Court Opinion

ID: 3065096
Source: CourtListenerOpinion
Date Created: 2015-10-14 22:28:48.538627+00
Date Added: 2024-06-11T08:53:29.978376
License: Public Domain

FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

RYAN FLEMING; JOY FLEMING,               
husband and wife and the marital
community composed thereof;
MIKE SMITH; DEENNA SMITH
husband and wife; BRAD HASLAM;
TAMMIE HASLAM, husband and wife
and the marital community
composed thereof; JEREMY GOODIN,
a single man,
               Plaintiffs-Appellants,
                and
SCOTT HEATON; JENNIFER HEATON,
husband and wife and the marital
community composed thereof,
                           Plaintiffs,        No. 07-35979
                 v.                            D.C. No.
                                             CV-07-00223-JCC
KENNETH PICKARD; JANE DOE
PICKARD, husband and wife and the               OPINION
marital community composed
thereof; JAMES MARTYN, also knows
as James A. Martyn, also known as
Anthony J. Martyn, also known as
James A. Martynovich, also known
as James A. Maretyn-Ovych, also
known as Anthony J. Martynovich,
also known as Anthony J. Martyn-
Ovych; CATHERINE A. MARTYN
husband and wife and the marital
community composed thereof; M3
HOLDINGS LLC, a Washington State
Limited Liability Company,
              Defendants-Appellees.
                                         
                             12875
12876                   FLEMING v. PICKARD
         Appeal from the United States District Court
           for the Western District of Washington
        John C. Coughenour, District Judge, Presiding

                    Submitted May 7, 2009*
                      Seattle, Washington

                    Filed September 9, 2009

    Before: Kim McLane Wardlaw, Richard A. Paez and
             N. Randy Smith, Circuit Judges.

                     Opinion by Judge Paez

  *The panel unanimously finds this case suitable for decision without
oral argument. See Fed. R. App. P. 34(a)(2).
                     FLEMING v. PICKARD                 12877

                         COUNSEL

James Sturdevant, Bellingham, Washinton, for the appellants.

Terence John Cullen and Susan Kathleen McIntosh, Forsberg
& Umlauf, P.S., Seattle, Washington, for the appellees.

                         OPINION

PAEZ, Circuit Judge:

   We must decide whether a cause of action for tortious con-
version constitutes a debt within the meaning of the Fair Debt
Collection Practices Act (“FDCPA”). We hold that it does
not. We therefore affirm the district court’s judgment on the
pleadings under Federal Rule of Civil Procedure 12(c) dis-
missing Plaintiffs’ FDCPA claim without prejudice to their
related state law claims.
12878                      FLEMING v. PICKARD
                                     I.

   Between 2002 and 2005, Ryan and Joy Fleming, Brad and
Tammie Haslam, Jeremy Goodin, Deenna Smith, and the
estate of Michael Smith (collectively “Plaintiffs”) purchased
firearms, fishing gear, and general merchandise at a discount
from Gary Barnes, an employee of Ace Hardware in Oak Har-
bor, Washington.1 In 2005, Barnes was arrested for stealing
items from Ace, including the goods that he sold to Plaintiffs.
He was convicted of the offenses and imprisoned.

   Ace sued Barnes that same year to recover the stolen mer-
chandise or its value. Kenneth Pickard, a local attorney, repre-
sented Barnes in the lawsuit. Ace and Barnes reached a
settlement, wherein Barnes’s father, Robert, paid Ace
$50,000.00 in exchange for an assignment of all Ace’s claims
against third parties. Robert in turn assigned his rights to Jim
Martyn, who then assigned those rights to M3 Holdings, Inc.
M3 Holdings and Martyn, represented by Pickard, filed a tort
action against Plaintiffs in 2006 in Washington State Superior
Court for wrongful conversion,2 unjust enrichment, and viola-
tion of the Washington Criminal Profiteering Act. The com-
plaint alleged that Plaintiffs had entered into illicit agreements
with Barnes to acquire the stolen goods at discounted prices,
and that they had not returned the goods to Ace.

