Aldaya v. Encore Capital Group, Inc.
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR JUDGMENT ON THE PLEADINGS re: 52 . Signed by JUDGE SUSAN OKI MOLLWAY on 3/20/2017. (afc)WRITTEN ORDER follows hearing held 2/27/2017. Minutes of hearing: d oc. no. 78 . 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
MARIVIC ALDAYA (fka Marivic
Amistoso), et al.,
ENCORE CAPITAL GROUP, INC.;
MIDLAND FUNDING, LLC; and
MIDLAND CREDIT MANAGEMENT,
CIVIL NO. 15-00284 SOM/RLP
ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’
MOTION FOR JUDGMENT ON THE
ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANTS’ MOTION FOR JUDGMENT ON THE PLEADINGS
This putative class action asserts violations of the
Fair Debt Collection Practices Act and Hawaii’s consumer
protection laws arising out of credit card debt sold to debt
Defendants seek judgment on the pleadings pursuant
to Rule 12(c) of the Federal Rules of Civil Procedure.
grants Defendants’ motion with respect to Plaintiff’s claim based
on allegedly confusing account numbers, as well as with respect
to a claim Plaintiff offered to withdraw (i.e., the claim arising
out of Defendants’ alleged failure to pay Hawaii’s general excise
The court denies the remainder of the motion.
On July 22, 2016, Plaintiff Marivic Aldaya filed a
First Amended Class Action Complaint denominated as a class
The First Amended Complaint asserts claims under the
Fair Debt Collection Practices Act, Hawaii’s statutory
prohibition against unfair or deceptive acts or practices, and
Hawaii’s statutory prohibition against the use by collection
agencies of fraudulent, deceptive, or misleading
misrepresentations, or unfair or unconscionable means of
collecting or attempting to collect debts.
See ECF No. 33.
This case arises out of a credit card debt incurred for
personal, family, or household use that Aldaya originally owed
HSBC Bank Nevada, N.A.
See First Amended Complaint ¶¶ 12, 18,
ECF No. 33, PageID # 272-73.
The First Amended Complaint’s
allegations concerning the credit card debt are minimal.
credit card agreement is attached to or described in the First
Nor is the exact amount of the alleged debt
clearly established in it.
This court takes judicial notice of Aldaya’s Equifax
credit report, attached as Exhibit 6 to the First Amended
Complaint, which shows that Aldaya had a $600 credit limit with
See ECF No. 33-6, PageID # 325.
According to the same
report, Aldaya first failed to make payments on her account in
Id., PageID 326.
The credit report indicates
that HSBC eventually “charged off” $546 of debt.
Amended Complaint alleges that either $546 or $600 “was the
amount of the alleged debt sold by HSBC.”
ECF No. 33, PageID # 294.
According to Paragraph 107 of the First Amended
Complaint, federal regulations require a “charge off” when a debt
is 180 days overdue.
According to Equifax’s glossary of
terms, a “charge off” is an
[a]ccounting term to indicate the creditor
does not expect to collect a balance owing
and chooses to transfer the account to an
accounting category such as “bad debt” or
“charged to loss”. These accounts are
usually turned over to collection agencies.
This is the most adverse status reported on
f-credit-terms (last visited February 21, 2017).
that her debt was “charged off” in March 2011.
ECF No. 33 ¶ 109,
PageID # 294.
Aldaya says her charged off credit card debt was at
some point “assigned” to Defendants Midland Funding, LLC, and
Midland Credit Management, Inc.
See First Amended Complaint
¶¶ 13, 17, ECF No. 33, PageID # 272.
Midland Funding is
allegedly Defendant Encore Capital Group, Inc.’s wholly owned
Id. ¶ 9, PageID # 271.
The First Amended Complaint
has no allegations concerning whether the Midland entities are
registered with the State of Hawaii as debt collectors, but
Aldaya conceded at the hearing on the present motion that they
are so registered.
Aldaya represented, however, that the parent
company, Encore, is not so registered.
Whether any company is
registered as a debt collector is not relevant to the present
Aldaya says that neither of the Midland entities pays
general excise taxes in Hawaii.
See ECF No. 33 ¶¶ 182-84, PageID
The Equifax credit report attached to the First Amended
Complaint shows that Aldaya owed the following balances on her
ECF No. 33-6, PageID #s 327-29.
The uneven monthly totals
suggest that a variable interest rate might have been assessed.
There is no explanation as to how Aldaya’s debt went from the
charge off amount of $546 in November 2010 to $1,304 in August
2013, which appears to be when Midland first reported to Equifax
that Aldaya owed it money.
