brief Background on How Credit Reporting System,” Mr. 

Hendricks states that “HSBC does not furnish data regarding debts that are part of Defendant 

Midland’s portfolio.” Hendricks Report at 2. The foundation for this statement, if any, is not 

disclosed in the report, and Plaintiff’s counsel acknowledged this defect at the January 8 hearing. 

Finally, the Court agrees with Defendants that Mr. Hendricks’s opinions concerning the 

falsity of the Letter and Brochure impermissibly encompass the ultimate legal issue question in 

this case. Although Plaintiff’s argument that there is a distinction between factual falsity and 

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liability under the FDCPA is well taken, see Pl.’s Opp. to Mot. to Strike 9, there are no factual

disputes on which Mr. Hendricks could reliably opine. Defendants concede that “they were not 

able to alter anything HSBC was reporting [ ] about Gold’s account.” Def.’s Reply to Mot. to 

Strike 2, ECF 103. Defendants thus acknowledge that if the Letter and Brochure suggest that 

Defendants could affect HSBC’s reporting to credit agencies, that suggestion would be false. As 

discussed below, the question of whether the communications could be read to so suggest is a 

question that this Court resolves as a matter of law. Thus, to the extent that Mr. Hendricks offers 

opinions concerning the misleading nature of the Letter and Brochure, they are irrelevant, either 

because the facts are not in dispute or because they are legal conclusions. As such, the Court 

GRANTS IN PART Defendants’ Motion to Strike with respect to: all sections of the Hendricks 

Report before the section titled “Brief Background on How Credit Reporting System”; the last 

paragraph in the “Brief Background” section; the first, third, and fifth through seventh paragraphs 

of the section titled “Defendant Midland Knew/Should Have Known of its Falsehoods”; and all 

paragraphs in the sections titled “Midland’s Representations on Improving Plaintiff’s Credit Were 

Misleading” and “Midland’s Misrepresentations Designed to Exploit Consumer Awareness of 

Importance of Good Credit.” These afore-mentioned sections are STRICKEN.

2

The remaining portions of the Hendricks Report (beginning on page 4 titled “Potential 

Areas of Testimony”) provide background information regarding credit reporting. Mr. Hendricks 

is unquestionably qualified in this respect, and his testimony concerning this background 

information shall be considered to the extent such information is relevant to the Court’s analysis of 

the legality of the letter at issue. Defendants’ Motion to Strike is accordingly DENIED IN PART 

as to those portions of the Hendricks Report.

III. MOTIONS FOR SUMMARY JUDGMENT

A. Legal Standard

Federal Rule of Civil Procedure 56 governs motions for summary judgment. Summary 

 

2

Striking the portions of Mr. Hendricks’ report that opine on the ultimate legal conclusion will 

have little effect on Plaintiff’s case. Mr. Hendrick’s report opinions simply echo the legal 

arguments that Plaintiff has set forth in her summary judgment briefing. See Def.’s Mot. 7-8.

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judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions 

on file, together with the affidavits, if any, show that there is no genuine issue as to any material 

fact and that the moving party is entitled to a judgment as a matter of law.” Celotex Corp. v. 

Catrett, 477 U.S. 317, 322 (1986) (citing Fed. R. Civ. P. 56(c)). The Court draws all reasonable 

inferences in favor of the party against whom summary judgment is sought. Matsushita Elec. 

Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

The moving party “bears the burden of showing there is no material factual dispute,” Hill 

v. R+L Carriers, Inc., 690 F. Supp. 2d 1001, 1004 (N.D. Cal. 2010), by “identifying for the court 

the portions of the materials on file that it believes demonstrate the absence of any genuine issue 

of material fact.” T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass’n, 809 F.2d 626, 630 (9th 

Cir. 1987). A material fact is one that could affect the outcome of suit under the governing 

substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). 

Once the moving party has satisfied its initial burden, the non-moving party must then 

“identify with reasonable particularity the evidence that precludes summary judgment.” Keenan v. 

Allan, 91 F.3d 1275, 1279 (9th Cir. 1996); see also Schneider v. TRW, Inc., 938 F.3d 986, 991 (9th 

Cir. 1990). Indeed, it is not the duty of the district court to “to scour the record in search of a 

genuine issue of triable fact.” Keenan, 91 F.3d at 1279 (quoting Richards v. Combined Ins. Co., 

55 F.3d 247, 251 (7th Cir. 1995)). “A mere scintilla of evidence will not be sufficient to defeat a 

properly supported motion for summary judgment; rather, the nonmoving party must introduce 

some significant probative evidence tending to support the complaint.” Summers v. Teichert & 

Son, Inc., 127 F.3d 1150, 1152 (9th Cir. 1997) (citation and internal quotation marks omitted). If 

the non-moving party fails to make this showing, the moving party is entitled to summary 

judgment. Celotex, 477 U.S. at 323.

