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Russell v. Ray Klein, Inc.

United States District Court, D. Oregon, Eugene Division

November 19, 2019




         Plaintiff Nicholas Russell brings this putative class action against Ray Klein, Inc. and Christopher Bevans for alleged violations of the Oregon Uniform Trade Practices Act (“UTPA”), Oregon Unlawful Debt Collection Practices Act (“UDCA”), and Federal Fair Debt Collection Practices Act (“FDCPA”). With respect to the UTPA, Mr. Russell alleges that Defendants are misrepresenting to debtors that they are authorized by state law to charge a $45 attorney's fee upon garnishment. Defendants move to dismiss the UTPA claim pursuant to Fed.R.Civ.P. 12(b)(6). Because Mr. Russell has alleged a plausible claim that Defendants' have violated the UTPA, Defendants' Motion to Dismiss (ECF No. 14) is DENIED.


         More than eighteen years ago, Nicholas Russell obtained a loan or extension of credit from non-party Washington Mutual Bank. First Am. Compl. (“FAC”) ¶ 27, ECF No. 1. The loan was obtained for “personal, family, or household purposes.” FAC ¶ 27. When Mr. Russell defaulted on that obligation, Washington Mutual initiated a lawsuit in Jackson County Circuit Court and obtained a judgment against Mr. Russell. FAC ¶ 27. Several years later, on February 21, 2003, Washington Mutual assigned that judgment to Ray Klein, Inc. FAC ¶ 27.

         In an effort to enforce its judgment, Ray Klein, Inc., acting through its in-house attorney Christopher Bevans, issued a writ of garnishment to Mr. Russell's employer in October 2018. FAC ¶¶ 9, 6, 29. A copy of the writ and a debt calculation form were also sent to Mr. Russell. FAC ¶¶ 11, 37. On both documents, Ray Klein, Inc. represented that it was authorized to charge an attorney's fee of $45 for issuing the writ of garnishment. FAC ¶ 51. It further represented that Mr. Russell was responsible for the fee and that the fee had been added to Mr. Russell's outstanding debt. FAC ¶¶ 7-8, 11, 37. To that end, when Ray Klein, Inc. received the garnished wages from Mr. Russell's employer, it deducted the $45 attorney's fee and then credited the remainder of the funds toward satisfaction of Mr. Russell's debt. FAC ¶¶ 7-8.

         Mr. Russell filed this putative class action on January 1, 2019. Compl. at 23, ECF No. 1. Defendants moved to dismiss the Complaint in April, but their motion was denied as moot when Mr. Russell submitted his FAC on May 1. See Minute Order, ECF No. 13 (citing Ramirez v. Cty. of San Bernardino, 806 F.3d 1002, 1008 (9th Cir. 2015)). In the FAC, Mr. Russell asserts claims for violations of the UTPA, UDCA, and FDCPA. FAC ¶¶ 50-54. With respect to the UTPA claim, Mr. Russell alleges that Defendants “caused a likelihood of confusion and . . . misunderstanding as to source, approval, and/or certification” of the $45 attorney's fee by wrongly suggesting that the fee was authorized under Oregon law. FAC ¶ 50. Defendants now move to dismiss Mr. Russell's UTPA claim pursuant to Fed.R.Civ.P. 12(b)(6).


         To survive a motion to dismiss under Fed.R.Civ.P. 12(b)(6), a complaint must contain factual allegations sufficient to “state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is plausible on its face when the factual allegations allow a court to infer the defendant's liability based on the alleged conduct. Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). The factual allegations must present more than “the mere possibility of misconduct.” Id. at 678. When considering a motion to dismiss, a court must accept all allegations of material fact as true and construe those facts in the light most favorable to the non-moving party, Burget v. Lokelani Bernice Pauahi Bishop Trust, 200 F.3d 661, 663 (9th Cir. 2000), but it is “not bound to accept as true a legal conclusion couched as a factual allegation.” Twombly, 550 U.S. at 555. If a complaint is dismissed, the court must grant the plaintiff leave to amend unless it “determines that the pleading could not possibly be cured by the allegation of other facts.” Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995).


         Under his UTPA claim, Mr. Russell must establish three elements: “(1) a ‘person' (2) ‘in the course of the person's business, vocation or occupation' (3) ‘[c]auses likelihood of confusion or of misunderstanding as to the source, sponsorship, approval, or certification' of, among other things, a ‘loan or extension of credit.'” Gordon v. Rosenblum, 361 Or. 352, 367 (2017). In response, Defendants raise three arguments as to why Mr. Russell's UTPA claim fails. First, Defendants argue that the UTPA's substantive protections are not broad enough to govern the business practices of a debt collector whose conduct is unrelated to the original service rendered to the targeted debtor. Second, Defendants argue that, even if their business practices are subject to the UTPA, they never engaged in any conduct which would violate a consumer's rights under the UTPA. Finally, Defendants argue that, even if their businesses practices are subject to and violated the UTPA, those alleged violations are not actionable because the debtor here never suffered an ascertainable loss of money or property as a result of the alleged violations. The Court addresses each argument in turn.

         I. Or Rev. Stat. § 646.608(1)(b)

         Mr. Russell alleges that Defendants violated Or. Rev. Stat. § 646.608(1)(b) by causing a “likelihood of confusion or misunderstanding” as to the source, approval, or certification of fees which they added to his outstanding debt when garnishing his wages. FAC ¶ 50. Specifically, he argues that Defendants misrepresented that Or. Rev. Stat. § 18.999(4)(a)(H) authorized Defendants to recover an additional $45 attorney's fee, when, in fact, Defendants never “actually paid” an attorney to issue the garnishment. FAC ¶¶ 33-36, 50.

         Defendants argue that, regardless of whether they were authorized to recover an issuance fee under Or. Rev. Stat. § 18.999(4)(a)(H), the UTPA does not govern representations made by a debt collector about such fees. Defendants' argument is an attempt to reframe the issuance fee as the service, notwithstanding the underlying loan Mr. Russell obtained from Washington Mutual Bank.

         “Oregon's UTPA . . . was enacted as a comprehensive statute for the protection of consumers from unlawful trade practices.” Pearson v. Phillip Morris, Inc., 358 Or. 88, 115 (2015). Although the UTPA does not define “services, ” it limits the application of its protections to those services “obtained primarily for personal, family, or household purposes, ” including “loans and extensions of credit.” Id. (quoting Or. Rev. Stat. ยง 646.605(6)(a)). Defendants argue that the ...

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