At most, the letter of May 15, 2015,
indicates a “Previous Balance” of $1,026.59 with “Accrued
Interest” of $412.80, for a total of $1,439.39.
ECF No. 33-1,
PageID # 315.
The record does not contain allegations concerning
Midland’s initial communication with Aldaya or allege that Aldaya
failed to receive the validation disclosures required by the Fair
Debt Collection Practices Act, 15 U.S.C. § 1692g(a).
Letter Dated January 29, 2015.
The earliest communication attached to the First
Amended Complaint is a letter from Midland Credit Management,
Inc., to Aldaya dated January 29, 2015.
See ECF No. 33-2, PageID
In its top right corner, this letter prominently
identifies the original creditor as HSBC and lists the original
HSBC account number, redacted in the exhibit to include only the
last four digits, 4087.
Id. PageID # 316.
There is no dispute
that the original copy of this letter that Aldaya received (and
all other letters attached to the First Amended Complaint) listed
the complete original HSBC account number.
The letter noted a new Midland Credit Management
account number of 8538045269.
The letter stated that the
balance owed was $1,439.39, but that Aldaya could pay off the
loan for $863.63, in which event Midland would report that the
account was “Paid in Full for less than the full balance.”
The letter indicated that it was a communication from a debt
collector and that any information obtained would be used to
collect the debt.
Id., PageID 317.
It then listed various state
rights, most applicable to people living in states other than
A very similar letter was sent to Aldaya by Midland
Credit Management in March 2015.
See ECF No. 33-3, PageID
Letter Dated April 27, 2015.
In a letter to Aldaya dated April 27, 2015, Midland
Credit Management, Inc., explained that Midland Funding LLC owned
the balance of $1,439.39 that Aldaya had allegedly owed to HSBC.
ECF No. 33-4, PageID # 320.
The letter acknowledged that Aldaya
was disputing her debt and asked Aldaya’s help to reach a quick
Like the January and March 2015 letters, the
April 2015 letter prominently included Aldaya’s original HSBC
account number in its upper right corner.
The April 2015 letter appears to have been a response
to Aldaya’s assertion that the Midland entities’ records were
We understand that you are disputing the
accuracy of our records concerning the above
referenced account. After reviewing the
information you provided, as well as our
account notes, and information provided by
the previous creditor, we are unable to
determine the nature of your dispute, and
consequently deny that our records are
If you still believe the account information
is inaccurate, please provide an explanation
of why you believe it is inaccurate along
with any documentation you have supporting
this explanation. Upon receipt of this new
information we will be happy to reinvestigate
An almost identical letter was sent to Aldaya on June
See ECF No. 33-5, PageID #s 322-23.
Letter dated May 15, 2015.
In a letter dated May 15, 2015, Midland Credit
Management, Inc., stated that Aldaya’s current balance on the
account was $1,439.39, that her original creditor was HSBC, and
that the current owner of the debt was Midland Funding LLC.
No. 33-1, PageID # 314.
Unlike the four previous letters, the
May 2015 letter listed the original account number in a smaller
font in the Payment Certificate at the bottom of its first page
and in the Additional Account Information section at the bottom
of its second page.
The Additional Account Information
section noted that interest of 10% was being charged and that the
debt included “accrued interest” of $412.80.
Id., PageID # 315.
The letter told Aldaya that Midland Credit Management had made
several attempts to contact her and that it was considering
forwarding her account to an attorney for collection.
Aldaya to call (800) 939-2353 to discuss her options.
PageID # 314.
To stop the process, Aldaya was to “Mail in $250
and call to set up your remaining payments.”
included the following statement, “Please understand this is a
communication from a debt collector.
collect a debt.
This is an attempt to
Any information obtained will be used for that
Id., PageID # 315.
It also stated, “This may be your
last chance to work with us before the account goes to an
Id., PageID # 314.
Aldaya says the 10% interest rate referred to in the
letter of May 15, 2015, is false and that the interest rate on
her HSBC credit card account was never 10%.
Complaint ¶ 24, PageID # 273.
Aldaya alleges, “When a lender charges off a debt[,] it
ceases to charge interest because doing so would require it to
expend additional funds by continuing to calculate, service, and
send monthly statements.”
Id. ¶ 25, PageID # 274.
alleges that HSBC, by choosing to receive the tax benefits of
charging off its loans, waived its contractual right to collect
interest on charged off accounts such as hers
Id. ¶ 26, PageID
The legal or factual basis for these allegations is not
According to Aldaya, because HSBC charged off her
account, allegedly waiving any right to further interest under
the credit card agreement, any Midland entity that purchased the
debt was barred from charging any interest.
