Court Opinion

ID: 4517978
Source: CourtListenerOpinion
Date Created: 2020-03-19 20:00:47.135935+00
Date Added: 2024-06-11T11:48:45.358314
License: Public Domain

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                             NOT FOR PUBLICATION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