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Mashiri v. Grinnell

United States Court of Appeals, Ninth Circuit

January 13, 2017

Zakia Mashiri, Plaintiff-Appellant,
v.
Epsten Grinnell & Howell; Debora M. Zumwalt; Does 1-25, Defendants-Appellees.

          Argued and Submitted October 4, 2016 Pasadena, California

         Appeal from the United States District Court for the Southern District of California D.C. No. 3:14-cv-00839-JLS-RBB Janis L. Sammartino, District Judge, Presiding

          Asil Marhiri (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.

         SUMMARY[**]

         Fair Debt Collection Practices Act

         The panel reversed the district court's dismissal for failure to state a claim of an action under the Fair Debt Collection Practices Act.

         The plaintiff alleged that the defendant sent her a debt collection letter demanding payment of an assessment fee from her homeowners' association. The panel held that the plaintiff stated plausible claims for relief because the collection letter contained language that overshadowed and conflicted with her FDCPA debt validation rights under 15 U.S.C. § 1692g when reviewed under the "least sophisticated debtor" standard.

         The panel rejected the defendant's argument that in sending the collection letter, it merely sought to perfect a security interest and was therefore subject only to the limitations in 15 U.S.C. § 1692f(6).

          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 ...

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