B. Midland Funding’s Motion for Summary Judgment

Defendant Midland Funding separately moves for summary judgment on all of Plaintiff’s 

claims on the ground that it is not a debt collector subject to liability under the FDCPA and 

Rosenthal Act. Midland Funding Mot., ECF 82. For the reasons stated herein, the Court agrees. 

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i. Material Facts

For purposes of this motion, the parties do not dispute that Midland Funding purchased the 

defaulted accounts from HSBC and referred those accounts to MCM for collection pursuant to an 

intercompany servicing agreement. Decl. of Tomio Narita Exh. A (Deposition of Angelique Ross, 

hereinafter “Ross Dep.”) at 18:21-21:22; 35:10-37:2; 38:6-39:20, ECF 81-3;

3

see also Ross Decl. 

¶ 3. It is furthermore undisputed that MCM is responsible for collecting on the accounts and 

furnishing information to consumer reporting agencies on Midland Funding’s behalf. Ross Decl. ¶ 

7; Ross Dep. 25:16-26:6.

The only dispute is whether this legal arrangement between the two entities means that 

Midland Funding can be held liable for MCM’s debt collection activities. That is a legal question 

that the Court resolves in Midland Funding’s favor.

ii. Discussion

Under the FDCPA, the term “debt collector” means “[1] any person who uses any 

instrumentality of interstate commerce or the mails in any business the principal purpose of which 

is the collection of any debts, or [2] who regularly collects or attempts to collect, directly or 

indirectly, debts owed or due or asserted to be owed or due another.” 15 U.S.C. § 1692a(6). The 

Rosenthal Act defines “debt collector” as “any person who, in the ordinary course of business, 

regularly, on behalf of himself or herself or others, engages in debt collection.” Cal. Civ. Code § 

1788.2(c). Critical to both definitions of the term is the notion that a debt collector is one who 

directly or indirectly engages in collection activity. 

Midland Funding argues that it has no employees and therefore cannot be a business whose 

principal purpose is the collection of debts via interstate commerce or the mails. Midland Funding 

Mot. 4. Moreover, Midland Funding further argues that it “engaged in no direct or indirect efforts 

to collect on [Plaintiff’s] account.” Id. at 1. Analogizing its situation to Scally v. Hilco 

Receivables, LLC, 392 F. Supp. 2d 1036 (N.D. Ill. 2005), Midland Funding argues that its debt 

buying business does not meet either definition of a debt collector under the FDCPA (and, by 

 

3 Duplicate declaration and exhibits at ECF 82-3. 

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extension, the Rosenthal Act) and that there is no basis for holding Midland Funding vicariously

liable for the alleged misdeeds of MCM. Id. at 4-6. Midland Funding further contends that should 

there be a triable issue of fact on its status as a debt collector, this Court should not permit the 

plaintiff class to recover statutory damages from both Midland Funding and MCM. Id. at 4-8.

Plaintiff acknowledges that Midland Funding has no employees and uses MCM to 

“physically collect the debts.” Pl.’s Opp. to Midland Funding at 4, ECF 94. Thus, Midland 

Funding has satisfied its initial burden to demonstrate no genuine dispute concerning these 

material facts relevant to its status as a debt collector under the FDCPA. The only evidence that 

Plaintiff offers in opposition is Midland Funding’s acknowledgment that its business is 

“purchas[ing] defaulted consumer accounts.” Id. (citing Ross Dep. 18:21-19:18 and 20:6-21:21; 

Schwinn Decl. Exh. E (Deposition of Jared McClure, hereinafter “McClure Dep.”) at 26:19-28:8). 

There is no evidence to suggest that Midland Funding’s business is debt collection. Rather, 

Plaintiff would have the Court fill in the gap with an inference that because Midland Funding is in 

the business of acquiring defaulted debts, it must therefore be in the business of collecting on 

those debts. See id. (arguing that Midland Funding does not acquire defaulted consumer accounts 

“simply to have and admire” and that the fact that Midland Funding does not have any employees 

is “merely a quirk of the corporate structure of Defendants’ parent company”). 