Id. ¶ 27, PageID
Aldaya alleges that Midland made a practice of sending
form collection letters listing prejudgment interest of 10% per
annum pursuant to section 478-2 of Hawaii Revised Statutes.
¶ 29, PageID # 274.
JUDGMENT ON THE PLEADINGS STANDARD.
Rule 12(c) states, “After the pleadings are closed--but
early enough not to delay trial--a party may move for judgment on
The standard governing a Rule 12(c) motion for
judgment on the pleadings is “substantially identical” to that
governing a Rule 12(b)(6) motion.
Under either, this court must
determine whether the facts alleged in the complaint, taken as
true, entitle the plaintiff to a legal remedy.
Pit River Tribe
v. Bureau of Land Mgmt., 793 F.3d 1147, 1155 (9th Cir. 2015);
United States ex rel. Cafasso v. Gen. Dynamics C4 Sys., Inc., 637
F.3d 1047, 1054 n.4 (9th Cir. 2011) (stating standard is
For a Rule 12(c) motion, the allegations of the
nonmoving party are accepted as true, while the allegations of
the moving party that have been denied by the nonmoving party are
assumed to be false.
See Hal Roach Studios v. Richard Feiner &
Co., 896 F.2d 1542, 1550 (9th Cir. 1989).
A court evaluating a
Rule 12(c) motion must construe factual allegations in a
complaint in the light most favorable to the nonmoving party.
Fleming v. Pickard, 581 F.3d 922, 925 (9th Cir. 2009).
Rule 12(c), “Judgment on the pleadings is properly granted when,
accepting all factual allegations as true, there is no material
fact in dispute, and the moving party is entitled to judgment as
a matter of law.”
Chavez v. United States, 683 F.3d 1102, 1108
(9th Cir. 2012) (quoting Fleming, 581 F.3d at 925); accord Jensen
Family Farms, Inc. v. Monterey Bay Unified Air Pollution Control
Dist., 644 F.3d 934, 937 n.1 (9th Cir. 2011).
Generally, when matters outside the pleadings are
considered, a motion for judgment on the pleadings must be
considered as being one for summary judgment under Rule 56 of the
Federal Rules of Civil Procedure.
See Fed. R. Civ. P. 12(d).
Courts have held, however, that, when adjudicating a Rule 12(c)
motion, courts may consider matters subject to judicial notice
without converting the motion to one for summary judgment.
Heliotrope Gen., Inc. v. Ford Motor Co., 189 F.3d 971, 981 n.18
(9th Cir. 1999) (“When considering a motion for judgment on the
pleadings, this court may consider facts that are contained in
materials of which the court may take judicial notice.”
(quotations omitted)); accord Lacondeguy v. Adapa, 2011 WL 9572,
*2 (E.D. Cal. Jan. 3, 2011); Williams v. City of Antioch, 2010 WL
3632199, *2 (N.D. Cal. Sept. 2, 2010).
Defendants seek judgment on the pleadings to the extent
the First Amended Complaint is based on a claim that the interest
rate the Midland entities applied was false.
that state law authorized them to charge the interest imposed on
Aldaya’s debt, that they cannot be said to have charged varying
rates of interest, and that HSBC did not waive its right to
charge interest when it charged off the debt.
arguments assume facts neither alleged by Aldaya nor subject to
On the present motion for judgment on the
pleadings, this court does not make the assumptions Defendants
urge and denies this part of the motion.
In relevant part, the Fair Debt Collection Practices
Act prohibits debt collectors from using false, deceptive, or
misleading representations in connection with the collection of
any debt, listing the following as violations of that
prohibition: “(2) The false representation of--(A) the character,
amount, or legal status of any debt; or . . . (10) The use of any
false representation or deceptive means to collect or attempt to
collect any debt . . . .”
15 U.S.C. § 1692e.
The Fair Debt
Collection Practices Act also prohibits debt collectors from
using unfair or unconscionable means to collect or attempt to
collect a debt, stating that that prohibition is violated by the
“collection of any amount (including any interest, fee, charge,
or expense incidental to the principal obligation) unless such
amount is expressly authorized by the agreement creating the debt
or permitted by law.” 15 U.S.C. § 1692f(1).
Hawaii law similarly prohibits a collection agency from
using fraudulent, deceptive, or misleading representations or
means to collect or attempt to collect debts, including false
representations as to the character, extent, or amount of a claim
against a debtor.
