Turner et al v. Associa et al
ORDER GRANTING DEFENDANT'S MOTION TO DISMISS AND, IN THE ALTERNATIVE, MOTION FOR SUMMARY JUDGMENT AND DENYING AS MOOT PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT 46 ; 53 . Signed by JUDGE ALAN C KAY on 10/15/2012. (eps) -- Fo r the foregoing reasons, the Court GRANTS Defendant's Motion To Dismiss and, in the alternative, Motion For Summary Judgment. Plaintiffs' First Amended Complaint is dismissed in its entirety without prejudice. Finally, Plaintiffs also moved for summary judgment. (Doc. No. 53 .) That motion is DENIED as moot CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
CHARLES J. TURNER, individually
AND as a Personal Representative
of The Estate of DAE’VID LEI
HAWAII FIRST INC., A
Corporation; DOES 1-30,
) Civ. No. 11-00332 ACK-BMK
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS AND, IN THE
ALTERNATIVE, MOTION FOR SUMMARY JUDGMENT AND DENYING AS MOOT
PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT
Plaintiffs’ First Amended Complaint (“FAC”) was filed
on May 7, 2012. (Doc. No. 44).
Defendant’s Motion To Dismiss the First Amended
Complaint (“Motion”) was filed on May 14, 2012. (Doc. No. 46.)
The Motion To Dismiss was supported by a Concise Statement of
Facts, declarations by counsel and by Albert Denys, Defendant’s
Chief Operating Officer, and various exhibits. (Doc. No. 47.)
Plaintiffs filed an Opposition to the Motion To Dismiss (“Opp’n”)
on September 17, 2012, which incorporated by reference the
Concise Statement of Facts, declarations, and exhibits that
Plaintiffs filed in support of their Motion for Summary Judgment.
(Doc. No. 58; Opp’n at 2.)1/ Defendant filed a Reply in support
of its Motion To Dismiss on September 25, 2012. (Doc. No.
Counsel clarified during the hearing on the Motion
conducted before this Court on October 9, 2012, that despite its
title the Motion was both a motion to dismiss and, in the
alternative, a motion for summary judgment.
The Court notes that
both parties filed Concise Statements of Facts in support of
their papers and that, although its title was lacking, the body
of the Motion discussed Federal Rule of Civil Procedure 56 and
the standard of review for summary judgment motions. The Court
finds that Plaintiffs had sufficient notice that Defendant was
moving for summary judgment in the alternative, and therefore
will treat Defendant’s Motion as a motion to dismiss the
Plaintiffs filed their Motion for Summary Judgment and
FRCP 56(g) Determination on August 31, 2012. (Doc. No. 53.) The
Motion for Summary Judgment was supported by a Concise Statement
of Facts, declarations by counsel and Plaintiff Charles J.
Turner, and various exhibits. (Doc. No. 54.) Defendant filed an
Opposition to the Motion for Summary Judgment on September 17,
2012. (Doc. No. 56.) The Opposition to the Motion for Summary
Judgment was supported by a Concise Statement of Facts, a
declaration of counsel, and various exhibits. (Doc. No. 57.)
Plaintiffs filed a Reply in support of their Motion for Summary
Judgment on September 24, 2012. (Doc. No. 59.)
complaint, or in the alternative for summary judgment on
This case concerns fees assessed against Plaintiffs as
members of a condominium association, which Defendant as managing
agent of the condominium project attempted to collect.
Plaintiff Charles J. Turner appears on his own behalf
and as representative of the estate of his domestic partner,
Dae’vid Lei Frank Guevara, who died on December 18, 2011. (FAC ¶¶
2, 79.) In October 2006, Plaintiffs purchased a condominium in
Ewa Colony Estates and thus became members of the Association of
Apartment Owners of Ewa Colony Estates (“Association”). (Id. ¶
10.) The governing documents of the Association require members
to pay various assessments for communal expenses. (Id. ¶¶ 11-13 &
Exs. A,10, A.25.)
Defendant Hawaii First, Inc. is a managing agent for
condominium associations and collects both delinquent and nondelinquent bills on the Association’s behalf. (Id. ¶¶ 14, 26, 27
& Exs. 45a-46.)
The facts as recited in this Order are for the purpose of
disposing of the instant motions and are not to be construed as
findings of fact that the parties may rely on in future
proceedings in this case.
In late February or early March, 2010, Plaintiffs filed
in state court a request for a temporary restraining order
against the president of the Association and two family members,
alleging that the president and family members had physically
attacked and harassed Mr. Guevara. (Id. ¶ 16.) On March 15, 2010,
a hearing was held regarding Plaintiffs’ request, at which
Plaintiffs spoke to the Association’s attorney and “verbally
repudiated their obligation to pay all attorney’s fees for legal
services related to the condominium project including the subject
injuries and harassment.” (Id. ¶¶ 17-18.)