As another court addressing this point has reasoned:

The [FDCPA] governs interactions between debt collectors and 

consumers and seeks “to eliminate abusive debt collection practices 

by debt collectors.” An entity that acquires a consumer’s debt 

hoping to collect it but that does not have any interaction with the 

consumer itself does not necessarily undertake activities that fall 

within this purview. 

Kasalo v. Trident Asset Mgmt., LLC, --- F. Supp. 2d---, No. 12 C 2900, 2014 WL 3056821, at *3 

(N.D. Ill. July 7, 2014) (quoting 15 U.S.C. § 1692(a)). In the absence of evidence showing a 

purpose to collect on those debts, Plaintiff’s legal arguments are insufficient to create a triable 

issue of fact on whether Midland Funding “uses any instrumentality of interstate commerce or the 

mails” to engage in a “business the principal purpose of which is the collection of any debts.” 15 

U.S.C. § 1692a(6). 

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As to whether Midland Funding is a debt collector under the second prong of the definition 

set forth in § 1692a(6), Plaintiff notes, correctly, that there are “no cases in this Circuit which 

discuss whether an entity indirectly collects a debt when the entity engages a (non-attorney) debt 

collector to collect a debt on its behalf.” Pl.’s Opp. to Midland Funding 4. Plaintiff then proceeds 

to rely upon a number of cases holding debt collectors vicariously liable for the actions of their 

debt collection attorneys. Id. at 5 (citing Fox v. Citicorp., 15 F.3d 1507, 1516 (9th Cir. 1994) and 

Caron v. Maxwell, 48 F. Supp. 2d 932, 936 (D. Ariz. 1999)). Plaintiff also relies on the 

subsequent case of Schutz v. Arrow Financial Services, LLC, 465 F. Supp. 2d 872 (N.D. Ill. 2006), 

arguing that Schutz criticized the reasoning of Scally, finding that it “wrongly limited vicarious 

liability to those entities who engaged attorney debt collectors to collect on their behalf, contrary 

to the legislative intent of the FDCPA.” Pl.’s Opp. to Midland Funding 5 (emphasis omitted)

(citing Schutz, 465 F. Supp. at 876). These arguments miss the point because Plaintiff conflates 

two different questions to arrive at her conclusion.

Whether Midland Funding is a “debt collector” because it “indirectly” collects debts within 

the meaning of § 1692a(6) is a distinct and separate question from whether Midland Funding can 

be held vicariously liable for MCM’s alleged misconduct. The former is a question of primary 

liability while the latter concerns secondary liability for the actions of an agent. 

On the first question, Midland Funding’s status as a “debt collector” requires an 

examination of the relationship between it and MCM. See Jenkins v. Union Corp., 999 F. Supp. 

1120, 1143 (N.D. Ill. 1998) (plaintiff must show that separate entities are interdependent “single 

economic enterprise” in order to show that debt holding entity “indirectly” collects through debt 

collection entity and is therefore a “debt collector”). On this, the Court again finds persuasive the 

reasoning of the court in Kasalo, which addressed the exact scenario in this case. There, the court 

held that a company that (1) purchases consumer debts for the purpose of making money on the 

debts, (2) acquires the debts at issue after they have been charged off, and (3) hires others to 

collect on those debts may meet the literal definition of a debt collector, but does not fit within the 

FDCPA’s definition of that term. 2014 WL 3056821, at *3-4. Critically, the plaintiff in Kasalo

failed to put forth any evidence suggesting that the entity that held the debt accounts had 

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undertaken any collection activity, whether directly or indirectly. See id. at *4. Plaintiff has 

similarly failed to make such a showing here.

The undisputed facts establish that Midland Funding merely holds debts and engages 

MCM to collect on those debts. Plaintiff identifies no evidence suggesting that Midland Funding 

directs or otherwise participates in MCM’s collection activities or that Midland Funding ever 

communicated with consumer debtors directly. In fact, Plaintiff offers no evidence to hint at a 

triable fact on this issue, relying solely on legal argument in opposition to Midland Funding’s 

summary judgment motion. See Pl.’s Opp. to Midland Funding 3-6. Rendering all inferences in 

Plaintiff’s favor, there is nothing in the record to suggest that Midland Funding does anything 

other than hold the defaulted accounts and refer them to MCM for collection. There being no 

genuine dispute of material fact that Midland Funding does not directly or indirectly collect the 

debts that it holds, Midland Funding is entitled to summary judgment that it is not a debt collector 

within the meaning of the FDCPA. 

