Medrano v. Grant Mercantile Agency, Inc.
1:17-cv-01392
E.D. Cal.Jun 20, 2018Background
- Plaintiff Sarai Medrano sued Great Mercantile Agency, Inc. alleging unlawful debt-collection practices under the FDCPA, California's Rosenthal Act, and TILA arising from collection of a medical debt and a proposed payment plan.
- Defendant failed to appear; default was entered and Medrano moved for default judgment.
- Magistrate Judge recommended denying default judgment and dismissing the complaint; Medrano objected and the District Judge reviewed de novo.
- Court found the record lacks proof of proper service (process server returned service on Crystal Neill but did not state relation or location; registered agent listed as Rick Slayton), so default judgment cannot stand on that ground alone.
- On the merits, the Court agreed with the Magistrate that the complaint fails to state viable FDCPA and Rosenthal Act claims because reserving the right to refuse partial payments (and offering a $150/month plan) is not a prohibited false, deceptive, unfair, or unconscionable practice.
- The TILA claim was dismissed without prejudice: the complaint does not clearly plead whether Defendant was a "creditor" (i.e., the payment plan might be a consumer credit transaction as in Pollice, but facts are ambiguous). Plaintiff may amend only the TILA claim within 14 days; FDCPA and Rosenthal claims are dismissed with prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper service | Service was sufficient (proof of service filed) | Record fails to show service on registered agent or where served | Denied default judgment for lack of adequate proof of service |
| FDCPA §1692e(5)/(10) – threat/false statement about refusing partial payments | Statement reserving right to refuse partial payments is a threatening/false representation | Reservation of right to refuse partial payments is not a legal threat or falsehood | FDCPA §1692e claims dismissed with prejudice; reservation not actionable |
| FDCPA §1692f – unfair or unconscionable means | Refusal (or reservation to refuse) partial payments is unfair/unconscionable | Reservation plus offering a payment plan is not unfair; courts reject theory | §1692f claim dismissed with prejudice |
| TILA – whether Defendant is a "creditor" under §1602(g) | Payment plan of more than four installments makes Defendant a creditor and required disclosures | Defendant likely acted as a servicer/collector for Delano Ambulance, not an initial creditor | TILA claim dismissed without prejudice; Plaintiff may amend with facts on who first offered/deemed payments initially payable to |
Key Cases Cited
- Mason v. Genisco Tech. Corp., 960 F.2d 849 (9th Cir. 1992) (service of process is prerequisite to binding judgment)
- Heintz v. Jenkins, 514 U.S. 291 (U.S. 1995) (FDCPA prohibits false, deceptive, or misleading representations)
- DirecTV, Inc. v. Huynh, 503 F.3d 847 (9th Cir. 2007) (complaint must plead facts, not mere legal conclusions; deficient pleadings can defeat default judgment)
- Aldabe v. Aldabe, 616 F.2d 1089 (9th Cir. 1980) (default judgment may be denied where complaint lacks merit)
- Pollice v. Nat'l Tax Funding, L.P., 225 F.3d 379 (3d Cir. 2000) (payment plans that defer payment can create a consumer credit transaction and render purchaser a "creditor" under TILA)
- Riggs v. Prober & Raphael, 681 F.3d 1097 (9th Cir. 2012) (California Rosenthal Act incorporates FDCPA standards)
- McDonald v. Checks-N-Advance, Inc., 539 F.3d 1186 (9th Cir. 2008) (purpose and disclosure requirements of TILA)