See Haw. Rev. Stat. § 443B-18(5).
also prohibits collection agencies from using unfair or
unconscionable means to collect or attempt to collect a claim
against a debtor, including the collection or attempt to collect
interest, charges, fees, or expenses unless expressly authorized
by the agreement creating the obligation or by law.
Rev. Stat. § 443B-19.
Section 443B-20 of Hawaii Revised Statutes states that
a collection agency’s violation of Chapter 443B of Hawaii Revised
Statutes “shall constitute unfair methods of competition and
unfair or deceptive acts or practices in the conduct of any trade
or commerce for the purpose of section 480-2.”
Defendants first argue that, because they had a
contractual right to charge 10% prejudgment interest, they did
not charge an improper interest rate.
Defendants say that they
acquired this contractual right from HSBC.
PageID # 554.
See ECF No. 52-1,
However, Aldaya’s credit card agreement with HSBC
is not part of the record, and this court must view the facts in
the light most favorable to the nonmoving party with respect to
this motion for judgment on the pleadings.
This court cannot
assume that Defendants are correct in asserting a contractual
right to charge 10% prejudgment interest.
This court is similarly unpersuaded by Defendants’
argument that they are entitled to charge prejudgment interest of
10% per year pursuant to section 478-2 of Hawaii Revised
Section 478-2 states: “When there is no express
written contract fixing a different rate of interest, interest
shall be allowed at the rate of ten per cent a year . . . .”
ECF No. 52-1, PageID # 555.
Defendants’ argument is premised on
the assumption that there was no rate of interest fixed in the
agreement governing Aldaya’s loan.
Without knowing the facts of
this case, the court cannot determine whether Aldaya’s credit
card agreement with HSBC provided for interest at a particular
Nor can this court determine that charging off any
interest nullified any contractual rate and authorized
prejudgment interest under section 478-2, or whether Defendants
properly calculated any interest.
The court notes that the debt amounts in Aldaya’s
credit report suggest that the interest rate imposed on Aldaya’s
debt may have fluctuated.
See ECF No. 33-6, PageID #s 327-29.
Defendants argue that allegations concerning a fluctuating
interest rate are implausible and therefore should be
They say, “Plaintiff cannot contend both that
Midland was applying a rate of 10% and that the rate varied,
changed or was inconsistent.”
ECF No. 69, PageID # 902.
is not at all clear that Aldaya has pled inconsistent facts.
This court cannot tell whether Midland charged a 10% rate
sometimes, but a lesser rate at other times.
Even if the
allegations in the First Amended Complaint can be read as saying
that Midland charged both an interest rate of 10% and varying
rates, Aldaya is allowed to plead inconsistent claims.
R. Civ. P. 8(d)(3) (“A party may state as many separate claims or
defenses as it has, regardless of consistency.”).
Defendants also seek judgment on the pleadings with
respect to Aldaya’s claim that, when HSBC charged off her debt,
it waived any right to collect interest.
See ECF No. 52-1,
PageID # 554-55, 560-61; ECF No. 33 ¶ 26, PageID # 274.
Defendants say that this allegation “is based on mistaken factual
assumptions and misstatement of the law.”
Id., PageID # 561.
Defendants say that they could not be said to have “waived” any
right to collect interest based on a charge off because, as
alleged in Paragraph 107 of the First Amended Complaint, the
charge off occurred pursuant to federal banking regulations
requiring the charge off when Aldaya’s debt was 180 days overdue.
Defendants contend that a waiver is a voluntary or intentional
relinquishment of a known right, and no waiver occurs when an act
This argument is better made in a motion that places
before this court the actual legal effect of a charge off.
if a charge off was required, the effect of the charge off may
not be automatically assumed.
HSBC may, for example, have
intended for no further interest to be added to charged off
Although Defendants characterize the allegations of
the First Amended Complaint as being “based on mistaken factual
assumptions,” this court cannot tell from the allegations whether
HSBC intended to cease and ceased collecting interest on Aldaya’s
delinquent credit card debt.
Nor can this court tell what rights
Midland Funding acquired when it purchased Aldaya’s charged off
Defendants rely on Bunce v. Portfolio Recovery
Associates, LLC, 2014 WL 5849252, at *6 (D. Kan. Nov. 12, 2014),
for the proposition that, as a matter of law, there is no waiver
whenever there is a charge off.
That case is not persuasive
In Bunce, the plaintiff alleged that an original lender
had waived interest after charging off the debt and then sold the
debt to a debt collector, who sought an amount greater than the
charged off amount.
Id. at *1.
