Case Information
*2
CLIFTON, Circuit Judge:
The federal Fair Debt Collection Practices Act
(“FDCPA”), 15 U.S.C. § 1692 et seq., prohibits debt
*3
collectors from making false statements when attempting to
collect debts from consumers. 15 U.S.C. § 1692e. Not all
false statements are actionable, however. To constitute a
violation of the FDCPA, a false statement must be “material.”
Donohue v. Quick Collect, Inc.
,
What makes a false statement material or immaterial in
the debt collection world? Material false statements, we have
held, are those that could “cause the least sophisticated debtor
to suffer a disadvantage in charting a course of action in
response to the collection effort.”
Tourgeman v. Collins Fin.
Servs., Inc.
,
As for the Rosenthal Act claim, we affirm the grant of summary judgment on an alternative ground. The debt collector corrected the misstatements within fifteen days of discovering the violation and thus satisfied the requirements necessary to avail itself of a defense under the Rosenthal Act.
I. Background
Los Angeles Federal Credit Union (“LAFCU”) was owed money by Plaintiff Robel Afewerki, a credit card customer of LAFCU who had fallen behind on payments. LAFCU hired Anaya Law Group to collect the debt and correctly informed Anaya Law Group that the principal due was $26,916.08 and *4 that the debt was subject to a 9.65 percent interest rate. Anaya Law Group filed a complaint on behalf of LAFCU against Afewerki on May 6, 2014, in Los Angeles County Superior Court alleging that the principal of Afewerki’s debt was $29,916.08 ($3,000 more than he in fact owed) and that the debt was subject to an interest rate of 9.965 percent (a figure that was 0.315 percent too high). Anaya Law Group served the complaint directly on Afewerki, who was not represented by counsel at that time.
Given this circumstance, Afewerki retained a lawyer, who sent a demand for a bill of particulars to Anaya Law Group on June 6, 2014. As she later set out in a declaration, an Anaya Law Group attorney discovered the errors in the complaint for the first time on June 16, 2014, while preparing a response to the demand. She asserted that the errors were inadvertent. Two days later, on June 18, 2014, Anaya Law Group filed a notice of errata correcting the errors.
Relying on two statutes that prohibit debt collectors from making false representations in connection with efforts to collect consumer debts, Afewerki filed this lawsuit in federal court. Specifically, in his first amended complaint, Afewerki alleged a violation of the FDCPA against Anaya Law Group and a violation of the Rosenthal Act against both Anaya Law Group and LAFCU. [1] See 15 U.S.C. § 1692e; Cal. Civ. Code § 1788.17.
Each of the parties moved for summary judgment. The
district court granted Defendants’ motion for summary
judgment and denied Afewerki’s motion for summary
judgment, concluding that the errors in the state court
[1]
Afewerki did not sue LAFCU under the FDCPA. Under the
FDCPA, a creditor collecting debts on its own behalf is not a “debt
collector.” 15 U.S.C. § 1692a(6);
Henson v. Santander Consumer USA
Inc.
,
6 A FEWERKI V . A NAYA L AW G ROUP complaint were “not material.” The district court reaffirmed its decision after Afewerki filed a motion for reconsideration.
Notice of appeal was timely filed. We have jurisdiction.
28 U.S.C. § 1291.
II. Discussion
We review de novo a grant of summary judgment.
Tourgeman
,
The district court determined that Defendants were not liable under either the FDCPA or the Rosenthal Act because it concluded that the complaint’s misstatements of the principal owed and interest rate were “not material.” Even if Afewerki had not appeared and LAFCU had been granted default judgment in the state court case, the district court believed that LAFCU would have been required to prove the amount owed prior to entry of judgment, so the judgment ultimately entered would have been in the correct amount. In addition, the district court noted that Afewerki had not presented evidence that he would have proceeded differently had the complaint alleged the correct principal amount and interest rate. We conclude, however, that the false statements made by the debt collector in this case were material because they could have disadvantaged the least sophisticated debtor in responding to the complaint.
The FDCPA prohibits debt collectors from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt.” 15 U.S.C. § 1692e. Specifically, 15 U.S.C. § 1692e(2) prohibits “[t]he false representation of . . . the character, amount, or legal status of any debt.” The Rosenthal Act incorporates these prohibitions by reference. Cal. Civ. Code § 1788.17 (“[E]very debt collector collecting or attempting to collect a consumer debt shall comply with the provisions of Sections 1692b to 1692j, inclusive, of . . . Title 15 of the United States Code.”). The complaint that was filed misrepresented the *6 amount of the debt owed by Afewerki.
The text of the FDCPA does not itself establish either the
least sophisticated debtor standard or the materiality
requirement, nor does the statute define these terms. The
FDCPA’s broad prohibition on misleading statements poses
the question, “Misleading to whom?” We answered this
question in 1982, when we explained that, “[i]n evaluating
the tendency of language to deceive, [we] should look not to
the most sophisticated readers but to the least.”
