Santos v. LVNV Funding, LLC et al

Filing 21

ORDER by Judge Edward J. Davila denying 8 Motion to Dismiss; denying 20 Motion to Appear by Telephone (ejdlc2, COURT STAFF) (Filed on 1/24/2012)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

United States District Court
For the Northern District of California

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BLANCA SANTOS,
Plaintiff,

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v.
LVNV FUNDING, LLC, ET AL.,
Defendants.

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Case No.: 5:11-CV-2683 EJD
ORDER DENYING MOTION TO
DISMISS
(Re: Docket No. 8)

Pending before the court is Defendants LVNV Funding, LLC (“LVNV”), Brachfeld Law

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Group, P.C. (“BLG”) and Erica Brachfeld’s motion to dismiss Plaintiff Blanca Santos’s (“Santos”)

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Complaint. The court finds this motion appropriate for determination without oral argument. See

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Civil L.R. 7-1(b). For the reasons discussed below, the motion is DENIED.

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I. BACKGROUND
According to the Complaint, Santos became delinquent on a consumer credit card account

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assigned to LVNV, and LVNV filed a collection action against Santos in Santa Clara County

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Superior Court. Compl. ¶ 9. Santos called BLG and worked out a payment plan to resolve the debt.

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Id. ¶ 10. BLG informed Santos that if she made the agreed upon payments, she would not need to

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go to court and could disregard the summons. Id. ¶ 12. Santos completed the payments on or about

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February 28, 2009, and Defendants had knowledge of that fact. Id. ¶¶ 13-14.

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Case No.: 5:11-CV-2683 EJD
ORDER DENYING MOTION TO DISMISS

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On September 23, 2009, despite the completed settlement, Defendants filed a Request for

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Entry of Default in the state court action. Id. ¶ 15. Default was entered and default judgement was

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granted in the amount of $4,210.75. Id. On or about March 2, 2010, Defendants caused Santos’s

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bank account to be levied, and Santos was charged a fee for processing the levy. Id. ¶ 17. In or

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around October 2010, Defendants served an earnings withholding order on Santos’s employer. Id. ¶

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18. The judgment was set aside on or about May 3, 2011. Id. ¶ 21. Defendants then filed a

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dismissal without prejudice. See Motion to Dismiss at 5:21-22, ECF No. 8.

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On June 3, 2011, Santos filed her Complaint in this action alleging that Defendants (1)
violated the Federal Fair Debt Collection Practice Act (“FDCPA”), 15 U.S.C. § 1692, by

United States District Court
For the Northern District of California

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representing that Santos owed a debt that Defendants knew was not owed, by engaging in conduct

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that had the natural consequences of harassing, oppressing, and abusing Santos, and by attempting

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to collect additional fees and interest in contravention to the settlement agreement, and (2) violated

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the Rosenthal Fair Debt Collection Practices Act (“RFDCPA”), Cal. Civ. Code § 1788, by

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violating the Federal Fair Debt Collection Practice Act as set forth above, by communicating with

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Santos in the name of an attorney without the approval or authorization of any attorney, and by

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attempting to collect charges not permitted by law. Compl. at 5-6.

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On July 29, 2011, Defendants filed this motion to dismiss Santos’s Complaint on the basis

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that retraxit, Rooker-Feldman, and litigation privilege are all complete bars to this action. On

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August 12, 2011, Santos filed her opposition to the motion. No reply brief has been filed.

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II. DISCUSSION
A. Retraxit
“In common law, a retraxit was ‘a voluntary renunciation by plaintiff in open court of his

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suit and cause thereof, and by it plaintiff forever loses his action.’ In California, the same effect is

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now accomplished by a dismissal with prejudice.” Aerojet-General Corp. v. Commercial Union

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Ins. Co., 65 Cal. Rptr. 3d. 803, 814 (Ct. App. 2007) (citing Morris v. Blank, 94 Cal. App. 4th 823,

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828 (App. Ct. 2001)). “Under the doctrine of retraxit, ‘[w]here the parties to an action settle their

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dispute and agree to a dismissal, it is a retraxit and amounts to a decision on the merits and as such

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is a bar to further litigation on the same subject matter between the parties.’ The doctrine has been
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Case No.: 5:11-CV-2683 EJD
ORDER DENYING MOTION TO DISMISS

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applied to cases . . . where one party dismisses an action with prejudice, and the other party seeks

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further litigation on the same subject matter.” Morris, 94 Cal. App. 4th at 828 (citing Datta v.

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Staab, 173 Cal. App. 2d 613, 621 (App. Ct. 1959)).