The district court dismissed the
FDCPA claim, which was premised on the theory that the original
lender had impliedly waived the right to collect interest.
applicable Kansas law, an implied waiver occurred when there was
some manifestation in an “unequivocal manner by some distinct act
or by inaction inconsistent with an intention to claim forfeiture
of a right.”
Id. at *1.
Because the plaintiff had not alleged
that the original lender had explicitly or formally meant to
waive its right to collect interest when it charged off the debt,
the district court determined that the factual allegations did
not plausibly allege that the original lender had waived the
right to collect interest simply by charging off the debt.
Recognizing that charging off delinquent accounts is a
federal regulatory requirement, the district court concluded that
the charge off had not been voluntary.
Unlike in Bunce, the allegations of Aldaya’s First
Amended Complaint go beyond simply concluding that HSBC must have
waived interest after charging off Aldaya’s loan.
First Amended Complaint specifically alleges that, “as a standard
practice, and for a variety of sound business reasons (e.g. tax
purposes), HSBC waive[d] interest on credit card debts after
charge-off for as long as it [held] the debt.”
PageID # 295.
ECF No. 33 ¶ 115,
According to Aldaya, because HSBC waived the right
to add interest after the charge off, no Midland entity could
Id. ¶ 116.
The allegations of “standard
practice” and “business reasons” raise at least a suggestion of
an intentional waiver of interest, distinguishing Bunce from this
Citing Frost v. Resurgent Capital Services, 2016 WL
3479087 (N.D. Cal. June 27, 2016), Defendants contend that
Aldaya’s allegations regarding any business practices following
charge off are insufficiently pled.
In Frost, the debtor owed
General Electric $547.96 as of September 25, 2012.
unknown time before January 14, 2015, General Electric allegedly
charged off the debt and sold it to a debt collector.
no dispute that, on the day the debt collector first sought to
collect the debt, January 14, 2015, the debt amount was $547.96.
The court concluded that the debt collector had a statutory right
under California law to collect interest, supporting the debt
collector’s claim for $604.01. Id. at *3.
In examining whether
General Electric had waived its right to collect interest, the
court in Frost noted that a waiver could result from an express
agreement or be inferred from unequivocal acts of conduct
demonstrating an intent to waive.
Frost determined that the
bare allegation that the right to collect interest had been
waived given General Electric’s business practice not to collect
interest after charge off was insufficient to plausibly allege
Aldaya’s allegations concerning waiver are
distinguishable from those in Frost.
In Frost, the debt amount
as of the sale of the debt was not in dispute, while the debt at
issue in this case appears to be in question.
Amended Complaint alleges that “HSBC charged off the alleged debt
in March 2011 in the amount of either $546 or $600, and this was
the amount of the alleged debt sold by HSBC.”
PageID # 294.
ECF No. 33 ¶ 109,
When Midland purchased the debt, likely around
August 2013 (as that was the time any Midland debt was first
reported to Equifax), that amount had somehow ballooned to
Accepting as true the facts alleged by Aldaya, this
court cannot agree with Defendants that HSBC, which allegedly
froze the debt in the amount of either $546 or $600 for, among
other things, “sound business reasons” such as tax
considerations, did not waive interest.
Accordingly, to the extent Defendants seek judgment on
the pleadings with respect to claims arising out of any charge
off, the motion is denied.
Defendants say the allegations concerning their alleged
improper assignment of fees should be dismissed.
alleges that “Defendants did not have authority to impose
additional fees on the originating account.”
similarly alleges, “Defendants’ collection of additional fees are
collection attempts for amounts not expressly authorized by
Paragraphs 170 and 171 also allege that Defendants
lacked authority to impose additional fees.
The court disagrees that the First Amended Complaint’s
references to fees are based on naked assertions of fact.
alleges that the amount of debt sold by HSBC to Midland was $546
ECF No. 33 ¶ 109, PageID # 294.
the debt, that amount had become $1,304.
When Midland purchased
ECF No. 33-6, PageID
Without knowing what interest rate was charged by any
Midland entity, Aldaya is reasonably inferring that fees may have
To the extent Defendants seek judgment on the
pleadings with respect to claims arising out of the alleged
charging of fees, the motion is denied.
Aldaya claims that, although Midland Funding was
identified as owning her debt, Midland Credit Management
confusingly attempted to collect the debt using Midland Credit
Aldaya says that this violated section
443B-18(4), which prohibits the “failure to disclose clearly the
name and full business address of the person to whom the claim
has been assigned for collection or to whom the claim is owed at
the time of making any demand for money.”
