Mashiri v. Epsten Grinnell & Howell

• Citation: 845 F.3d 984
• Decision Date: 13 January 2017
• Docket Number: No. 14-56927,14-56927
• Parties: Zakia MASHIRI, Plaintiff-Appellant, v. EPSTEN GRINNELL & HOWELL; Debora M. Zumwalt ; Does 1–25, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

845 F.3d 984

Zakia MASHIRI, Plaintiff-Appellant,

v.EPSTEN GRINNELL & HOWELL; Debora M. Zumwalt ; Does 1–25, Defendants-Appellees.

No. 14-56927

United States Court of Appeals, Ninth Circuit.

Argued and Submitted October 4, 2016, Pasadena, California

Filed January 13, 2017

Asil Mashiri (argued), Mashiri Law Firm, San Diego, California, for Plaintiff-Appellant.

Anne Lorentzen Rauch (argued), Mandy D. Hexom, and Rian W. Jones, Epsten Grinnell & Howell APC, San Diego, California, for Defendants-Appellees.

Before: Dorothy W. Nelson and Richard A. Paez, Circuit Judges, and Elaine E. Bucklo,^* District Judge.

OPINION

PAEZ, Circuit Judge:

Zakia Mashiri ("Mashiri") appeals the dismissal of her complaint alleging that the law firm of Epsten Grinnell & Howell and attorney Debora M. Zumwalt (collectively, "Epsten") committed unlawful debt collection practices in violation of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692 et seq. , the Rosenthal Fair Debt Collection Practices Act ("Rosenthal Act"), Cal. Civ. Code §§ 1788 et seq. , and the California Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200, et seq . Mashiri alleges that Epsten sent her a debt collection letter in May 2013 demanding payment of an assessment fee from her homeowners' association. She alleges that the letter contained language that overshadowed and conflicted with her FDCPA right to thirty days in which to dispute the debt. On a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the district court dismissed Mashiri's FDCPA claims, concluding that the collection letter satisfactorily explained her right to dispute the debt and therefore did not improperly threaten to record a lien. Because Mashiri's state law claims were dependant on her FDCPA claims, the court also dismissed Mashiri's Rosenthal Act and Unfair Competition Law claims.

We hold that the district court erred. Mashiri has alleged a plausible claim for relief because the collection letter contains language that overshadows and conflicts with her FDCPA debt validation rights when reviewed under the "least sophisticated debtor" standard. We also reject Epsten's argument, raised for the first time on appeal, that in sending the collection letter, it merely sought to perfect a security interest and is therefore subject only to the limitations in § 1692f(6). We hold that Epsten is subject to the full scope of the FDCPA. We reverse and remand for further proceedings consistent with this Opinion.

I.

Mashiri alleges that she owns a home in San Diego, California and is a member of the Westwood Club homeowners' association ("HOA").¹ As a member, Mashiri incurs annual assessment fees. Mashiri failed to pay in a timely manner the $385 fee assessed in July 2012.

In a collection letter dated May 1, 2013 (the "May Notice"), Epsten, on behalf of the HOA, sought to collect Mashiri's overdue assessment fee, as well as corresponding late, administrative, and legal fees. The May Notice also included a warning that failure to pay the assessment fee would result in the HOA recording a lien against Mashiri's property. This notice is required by section 5660 of the Davis-Stirling Common Interest Development Act, Cal. Civ. Code §§ 4000 et seq. , which governs the collection of overdue homeowners' association assessments.² The May Notice stated, in pertinent part:

This letter is to advise you that $598.00 is currently owing on your Association assessment account. Failure to pay your assessment account in full within thirty-five (35) days from the date of this letter will result in a lien being recorded against your property upon authorization of the Board of Directors. All collection costs incurred will be charged to your account.

Unless you notify this office within 30 days of receiving this notice that you dispute the validity of the debt or any portion thereof, this office will assume this debt is valid. If you notify this office in writing within thirty (30) days of receiving this notice that the debt, or any portion thereof, is disputed, we will obtain verification of the debt or a copy of the judgment against you (if applicable) and a copy of [ ] such verification or judgment will be mailed to you.

....

