Rahman v. San Diego Accounts Service et al

Filing 19

ORDER Granting in Part and Denying in Part Plaintiff's 13 Motion to Strike. It is ordered that the Court grants plaintiff's Motion to Strike defendant's affirmative defenses of (1) good faith and (2) bona fide error, and denies plaintiff's Motion to Strike defendant's affirmative defenses of (3) statutes of limitations and (4) offset. Defendant is granted leave to amend its answer regarding the affirmative defenses of good faith and bona fide error. Signed by Judge Janis L. Sammartino on 4/18/2017. (dxj)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 ADNAN RAHMAN, Case No.: 16cv2061-JLS (KSC) Plaintiff, 12 13 14 ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S MOTION TO STRIKE v. SAN DIEGO ACCOUNTS SERVICE, a California corporation, d/b/a CALIFORNIA ACCOUNTS SERVICE, et al., 15 16 17 (ECF No. 13) Defendant. 18 19 Presently before the Court is Plaintiff Adnan Rahman’s Motion to Strike Affirmative 20 Defenses in Defendant’s First Amended Answer (“MTS”), (ECF No. 13), Defendant’s 21 Response in Opposition to Plaintiff’s Motion to Strike (“Opp’n”), (ECF No. 15), and 22 Plaintiff’s Reply in Support of Motion to Strike (“Reply”), (ECF No. 16). The Court took 23 the matter under submission without oral argument pursuant to Civil Local Rule 7.1(d). 24 (ECF No. 18.) Having considered the Parties’ arguments and the law, the Court GRANTS 25 IN PART and DENIES IN PART Plaintiff’s Motion to Strike. 26 BACKGROUND 27 In 2011, Plaintiff received emergency medical services at Palomar Medical Center 28 (“Palomar”) in Escondido, California. (Compl ¶ 11, ECF No. 1.) At least one of those 1 16cv2061-JLS (KSC) 1 services was provided by Dr. Tantuwaya. (Id. ¶ 12–15.) Subsequently, although Plaintiff’s 2 Medi-Cal coverage allegedly paid some of these emergency-medical claims, “[t]he services 3 provided by Dr. Tantuwaya were not included in these claims . . . despite Dr. Tantuwaya’s 4 knowledge of [Plaintiff’s] Medi-Cal eligibility.” (Id. ¶¶ 14, 15.) Defendant California 5 Account Services has since taken action on this alleged debt, including by making alleged 6 false representations to credit reporting agencies regarding “the amount, nature, and legal 7 status of the purported debt alleged to be owed by Plaintiff . . . .” (Id. ¶¶ 22–30.) 8 Plaintiff marshaled these allegedly false representations into a Complaint alleging 9 claims against Defendant under the Fair Debt Collection Practices Act (“FDCPA”), 15 10 U.S.C. § 1692 et seq., (id. ¶¶ 32–37); the Rosenthal Fair Debt Collection Practices Act 11 (“Rosenthal Act”), Cal. Civ. Code § 1788 et seq., (id. ¶¶ 38–43); and the Consumer Credit 12 Reporting Agencies Act (“CCRAA”), Cal. Civ. Code § 1785.1 et seq., (id. ¶¶ 44–55). 13 Defendant filed an Answer to the Complaint, (ECF No. 11), including several affirmative 14 defenses which underlie the substance of this Motion to Strike. 15 LEGAL STANDARD 16 Rule 12(f) provides that the court “may strike from a pleading an insufficient defense 17 or any redundant, immaterial, impertinent, or scandalous matter.” Fed. R. Civ. P. 12(f). 18 “The function of a 12(f) motion to strike is to avoid the expenditure of time and money that 19 must arise from litigating spurious issues by dispensing with those issues prior to trial . . . .” 20 Whittlestone, Inc. v. Handi–Craft Co., 618 F.3d 970, 973 (9th Cir. 2010) (quoting Fantasy, 21 Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir. 1993), rev’d on other grounds, 510 U.S. 517 22 (1994)). Accordingly, “[a] defense may be struck if it fails to provide ‘fair notice’ of the 23 basis of the defense.” Qarbon.com Inc. v. eHelp Corp., 315 F. Supp. 2d 1046, 1048 (N.D. 24 Cal. 2004); see also Wyshak v. City Nat’l Bank, 607 F.2d 824, 826 (9th Cir. 1979). 25 “Motions to strike are ‘generally disfavored because they are often used as delaying 26 tactics and because of the limited importance of pleadings in federal practice.’ ” Cortina v. 27 Goya Foods, Inc., 94 F. Supp. 3d 1174, 1182 (S.D. Cal. 2015) (quoting Rosales v. Citibank, 28 133 F. Supp. 2d 1177, 1180 (N.D. Cal. 2001)). “[M]otions to strike should not be granted 2 16cv2061-JLS (KSC) 1 unless it is clear that the matter to be stricken could have no possible bearing on the subject 2 matter of the litigation.” Colaprico v. Sun Microsystems, Inc., 758 F. Supp. 1335, 1339 3 (N.D. Cal. 1991). “When ruling on a motion to strike, this Court ‘must view the pleading 4 under attack in the light most favorable to the pleader.’ ” Id. (citing RDF Media Ltd. v. Fox 5 Broad. Co., 372 F. Supp. 2d 556, 561 (C.D. Cal. 2005)). 6 ANALYSIS 7 As an initial matter, the Court addresses the threshold issue of whether the Twombly 8 and Iqbal “plausibility” standard governs Defendant’s pleading of its affirmative defenses. 9 Plaintiff contends that it does, (e.g., MTS 2–6); Defendant contends that the original 10 enunciation of the “fair notice” standard in Wyshak v. City National Bank, 607 F.2d 824 11 (9th Cir. 1979), governs instead, (Opp’n 3). The Court agrees with Plaintiff. 12 Prior to the Supreme Court’s articulation of the “plausibility” standard for pleading 13 under Federal Rule of Civil Procedure 8, there was no question that in our Circuit the 14 Wyshak “fair notice” standard governed pleading an affirmative defense under Rule 8. 15 Pursuant to Wyshak, “[t]he key to determining the sufficiency of pleading an affirmative 16 defense is whether it gives plaintiff fair notice of the defense.” 607 F.2d at 827 (citing 17 Conley v. Gibson, 355 U.S. 41, 47–48 (1957); 5 Wright & Miller Federal Practice and 18 Procedure, § 1274 at 323). However, in 2007 and 2009, the Supreme Court issued seminal 19 decisions in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 20 556 U.S. 662 (2009), holding that Rule 8 requires a plaintiff to plead facts supporting a 21 “plausible” rather than merely “possible” claim to relief. E.g., Iqbal, 556 U.S. at 678–79. 22 Since Twombly and Iqbal, district courts in the Ninth Circuit have come to differing 23 conclusions regarding whether those cases necessitate a different interpretation of 24 Wyshak’s “fair notice” standard. See, e.g., J & J Sports Prods., Inc. v. Scace, No. 25 10CV2496-WQH-CAB, 2011 WL 2132723, at *1 (S.D. Cal. May 27, 2011) (discussing 26 split). Ultimately, this Court agrees with the numerous district courts that have concluded 27 the Twombly and Iqbal “plausibility” standard applies with equal force to the pleading of 28 affirmative defenses. Although there is a valid question as to whether the logic of Twombly 3 16cv2061-JLS (KSC) 1 and Iqbal—rendered in the context of Rule 8(a)—applies with equal force to Rule 8(c) 2 governing affirmative defenses, this Court concludes that Wyshak compels application of 3 the plausibility standard to pleading affirmative defenses. Specifically, the only case 4 Wyshak cited to support its “fair notice” standard is Conley v. Gibson, 355 U.S. 41, 47–48 5 (1957), Wyshak, 607 F.2d at 827, and Conley has since been abrogated insofar as it 6 permitted pleading at a standard lower than Twombly’s plausibility standard, see Twombly, 7 550 U.S. at 555, 560–61 (citing Conley for “fair notice” rule statement immediately prior 8 to articulating “plausibility” standard and expressly abrogating Conley’s “no set of facts” 9 language). Accordingly, “fair notice” necessarily now encompasses the “plausibility” 10 standard; whatever standard “fair notice” previously encompassed no longer exists. E.g., 11 Madison v. Goldsmith & Hull, No. 5:13-CV-01655 EJD, 2013 WL 5769979, at *1 (N.D. 12 Cal. Oct. 24, 2013); Gonzalez v. Heritage Pac. Fin., LLC, No. 2:12-CV-01816-ODW, 2012 13 WL 3263749, at *2 (C.D. Cal. Aug. 8, 2012); Perez v. Gordon & Wong Law Grp., P.C., 14 No. 11-CV-03323-LHK, 2012 WL 1029425, at *6–8 (N.D. Cal. Mar. 26, 2012). 15 Accordingly, the Court reviews for plausibility Defendant’s pleaded affirmative 16 defenses of (1) Statutes of Limitations; (2) Bona Fide Error; (3) Good Faith; and (4) Offset. 17 The Court addresses each in turn. 18 I. Statutes of Limitations 19 Under the FCDPA and the Rosenthal Act, a Plaintiff must bring an action within one 20 year of the date of the alleged violation. 15 U.S.C. § 1692k(d); Cal. Civ. Code § 1788.30(f). 21 Under the CCRAA such time period stretches to two years from “the date the plaintiff 22 knew of, or should have known of, the violation . . . .” Cal. Civ. Code § 1785.33. Plaintiff 23 asserts that “[l]ess than one year elapsed between the violations allegedly committed on or 24 about August 28, 2015 and the date of commencement of this action on August 16, 2016.” 