Midland Funding’s vicarious liability for MCM’s misconduct requires a finding that MCM 

acted as an agent of Midland Funding. However, the majority of courts to have considered the 

issue have determined that a principal must be a debt collector in order to be held vicariously 

liable for the debt collection activities of another. See Pollice v. Nat’l Tax Funding, L.P., 225 F.3d 

379, 405 (3d Cir. 2000) (“an entity that is itself a ‘debt collector’—and hence subject to the 

FDCPA—should bear the burden of monitoring the activities of those it enlists to collect debts on 

its behalf”); Wadlington v. Credit Acceptance Corp., 76 F.3d 103, 108 (6th Cir. 1996) (“[w]e do 

not think it would accord with the intent of Congress, as manifested in the terms of the Act, for a 

company that is not a debt collector to be held vicariously liable”); Miranda v. Field Asset Servs., 

No. 3:11-CV-1514-GPC-JMA, 2013 WL 124047, at *4 (S.D. Cal. Jan. 9, 2013); Plumb v. 

Barclays Bank Delaware, No. CV-11-3090-RMP, 2012 WL 2046506, at *4 (E.D. Wash. June 5, 

2012) (“even vicarious liability under the FDCPA has been restricted to principals who themselves 

are statutory ‘debt collectors’”); Oei v. N. Star Capital Acquisitions, LLC, 486 F. Supp. 2d 1089, 

1097 (C.D. Cal. 2006); see also Rich v. BAC Home Loans Servicing LP, No. CV-11-00511-PHXSRB, 2013 WL 10104612, at *5 (D. Ariz. Dec. 13, 2013) (rejecting aiding and abetting liability 

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under the FDCPA because it “expressly imposes liability only for the violations of a ‘debt 

collector’”); but see Huy Thanh Vo v. Nelson & Kennard, 931 F. Supp. 2d 1080, 1090 (E.D. Cal. 

2013) (rejecting Oei and Pollice to hold that “non-‘debt collector’ creditors” can be “vicariously 

liable for their attorneys’ actions” under the FDCPA). The Court is persuaded by the weight of 

opinion restricting FDCPA liability—whether primary or secondary—to entities that fit the 

statutory definition of “debt collector” set forth in § 1692a(6). Because Midland Funding does not 

fit such definition, it cannot be held vicariously liable for MCM’s collection activities.

The Court accordingly GRANTS Midland Funding’s Motion for Summary Judgment with 

respect to all of Plaintiff’s claims against Midland Funding.

4

 

C. Cross Motions for Summary Judgment on Liability

Plaintiff and MCM each moved for summary judgment on the question of MCM’s liability 

under the FDCPA and the Rosenthal Act. Pl.’s Mot., ECF 90; MCM Mot., ECF 81. Plaintiff 

contends that the Letter and Brochure threaten to take action that cannot legally be taken, a 

violation of § 1692e(5) of the FDCPA, and that the communications are materially misleading, a 

violation of § 1692e(10) of the Act. See Pl.’s Mot. 7-15. MCM contends that the Letter and 

Brochure are not misleading and do not threaten any action and, accordingly, do not violate the 

FDCPA. See MCM Mot. 5-13. The Court agrees with MCM.

“In this circuit, a debt collector's liability under § 1692e of the FDCPA is an issue of law.” 

Gonzales v. Arrow Fin. Servs., LLC, 660 F.3d 1055, 1061 (9th Cir. 2011). In considering whether 

a debt collector has violated the proscriptions of § 1692e, the Court analyzes the debt collector’s 

challenged communications from the standpoint of the “least sophisticated debtor.” Id. at 1062; 

Swanson v. S. Oregon Credit Serv., Inc., 869 F.2d 1222, 1227 (9th Cir. 1988) (per curiam). The 

“least sophisticated debtor” standard “is ‘designed to protect consumers of below average 

sophistication or intelligence,’ or those who are ‘uninformed or naive,’ particularly when those 

individuals are targeted by debt collectors. Gonzales, 660 F.3d 1055 at 1062 (quoting Duffy v. 

 

4 Because Midland Funding cannot be held liable under the FDCPA and the Rosenthal Act for the 

Letter and Brochure at issue in this action, the Court need not reach Midland Funding’s further 

argument that the plaintiff class cannot recover statutory damages from both defendants.

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Landberg, 215 F.3d 871, 874–75 (8th Cir. 2000)). Thus, although it is still an objective one, “the 

standard is lower than simply examining whether particular language would deceive or mislead a 

reasonable debtor.” Swanson, 869 F.2d at 1227. 