You have the right to inspect the association records pursuant to Corporations Code Section 8333. You may submit a written request to meet with the Board to discuss a payment plan for this debt. You shall not be liable to pay the charges, interest and costs of collection if it is determined the assessment was paid on time to the Association. You have the right to dispute the assessment debt by submitting a written request for dispute resolution to the association pursuant to the association's "meet and confer" program required in Civil Code Section [5900] et seq., and the Board offers to participate in dispute resolution. You have the right to request alternative dispute resolution with a neutral third party pursuant to Civil Code Section [5925] et seq. before the association may initiate foreclosure against your separate interest, except that binding arbitration shall not be available if the association intends to initiate a judicial foreclosure.

....

IMPORTANT NOTICE: IF YOUR SEPARATE INTEREST IS PLACED IN FORECLOSURE BECAUSE YOU ARE BEHIND IN YOUR ASSESSMENTS, IT MAY BE SOLD WITHOUT COURT ACTION.

....

This is a communication from a debt collector attempting to collect a debt and any information obtained will be used for that purpose.

Accompanying the May Notice, Epsten included copies of Mashiri's account statement and the HOA's assessment collection policy.

On or about May 20, 2013, in a letter to Epsten, Mashiri disputed the debt and requested that Epsten validate it. Mashiri also stated that she never received a bill for the July 2012 assessment fee. Approximately two weeks later, on June 5, Epsten responded with another copy of Mashiri's account statement.

On June 18, 2013, Epsten, on behalf of the HOA, recorded a lien on Mashiri's property in the amount of $928, reflecting the $598 she previously owed and $330 in additional legal fees. Three days later, on June 21, Mashiri sent the HOA a check for $385. In a letter accompanying the check, Mashiri disputed the balance of the debt. As required by the Davis-Stirling Act, on June 24, Epsten notified Mashiri of the lien. Cal. Civ. Code § 5675(e).

Mashiri ultimately filed her complaint alleging violations of the FDCPA, the Rosenthal Act, and the Unfair Competition Law based on the contents of the May Notice. Epsten subsequently moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. The district court granted Epsten's motion to dismiss, concluding, inter alia , that the May Notice "complied with the clarity and accuracy requirements" of the FDCPA and therefore "did not threaten to take action that could not legally be taken" as prohibited by the FDCPA. The district court dismissed Mashiri's state law claims as dependant on her FDCPA claims. Mashiri timely appealed.

II.

We review de novo a dismissal under Rule 12(b)(6). Ariz. Students' Ass'n v. Ariz. Bd. of Regents , 824 F.3d 858, 864 (9th Cir. 2016). For purposes of our review, we accept the complaint's well-pleaded factual allegations as true and construe all inferences in favor of Mashiri. Id. The "complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal quotation marks omitted). "The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ).

III.

Congress enacted the FDCPA "to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses." 15 U.S.C. § 1692(e). In furtherance of these stated goals, "[t]he FDCPA subjects ‘debt collectors' to civil damages for engaging in certain abusive practices while attempting to collect debts." Ho v. ReconTrust Co., NA , 840 F.3d 618, 620 (9th Cir. 2016).

Mashiri challenges the district court's ruling that she did not allege a plausible violation of § 1692g of the FDCPA, and its corresponding dismissal of the § 1692e(5) and state law claims that depended on her § 1692g claim. See 15 U.S.C. § 1692g. She argues that the May Notice violated § 1692g for two reasons. First, she contends that the May Notice demanded payment sooner than the expiration of the debtor's thirty-day dispute period. Second, she claims that by threatening to record a lien within thirty-five days, irrespective of whether she disputed the debt, Epsten failed to explain effectively a debtor's right to dispute the debt. Epsten counters that it was not attempting to collect a debt and therefore the May Notice needed to comply only with the obligations in § 1692f(6) of the FDCPA relating to enforcement of security interests. Epsten further argues that even if it is subject to § 1692g, it complied with the statutory requirements. We turn first to whether Epsten is subject solely to § 1692f(6), and then discuss whether Mashiri has sufficiently alleged a violation of § 1692g and related claims.

A.

For the first time in its answering brief, Epsten argues that it is subject only to § 1692f(6)³ because it sent the May Notice to perfect the HOA's right to record an assessment lien against Mashiri's property under California Civil Code section 5660. "Ordinarily, we decline to consider arguments raised for the first time on appeal." Dream Palace v. Cty. of Maricopa , 384 F.3d 990, 1005 (9th Cir. 2003).

We have, however, recognized an exception where "the issue presented is purely...