25 (MTS 7.) Therefore, Plaintiff argues, “Defendant cannot prevail on a statue limitations 26 defense and it should be stricken from Defendant’s Amended Answer.” (Id.) But this does 27 not tell the whole story of Plaintiff’s Complaint. True, Plaintiff lists Defendant’s specific 28 violation on August 28, 2016, (Compl. ¶ 30), but Plaintiff also alleges “[o]n information 4 16cv2061-JLS (KSC) 1 and belief, Defendant CAS falsely represented and continues to falsely represent the 2 amount, nature, and legal status of the purported debt” such that “Plaintiff now sues for 3 numerous violations of” the relevant statutory provisions, (id. ¶¶ 29, 31). Accordingly, to 4 the extent Plaintiff attempts to assert claims for violations prior to August 16, 2015, such 5 claims may well be barred by relevant statutes of limitation. That is, rather than 6 Defendant’s affirmative defenses it is instead Plaintiff’s Complaint that lacks specificity in 7 pleading. And the Court will not use the Complaint’s deficiencies as a sword against 8 Defendant’s attempts to defend Plaintiff’s general allegations. Given the foregoing, the Court DENIES Plaintiff’s Motion to Strike Defendant’s 9 10 affirmative defense regarding statutes of limitations. 11 II. Bona Fide Error 12 The FDCPA provides a defense of “bona fide error” when a debt collector can show 13 “by a preponderance of the evidence that the violation was not intentional and resulted 14 from a bona fide error notwithstanding the maintenance of procedures reasonably adapted 15 to avoid any such error.” 15 U.S.C. § 1692k(c). Because such a showing necessarily 16 requires a “mistake” on the part of a Defendant, “[d]istrict courts have held that the 17 affirmative defense of bona fide error must be stated with particularity under Rule 9(b).” 18 Youssofi v. Allied Interstate LLC, No. 15CV2197-GPC (JLB), 2016 WL 29625, at *3 (S.D. 19 Cal. Jan. 4, 2016) (collecting cases). Particularity requires setting forth “the who, what, 20 when, where, and how of the misconduct charged.” Ebeid ex rel. U.S. v. Lungwitz, 616 21 F.3d 993, 998 (9th Cir. 2010) (quoting Vess v. Ciba–Geigy Corp. USA, 317 F.3d 1097, 22 1106 (9th Cir. 2003)). 23 24 25 26 27 28 Defendant’s affirmative defense of bona fide error sets forth the following information: As a separate, affirmative defense, assuming arguendo that Defendant violated a statute alleged in the Complaint, which presupposition Defendant denies, such violation was not intentional and resulted from a bona fide error, notwithstanding the maintenance of procedures reasonably adapted to avoid any such error. Defendant contends that it . . . has appropriate policies and 5 16cv2061-JLS (KSC) 1 procedures in place, in which it verifies all debts before collecting thereon. Here, Defendant verified the debt at issue, which reflected the cost of Dr. Tantuwaya’s medical services. Dr. Tantuwaya was not a Medi-Cal provider and once the appropriate insurance adjustments were made, a valid medical debt arose that was not paid, and to which Defendant attempted to collect. 2 3 4 5 (Am. Answer 7–8.) But this brief statement is insufficient to comply with Rule 9(b)’s 6 particularity requirement. Essentially, Defendant asserts only two relevant facts: that (1) 7 Defendant verifies all debts prior to collection and (2) Defendant verified this particular 8 debt. Noticeably lacking—at minimum—are any assertions regarding what particular 9 policies and procedures Defendant has in place to verify debts, or how or when Defendant 10 attempted to verify this particular debt. See Youssofi, 2016 WL 29625, at *3–4. 11 Accordingly, Defendant’s affirmative defense of bona fide error is not currently pled 12 with sufficient particularity to comply with Rule 9(b). Plaintiff’s Motion to Strike is 13 therefore GRANTED as to Defendant’s affirmative defense of bona fide error. 