On March 30, 2010, the Association’s counsel billed the
Association $247 for work relating to the alleged attack on
Plaintiff Guevara. (Id. ¶ 23.) On May 21, 2010, the Association
paid its counsel $258.64, which amount included the $247 for the
work billed on March 30. (Id. ¶ 24.)
Sometime after May 21, 2010, Defendant “acquired” this
legal debt from the Association. (Id. ¶ 25.) On May 25, 2010,
Defendant sent a bill to Plaintiffs which included a charge of
$258.64 labeled “Legal 04/30/10 St: 5”. (Id. ¶ 28 & Ex. A.47.)
This charge was the debt at issue in this case (“Debt”).3/
The rest of Plaintiffs’ allegations in the First Amended
Complaint, which relate to Defendant’s attempts to collect the
Debt, are not relevant for the disposition of the instant
In their First Amended Complaint, Plaintiffs bring
fourteen4/ claims under the Federal Debt Collection Practices Act
(“FDCPA”), 15 U.S.C. §§ 1692e-h, alleging at least four kinds of
FDCPA violations: making false or misleading representations;
employing unfair practices; failing to give required notices; and
applying a payment to a debt still in dispute. (FAC ¶¶ 35-68.)
Plaintiffs also bring three claims under Hawaii state law for
unfair or deceptive acts or practices, intentional infliction of
emotional distress, and wrongful death. (Id. ¶¶ 69-87.)
SUBJECT MATTER JURISDICTION
As a preliminary matter, Defendant characterizes its
Motion To Dismiss as, in part, one for lack of subject matter
jurisdiction under Federal Rules of Civil Procedure 12(b)(1)
(“Rule 12(b)(1)”), while Plaintiffs argue that it is a motion to
dismiss for failure to state a claim under Federal Rules of Civil
Procedure 12(b)(6) (“Rule 12(b)(6)”). (See Motion at 5; Opp’n at
3.) When deciding a “factual” Rule 12(b)(1) motion, the burden is
on the nonmoving party to prove that the court has jurisdiction,
see Savage v. Glendale Union High Sch., 343 F.3d 1036, 1040 n.2
(9th Cir. 2003); the court may consider evidence outside the
pleadings and should not presume that the allegations of the
The claims in the First Amended Complaint appear to be
complaint are true, see White v. Lee, 227 F.3d 1214, 1242 (9th
Cir. 2000); McCarthy v. United States, 850 F.2d 588, 560 (9th
Cir. 1988). In contrast, when deciding a 12(b)(6) motion, the
court generally may only consider the face of the complaint and
any documents attached to or referenced in it; the court should
presume that the allegations of the complaint are true and should
construe those allegations in the light most favorable to the
nonmoving party. Sprewell v. Golden State Warriors, 266 F.3d 979,
988 (9th Cir. 2001) (citing Enesco Corp. v. Price/Costco, Inc.,
146 F.3d 1083, 1085 (9th Cir. 1998)).
Defendant’s attempt to challenge the Court’s subject
matter jurisdiction is unavailing. Defendant argues that the
Court does not have jurisdiction over Plaintiffs’ FDCPA claims
because Defendant is not a “debt collector” under the FDCPA’s
meaning, and therefore is not subject to its provisions. But the
Ninth Circuit, ruling on this same jurisdictional argument under
the FDCPA, held that “whether [Defendant] is a ‘debt collector’
under the meaning of the FDCPA is not a jurisdictional fact, but
rather an element of [Plaintiffs’] claim under the FDCPA.”
Bennett v. Am. Med. Response, Inc., 226 Fed. App’x 725, 727 (9th
Cir. March 27, 2007) (unpublished) (citing Arbaugh v. Y & H
Corp., 546 U.S. 500, 514-15 (2006)); see Fitzpatrick v. Ass’n of
Apartment Owners of Kai Malu, No. Civ 10-00569, 2011 WL 197222,
at *1 (D. Haw. Jan. 19, 2011) (“[Defendants] argue that they are
not ‘debt collectors’ under the meaning of the FDCPA . . . .
Notwithstanding the asserted jurisdictional basis of the motion,
these Defendants are actually arguing that statutory requirements
are not satisfied, not that there is no federal jurisdiction
question. Therefore, this motion is more properly viewed as a
motion to dismiss for failure to state a claim.”)
