District Court (Cal.) Says CC&R Fines Not “Debts” Under FDCPA or Rosenthal Act

In Mlnarik v. Smith, Gardner, Slusky, Lazer, Pohren & Rogers, LLP, 2014 WL 6657747 (N.D.Cal. 2014), Judge Freeman held that finds incurred for violating restrictive covenants in an HOA’s CC&Rs was neither a consentual transaction to constitute a “debt” under the FDCPA nor a “consumer credit transaction” under the Rosenthal Act.

 Because the allegations in the FAC indicate that the underlying fines Defendants attempted to collect do not arise from a consensual transaction wherein the “money, property, insurance, or services” that are the subject of the transaction are “primarily for personal, family, or household purposes,” 15 U.S.C. § 1692a(5), nor are they unauthorized fees incidental to some other financial obligation that meets the definition of “debt” under the FDCPA, id. § 1692f(1), Plaintiffs have failed to allege a legally cognizable claim for collection activities in violation of the FDCPA. Defendants’ Motion to Dismiss is therefore GRANTED as to Plaintiffs’ FDCPA claim against SGSLPR. . . . Under the Rosenthal Act, Plaintiffs must plead facts demonstrating that Defendants were collecting or attempted to collect a consumer debt, i.e., “money, property or their equivalent, due or owing or alleged to be due or owing from a natural person by reason of a consumer credit transaction.” Cal. Civ.Code § 1788.2(a), (f). A consumer credit transaction, in turn, is “a transaction between a natural person and another person in which property, services or money is acquired on credit by that natural person from such other person primarily for personal, family, or household purposes.” Id. § 1788.2(e) (emphasis added). ¶ Plaintiffs argue that “[g]iven the trend toward treating HOA collections as consumer debt under the FDCPA, HOA collections ought to qualify as consumer debt under the Rosenthal Act.” Pl.’s Opp. 9. As discussed above, the fines alleged in the FAC are not “debts” within the protection of the FDCPA. Therefore, Plaintiffs’ Rosenthal Act claims fail as well. Moreover, as the Court noted in its prior order, Plaintiffs in their previous complaint did not allege the acquisition of services “on credit” from DCHA sufficient to satisfy the Rosenthal Act, and that has not changed in the FAC. See Order at 7–8. As such, Plaintiffs have failed to allege facts indicating that the subject fines arose from a transaction wherein they “acquire[d] something without paying for it.” Gouskos v. Aptos Village Garage, Inc., 94 Cal.App. 4th 754, 759 (2001). Plaintiffs have thus failed to state a legally cognizable claim under the Rosenthal Act, and Defendants’ Motion to Dismiss is GRANTED as to that claim.