   In 2007, Plaintiffs filed suit in the United States District
Court for the Western District of Washington, alleging that
Pickard, M3 Holdings, and James Martyn and his wife, Cath-
erine A. Martin, (collectively “Defendants”) had violated the
FDCPA and Washington statutes by filing the lawsuit against
them and using other coercive methods, including displaying
  1
     This factual summary is taken from Plaintiffs’ allegations in their com-
plaint and was not disputed by Defendants in their answer.
   2
     Under Washington law, “[c]onversion is the unjustified, willful inter-
ference with a chattel which deprives a person entitled to the property of
possession.” Lang v. Hougan, 150 P.3d 622, 626 (Wash. Ct. App. 2007).
                          FLEMING v. PICKARD                        12879
a pistol, to force Plaintiffs to pay for the stolen merchandise.
Defendants’ answer admitted the material allegations
described above.

   Defendants subsequently moved for dismissal under Rule
12(c), arguing that there was no consumer debt at issue to
support a claim under the FDCPA, as actions constituting
theft or conversion of goods do not create a “debt.” The dis-
trict court granted the motion, concluding that the Plaintiffs’
obligation to pay had arisen in tort, not from a “debt” transac-
tion as contemplated by the FDCPA. Having decided that
there were no valid FDCPA claims, the district court dis-
missed the state law claims pursuant to 28 U.S.C.
§ 1367(c)(3). Plaintiffs timely appealed, seeking reversal of
the district court’s ruling on the grounds that the purchase of
stolen goods constituted a transaction that created a debt
under the FDCPA, or that, in the alternative, because there is
a “conflict in the evidence,” a jury should decide whether the
obligation was a debt. We conclude that the district court
properly granted Defendants judgment on the pleadings.3

                                    II.

  We have jurisdiction over the district court’s final judgment
under 28 U.S.C. § 1291.
  3
   We summarily reject one preliminary issue raised by Defendants.
Defendants challenge the standing of Deenna Smith and the estate of her
husband, Michael Smith. They argue that because Michael Smith signed
a release agreement with M3 Holdings on October 2, 2006, discharging
M3 Holdings from all liability related to the transactions with Ace, the
Smiths lack standing to assert their FDCPA claims. Because none of the
other Plaintiffs released their claims, their standing is not disputed. We
therefore need not address the question of the Smiths’ standing to reach
the merits of the case. See Brown v. City of Los Angeles, 521 F.3d 1238,
1240 n.1 (9th Cir. 2008); Bates v. United Parcel Serv., Inc., 511 F.3d 974,
985 (9th Cir. 2007) (en banc) (“[W]e consider only whether at least one
named plaintiff satisfies the standing requirements . . . .”).
12880                     FLEMING v. PICKARD
   We review de novo an order granting a Rule 12(c) motion
for judgment on the pleadings. Heliotrope Gen., Inc. v. Ford
Motor Co., 189 F.3d 971, 978 (9th Cir. 1999). We must
accept all factual allegations in the complaint as true and con-
strue them in the light most favorable to the non-moving
party. Turner v. Cook, 362 F.3d 1219, 1225 (9th Cir. 2004).
Judgment on the pleadings is properly granted when there is
no issue of material fact in dispute, and the moving party is
entitled to judgment as a matter of law.4 Heliotrope, 189 F.3d
at 979.

  We also review de novo the interpretation of a statute.
Romine v. Diversified Collection Servs., Inc., 155 F.3d 1142,
1145 (9th Cir. 1998).

                                   III.

   [1] The FDCPA provides a cause of action for consumers
who have been exposed to “abusive debt collection practices
by debt collectors.” 15 U.S.C. § 1692(e). As a threshold mat-
ter, a suit brought under the FDCPA must involve a “debt”
within the meaning of the statute. Turner, 362 F.3d at 1227.
The statute defines “debt” as

      any obligation or alleged obligation of a consumer to
      pay money arising out of a transaction in which the
      money, property, insurance, or services which are
      the subject of the transaction are primarily for per-
      sonal, family, or household purposes, whether or not
      such obligation has been reduced to judgment.

15 U.S.C. § 1692a(5). Thus, whether the undisputed facts
alleged in the complaint establish the existence of debt within
the meaning of § 1692a(5) is a question of law. This determi-
  4
   We thus do not consider the Plaintiffs’ declarations that were filed in
support of their competing motion for summary judgment.
                      FLEMING v. PICKARD                   12881
nation requires us to examine the alleged “transaction” and
determine whether it is covered by the FDCPA.