In Arbaugh, the Eastern District of Louisiana granted
a post-trial motion to dismiss for lack of subject matter
jurisdiction in a Title VII sexual harassment case, on the
grounds that Title VII defines an “employer” as “a person . . .
who has fifteen or more employees,” and the defendant in that
case employed fewer than fifteen people; the Fifth Circuit
affirmed. 546 U.S. at 508-09. The Supreme Court reversed and
remanded, pointing out that Congress could have made Title VII’s
employee-numerosity requirement jurisdictional, but did not: the
definition “does not speak in jurisdictional terms or refer in
any way to the jurisdiction of the district courts.”
Id. at 515
(quoting Zipes v. Trans World Airlines, Inc., 455 U.S. 385, 394
(1982)). The Court held that “when Congress does not rank a
statutory limitation on coverage as jurisdictional, courts should
treat the restriction as nonjurisdictional in character.” 546
U.S. at 515.
Like the employee-numerosity requirement in Arbaugh,
the FDCPA’s definition of “debt collector” in 15 U.S.C. §
1692a(6) “does not speak in jurisdictional terms or refer in any
way to the jurisdiction of the district courts.”
546 U.S. at
515. Under Arbaugh, courts must therefore treat the FDCPA’s
definition of “debt collector” as “nonjurisdictional in
character.” Id.; see Daley v. Provena Hosps., 88 F. Supp. 2d 881,
885 (N.D. Ill. 2000) (deciding that “[b]ecause the defendants in
this case are questioning the applicability of the FDCPA, the
court will review defendants’ motion to dismiss pursuant to Rule
12(b)(6)” rather than Rule 12(b)(1)).
Because the FDCPA’s definition of a debt collector is
“nonjurisdictional,” the Court finds that it has subject matter
jurisdiction over Plaintiffs’ federal claims under 28 U.S.C. §
1331 and 15 U.S.C. § 1692k(d), and over their state law claims
under 28 U.S.C. § 1367.
STANDARD OF REVIEW
Motion to Dismiss Under Rule 12(b)(6)
Rule 12(b)(6) permits dismissal of a complaint that
fails "to state a claim upon which relief can be granted." On a
Rule 12(b)(6) motion to dismiss, all allegations of material fact
are taken as true and construed in the light most favorable to
the nonmoving party. Fed’n of African Am. Contractors v. City of
Oakland, 96 F.3d 1204, 1207 (9th Cir. 1996). Nonetheless,
conclusory allegations of law, unwarranted deductions of fact,
and unreasonable inferences are insufficient to defeat a motion
to dismiss. See Sprewell, 266 F.3d at 988; Nat'l Ass’n for the
Advancement of Psychoanalysis v. Cal. Bd. of Psychology, 228 F.3d
1043, 1049 (9th Cir. 2000). Moreover, the court need not accept
as true allegations that contradict matters properly subject to
judicial notice or that contradict the exhibits attached to the
complaint. Sprewell, 266 F.3d at 988.
In summary, to survive a Rule 12(b)(6) motion to
dismiss, "[f]actual allegations must be enough to raise a right
to relief above the speculative level, on the assumption that all
the allegations in the complaint are true (even if doubtful in
fact)." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)
(internal citations and quotations omitted). "While a complaint
attacked by a Rule 12(b)(6) motion to dismiss does not need
detailed factual allegations, a plaintiff's obligation to provide
the ‘grounds' of his ‘entitlement to relief' requires more than
labels and conclusions, and a formulaic recitation of the
elements of a cause of action will not do." Id. (internal
citations and quotations omitted). Dismissal is appropriate under
Rule 12(b)(6) if the facts alleged do not state a claim that is
"plausible on its face." Id. at 547. "Determining whether a
complaint states a plausible claim for relief will . . . be a
context-specific task that requires the reviewing court to draw
on its judicial experience and common sense." Ashcroft v. Iqbal,
556 U.S. 662, 679 (2009) (citation omitted). "[W]here the
well-pleaded facts do not permit the court to infer more than the
mere possibility of misconduct, the complaint has alleged—but it
has not ‘show[n]'—‘that the pleader is entitled to relief.'" Id.
(quoting Fed. R. Civ. P. 8(a)(2)).
"Dismissal without leave to amend is improper unless it
is clear that the complaint could not be saved by any amendment."
Harris v. Amgen, Inc., 573 F.3d 728, 737 (9th Cir. 2009)
(internal quotation marks omitted). "But courts have discretion
to deny leave to amend a complaint for futility, and futility
includes the inevitability of a claim's defeat on summary
judgment." Johnson v. Am. Airlines, Inc., 834 F.2d 721, 724 (9th
Cir. 1987) (citations and internal quotation marks omitted).
Motion for Summary Judgment
The purpose of summary judgment is to identify and
dispose of factually unsupported claims and defenses.
Celotex Corp. v. Catrett, 477 U.S. 317, 323–24 (1986).
judgment is therefore appropriate if “the movant shows that there
is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a).
