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Class Action Defense Cases-Taylor v. Quall: California Federal Court Grants Defense Motion To Dismiss Class Action Holding That Debt Collection Practices During Lawsuit Are Insulated By Litigation Privilege

California’s Litigation Privilege Bars Claims of Unfair Debt Collection Practices California Federal Court Holds

Plaintiff filed a putative class action in California state court alleging violations of the federal Fair Debt Collection Practices Act (FDCPA) and California’s equivalent statute, the Rosenthal Fair Debt Collection Practices Act (RFDCPA), and for violations of California’s unfair competition law (UCL), California Business & Professions Code section 17200 et seq. The lawsuit was premised on acts committed by defendants’ efforts to collect a debt Defense attorneys removed the class action to federal court, and filed a motion to dismiss two claims for relief. Taylor v. Quall, 458 F.Supp.2d 1065, 1065-66 (C.D. Cal. 2006). Defendants argued that their conduct was absolutely privileged because it was part of the lawsuit aimed at collecting the debt. Id., at 1066. The district court agreed with the defense and granted the motion.

Plaintiff’s class action complaint alleged the following. After plaintiff lost his job, he received several calls from people attempting to collect monies owed on his Citibank credit card account. Plaintiff advised these people that he was unemployed and would not pay the debt. Eventually, these collection efforts ended. However, defendants thereafter acquired the Citibank debt and filed a lawsuit against plaintiff seeking to collect the amounts owed. Plaintiff claims the lawsuit was time-barred and that defendants lacked standing. Plaintiffs further alleges that “Defendants improperly sought attorney’s fees and costs, and made multiple misrepresentations to Plaintiff until he ultimately settled the action.” Taylor, at 1066. As noted above, defense attorneys argued that any statements made during the course of the lawsuit fell within the scope of the litigation privilege, thus warranting dismissal under Rule 12(b)(6). The district court agreed.

The federal court recognized Ninth Circuit “hostility” to Rule 12(b)(6) motions, Taylor, at 1067, but found the litigation privilege clearly applied to bar the class action claims. Under California law, “The litigation privilege applies to any publication or broadcast made in any judicial proceeding. . . . It applies to ‘”any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action.”‘ . . .” Id. (citations omitted). The privilege is, moreover, “absolute” – it applies “‘to apply to all publications, irrespective of their maliciousness'” and it applies “‘even though the publication is made outside the courtroom and no function of the court or its officers is involved,'” Id. (citation omitted). Because the gravamen of the class action complaint involved acts engaged in during the course of defendants’ lawsuit to enforce the debt, the litigation privilege applied. Id. The district court summarized its reasoning at pages 1067 and 1068 as follows:

Here, all of the allegedly wrongful debt collection practices engaged in by Defendants occurred in the context of litigation. According to the Complaint, all of Defendants’ communications to Plaintiff occurred between the time that he was served with the summons and complaint and the time that he settled the action. Thus, all of the communications fall within the scope of the privilege because they were made in the context of a judicial proceedings by parties to that litigation. They were also made to achieve the objects of the litigation and were connected to the action because they involved the allegations and requests for relief in the complaint and representations made in order to induce settlement of the claims. Furthermore, application of the privilege in this case furthers its purpose of promoting free access to the courts, zealous advocacy, and the finality of judgments. In the absence of a claim for malicious prosecution, Plaintiff’s remedy for the alleged abuses committed by Defendants was the exposure of those abuses in the earlier litigation.

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