She also says that
this violated 15 U.S.C. § 1692e(14), which prohibits the “use of
any business, company, or organization name other than the true
name of the debt collector’s business, company, or organization.”
Citing Paragraph 95 in the original Complaint, see ECF
No. 52-1, PageID # 569, Defendants say that Midland Credit
Management is the servicer for Midland Funding and that section
443B-18(4) and § 1692e(14) were therefore not violated.
not at all clear that this court may rely on allegations in the
original Complaint when evaluating the sufficiency of the First
Amended Complaint, especially when, as here, the allegations are
missing from the amended complaint.
See Rhodes v. Robinson, 621
F.3d 1002, 1005 (9th Cir. 2010) (“As a general rule, when a
plaintiff files an amended complaint, the amended complaint
supercedes the original, the latter being treated thereafter as
non-existent.” (quotation marks and alterations omitted)).
any event, Defendants denied the allegations set forth in
Paragraph 95 in the Answer to the original Complaint.
No. 15, PageID # 103.
Under these circumstances, this court will
not assume or take judicial notice of the truth of the
allegations set forth in Paragraph 95 of the original Complaint
to evaluate whether the First Amended Complaint’s allegations are
sufficient to state a viable claim.
Based solely on the allegations in the First Amended
Complaint, and construing those allegations in the light most
favorable to Aldaya, this court views Aldaya as contending that
she received letters indicating that the current owner of her
debt was Midland Funding, but that Midland Credit Management was
attempting to collect the debt.
It may well be that Aldaya was
told at some point that Midland Credit Management was the
servicer for debts owned by Midland Funding, but that is not
clear from the allegations in the First Amended Complaint.
Accordingly, to the extent Defendants seek judgment on the
pleadings with respect to claims based on the use of differing
business entities’ names, the motion is denied.
Original Account Number.
Aldaya asserts that Defendants violated 15 U.S.C.
§ 1692e(10), which prohibits the “use of any false representation
or deceptive means to collect or attempt to collect any debt,” by
“assigning Ms. Aldaya an account number not related to her
original account number.”
ECF No. 33 ¶ 134(e), PageID # 300.
For example, a letter dated January 29, 2015, listed a Midland
Credit Management account number of 8538045269, while also noting
that Aldaya’s original creditor was HSBC Bank Nevada, N.A, with
the original HSBC account number noted but redacted in the
filings in this case.
See ECF No. 32-3, PageID 316 (Jan. 29,
2015, letter); ECF No. 33-3, PageID # 318 (March 12, 2015,
letter); ECF No. 33-4, PageID # 320 (Apr. 27, 2015, letter); ECF
No. 33-1 (May 15, 2015, letter); ECF No. 33-5, PageID # 322 (June
19, 2015, letter).
Aldaya alleges that she was confused by these
letters “as to what money she owe[d] on the account and to whom.”
ECF No. 33 ¶ 138, PageID # 300.
At the hearing on the present motion, Aldaya clarified
that she is not relying on any redaction of her original account
She clarified that the original documents contained her
full account number and that the redactions in the record in this
case were made by her attorneys for purposes of filing materials
in the public record.
The First Amended Complaint does not allege that the
letter dated January 29, 2015, which is attached to the First
Amended Complaint, was the first communication Aldaya received
from Midland Credit Management.
That letter clearly states that
the original creditor was HSBC Bank Nevada, N.A., and lists the
original account number (redacted for this court’s files such
that only the last four digits are visible).
PageID # 316.
See ECF No. 33-2,
The next two letters in time similarly showed
Aldaya’s original creditor and account number.
See ECF No. 33-3,
PageID # 318 (March 12, 2015, letter); ECF No. 33-4, PageID # 320
(Apr. 27, 2015, letter).
The fourth letter Aldaya received,
although listing the original creditor at the top of the letter,
included the original account number in a smaller font at the
bottom of the first page of the letter.
15, 2015, letter).
See ECF No. 33-1 (May
Finally, the fifth letter included with the
First Amended Complaint again highlighted the original creditor
and account number at the top of the page.
See ECF No. 33-5,
PageID # 322 (June 19, 2015, letter).
Even viewing the letters with the eyes of the least
sophisticated debtor, this court cannot see how the letters to
Aldaya were false, deceptive, or in any way misleading with
respect to account numbers.
As a matter of law, no reasonable
juror could determine that Defendants used false or deceptive
means in assigning their own number to her account while also
stating in the same communications the original creditor and
original account number.