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Defendants argue that because their claims against Santos were dismissed and Santos was

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awarded costs in the state court action, retraxit applies to her claims in this action. Defendants,

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however, have made no argument, much less presented any evidence, as to how Santos’s claims for

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unfair debt collection practices constitute further litigation of the same subject matter decided in

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the state court action. Furthermore, Defendants dismissed their claims in state court without

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prejudice and have failed to cite any authority supporting its argument that retraxit applies to

United States District Court
For the Northern District of California

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claims dismissed without prejudice.
Accordingly, Santos’s Complaint is not barred by retraxit.
B. Rooker-Feldman
The Rooker-Feldman doctrine applies to “cases brought by state-court losers complaining

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of injuries caused by state-court judgments rendered before the district court proceedings

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commenced and inviting district court review and rejection of those judgments.” Exxon Mobil

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Corp. v. Saudi Basic Industries Corp., 544 U.S. 280, 284 (2005). The doctrine prevents litigants

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from attacking a state court judgment by filing a subsequent federal lawsuit, “no matter how

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erroneous or unconstitutional the state court judgment may be.” Kelly v. Med-1 Solutions, LLC,

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548 F.3d 600, 603 (7th Cir. 2008).

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Although the judgment Defendants obtained on its state court claims was set aside,

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Defendants argue that this federal action is based on harm resulting from that judgment. It appears

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that some of the injury alleged in the Complaint resulted from the state-court judgment that has

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been set aside. The Complaint, however, alleges violations based on Defendants’ conduct in

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pursuing that judgment in violation of a settlement; the Complaint does not ask the court to review

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or to reject the state court’s judgment.

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Accordingly, the Rooker-Feldman doctrine is inapplicable to remove this action from this
court’s jurisdiction.

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Case No.: 5:11-CV-2683 EJD
ORDER DENYING MOTION TO DISMISS

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C. Litigation Privilege
Finally, Defendants argue that because the basis for this action is Defendants’ filing of legal

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documents seeking default, levy, and garnishment in a judicial proceeding, the case is barred by

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California litigation privilege that protects statements made in any judicial proceeding. Cal. Civ.

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Code § 47(b).

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The California litigation privilege, however, does not apply to FDCPA claims. See Welker

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v. Law Office of Horwitz, 626 F. Supp. 2d 1068, 1072 (S.D. Cal. 2009); Oei v. N. Star Capital

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Acquisitions, LLC, 486 F. Supp. 2d 1089, 1098 (C.D. Cal. 2006). This rule is especially clear in

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light of the Supreme Court’s decision in Heintz v. Jenkins, 514 U.S. 291 (1995) that the Supreme

United States District Court
For the Northern District of California

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Court held that the FDCPA “applies to attorneys who ‘regularly’ engage in consumer-debt-

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collection activity, even when that activity consists of litigation.” Although the Henitz decision

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does not expressly address litigation privilege, the decision “leaves little room for the proposition

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that an attorney’s litigation activities are immune and thus not subject to the FDCPA.” Reyes v.

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Kenosian & Miele, LLP, 619 F. Supp. 2d 796, 803 (N.D. Cal. 2008).

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The California litigation privilege also does not apply to RFDCPA violations. See

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Komorova v. National Credit Acceptance, Inc., 175 Cal. App. 4th 324, 337 (App. Ct. 2009) (finding

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that the litigation privilege “cannot be used to shield violations of the [RFDCPA]).” In Komorova,

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the California Court of Appeals held that an exception to the litigation privilege existed because (1)

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the RFDCPA is more specific the California litigation privilege and (2) the RFDCPA would be

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“significantly inoperable if it did not prevail over the privilege where, as here, the two conflict.” Id.

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at 339-40. Here, as in Komorova, if the court were to apply the litigation privilege to protect

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Defendants’ filings, which allegedly sought to improperly collect the debt, that decision would in

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effect render the RFDCPA inoperable. See also, Welker v. Law Office of Daniel J. Horwitz, 699 F.

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Supp. 2d 1164, 1174 (S.D. Cal. 2010).

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Accordingly, the litigation privilege is inapplicable to shield Defendants from liability for
Santos’s FDCPA and RFDCPA claims.
IT IS HEREBY ORDERED that Defendants’ motion to dismiss is DENIED.

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Case No.: 5:11-CV-2683 EJD
ORDER DENYING MOTION TO DISMISS

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IT IS FURTHER ORDERED that the pending motion to appear by telephone at the January

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27, 2012 hearing is DENIED AS MOOT.

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Dated:

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_________________________________
EDWARD J. DAVILA
United States District Judge

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United States District Court
For the Northern District of California

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Case No.: 5:11-CV-2683 EJD
ORDER DENYING MOTION TO DISMISS