“A party asserting that a fact cannot be or is genuinely disputed
must support the assertion,” and can do so in either of two ways:
by “citing to particular parts of materials in the record,
including depositions, documents, electronically stored
information, affidavits or declarations, stipulations (including
those made for purposes of the motion only), admissions,
interrogatory answers, or other materials”; or by “showing that
the materials cited do not establish the absence or presence of a
genuine dispute, or that an adverse party cannot produce
admissible evidence to support the fact.”
Fed. R. Civ. P.
“A fact is ‘material’ when, under the governing
substantive law, it could affect the outcome of the case.
‘genuine issue’ of material fact arises if ‘the evidence is such
that a reasonable jury could return a verdict for the nonmoving
Thrifty Oil Co. v. Bank of Am. Nat’l Trust & Sav.
Ass’n, 322 F.3d 1039, 1046 (9th Cir. 2003) (quoting Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).5/
where the evidence could not lead a rational trier of fact to
find for the nonmoving party, no genuine issue exists for trial.
See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.
574, 587 (1986) (citing First Nat’l Bank v. Cities Serv. Co., 391
U.S. 253, 289 (1968)).
The moving party has the burden of persuading the court
as to the absence of a genuine issue of material fact.
477 U.S. at 323; Miller v. Glenn Miller Prods., 454 F.3d 975, 987
Disputes as to immaterial facts do “not preclude summary
judgment.” Lynn v. Sheet Metal Workers’ Int’l Ass’n, 804 F.2d
1472, 1483 (9th Cir. 1986).
(9th Cir. 2006).
The moving party may do so with affirmative
evidence or by “‘showing’—that is, pointing out to the district
court—that there is an absence of evidence to support the
nonmoving party’s case.”
Celotex, 477 U.S. at 325.6/
moving party satisfies its burden, the nonmoving party cannot
simply rest on the pleadings or argue that any disagreement or
“metaphysical doubt” about a material issue of fact precludes
See Celotex, 477 U.S. at 324; Matsushita
Elec., 475 U.S. at 586; Cal. Architectural Bldg. Prods., Inc. v.
Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir. 1987).7/
When the moving party would bear the burden of proof at
trial, that party must satisfy its burden with respect to the
motion for summary judgment by coming forward with affirmative
evidence that would entitle it to a directed verdict if the
evidence were to go uncontroverted at trial. See Miller, 454
F.3d at 987 (quoting C.A.R. Transp. Brokerage Co. v. Darden
Rests., Inc., 213 F.3d 474, 480 (9th Cir. 2000)). When the
nonmoving party would bear the burden of proof at trial, the
party moving for summary judgment may satisfy its burden with
respect to the motion for summary judgment by pointing out to the
court an absence of evidence from the nonmoving party. See id.
(citing Celotex, 477 U.S. at 325).
Nor will uncorroborated allegations and “self-serving
testimony” create a genuine issue of material fact. Villiarimo
v. Aloha Island Air, Inc., 281 F.3d 1054, 1061 (9th Cir. 2002);
see also T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass’n,
809 F.2d 626, 630 (9th Cir. 1987); Johnson v. Wash. Metro. Area
Transit Auth., 883 F.2d 125, 128 (D.C. Cir. 1989) (“The removal
of a factual question from the jury is most likely when a
plaintiff’s claim is supported solely by the plaintiff’s own
self-serving testimony, unsupported by corroborating evidence,
and undermined either by other credible evidence, physical
impossibility or other persuasive evidence that the plaintiff has
deliberately committed perjury.”), cited in Villiarimo, 281 F.3d
The nonmoving party must instead set forth “significant probative
evidence” in support of its position.
T.W. Elec. Serv., Inc. v.
Pac. Elec. Contractors Ass’n, 809 F.2d 626, 630 (9th Cir. 1987)
(quoting First Nat’l, 391 U.S. at 290).
Summary judgment will
thus be granted against a party who fails to demonstrate facts
sufficient to establish an element essential to his case when
that party will ultimately bear the burden of proof at trial.
See Celotex, 477 U.S. at 322.
When evaluating a motion for summary judgment, the
court must construe all evidence and reasonable inferences drawn
therefrom in the light most favorable to the nonmoving party.
See T.W. Elec. Serv., 809 F.2d at 630–31.8/
“reasonable minds could differ as to the import of the evidence,”
summary judgment will be denied.
Anderson, 477 U.S. at 250–51.
Motion To Dismiss
Plaintiffs’ federal claims allege that Defendant
violated multiple provisions of the FDCPA.