Although the fourth letter listed the
account number in a smaller font at the bottom of the letter,
when viewed in the context of the multiple communications already
sent to Aldaya, that letter would not allow a reasonable juror to
determine that § 1692e(10) was violated.
Accordingly, the court
grants judgment on the pleadings in favor of Defendants on any
claim relating to this inclusion of Midland Credit Management’s
account number in addition to Aldaya’s HSBC account number.
Failure to Pay General Excise Tax.
In the “Seventh Violation of the Hawaii Revised
Statutes,” Aldaya asserts a claim under section 480-2 of Hawaii
She alleges two factual bases for the claim.
First, she alleges that collection agencies must be
registered with the Department of Commerce and Consumer Affairs.
ECF No. 33 ¶ 180, PageID # 308.
She does not, however, allege
that either Midland Funding or Midland Credit Management failed
to register as debt collectors with the Hawaii Department of
Commerce and Consumer Affairs.
In fact, at the hearing on the
present motion, Aldaya stated that she is not asserting any claim
based on the failure by either Midland company to register as a
debt collector in Hawaii, conceding that both had so registered.
Instead, Aldaya says that neither Midland company had a general
excise tax license and therefore must not have paid any taxes on
money collected from Hawaii residents.
Id. ¶ 182-83, PageID #s
Aldaya claims that this provides them with an unfair
She says that she suffered actual damages
in the form of postage, mileage, and emotional distress as a
result of the violation.
Id. ¶ 187, PageID # 309.
Second, Aldaya alleges that she mailed letters
requesting validation of the alleged debt and disputing the debt.
She says that her requests were ignored and collection efforts
continued. Id. ¶ 185, PageID # 309.
She says that she suffered
actual damages in the form of postage, mileage, and emotional
distress as a result of the violation.
Id. ¶ 187.
Defendants seek judgment on the pleadings with respect
to the first section 480-2 claim based on the failure to pay
general excise taxes, arguing that Aldaya lacks standing to bring
such a claim.
After this court expressed doubt at the hearing
that Aldaya had standing to assert the claim, Aldaya offered to
withdraw the claim.
While the court declines to allow such a
withdrawal under the circumstances, the court dismisses for lack
of standing the claim Aldaya offered to withdraw.
Section 443B-20 makes any violation of Chapter 443B an
unfair method of competition and an unfair or deceptive act or
practice in the conduct of any trade or commerce for the purpose
of section 480-2, which prohibits unfair methods of competition
and unfair or deceptive acts or practices in the conduct of any
trade or commerce.
Section 480-13 of Hawaii Revised Statutes
provides for damages for violations of section 480-2.
section 480-13, “any person who is injured in the person’s
business or property by reason of anything forbidden or declared
unlawful by this chapter” and “[a]ny consumer who is injured by
any unfair or deceptive act or practice forbidden or declared
unlawful by section 480-2” may sue for actual damages.
damages may not include emotional distress damages under section
See Zanakis-Po v. Cutter Dodge, Inc., 98 Haw. 309, 319,
47 P.3d 1222, 1232 (2002).
If the plaintiff is successful,
courts are to award the plaintiff three times his or her actual
damages or $1,000, whichever is greater.
Haw. Rev. Stat. § 480-
Defendants initially argue that Aldaya is not a
consumer for purposes of section 480-13(b).
That argument is
foreclosed by Flores v. Rawlings Co., LLC, 117 Haw. 153, 164-65,
177 P.3d 341, 352-53, opinion amended on reconsideration, 119
Haw. 287, 196 P.3d 289 (2008):
By deeming violations of HRS chapter 443B an
unfair or deceptive act or practice for the
purposes of HRS § 480–2, it is evident that
the legislature wished to have chapter 443B
be enforceable in the same manner as other
unfair trade practices under chapter 480. If
enforcement were limited to individuals who
had purchased, attempted to purchase, or were
solicited for purchase of a service or good
from a collection agency, enforcement of HRS
chapter 443B would be left entirely in the
hands of the state. In view of the expressed
purpose of HRS chapter 480 to “encourage
those who have been victimized by persons
engaging in unfair or deceptive acts or
practices to prosecute their claim,” Hse.
Stand. Comm. Rep. No. 541, in 1987 House
Journal, at 1355, and the intent of HRS chapter 443B to “protect
creditors from unscrupulous or dishonest collection agencies, and
to protect debtors from abusive collection agencies,” this result
would not be in keeping with the statutory structure and would
appear to be the type of “inconsistent,” or “absurd,” result that
this court must presume the legislature would not have intended.