14 III. Good Faith 15 As an initial matter, Plaintiff argues that “good faith” is not a defense to FDCPA, 16 Rosenthal Act, or CCRAA liability, (MTS 11–12), and Defendant responds only that 17 “[u]nlike the FDCPA, the Rosenthal Act is not a strict liability statute” and therefore “Good 18 Faith . . . is a defense to [a] Rosenthal Act claim[,]” (Opp’n 4). Accordingly, Defendant 19 tacitly concedes Plaintiff’s points regarding FDCPA and CCRA liability. Further, 20 Defendant’s good faith affirmative defense states only the following: 21 22 23 24 25 26 Defendant contends it did not engage in any conduct that was outrageous, intentional and malicious or done with reckless disregard with respect to Plaintiff. Defendant also contends that it never engaged in any knowing, willful or fraudulent conduct with respect to Plaintiff. Dr. Tantuwaya was not a Medi-Cal provider, and as such, Defendant collected on a valid medical debt, which stemmed from the services rendered to Plaintiff by Dr. Tantuwaya. 27 28 6 16cv2061-JLS (KSC) 1 (Am. Answer 8.) This statement fails to provide any factual support—plausible or not— 2 for the assertion that Dr. Tantuwaya was not a Medi-Cal provider, or how Defendant would 3 have known such information prior to allegedly violating the Rosenthal Act.1 4 Accordingly, all aspects of Defendant’s good faith affirmative defense fail. The Court 5 therefore GRANTS Plaintiff’s Motion to Strike Defendant’s good faith affirmative 6 defense. 7 IV. Offset 8 Defendant’s final affirmative defense is one of “offset.” Specifically, “Defendant 9 contends that any recovery by Plaintiff be offset by the amount owed to Defendant resulting 10 from the valid medical debt from which this dispute arose.” (Am. Answer 8.) Plaintiff 11 attacks both the legal and factual sufficiency of Defendant’s pleading. (MTS 12–14.) 12 Regarding legal sufficiency, Plaintiff first acknowledges that “the Ninth Circuit has 13 not directly addressed the availability of offset to an FDCPA defendant,” and then focuses 14 on caselaw analogies and policy reasons as to why such a defense should not be available. 15 However, this is insufficient to show that the defense has “no possible bearing on the 16 subject matter of the litigation.” Colaprico, 758 F. Supp. at 1339. Accordingly, the Court 17 will not at this stage strike this affirmative defense as a matter of law. 18 Regarding factual sufficiency, Plaintiff argues that Defendant’s statement “does not 19 give any reference of what the amount is or how said debt should reduce Plaintiff’s 20 recovery.” (MTS 12.) However, Defendant specifically argues that “any recovery” should 21 be offset by “the amount owed to Defendant resulting from the valid medical debt from 22 which this dispute arose.” (Am. Answer 8.) And Plaintiff’s Complaint acknowledges two 23 underlying debt figures which may ultimately be proven to be “valid”: either “the full 24 amount of . . . services” Dr. Tantuwaya performed, (Compl. ¶ 16), or the amount Dr. 25 26 1 27 28 Plaintiff also asserts that good faith is not a defense to the particular Rosenthal Act claims here at issue. (MTS 11–12; Reply 4–6); see also Bentkowsky v. Benchmark Recovery, Inc, No. 13-CV-01252-VC, 2015 WL 502948, at *1–2 (N.D. Cal. Feb. 3, 2015). However, the Court does not address this legal issue given Defendants’ current lack of factual support for the defense. 7 16cv2061-JLS (KSC) 1 Tantauwaya “would have . . . been able to charge Plaintiff . . . according to the [relevant] 2 Medi-Cal rate table[,]” (id. ¶ 20). The Court concludes that this is sufficient to plausibly 3 state an affirmative defense for offset. See, e.g., Jacobson v. Persolve, LLC, No. 14-CV- 4 00735-LHK, 2014 WL 4090809, at *9 (N.D. Cal. Aug. 19, 2014) (“Even the minimal 5 language in [Defendant]’s Answer satisfies the heightened ‘plausibility’ standard because 6 the words ‘the amount owed to Defendant’ is self-explanatory in the context of the current 7 dispute.”). 8 9 Given the foregoing, the Court DENIES Plaintiff’s Motion to Strike Defendant’s affirmative defense of offset. 10 CONCLUSION 11 Given the foregoing, the Court GRANTS Plaintiff’s Motion to Strike Defendant’s 12 affirmative defenses of (1) good faith and (2) bona fide error, and DENIES Plaintiff’s 13 Motion to Strike Defendant’s affirmative defenses of (3) statutes of limitations and (4) 14 offset. Defendant is GRANTED LEAVE TO AMEND its Answer regarding the 15 affirmative defenses of good faith and bona fide error. 16 17 IT IS SO ORDERED. Dated: April 18, 2017 18 19 20 21 22 23 24 25 26 27 28 8 16cv2061-JLS (KSC)

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