Baker v. G.
C. Servs. Corp.
, 677 F.2d 775, 778 (9th Cir. 1982). We
concluded that the FDCPA does not ask the subjective
question of whether an individual plaintiff was actually
misled by a communication. Rather, it asks the objective
question of whether the hypothetical least sophisticated
debtor would likely have been misled. “If the least
sophisticated debtor would likely be misled by a
communication from a debt collector, the debt collector has
violated the Act.”
Guerrero v. RJM Acquisitions LLC
,
More recently, in
Donohue v. Quick Collect, Inc.
,
In Donohue , a debt collector filed a complaint that listed a principal due of $270.99 and interest due of $32.89, which, the complaint indicated, was calculated at a 12 percent interest rate. 592 F.3d at 1033. In reality, the $32.89 included finance charges assessed by the creditor in addition to the 12 percent interest rate. Id. While the complaint’s characterization of the amount was literally false, we determined that it did not matter. The total amount due was correct, and the mistake, we concluded, would “not affect a consumer’s ability to make intelligent decisions.” Id. at 1034.
We have applied this concept in subsequent cases. For example, we held that a voicemail message that failed to fulfill a statutory requirement to identify each communication as being from “a debt collector” was not a material violation when the debtor clearly knew who the debt collector was because the two had exchanged eight emails and a phone call in the two preceding weeks. Davis v. Hollins Law , 832 F.3d 962, 967 (9th Cir. 2016).
Nevertheless, the materiality requirement remains a fairly
narrow exception to the general rule requiring accuracy in
communications from debt collectors. Thus, we concluded
that misidentification of a consumer’s original creditor in a
dunning letter was material because such a mistake could lead
to “confusion and delay in trying to contact the proper party
concerning payment on the loan.”
Tourgeman
,
Material false representations, then, are those that could
“cause the least sophisticated debtor to suffer a disadvantage
in charting a course of action in response to the collection
effort.”
Id.
Immaterial false representations, by contrast, are
those that are “literally false, but meaningful only to the
‘hypertechnical’ reader.”
Id.
To the extent that a Rosenthal
Act claim is derivative of a 15 U.S.C. § 1692e claim, as is
true in this case, false statements are also subject to the
materiality requirement for purposes of the Rosenthal Act
claim.
See Davis
,
Because the materiality inquiry focuses on the objective question of how the least sophisticated debtor could have *8 10 A FEWERKI V . A NAYA L AW G ROUP reacted to a misstatement, the question of what Afewerki himself would actually have done differently had Anaya Law Group not misstated the amount of his debt is irrelevant in determining materiality. As we have explained:
[A] consumer possesses a right of action even where the defendant’s conduct has not caused him or her to suffer any pecuniary or emotional harm. An FDCPA plaintiff need not even have actually been misled or deceived by the debt collector’s representation; instead, liability depends on whether the hypothetical “least sophisticated debtor” likely would be misled.
Tourgeman
,
There are a number of circumstances in which the errors
in the complaint filed by Anaya Law Group might have
impacted the least sophisticated debtor. The Fourth Circuit
recently considered a similar case,
Powell v. Palisades
Acquisition XVI, LLC
,
We agree and conclude that Anaya Law Group’s $3,000 overstatement of the principal due in the state court complaint, [2] exacerbated by the statement of an inflated interest rate, was material. Just as in Powell , the fact that the debt collector corrected its mistake after the debtor challenged it does not mean that a less sophisticated debtor would have been so lucky. Unlike the debtor in Donohue , who was served with a complaint that was correct in stating the amount owed, the least sophisticated debtor in Afewerki’s position would not have had the option to avoid the lawsuit by simply “pa[ying] the accurately stated sum to settle [the] debt.” 592 F.3d at 1034; see also id. (“[A]pplying an incorrect rate of interest would lead to a real injury . . . .”). Rather, the least sophisticated debtor in Afewerki’s position, concerned that he had been sued, may well have simply paid the amount demanded in the complaint and would have overpaid by approximately $3,000.
[2]
Defendants contend that a complaint is not a communication with
a debtor subject to the prohibitions of the FDCPA. We explicitly held in
Donohue
, however, that “a complaint served directly on a consumer to
facilitate debt-collection efforts is a communication subject to the
requirements of §[] 1692e.”
There are other circumstances in which the errors in the complaint Anaya Law Group filed might have impacted the least sophisticated debtor. One circumstance discussed by the district court and the parties is the possibility that the state court case could have proceeded to default judgment. Contrary to Anaya Law Group’s argument, it is not certain that LAFCU would have been required to submit copies of its accounts or otherwise would have proved that the amount it sought was correct prior to entry of a default judgment. The Appellate Division of the Los Angeles County Superior Court has held that a credit card company attempting to collect a debt from a customer need not submit documentary evidence *10 in order to obtain a clerk’s default judgment for a definite sum. HSBC Bank Nev., N.A. v. Aguilar , 141 Cal. Rptr. 3d 206, 211 (App. Dep’t Super. Ct. 2012). This decision could have guided proceedings in the Los Angeles County Superior Court had Afewerki’s case proceeded to default judgment. Thus, the least sophisticated debtor in Afewerki’s position might not only have been misled as to the amount owed, but could also have had a judgment for an inflated amount entered against him.