Rather, in the context of consumer debt, the
determination of whether the individual
seeking suit is a “consumer” should rest on
whether the underlying transaction which gave
rise to the obligation was for a good or
service that is “primarily for personal,
family, or household purposes,” HRS § 480–1.
This reading is supported by the definition
of “debt” in HRS § 443B–1, as well as the
fact that the statutory structure of HRS
chapter 480 does not require that one be a
“consumer” of the defendant’s goods or
services, but merely a “consumer.” Cf.
Flenniken v. Longview Bank and Trust Co., 661
S.W.2d 705, 707 (Tex. 1983) (“Privity between
the plaintiff and defendant is not a
consideration in deciding the plaintiff's
status as a consumer under the [Texas
Deceptive Trade Practices Act]. A plaintiff
establishes his standing as a consumer in
terms of his relationship to a transaction,
not by a contractual relationship with the
defendant. The only requirement is that the
goods or services sought or acquired by the
consumer form the basis of his complaint.”
Defendants next argue that Aldaya lacks standing
because she lacks an actual injury.
See Hungate v. Law Office of
David B. Rosen, 2017 WL 747870, at *14 (Haw. Feb. 27, 2017) (“In
addition to adequately alleging sufficient facts that Deutsche
Bank’s conduct were unfair or deceptive pursuant to HRS § 480-2,
Hungate was also required to allege sufficient facts to show he
With respect to the claim based on an alleged
failure to pay general excise taxes, this court agrees that
Aldaya lacks standing to pursue the claim.
Chapter 480 does not define the term “injury.”
117 Haw. at 167, 177 P.3d at 355.
Courts interpreting the term
have noted that there is not a “high bar” for proving injury.
Hungate, 2017 WL 747870, at *14.
In fact, de minimus damages are
a sufficient injury to support recovery under section 480-13.
See Wiginton v. Pac. Credit Corp., 2 Haw. App. 435, 444, 634 P.2d
111, 119 (1981) (“the legislature was aware that damages might be
de minimus in a consumer protection action and specifically
provided for the $1,000.00 award or triple damages to cover that
In Flores, the Hawaii Supreme Court stated: “proof of a
violation of chapter 480 is an essential element of an action
under Sec. 480-13, the mere existence of a violation is not
sufficient ipso facto to support the action; forbidden acts
cannot be relevant unless they cause private damage.”
court further noted that a plaintiff sufficiently alleges an
injury for standing purposes by alleging that he or she was made
to pay money that was “wrongfully induced.”
Id. at 169, 177 P.3d
In Hungate, the Hawaii Supreme Court explained that a
plaintiff need only allege that the plaintiff has sustained
special and general damages “as a direct and proximate result” of
the 480-2 violation.
Hungate, 2017 WL 747870, at *14.
In Flores, the Hawaii Supreme Court determined that the
defendant was a collection agency required to register under
section 443B-3 of Hawaii Revised Statutes.
Id. at 161, 177 P.3d
Although the debt collector violated chapter 443B by
failing to register, the Hawaii Supreme court ruled that the
failure did not injure a plaintiff who had paid the debt
the provision at issue here does not bear on
the validity of the underlying obligation and
involved no illegal representations by
Rawlings such that payment on the obligation
would have caused Plaintiffs to incur private
damage. Rather, Plaintiffs had a valid loan
agreement with HMSA, which was settled
through Rawlings. Although Rawlings’s
activities in collecting money were in
violation of HRS chapter 443B, the collection
cannot be said to have “injured” Plaintiffs.
Id. at 169, 177 P.3d at 357.
If a debt collector cannot be said
to injure a debtor who pays a debt when the debt collector fails
to register as a debt collector, Defendants cannot be said to
have injured Aldaya through a failure to submit general excise
taxes to Hawaii, even assuming that they were required to pay
In other words, Aldaya has failed to allege any
actionable injury caused by Defendants’ alleged failure to pay
taxes to Hawaii.
Defendants’ motion for judgment on the pleadings is
denied in significant part.
The court grants the motion in only
First, the court grants the motion to the extent
Aldaya asserts claims based on any alleged confusion resulting
from the reference in collection letters to her original account
number as well as to a Midland account number.
Second, the court
grants the motion insofar as it argues that Aldaya lacks standing
to assert a section 480-2 claim based on Defendants’ alleged
failure to pay Hawaii general excise taxes.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, March 20, 2017.
/s/ Susan Oki Mollway
Susan Oki Mollway
United States District Judge
Aldaya v. Encore Capital Group, Inc., et al., Civ. No. 15-00284 SOM/RLP;
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION FOR JUDGMENT ON
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