At the same time, “[w]hile protecting naive consumers, the standard also prevents liability 

for bizarre or idiosyncratic interpretations of collection notices by preserving a quotient of 

reasonableness and presuming a basic level of understanding and willingness to read with care.”5 

United States v. Nat’l Fin. Servs., Inc., 98 F.3d 131, 136 (4th Cir. 1996); see also Gonzales, 660 

F.3d at 1062 (quoting Rosenau v. Unifund Corp., 539 F.3d 218, 221 (3d Cir. 2008), for same 

proposition); Strand v. Diversified Collection Serv. Inc., 380 F.3d 316, 318 (8th Cir. 2004); Wilson 

v. Quadramed Corp., 225 F.3d 350, 354-55 (3d Cir. 2000), as amended (Sept. 7, 2000). The 

standard serves a dual purpose: “it (1) ensures the protection of all consumers, even the naive and 

the trusting, against deceptive debt collection practices, and (2) protects debt collectors against 

liability for bizarre or idiosyncratic interpretations of collection notices.” Clomon v. Jackson, 988 

F.2d 1314, 1320 (2d Cir. 1993).

i. Material Facts

The material facts relevant to this issue are not in dispute. Midland Funding purchased 

defaulted accounts from HSBC (among them, Plaintiff’s account) and referred those accounts to 

MCM for collection. Ross Decl. ¶ 3; Ross Dep. 18:21-21:22; 35:10-37:2; 38:6-39:20. MCM is 

responsible for collecting on the accounts and furnishing information to consumer reporting 

agencies on Midland Funding’s behalf. Ross Decl. ¶ 7; Ross Dep. 25:16-26:6. Neither Midland 

Funding nor MCM has the ability to affect what HSBC reports to consumer reporting agencies 

concerning Plaintiff’s account. Def.’s Reply to Mot. to Strike 2. Finally, the parties do not 

dispute the wording of the Letter and Brochure, only what those words mean.

ii. MCM is Not Liable Under FDCPA Section 1692e(5)

Section 1692e(5) prohibits a debt collector from making a “threat to take any action that 

 

5 As some courts have noted, the FDCPA, while a consumer protection statute, “can be abused just 

as easily by attorneys who use debtors to allege and test the most minute violations of a 

concededly intricate statutory scheme.” Bailey v. Sec. Nat’l Servicing Corp., 154 F.3d 384, 388 

(7th Cir. 1998).

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cannot legally be taken or that is not intended to be taken.” 15 U.S.C. § 1692e(5). “[A] threat 

need not be express: it can be implied.” Gonzales, 660 F.3d at 1064. 

MCM contends that the Letter and Brochure properly informed debtors of the beneficial 

effect that paying off their debts would have on their credit scores. MCM Mot. 12. It is well 

established that paying off debts can help to improve one’s credit score and that it is not unlawful 

for debt collectors to remind debtors of this benefit. Id. at 13-16. Plaintiff argues that MCM did 

not “properly” notify Plaintiff and the class of the relationship between unpaid debt and “credit 

reputation,” but rather “attempted to seduce [Plaintiff] and the class into making payments by 

misrepresenting a positive outcome of the said payment.” Pl.’s Opp. to MCM 12. Neither party 

addresses whether the Letter and Brochure even expressly or implicitly threaten any action. In 

fact, Plaintiff specifically argues that “Defendants did not threaten a (likely true) bad outcome for 

non-payment, Defendants represented (falsely) that there would be a good outcome for payment.” 

Id. (emphasis added). Plaintiff’s own moving papers fare little better in shedding light on her § 

1692e(5) claim, arguing conclusorily that because Defendants made allegedly false representations 

in the Letter and Brochure, “Defendants have violated 15 U.S.C. §§ 1692e, 1692e(5), and 

1692e(10).” Pl.’s Mot. 9, 10. 

Given the paucity of argument on this point, and Plaintiff’s concession that the Letter does 

not threaten a bad outcome, the Court finds that the holding of Wade v. Regional Credit 

Association, 87 F.3d 1098 (9th Cir. 1996), controls in this case: “the [Letter] was not a ‘threat to 

take action that could not legally be taken’ in violation of Section 1692e(5).” Id. at 1100. “The 

body of the notice was informational,” and “[t]he least sophisticated debtor would construe the 

[Letter] as a prudential reminder, not as a threat to take action.” Id. The Court accordingly 

GRANTS MCM’s Motion for Summary Judgment with respect to liability under 15 U.S.C. § 

1692e(5). 

iii. MCM is Not Liable Under FDCPA Section 1692(e)(10)

“Section 1692e(10), which prohibits ‘[t]he use of any false representation or deceptive 

means to collect ... any debt,’ has been referred to as a ‘catchall’ provision, and can be violated in 

any number of novel ways.” Gonzales, 660 F.3d at 1062. “[I]t is well established that ‘[a] debt 

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collection letter is deceptive where it can be reasonably read to have two or more different 

meanings, one of which is inaccurate.’” Id. (quoting Brown v. Card Serv. Ctr., 464 F.3d 450, 455 

(3d Cir. 2006)). However, the Ninth Circuit has agreed with the Sixth and Seventh Circuits in 

concluding that “false but non-material representations are not likely to mislead the least 

sophisticated consumer and therefore are not actionable under §§ 1692e or 1692f.” Donohue v. 

