Morales v. Forster & Garbus LLP

Filing 53

ORDER that Defendant's 47 Motion to Dismiss is GRANTED in its entirety. Signed by Judge James A Teilborg on 01/11/12. (ESL)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Cindy Morales & Mark Morales, wife and)
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husband,
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Plaintiffs,
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vs.
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Forster & Garbus, LLP,
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Defendant.
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No. CV10-1464-PHX-JAT
ORDER

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Pending before the Court is Defendant’s Motion to Dismiss the Plaintiff’s Second

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Amended Complaint. (Doc. 47.) Plaintiff filed a Response to Defendant’s Motion to

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Dismiss (Doc. 49), and Defendant filed a Reply to Response to Motion to Dismiss (Doc. 52).

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The Court now rules on the motion.

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I.

FACTS

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Plaintiffs Mark and Cindy Morales owed Bank of America approximately $57,

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868.90. (Doc. 45 at 2.) Defendant Forster & Garbus, LLP, acted as counsel for FIA Card

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Services, N.A. (“FIA”), the credit card issuing arm of Bank of America, to collect Plaintiffs’

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debt. (Doc. 47 at 3.) Plaintiffs, with the assistance of Persels & Associates, LLC, entered

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a settlement agreement with Defendant for $22,000.00. (Doc. 45 at 2.)

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As outlined in the settlement agreement, Plaintiffs would make the following

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payments to Defendant: $471.00 due on or before October 28, 2009; $471.00 due on or

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before November 28, 2009; $1,250.00 due every month thereafter, beginning on December

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28, 2009; and final payment of $1, 058.00 due on or before April 28, 2011. (Id. at Exhibit

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A.)

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Plaintiffs claim that Persels & Associates paid the initial installment by phone on

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October 28. (Id. at 3.) The payment debited from Persels & Associates escrow account on

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October 30. (Id.) Plaintiffs claim that Persels & Associates sent an installment check for the

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second payment on November 16. (Id. at 4.) On December 3, Defendant returned the second

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installment check to Persels & Associates. (Doc. 45 at 4.) According to Plaintiff, Defendant

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breached the settlement agreement because Defendant never had authority to bind FIA to the

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settlement agreement. (Id.)

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On January 8, 2010, Plaintiffs received notice that their account had been turned over

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to Gurstel, Staloch & Chargo, P.A. (Doc. 45 at 4.) A month later, Gurstel, Staloch & Chargo

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filed a complaint seeking the full principle balance of Plaintiffs’ account. (Id.) Gurstel,

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Staloch & Chargo then offered a new settlement of $39,578.04, which Persels & Associates

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accepted on behalf of Plaintiffs. (Id. at 5.) Persels & Associates sent Gurstel, Staloch &

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Chargo the first payment of $300 but did not send any additional payments. (Id.)

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Plaintiffs claim that Defendant breached the settlement agreement by refusing the

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second payment and failing to return the first payment and that Defendant violated the Fair

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Debt Collection Practices Act (“FDCPA”), 15 U.S.C. §§ 1692-1692p.

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Defendant violated §1692d by harassing Plaintiff through false belief of settlement when

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Defendant had no authority to bind FIA, and by not returning the first payment. (Id. at 6)

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Also, Plaintiffs claim that Defendant violated § 1692e by misleading Plaintiffs in the

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settlement agreement and deceptively keeping the first payment. (Id. at 6, 7).

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Plaintiffs claim that Defendant violated § 1692f by using unfair or unconscionable means to

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get Plaintiffs to agree to a settlement and by not returning the first payment. (Id. at 7.)

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Defendant filed a Motion to Dismiss under Fed. R. Civ. P. 12(b)(6) because Plaintiffs failed

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“to state a claim . . . alleging a violation of the [FDCPA] . . . [and] for breach of contract.”

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(Doc. 47 at 1.)

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Specifically,

Finally,

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II.

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The Court may dismiss a complaint for failure to state a claim under Rule 12(b)(6) for

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two reasons: 1) lack of a cognizable legal theory or 2) insufficient facts alleged under a

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cognizable legal theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir.

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1990).

LEGAL STANDARD

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To survive a Rule 12(b)(6) motion for failure to state a claim, a complaint must meet

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the requirements of Fed. R. Civ. P. 8(a)(2). Rule 8(a)(2) requires a “short and plain statement

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of the claim showing that the pleader is entitled to relief,” so that the defendant has “fair

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notice of what the . . . claim is and the grounds upon which it rests.” Bell Atlantic Corp. v.

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Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)).

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Although a complaint attacked for failure to state a claim does not need detailed

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factual allegations, the pleader’s obligation to provide the grounds for relief requires “more

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than labels and conclusions, and a formulaic recitation of the elements of a cause of action

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will not do.” Twombly, 550 U.S. at 555 (internal citations omitted). The factual allegations

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of the complaint must be sufficient to raise a right to relief above a speculative level. Id.

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Rule 8(a)(2) “requires a ‘showing,’ rather than a blanket assertion, of entitlement to relief.

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Without some factual allegation in the complaint, it is hard to see how a claimant could

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satisfy the requirement of providing not only ‘fair notice’ of the nature of the claim, but also

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‘grounds’ on which the claim rests.” Id. (citing 5 C. Wright & A. Miller, Federal Practice

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and Procedure §1202, pp. 94, 95(3d ed. 2004)).