The FDCPA was enacted “to eliminate abusive debt
collection practices, to ensure that debt collectors who abstain
At the summary judgment stage, the court may not make
credibility assessments or weigh conflicting evidence. See
Anderson, 477 U.S. at 249; Bator v. Hawaii, 39 F.3d 1021, 1026
(9th Cir. 1994).
from using such practices are not competitively disadvantaged,
and to promote consistent State action to protect consumers.”
Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, __ U.S.
__, __, 130 S.Ct. 1605, 1608 (2010) (citing 15 U.S.C. § 1692(e)).
As a threshold matter, the FDCPA applies only to a “debt
collector” who engages in practices prohibited by the Act in an
attempt to collect a consumer debt. See Rowe v. Educ. Credit
Mgmt. Corp., 559 F.3d 1028, 1031 (9th Cir. 2009) (“The FDCPA
regulates the collection of ‘debts' by ‘debt collectors' by
regulating the number and types of contacts a debt collector may
make with the debtor.”). Thus, a complaint under the FDCPA may be
dismissed if it fails to allege that the defendant meets the
statutory definition of a “debt collector.”
The FDCPA defines “debt collector” as:
any person who uses any instrumentality of interstate
commerce or the mails in any business the principal
purpose of which is the collection of any debts, or who
regularly collects or attempts to collect, directly or
indirectly, debts owed or due or asserted to be owed or
due another . . . .
15 U.S.C. § 1692a(6). The Act therefore is not limited in
application to collection agencies, but rather “regulates the
conduct of ‘any person’ in ‘any business' whose (1) principal
purpose is debt collection, or (2) who regularly collects or
attempts to collect debts, indirectly or directly.” Romine v.
Diversified Collection Servs., Inc., 155 F.3d 1142, 1146 (9th
Cir. 1998) (citing 15 U.S.C. § 1692a(6)). Possession of the debt
or personal financial benefit from the satisfaction of the debt
is not necessary for liability as a “debt collector” to attach
under the FDCPA. Id. (citing Heintz v. Jenkins, 514 U.S. 291, 297
(1995) (attorneys litigating cases on behalf of clients may fall
within the FDCPA definition of “debt collector” because
“litigating . . . seems simply one way of collecting a debt.”)).
Exempted from the definition of a debt collector,
any person collecting or attempting to collect any debt
owed or due or asserted to be owed or due another to
the extent such activity (i) is incidental to a bona
fide fiduciary obligation . . . ; [or] (iii) concerns a
debt which was not in default at the time it was
obtained by such person . . . .
15 U.S.C. § 1692a(6)(F)(i), (iii).
Defendant argues that it is does not fall under the
FDCPA’s definition of a ‘debt collector” because it meets the two
exemptions above: (1) its collection activities were “incidental
to a bona fide fiduciary obligation”; and (2) the bills at issue
here “concern a debt which was not in default at the time it
was obtained.” See 15 U.S.C. § 1692a(6)(F)(i),(iii).
Collection Incidental to a Bona Fide Fiduciary Obligation
Two requirements must be satisfied for an entity to
come within the exception to the FDCPA for collection activities
“incidental to a bona fide fiduciary obligation”: first, the
entity must have a “fiduciary obligation”; second, the entity's
collection activity must be “incidental to” its “fiduciary
obligation.” Rowe, 559 F.3d at 1032 ; see also Franceschi v.
Mautner-Glick Corp., 22 F. Supp. 2d 250, 254 (S.D.N.Y. 1998)
(“The legislative history of the FDCPA confirms that Congress did
not intend the Act to cover companies in the business of
regularly servicing outstanding debts, such as rents, for
others.”). Neither “fiduciary obligation” nor “incidental to” is
defined in the FDCPA. Id.
Here, the first prong is easily resolved; a managing
agent of a condominium complex is a fiduciary under Hawaii
statutory law. Haw. Rev. Stats §§ 514A-95(c) Defendant is a
managing agent (see FAC ¶ 26 & Exs. A.20, A.45a) and therefore
under Hawaii law it has fiduciary obligations to the Association.
The more difficult question is whether Defendant’s debt
collection activities were “incidental” to its fiduciary
relationship. The Ninth Circuit in Rowe, 559 F.3d 1028, stated
that “[t]he ‘incidental to’ requirement means that the collection
activity must not be ‘central to’ the fiduciary relationship.”
Id. at 1034 (citing Wilson v. Draper & Goldberg, 443 F.3d 373,
377 (4th Cir. 2006)).
The court explained that “[t]he function
of this requirement is to exclude fiduciaries whose sole or
primary function is to collect a debt on behalf of the entity to
whom the fiduciary obligation is owed.”
The court went on
to reverse a district court’s granting of a motion to dismiss
under Rule 12(b)(6), finding that the face of the complaint did
not demonstrate that the defendant’s debt collection actions were
“incidental to” its fiduciary relationship. Id. at 1035.