Quick Collect, Inc., 592 F.3d 1027, 1033 (9th Cir. 2010). As the Ninth Circuit recently reiterated 

in Tourgeman v. Collins Financial Services, Inc.:

“[i]n assessing FDCPA liability, we are not concerned with mere 

technical falsehoods that mislead no one, but instead with genuinely 

misleading statements that may frustrate a consumer’s ability to 

intelligently choose his or her response.” In other words, a debt 

collector’s false or misleading representation must be “material” in 

order for it to be actionable under the FDCPA. “The purpose of the 

FDCPA, ‘to provide information that helps consumers to choose 

intelligently,’ would not be furthered by creating liability as to 

immaterial information because ‘by definition immaterial 

information neither contributes to that objective (if the statement is 

correct) nor undermines it (if the statement is incorrect).’” 

755 F.3d 1109, 1119 (9th Cir. 2014), as amended on denial of reh’g and reh’g en banc (Oct. 31, 

2014) (quoting Donohue, 592 F.3d at 1034 and Hahn v. Triumph P’ships LLC, 557 F.3d 755, 757-

58 (7th Cir. 2009)).

Here, Plaintiff contends that the following three phrases in the Letter and Brochure are 

materially misleading:

“We can help you reduce your past balance with HSBC Bank 

Nevada, N.A. and get your finances back on track.”

“Your credit report will be updated with each payment made, and 

once you’ve completed your agreed-upon payments to settle the 

account, your credit report will be updated as ‘Paid in Full’!”

“Having a good credit report is important . . . We can help you get 

your finances back on track.”

Compl. ¶¶ 19, 21, 23. Plaintiff asserts that the statement “We can help you reduce your past due 

balance with HSBC Bank Nevada, N.A. and get your finances back on track” is misleading 

because it suggests that there is an outstanding balance “with HSBC” that MCM can reduce. Such 

a suggestion would be an illusory promise because no such balance exists “with HSBC.” Rather, 

the balance exists “with” Midland Funding. Pl.’s Mot. 9. Plaintiff thus relies on the Gonzales

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court’s reasoning that “the debt collector that fails to clarify [ ] ambiguity does so at its peril,” 

Gonzales, 660 F.3d at 1063, to argue that the ambiguity in MCM’s use of the prepositional phrase 

“with HSBC” causes the Letter to be materially misleading in violation of the FDCPA, see Pl.’s 

Mot. 9. MCM argues that Plaintiff’s is a bizarre and idiosyncratic reading of that phrase, and that 

even the least sophisticated debtor with a basic understanding of her account history would not be 

misled into believing either that MCM is collecting a debt on HSBC’s behalf or that there exists 

some other debt with HSBC. Def.’s Mot. 8-9; Def.’s Opp. to Pl.’s Mot. 10-12, ECF 95. The 

Court agrees with MCM.

Consumer protection laws are made “to protect the trusting as well as the suspicious.” 

Fed. Trade Comm’n v. Standard Educ. Soc., 302 U.S. 112, 116 (1937). However, even the 

especially trusting least sophisticated debtor is not a “dimwit;” she presumably “has ‘rudimentary 

knowledge about the financial world’ and is ‘capable of making basic logical deductions and 

inferences.’” Wahl v. Midland Credit Mgmt., Inc., 556 F.3d 643, 645-46 (7th Cir. 2009) (quoting 

Pettit v. Retrieval Masters Creditors Bureau, Inc., 211 F.3d 1057, 1060 (7th Cir. 2000)). Here, 

Plaintiff’s account of the least sophisticated debtor fails to take into consideration the rest of the 

Letter, which clearly identifies HSBC as the “Original Creditor” and Midland Funding as the 

