A Nice Review of the FDCPA and 12(b)(6) Motions to Dismiss - Nevada 2014

Plaintiff filed a complaint alleging that the Defendant filed suit based upon a time-barred debt.  The Defendant filed a motion to dismiss alleging in part that the statute of limitations had not expired, that they were not a collection agency rather they were the owner of the debt and that the Plaintiff failed to dispute the debt within 30 days of the first communication.  The Court on a 12(b)(6) motion must determine if the factual allegations contained in the complaint together with all reasonable inferences state a plausible claim for relief. 


The Defendant's arguments may have had some validity but this was not a motion for summary judgment.  As a result, the majority of the causes of actions by the Plaintiff were sustained and only 1 cause of action was dismissed. 


The following is a brief statement by the Court on 12(b)(6) motions and an overview of the Act:




On a 12(b)(6) motion, the court must determine "whether the complaint's factual allegations, together with all reasonable inferences, state a plausible claim for relief." Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., 637 F.3d 1047, 1054 (9th Cir. 2011) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)).
When  [4] determining the sufficiency of a claim, "[w]e accept factual allegations in the complaint as true and construe the pleadings in the light most favorable to the non-moving party[; however, this tenet does not apply to] . . . legal conclusions . . . cast in the form of factual allegations." Fayer v. Vaughn, 649 F.3d 1061, 1064 (9th Cir. 2011) (citation and internal quotation marks omitted). "Therefore, conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss." Id. (citation and internal quotation marks omitted); see also Iqbal, 556 U.S. at 678 ("A pleading that offers 'labels and conclusions' or 'a formulaic recitation of the elements of a cause of action will not do.'" (quoting Twombly, 550 U.S. at 555)).




The FDCPA creates civil liability for "any debt collector who fails to comply with any provision [of the Act] . . . with respect to any person . . . ." 15 U.S.C. § 1692k(a). The Act defines a debt collector as "any person . . . in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect . . . debts owed or due or asserted to be owed or due another." 15 U.S.C. § 1692a(6). This definition "'would include those who collect for others in the regular course of business.'" Romine v. Diversified Collection Servs., Inc., 155 F.3d 1142, 1146 (9th Cir. 1998)  [6] (quoting S. Rep. No. 95-382 (1977)). The FDCPA does not, however, apply to a "creditor," who is "any person who offers or extends credit creating a debt or to whom a debt is owed." 15 U.S.C. § 1692a(4). Notably, assignees of debt may be considered creditors only if the "'debt was not in default at the time it was assigned.'" Nool v. HomeQ Servicing, 653 F. Supp. 2d 1047, 1053 (E.D. Cal. 2009) (quoting Perry v. Stewart Title Co., 756 F.2d 1197, 1208 (5th Cir. 1985)). Thus, a person who collects a defaulted debt assigned or transferred "solely for the purpose of facilitating collection of such debt for another" is a debt collector, not a creditor. See 15 U.S.C. § 1692a(4).








Todorov v. Easy Loans Corp., 2014 U.S. Dist. LEXIS 84484
United States District Court for the District of Nevada
June 19, 2014, Decided; June 19, 2014, Filed
Case No. 2:13-cv-01264-MMD-GWF

7-22-13 - 9th Cir. BAP - IRS Penalties are Not an Administrative Expense Under 503(b)(1)(A) -

The BAP had a good idea in 800ideas.com, Inc. to hold that the IRS did not have an administrative claim under 503(b)(1)(A) but remanded for a further determination as to whether it still could be an administrative expense on some other legal basis. 

In this case, the Court found that an IRS post-petition claim for penalties based upon the Trustee's failure to timely file a debtor's corporate tax return was NOT allowed as an administrative expense claim with first priority under 503(b)(1)(A) but the Court remanded the case for further determination if the post-petition penalty could be an administrative expense for some other reason.

In re 1800ideas.com (9th Cir. July 22, 2013)  

Fraud Under 523(a)(2)(A) - Supreme Court - In re Cohen - 523 US 213 (1998) and In re Speisman - 2013

In 1998, Justice O'Connor authorized the Cohen decision.  Such decision held that a debt for purposes of 523(a)(2)(A) is not limited to the amount obtained.  "Once it is established that specific money or property has been obtained by fraud...'any debt' arising therefrom is excepted from discharge".  The Court found that the award of treble damages plus attorney fees  under the New Jersey Consumer Fraud Act was nondischargeable.

On July 19, 2013, the Bankruptcy Court in Illinois gave me a quick refresher course of the Cohen decision in In re Speisman (Bankr. N.D. ILL 2013).  The decision arose from a motion to dismiss under Rule 9(b). 

Unilateral Withdrawal by a Debtor's Attorney Could be Costly to the Debtor and Counsel

Bankruptcy Judge Eileen Howell, in In re Barron, 2010 WL 5168889 (Bankr. D. Ariz, December 14, 2010) recently entered a decision on a reaffirmation agreement issue.  The decision is very important on the jurisdictional issue for the Court (i.e. must the Court hold a hearing if the Debtor is represented by counsel but counsel fails to sign off on the reaffirmation agreement? – the answer is “no jurisdiction”).  However, as the Debtor did everything required of them, the Court found that 521(d) is inapplicable. 

My focus is on the Court’s statement that “[c]ounsel simply cannot unilaterally withdraw from the reaffirmation process and abandon the client even if counsel and their clients disagree").  In the Barron case, the Debtor’s counsel did not formally withdraw but instead chose not to represent the debtor.  This type of action by Debtor’s counsel is prevalent throughout the Country. 

All Debtors’ counsel should be fully aware that their action or lack of action could be costly to not only their client but their own pocketbook.  The Nevada Courts have the local rules, case law as well as our ethical rules to support the same conclusion that your the attorney until you obtain an order withdrawing from the case.