Here, as in Rowe, Plaintiffs have not pleaded any facts
suggesting that Defendant’s debt collections were merely
“incidental” to its broader fiduciary relationship with the
Association. The Court therefore finds that it cannot resolve
this issue of fact under Rule 12(b)(6).
Debt In Default At The Time It Was Acquired
If Plaintiffs’ debt was not “in default” when Defendant
acquired it, Defendant was not a “debt collector” and is not
subject to the FDCPA. 15 U.S.C. § 1692(6)(F)(iii).
Plaintiffs repeatedly allege in their First Amended
Complaint that the Debt was “in default” when Defendant acquired
it. (FAC ¶¶ 25, 28.) However, in ruling on a Rule 12(b)(6) motion
to dismiss, the court “is not required to accept as true
allegations that are merely conclusory, unwarranted deductions of
fact, or unreasonable inferences.” See Sprewell, 266 F.3d at 988
(citing Clegg v. Cult Awareness Network, 18 F.3d 752, 754-55 (9th
The Ninth Circuit has stated that “[a]lthough the FDCPA
does not define ‘in default,’ courts interpreting 15 U.S.C. §
1692a(6)(F)(iii) look to any underlying contracts and applicable
law governing the debts at issue.” De Dios v. Int’l Realty &
Invs., 641 F.3d 1071, 1074 (9th Cir. 2011) (citing inter alia Fed
Trade Comm’n, Advisory Op. n. 2 (Apr. 25, 1989) (“Whether a debt
is in default is generally controlled by the terms of the
contract creating the indebtedness and applicable state law.”)).
Here, there is no controlling state law definition, and even in
contexts not applicable here, Hawaii statutes leave “default” to
be defined by the contract between the parties. See, e.g., Haw.
Rev. Stat. § 53-16(h) (agency bonds); § 201H-19(4) (contracts
with Hawaii Housing Finance & Development Corporation); §§ 356D16 (contracts relating to public housing projects). The various
Association agreements and by-laws that Plaintiffs have attached
to the First Amended Complaint do not contain any provisions that
define “default” or even set due dates for the monthly
Nonetheless, case law provides some guidance. The Ninth
Circuit has noted that the FDCPA’s legislative history “is
consistent with construing ‘in default’ to mean a debt that is at
least delinquent, and sometimes more than overdue.” De Dios, 641
F.3d at 1075 n.3. Similarly, the Second Circuit has noted, “[i]n
applying the FDCPA, courts have repeatedly distinguished between
a debt that is in default and a debt that is merely outstanding,
Plaintiffs refer to “agreements for attorney’s fees” which
they allege would illuminate this issue and which are not before
the Court. (See Opp’n at 10.) Plaintiffs seem to be referring to
fee agreements between the Association and its attorneys.
Plaintiffs do not explain how such agreements would determine
whether Plaintiffs’ debt to the Association was in default.
emphasizing that only after some period of time does an
outstanding debt go into default.” Alibrandi v. Fin. Outsourcing
Servs., Inc., 333 F.3d 82, 86 (2d Cir. 2003).
In De Dios, the
Ninth Circuit discussed with approval a case from the Southern
District of New York, Franceschi v. Mautner-Glick Corporation, 22
F. Supp. 2d 250, 253 (S.D.N.Y. 1998).
In that case, the court
found that “[b]ecause the property management obtained the right
to collect rents . . . before the rents became due . . . the
agent was not collecting a debt in default when it sent a demand
letter for the remaining, disputed portion of overdue rent.”
Dios, 641 F.3d at 1075 (citing Franceschi, 22 F. Supp. 2d at
Here, Plaintiffs do not allege when the Debt was or
would have become due. Nor do Plaintiffs allege the precise date
that Defendant “acquired” the Debt from the Association. (FAC ¶
25.) In fact, Plaintiffs’ assertions that the Debt was “in
default” when Defendant acquired it rest solely on the fact that
when Defendant acquired the Debt Plaintiffs had already
repudiated their obligation to pay assessments for the
Association’s legal fees. (See id.)
Plaintiffs’ argument is unconvincing. “Default” is
commonly defined as a failure to pay a debt once it has become
due. See, e.g., Black’s Law Dictionary (9th ed. 2009) (defining
default as “The omission or failure to perform a legal or
contractual duty; esp., the failure to pay a debt when due.”
(emph. added)); see also Magee v. AllianceOne, Ltd., 487 F. Supp.
2d 1024, 1027-28 (S.D. Ind. 2007) (quoting the Black’s Law
Dictionary definition of “default” with approval as furthering
Congress’s intentions in passing the FDCPA).