“Current Owner.” Given that the least sophisticated debtor is presumed to have a willingness to 

read with care, any ambiguity injected by MCM’s use of the prepositional phrase “with HSBC” is 

eliminated by the clear statement that HSBC is the original creditor and Midland Funding is the 

current owner. It is reasonable to presume that even the least sophisticated consumer would read 

the entire Letter, especially the entire right-hand column where both the supposedly offending 

statement and the identification of the original creditor and current owner of the account are 

located. In this way, Plaintiff’s reliance on Gonzales is inapposite because that case involved an 

ambiguous conditional phrase—with no clarification—that suggested the debt collector might do 

something it had no intent (or legal right) to do. See Gonzales, 660 F.3d at 1063 (“Conditional 

language, particularly in the absence of any language clarifying or explaining the conditions, does 

not insulate a debt collector from liability.”). Furthermore, the second page (or back) of the Letter 

states at the very top: “Please understand this is a communication from a debt collector. This is an 

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attempt to collect a debt. Any information obtained will be used for that purpose.” Compl. Exh. 

1. The FDCPA expressly requires that collection notices contain such language, 15 U.S.C. § 

1692e(11), and no debtor reading this disclaimer could reasonably believe that MCM was doing 

anything other than collecting on a debt previously owed to HSBC.6 

Moreover, even if some debtors could read the phrase “with HSBC” to suggest that MCM 

was offering to reduce a debt currently held by HSBC, Plaintiff identifies no evidence suggesting 

that knowing the ultimate recipient of one’s debt payments is information that is material to a 

consumer’s ability to intelligently choose her response to the Letter. There is furthermore no 

evidence to suggest that a consumer would reap some benefit from paying off debts held by HSBC 

that she would not otherwise receive by paying off debts held by Midland Funding. Unlike in 

Tourgeman, there is no contention that the information in the Letter concerning the “original” 

account with HSBC Bank is incorrect. Nor is it suggested that there is some defect in the factual 

information contained in the letter that would frustrate a consumer’s ability to respond to the letter 

in a timely fashion. See Tourgeman, 755 F.3d at 1121 (“[T]he factual errors in Paragon Way’s 

letters to Tourgeman could easily cause the least sophisticated debtor to suffer a disadvantage in 

charting a course of action in response to the collection effort.”). Thus, Plaintiff has failed to 

demonstrate that a mistaken understanding of the phrase “with HSBC” would be so material as to 

mislead the least sophisticated debtor in violation of 15 U.S.C. § 1692e(10).

Nor does the Court find persuasive Plaintiff’s argument that the statement “We can help 

you reduce your past due balance with HSBC Bank Nevada, N.A. and get your finances back on 

track,” taken in conjunction with “Your credit report will be updated with each payment made, 

 

6

In a similar vein, it is important to note that the Letter was not the initial communication sent to 

Plaintiff and the class members. Defendants have produced the initial communication clearly 

identifying themselves as debt collectors that have acquired the past due HSBC account. See Ross 

Decl. Exh. A (letter stating “Midland Funding LLC has purchased your HSBC Bank Nevada, N.A. 

account and Midland Credit Management, Inc. (“MCM”), a debt collection company, is the new 

servicer of this obligation.”). While Plaintiff may not recall receiving this initial letter, she has put 

forth no evidence that other class members similarly do not recall or have not received this letter. 

Other than her own interpretation of the challenged statement, which this Court finds idiosyncratic 

and unreasonable, Plaintiff offers no evidence to suggest that others would not recall MCM’s 

initial communication explaining Midland Funding’s acquisition of the HSBC account or would 

not immediately understand, after reading the entirety of the Letter, that “with HSBC” was a 

reference to their original creditor. 

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and once you’ve completed your agreed-upon payments to settle the account, your credit report 

will be updated as ‘Paid in Full’!” and “Having a good credit report is important . . . We can help 

you get your finances back on track” misleadingly suggests that MCM can modify the way in 

which HSBC reports Plaintiff’s and the class’s accounts.7 See Pl.’s Mot. 9-10. Plaintiff contends 

that these statements, in toto, represent an “illusory promise to update [Plaintiff’s] credit report by 

modifying HSBC’s trade line,” and that “any express or implied promise to improve the 

relationship between [Plaintiff] and HSBC (e.g., by updating HSBC’s trade line on [Plaintiff’s] 

credit report to read ‘Paid in Full’) was mere manipulation on the part of the Defendants.” Id. at 

10; see also Pl.’s Opp. to MCM 11-12. 