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Rule 8’s pleading standard demands more than “an unadorned, the-defendant-

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unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009)(citing

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Twombly, 550 U.S. at 555). A complaint that offers nothing more than naked assertions will

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not suffice. To survive a motion to dismiss, a complaint must contain sufficient factual

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matter, which, if accepted as true, states a claim to relief that is “plausible on its face.” Iqbal,

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129 S.Ct. at 1949. Facial plausibility exists if the pleader pleads factual content that allows

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the court to draw the reasonable inference that the defendant is liable for the misconduct

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alleged. Id. Plausibility does not equal “probability,” but plausibility requires more than a
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sheer possibility that a defendant has acted unlawfully. Id. “Where a complaint pleads facts

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that are ‘merely consistent’ with a defendant’s liability, it ‘stops short of the line between

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possibility and plausibility of entitlement to relief.’” Id. (citing Twombly, 550 U.S. at 557).

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In deciding a motion to dismiss under Rule 12(b)(6), the Court must construe the facts

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alleged in the complaint in the light most favorable to the drafter of the complaint and the

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Court must accept all well-pleaded factual allegations as true. See Shwarz v. United States,

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234 F.3d 428, 435 (9th Cir. 2000). Nonetheless, the Court does not have to accept as true

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a legal conclusion couched as a factual allegation. Papasan v. Allain, 478 U.S. 265, 286

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(1986).

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III.

ANALYSIS
A.

FDCPA

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Plaintiffs’ Second Amended Complaint does not state a claim under the FDCPA. The

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Second Amended Complaint argues that Defendant’s actions in obtaining and offering the

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settlement agreement, as well as Defendant’s failure to return the first payment, violated at

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least one of §§ 1692d-1692f. The actions alleged to violate the FDCPA are between the

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Defendant and Persels & Associates, as counsel for Plaintiffs. Defendant correctly argues

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that any communications Defendant made exclusively to Plaintiffs’ counsel are not subject

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to the FDCPA. Guerrero v. RJM Acquisitions LLC, 499 F.3d 926, 939 (9th Cir. 2007).

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Plaintiff fails to state any facts supporting communication directed towards them personally.

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The Ninth Circuit Court of Appeals has held that attorneys are “intermediaries able

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to bear the brunt of overreaching debt collection practices” from which the FDCPA aims to

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protect debtors. Id. at 935. When the attorney is the recipient of the communication, the

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“FDCPA’s purpose of protecting unsophisticated consumers is not implicated.” Donohue

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v. Quick Collect, Inc., 592 F.3d 1027, 1032 (9th Cir. 2010).

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The debt collection practices that the FDCPA is concerned with are collectors

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harassing, deceiving, or otherwise abusing debtors. Guerrero, 499 F.3d at 935. Congress

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stated in the FDCPA that the “debt collector may not communicate . . . with any person other

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than the consumer, his attorney . . ., or the attorney of the debt collector.” 15 U.S.C. §
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1692c(b) (2009). And Congress defined consumer to include “consumer’s spouse, parent (if

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the consumer is a minor), guardian, executor, or administrator.” 15 U.S.C. § 1692c(d).

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Congress chose to not include attorney in the definition of consumer. See Guerrero, 499

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F.3d at 935.

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Plaintiffs do not make any allegations that Defendant communicated with anyone

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other than their counsel. Persels & Associates helped Plaintiffs reach a settlement agreement

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with FIA, and handled the payments on behalf of the Plaintiffs. Because all negotiations and

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communications were with Plaintiffs’ counsel, not Plaintiffs, Plaintiffs fail to assert a claim

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that the Defendant violated the FDCPA. The Court therefore grants the Motion to Dismiss

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Count I.
B.

Breach of Contract

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Defendant also moves to dismiss Plaintiffs’ breach of contract claim. Plaintiffs claim

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that they fulfilled their contractual obligations to make timely payments, but Defendant

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breached the settlement agreement by refusing to accept the second payment and by not

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returning the first payment. In Plaintiffs’ Second Amended Complaint, they recognize that

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the Defendant acted on behalf of FIA, but offer no authority as to why this would bind

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Defendant in the event of a breach or make Defendant a party to the agreement.

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The attorney-client relationship is governed by the law of agency. Garn v. Garn, 155

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Ariz. 156, 160, 745 P.2d 604, 608 (1987). An agent who signs an agreement on behalf of a

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fully disclosed principal is not a party to the agreement and is not personally liable if the

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principal breaches the agreement. Ferrarell v. Robinson, 11 Ariz. App. 473, 475, 465 P.2d

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610, 612 (1970).

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An agent has apparent authority to affect a principal’s legal relations with a third party

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“when a third party reasonably believes the actor has authority to act on behalf of the

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principal and that belief is traceable to the principal’s manifestations.” Restatement (Third)

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of Agency § 2.03 (2006). The Second Amended Complaint sets forth that Defendant sent

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a letter acknowledging that the Defendant represented FIA and that the debt would be settled

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per the terms of the proposed agreement.
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Plaintiffs claim that Defendant had no authority from FIA to agree to the settlement

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and that this makes Defendant a party to the agreement. However, an agent “does not

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become a party to a contract made on behalf of a disclosed principal.” Restatement (Third)

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of Agency § 6.10 cmt. b.

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Plaintiffs point to the settlement agreement in support of a contract between

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themselves and Defendant. But the letter sent by Defendant states that the agreement is in

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response to the Plaintiffs’ debt with FIA. Also, Plaintiffs Second Amended Complaint

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claims that Defendant communicated evidence that they represented FIA regarding this debt.

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Plaintiffs’ allegation make clear that they knew Defendant represented FIA, the lender.

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Because an agent who signs an agreement on behalf of a fully disclosed principal is not liable

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for breach of the agreement, Plaintiffs’ breach of contract claim against Defendant fails as

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a matter of law. The Court therefore grants the motion to dismiss Count II.

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Accordingly,

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IT IS ORDERED that Defendant’s Motion to Dismiss (Doc. 47) is GRANTED in

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its entirety.
DATED this 11th day of January, 2012.

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