Indeed, as the
Second Circuit noted in Alibrandi, many judicial decisions and
federal regulations “agree that default does not occur until well
after a debt becomes outstanding.” 333 F.3d at 87 (emphasis
added) (citing numerous federal cases and regulations).
In this case, the allegations of the First Amended
Complaint demonstrate that Plaintiffs repudiated the Debt two
weeks before the legal work underlying the Debt was even done,
let alone its costs assessed to Plaintiffs. (See FAC ¶ 23.)
in Franceschi, Defendant were not collecting a debt in default
because Defendant “obtained the right to collect [the debt]
before [it] became due.”
De Dios, 641 F.3d at 1075 (citing
Franceschi, 22 F. Supp. 2d at 253).
As the Ninth Circuit noted,
“[i]t follows as a matter of logic that a debt not yet payable
cannot be in default.” De Dios, 641 F.3d at 1074. Equally, it
follows as a matter of logic that a debt cannot be in default
before that debt even exists.
Plaintiffs argue that their anticipatory repudiation
constituted a “breach” of their obligation to pay Association
assessments, and therefore a default. (Opp’n at 12.) Again, the
argument is unconvincing. Plaintiffs’ anticipatory repudiation
may well have constituted a breach, see Ricketts v. Adamson, 483
U.S. 1, 18 & n.9 (1987) (“In the conventional case of
anticipatory repudiation . . . the announcement of an intention
to default on the contract constitutes a breach.”) (dicta)
(citing and discussing Hochster v. De la Tour, (1853) 118 Eng.
Rep. 922 (Q.B.); 2 El. & Bl. 678), but despite Plaintiffs’ best
efforts to conflate the two terms, Plaintiffs have cited no
authority, and the Court can find none, for the proposition that
an anticipatory breach puts the party breaching “in default.”10/
Finally, Plaintiffs argue that the section of the
Association agreement which creates a lien against their property
for any unpaid assessments (FAC Ex. A.10) demonstrates that they
were in default. (Opp’n at 16-17.) This argument, too, is
unavailing. The provision in question deals with “[a]ll sums
assessed by the Association but unpaid.” (FAC Ex. A.10.) In this
case, Plaintiffs have not alleged that the sums in question had
been assessed to them when Defendant acquired their “debt.” In
fact, the factual allegations of the First Amended Complaint
The case cited by Plaintiffs, Aickin v. Ocean View Invs.
Co., 935 P.2d 992 (Sup. Ct. Haw. 1997), does not support their
argument. The Supreme Court of Hawai’i noted that it was using
the words “default” and “breach” interchangeably “[f]or the
purposes of this opinion”, id. at 457 n.16 (emphasis added) –
that is, not as a holding or statement of law. Moreover, the
court disagreed with the trial court’s conclusion that an
anticipatory breach had even occurred. Id. at 462 n.29.
imply the opposite: that Defendant was the first to assess the
Debt against Plaintiffs. (See FAC ¶¶ 20-21, 28.)
In sum, Plaintiffs’ First Amended Complaint does not
contain allegations sufficient to show that Plaintiffs’ Debt was
in default at the time that Defendant acquired it. Plaintiffs
have therefore failed to state their claims against Defendant
under the FDCPA.
Motion for Summary Judgment
In the alternative, the Court finds that Defendant’s
arguments also prevail under the summary judgment standard, for
the same reasons.
Collection Incidental to a Fiduciary Relationship
As discussed more fully above, the FDCPA exempts from
its definition of “debt collector” an entity whose debt
collection activity is “incidental to a fiduciary relationship.”
15 U.S.C. § 1692a(6)(F)(i).
The evidence set forth by the
parties in their Concise Statements of Material Fact and exhibits
preclude summary judgment on this exception to the FDCPA.
Defendant has produced and properly authenticated the
Agreement between the Association and Defendant, dated March 1,
(Motion CSF Ex. B.) The Agreement demonstrates that
Defendant did indeed have a broader fiduciary relationship with
the Association, thus satisfying the first prong of Rowe’s twoprong test.
See Rowe, 559 F.3d 1032.
However, the facts adduced
by Plaintiffs again raise questions of fact as to whether
Defendant’s debt collection was “incidental to” and not “central
to” its fiduciary relationship with the Association.
1034 (citing Wilson, 443 F.3d at 377).
See id. at
Charles Turner, who served on the Association’s board of
directors for approximately six months (Turner Decl. ¶ 5) attests
that, notwithstanding the language of the agreement, in
actuality, Defendant’s “principal dut[y]” was to collect debts
for the Association, while the Association itself “retained
nearly all of the [other] management obligations” of the
(Turner Decl. ¶ 5.)