For these reasons, we conclude that the incorrect statement of the principal due in the state court complaint, which was further inflated by the incorrect interest rate, was material. [3]
[3]
Although “[t]he FDCPA is a strict liability statute that makes debt
collectors liable for violations that are not knowing or intentional,”
Donohue
,
Although we disagree with the district court’s conclusion
that the misstatements were not material, which was the basis
on which the district court granted summary judgment to
Defendants, “[w]e may affirm on any basis supported by the
record.”
Fisher v. Kealoha
,
California Civil Code § 1788.30(d) states: A debt collector shall have no civil liability under this title if, within 15 days either after discovering a violation which is able to be cured, or after the receipt of a written notice of such violation, the debt collector notifies the debtor of the violation, and makes whatever adjustments or corrections are necessary to cure the violation with respect to the debtor.
Defendants argue they are absolved of liability under the *11 Rosenthal Act because they corrected their error in accordance with this provision and served Afewerki with notice of the correction. Defendants pleaded this defense in their answer and argued it in their motion for summary judgment before the district court.
An attorney from Anaya Law Group filed a declaration in the district court stating that the errors were inadvertent and that she discovered the errors only while reviewing the file to respond to Afewerki’s demand for a bill of particulars. The notice of errata was filed on June 18, 2014, which was within fifteen days of June 6, 2014, when the demand for a bill of particulars was served. Accordingly, Defendants satisfied the criteria to invoke the defense provided by § 1788.30(d).
Afewerki does not cite any evidence to contradict the declaration by the Anaya Law Group attorney. Instead, Afewerki argues that § 1788.30(d) was eliminated in 1999 by California Civil Code § 1788.17, which states:
Notwithstanding any other provision of this title, every debt collector collecting or attempting to collect a consumer debt shall . . . be subject to the remedies in Section 1692k of[] Title 15 of the United States Code.
The California Supreme Court has not addressed the impact
of § 1788.17 on § 1788.30(d), nor have the California Courts
of Appeal done so in a published opinion. “When a state’s
highest court has not yet ruled on an issue, we must
reasonably determine the result that the highest state court
would reach if it were deciding the case.”
Gonzales v.
CarMax Auto Superstores, LLC
,
Afewerki argues that legislative history documents
suggest that, in approving § 1788.17, the California
legislature intended to remove the § 1788.30(d) defense. We
must start, however, with the text of the statute, and when the
statutory “language is unambiguous, the plain meaning
controls.”
Voices of the Wetlands v. State Water Res. Control
Bd.
,
A FEWERKI V . A NAYA L AW G ROUP 15 Section 1788.17 makes debt collectors “subject to the remedies in Section 1692k” but says nothing about defenses. Section 1788.30(d) is a defense, not a remedy. To be sure, there are remedies included in 15 U.S.C. § 1692k that were not available under the Rosenthal Act prior to enactment of § 1788.17. For example, as Afewerki notes, § 1788.17 made class remedies available under the Rosenthal Act. Gonzales v. Arrow Fin. Servs., LLC , 660 F.3d 1055, 1065 (9th Cir. 2011). The 1999 amendment also permitted individuals suing under the Rosenthal Act to claim statutory damages without regard to whether a debt collector acted knowingly. Compare Cal. Civ. Code § 1788.30(b), with 15 U.S.C. § 1692k(a)(2)(A). But, again, these are remedies, not defenses.
Furthermore, as we explained in a previous decision,
§ 1788.17 did not delete § 1788.30, but rather nullified some
of § 1788.30’s limitations on remedies to the extent that those
limitations did not apply to the remedies described in
§ 1692k.
Gonzales
,
grant of summary judgment to Defendants as to the Rosenthal Act claim.
III. Conclusion
On the FDCPA claim, we vacate the district court’s summary judgment in favor of Anaya Law Group. As to the Rosenthal Act claim, we affirm the district court’s summary judgment in favor of Defendants. We remand for further proceedings on the FDCPA claim. Because Anaya Law Group is the only defendant sued under the FDCPA claim, LAFCU will no longer be part of the case on remand.
AFFIRMED IN PART, VACATED IN PART, AND REMANDED.
[4] Because we affirm on this ground, we do not consider Defendants’ contention that law firms are not “debt collectors” subject to the Rosenthal Act. Additionally, Defendants seek summary affirmance on the ground that the excerpts of record Afewerki submitted were inadequate. Although the excerpts of record were deficient, see 9th Cir. R. 30-1.4(c)(ii), summary affirmance is not an appropriate remedy for these omissions, see 9th Cir. R. 30-2 (detailing the actions the court may take when the excerpts of record omit required materials).