   [2] We have held that “at a minimum, a ‘transaction’ under
the FDCPA must involve some kind of business dealing or
other consensual obligation.” Turner, 362 F.3d at 1227. The
FDCPA, therefore, does not apply where a defendant attempts
to collect a state court judgment for damages as a result of tor-
tious conduct. Id. at 1228. Other circuits have addressed crim-
inal wrongdoing or tortious acts in the context of FDCPA
claims, concluding that the obligation to pay for criminal or
tortious actions does not constitute a “debt.” See, e.g., Bass v.
Stolper, Koritzinsky, Brewster & Nader, S.C., 111 F.3d 1322,
1326 (7th Cir. 1997) (“[A]lthough a thief undoubtedly has an
obligation to pay for the goods or services he steals, the
FDCPA limits its reach to those obligations to pay arising
from consensual transactions, where parties negotiate or con-
tract for consumer-related goods or services.”); Zimmerman v.
HBO Affiliate Group, 834 F.2d 1163, 1168 (3d Cir. 1987)
(“[N]othing in the statute or the legislative history leads us to
believe that Congress intended to equate asserted tort liability
with asserted consumer debt.”); Hawthorne v. Mac Adjust-
ment, Inc., 140 F.3d 1367, 1371 (11th Cir. 1998) (holding that
“debt” under the FDCPA is limited to liability arising out of
consensual, consumer transactions, and not tortious activity).

   Plaintiffs argue that they were in consensual and contrac-
tual relationships with Ace because Ace consented to employ
Barnes, so that he could sell its merchandise, and to allow
Plaintiffs to purchase the merchandise. Plaintiffs fail to recog-
nize, however, that Ace did not consent to Barnes’s stealing
the merchandise, selling it at a discount, or pocketing the pro-
ceeds. Barnes’s actions far exceeded the scope of Ace’s con-
sent, placing the resulting obligations well outside the scope
of the debt obligation contemplated by the FDCPA.
   Plaintiffs also cite two cases addressing FDCPA actions for
attempting to collect the debt created by a dishonored check.
12882                    FLEMING v. PICKARD
In Charles v. Lundgren Assocs., P.C., 119 F.3d 739, 740 (9th
Cir. 1997), we adopted the reasoning of the Seventh Circuit
in Bass, and held that a dishonored check created a debt
within the meaning of the FDCPA. In Bass, the Seventh Cir-
cuit held that “third-party efforts to collect payment from con-
sumers who use a dishonored check for the purchase of goods
or services” can be held liable under the FDCPA. 111 F.3d at
1323. Plaintiffs attempt to analogize these cases to their own,
on the theory that writing a bad check is a crime, and there-
fore does not constitute a consensual transaction. The Bass
court, however, specifically noted that not all dishonored
checks evidence tortious or criminal activity. Id. at 1329. It
further clarified that the obligation to pay for stolen goods
does not create a debt governed by the FDCPA. Id. at 1326.
In Hawthorne, the Eleventh Circuit agreed with this distinc-
tion, holding that “[u]nlike torts . . . bounced checks represent
legal obligations to pay. In other words, they constitute evi-
dence of a business dealing, or a ‘transaction’ under the
FDCPA.” Hawthorne, 140 F.3d at 1372. Both Bass and
Charles involved consumers with honest intentions to pay the
full price for legitimately acquired goods, and hence are inap-
posite to this case.5
   [3] Having recognized that a consensual obligation must be
the basis for a transaction covered by § 1692a(5), we have lit-
tle difficulty concluding that Defendants’ cause of action
against Plaintiffs for wrongful conversion does not, as a mat-
ter of law, constitute a debt for purposes of the FDCPA.
   AFFIRMED.
  5
    For further discussion of the meaning of “debt” under the FDCPA, see
Elwin Griffith, The Fair Debt Collections Practices Act —Reconciling the
Interests of Consumers and Debt Collectors, 28 Hofstra L. Rev. 1, 17-20
(1999) (affirming the reasoning of courts that have declined to apply the
FDCPA to obligations arising from tortious or non-consensual behavior);
Elwin Griffith, The Meaning of Language and the Element of Fairness in
the Fair Debt Collection Practices Act, 27 U. Tol. L. Rev. 13, 18-19
(1995) (affirming the reasoning of courts that have held that a “transac-
tion” under the FDCPA applies only to consensual dealings).