Mr. Turner maintains
that Defendant’s other duties were performed in service of its
The extent and nature of the services actually
performed by Defendant for the Association constitute a “genuine
dispute as to [a] material fact,” which precludes summary
judgment as to whether Defendant’s debt collection activities
were merely “incidental” or in fact “central” to its fiduciary
See Fed. R. Civ. Proc. 56(a); Anderson, 477 U.S. at 250-
51 (summary judgment will be denied if “reasonable minds could
differ as to the import of the evidence”).
Debt Not in Default When Acquired
The evidence adduced by both parties demonstrates that
there is no genuine dispute that the Debt was not in default when
Defendant acquired it.
Mr. Turner in his declaration repeats, with personal
knowledge, the relevant factual allegations of the First Amended
Complaint: on March 15, 2010, he and Mr. Guevara verbally
repudiated the payment of any attorney’s fees related to the
condominium project on March 15, 2010 (Turner Decl. ¶ 14);
following that confrontation, the Association did not bill Mr.
Turner and Mr. Guevara for attorney’s fees (id. ¶ 17); on March
30, 2010, an attorney billed the Association $247.00 for work
relating to the dispute with Mr. Turner and Mr. Guevara (id. ¶
18); and Defendant’s bill of May 25, 2010 was the first
communication with Plaintiffs regarding the debt (id. ¶ 23.)11/
Plaintiffs’ evidence adds nothing to the allegations of
the First Amended Complaint; their claims rest on the argument
that the Debt was “in default” when Defendant acquired it because
Plaintiffs had already repudiated their obligation to pay legal
As discussed above, that argument is unconvincing.
Plaintiffs’ anticipatory repudiation might have constituted a
Mr. Turner’s declaration also includes repeated legal and
factual conclusions, notably that the Debt was already “in
default” when acquired by Defendant. (See id. at ¶¶ 19, 23.)
The Court is not obliged to credit these conclusory statements,
and does not do so.
breach, but there is no authority for the proposition that it put
Plaintiffs “in default” on their debt.
As a matter of logic, the
Debt could not be “in default” before it even existed.
Dios, 641 F.3d at 1074.
Defendant is therefore entitled to
summary judgment as to this exception to the FDCPA.
The remaining claims against Defendant are all state
law claims. A federal court’s supplemental jurisdiction over
state law claims is governed by 28 U.S.C. § 1367, and exists when
“a federal claim is sufficiently substantial to confer
jurisdiction and there is ‘a common nucleus of operative fact
between the state and federal claims.’” See Maizner v. Dep’t of
Educ., 405 F. Supp. 2d 1225, 1241 (D. Haw. 2006) (quoting Brady
v. Brown, 51 F.3d 810, 816 (9th Cir. 1995)). Once it has
determined that a state law claim arises out of a common nucleus
of operative facts, a district court may nevertheless decline
jurisdiction over the state law claim if “the district court has
dismissed all claims over which it has original jurisdiction.” 28
U.S.C. § 1367. Thus, once it is determined that a plaintiff’s
FDCPA claims should be dismissed, it is proper to dismiss any
pendent state law claims for lack of subject matter jurisdiction.
See Marschall v. Recovery Solution Specialists, Inc., 399 Fed.
App’x 186, 188 (9th Cir. Oct. 5, 2010) (unpublished); Gini v. Las
Vegas Metro. Police Dep't, 40 F.3d 1041, 1046 (9th Cir. 1994).
Similarly, it is appropriate for a district court to
decline to exercise supplemental jurisdiction over state law
claims when it has disposed of all federal claims on summary
See City of Colton v. Am. Promotional Events, Inc.-W.,
614 F.3d 998, 1007 (9th Cir. 2010) (citing Bryant v. Adventist
Health Sys./W., 289 F.3d 1162, 1169 (9th Cir. 2002)).
Here, the Court declines to exercise supplemental
jurisdiction over Plaintiffs’ state law claims because it has
dismissed or disposed of all claims over which it had original
For the foregoing reasons, the Court GRANTS Defendant’s
Motion To Dismiss and, in the alternative, Motion For Summary
Judgment. Plaintiffs’ First Amended Complaint is dismissed in its
entirety without prejudice. Finally, Plaintiffs also moved for
summary judgment. (Doc. No. 53.) That motion is DENIED as moot.
IT IS SO ORDERED.
Honolulu, Hawaii, October 15, 2012.
Alan C. Kay
Sr. United States District Judge
Turner v. Hawaii First, Inc, Civ. No. 11-00332 ACK-BMK, Order Granting
Defendant’s Motion To Dismiss and in the Alternative Motion for Summary
Judgment and Denying as Moot Plaintiffs’ Motion for Summary Judgment.
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