In Martinez v. CACH, LLC, 2011 WL 2560251 (S.D.Cal. 2011), Judge Sabraw rejected a debt collector’s Rooker-Feldman argument.  Further, Judge Sabraw rejected the argument that a Rule 68 offer mooted the class-action proceedings because the net worth requirement of a class-action under the FDCPA was not met due to alter ego allegations. 


Plaintiff is alleged to have incurred debt to Bank of America, N.A. sometime prior to December 2009. The debt was subsequently assigned or transferred to CACH for collection. On December 8, 2009, CACH filed a Com-plaint against Plaintiff in San Diego Superior Court in an effort to collect the outstanding debt.  In that Complaint, CACH claimed a right to 24.50 percent annual fixed interest rate on the alleged debt. Plaintiff alleges CACH violated the Fair Debt Collection Practices Act and the Rosenthal Fair Debt Collection Practices Act when, as a custom and practice, it sued him and other similarly situated individuals for excessive interest rates it did not have a legal right to collect under statute or contract.


Judge Sabraw found no Rooker-Feldman defense.


The Court agrees with Plaintiff that the Rooker–Feldman doctrine does not deprive it of subject matter jurisdiction over the entire action at this stage in the proceedings. Plaintiff is not seeking a de facto appeal of the state court judgments obtained by CACH against certain members of the putative class. Rather, Plaintiff claims CACH became liable under the FDCPA and the Rosenthal Act immediately upon filing of the state court complaints against Plaintiff and the putative class members and that any judgments obtained by CACH against members of the putative class will remain undisturbed by this action. Plaintiff’s claims in the present action are therefore not inextricably intertwined with any potential underlying state court judgments of putative class members. See Reusser v. Wachovia Bank, N.A., 525 F.3d 855, 859 (9th Cir.2008) (“A federal action con-stitutes such a de facto appeal where claims raised in the federal court action are inextricably intertwined with the state court’s decision such that the adjudication of the federal claims would undercut the state ruling or require the district court to interpret the application of state laws or procedural rules.” (citation and quotations omitted)). Furthermore, CACH claims Plaintiff is asking “this Court to question the validity of state court judgments to the extent that those judgments are purportedly based on an improper interest rate,” but fails to identify or provide any information as to any such judgment entered against Plaintiff or any member of the putative class. (Reply at 7.) Accordingly, this Court is not prevented from exercising subject matter jurisdiction over this action under the Rooker–Feldman doctrine. For the forego-ing reasons, Defendant’s motion to dismiss the FAC pursuant to Rule 12(b)(1) is denied in its entirety.


Further Judge Sabraw found no mootness as result of the Rule 68 offer.  The debt collector had made an offer that would allow judgment to be taken against it in favor of Plaintiff in the amount of $2,100.00 and in favor of the putative class in the amount of $500.00, both together with reasonable fees and costs. The debt collector argued that the Court lacked subject matter jurisdiction over this action because the offer of judgment offered Plaintiff and the putative class all the relief they could possibly obtain in this action and was not accepted. According to the debt collector, the offer of $2,100 .00 to Plaintiff exceeds the statutory damages he is individually entitled to under the FDCPA and the Rosenthal Act, and the offer of $500.00 to the putative class exceeds one percent of the debt collector’s net worth, which it asserted was presently negative. The debt collecter claimed that Plaintiff’s failure to accept the offer rendered the action moot and deprived the Court of jurisdiction over the action due to the lack of a present case or controversy.  The Court disagreed because Plaintiff alleged that the debt collector fraudulently transferred assets to its alter ego, SquareTwo Financial Commercial Funding Corporation (“SquareTwo”), for the purpose of making its net worth zero in order to avoid liability for damages in the present action and other similar actions. The Court found that Plaintiff failed to properly plead actual or constructive fraudulent transfer between entities, but found that Plaintiff had properly pleaded an alter-ego theory.  Accordingly, the Court denied the Motion to Dismiss on the basis that the net-worth of the alter-ego plausibly exceeded the net worth of the Rule 68 offer and, accordingly, the Rule 68 offer did not moot the proceedings.