To the extent Plaintiff contends that the Letter and Brochure represent an offer to improve 

a debtor’s relationship with HSBC, that is an imaginative interpretation that is not reasonably 

grounded in the statements actually made. To the extent Plaintiff argues that a debtor would 

mistakenly believe that MCM could affect HSBC’s trade line8(as opposed to that of Midland 

Funding), that argument claims too much. To accept her interpretation of the letter, the Court 

would have to assume that the least sophisticated debtor is sophisticated enough to know that 

HSBC has a trade line that is distinct from Midland Funding’s trade line and yet would be misled 

into believing that Defendants could affect HSBC’s trade line despite the letter’s clear indication 

that Midland Funding is the current owner of a past-due account originally incurred with HSBC. 

Moreover, the Court would have to presume that this distinction matters to the least sophisticated 

debtor. These are too many inferences to reasonably draw in Plaintiff’s favor in the absence of 

supporting evidence.9 The Court does not presume that the least sophisticated debtor is as 

 

7 Although Plaintiff addresses the latter two phrases separately, the Court understands her 

argument to be that these statements, though literally true, are misleading with read together. See

Pl.’s Opp. to MCM 12 (“a group of literally true statements taken together, can combine to form a 

misleading representation”). 

8

The term “trade line” is not well defined in either Plaintiff’s papers or in the Hendricks Report. 

The Court infers that “trade line” refers to the data that a creditor or debt holder reports about its 

own accounts to a consumer credit agency. 

9

To the extent the admissible portions of the Hendricks Report can be understood to suggest that 

HSBC reporting a debt paid in full would have a more significant impact on a debtor’s credit 

rating than Midland Funding reporting the same information, that is irrelevant because the Letter 

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sophisticated and as irrationally optimistic as Plaintiff would suggest. More reasonably, the least 

sophisticated debtor would be unaware—as this Court is unaware—of the operation of a creditor’s 

“trade line.”

In sum, even the most trusting of debtors would not reasonably read the Letter and 

Brochure to be anything other than it is: a communication from a debt collector offering to settle a 

debt originally incurred with HSBC. Plaintiff cannot convert an otherwise lawful letter into 

something else simply by focusing on a hyper-technical reading of certain phrases out of context. 

Because the Letter and Brochure cannot reasonably be read to either threaten an action that MCM 

could not take or otherwise materially misrepresent the effect of paying off the debt at issue, the 

Court concludes that Plaintiff has failed to establish a violation of any provision of § 1692e and 

MCM is entitled to summary judgment on those claims. The Court accordingly GRANTS MCM’s 

Motion for Summary Judgment and DENIES Plaintiff’s cross motion on the issue of liability 

under the FDCPA.

iv. MCM is Not Liable Under the Rosenthal Act

The Rosenthal Act requires compliance with the FDCPA and a debt collector that violates 

the FDCPA also violates the Rosenthal Act. See Cal. Civ. Code § 1788.17; Hosseinzadeh v. 

M.R.S. Assocs., 387 F. Supp. 2d 1107, 1118 (C.D. Cal. 2005). Plaintiff’s Rosenthal Act claims 

against MCM rise and fall with her FDCPA claims, as she has offered no other theories of liability 

that would be valid under the Rosenthal Act but not the FDCPA. See Pl.’s Mot. 11. Because the 

Court finds that the Letter and Brochure do not violate the FDCPA, MCM is also entitled to 

summary judgment on Plaintiff’s Rosenthal Act claims. MCM’s Motion for Summary Judgment 

is accordingly GRANTED, and Plaintiff’s Motion for Summary Judgment is DENIED with 

respect to the Rosenthal Act claim.10

 

cannot be reasonably read to promise an improvement to one’s credit rating to any specific degree.

10 Because there is no liability under the acts, the Court need not reach Plaintiff’s motion for 

summary judgment as it pertains to damages. See Pl.’s Mot. 18-24. In any event, the Court agrees 

with MCM that the amount of statutory damages must be tried to a jury. Def.’s Opp. to Pl.’s Mot. 

21-22.

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IV. ORDER

For the foregoing reasons, IT IS HEREBY ORDERED that:

(1) Defendants’ Motion to Strike Expert Report and Testimony of Plaintiff’s Expert 

Evan Hendricks is GRANTED IN PART and DENIED IN PART;

(2) Defendant Midland Funding’s Motion for Summary Judgment is GRANTED; 

(3) Defendant Midland Credit Management’s Motion for Summary Judgment is 

GRANTED; and

(4) Plaintiff’s Motion for Summary Judgment, or in the Alternative, Summary 

Adjudication is DENIED.

IT IS SO ORDERED.

Dated: March 10, 2015

______________________________________

BETH LABSON FREEMAN

United States District Judge

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