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Date: 11-19-2017

Case Style:

Patricia Arellano v. Clark County Collection Service, LLC; Borg Law Group, LLC

Ninth Circuit Court of Appeals Courthouse - San Francisco, California

Case Number: 16-15467

Judge: Sidney R. Thomas

Court: United States Court of Appeals for the Ninth Circuit (Clark County)

Plaintiff's Attorney: Deepak Gupta, Richard Rubin and Neil K. Sawhney

Defendant's Attorney: Patrick J. Reilly

Description: Can a debt collector avoid liability under the Federal Fair
Debt Collection Practices Act by obtaining the debtor’s
lawsuit through a writ of execution? We conclude that such
a procedure frustrates the Act’s purpose and is thus


Patricia Arellano was overdue on a small amount of
medical debt—$371.89 to be precise. A private collection
agency, Clark County Collection Services, sent her a letter
about it. Included with the letter was a summons and state
justice court complaint seeking collection of the debt. The
complaint itself stated that Arellano could “[d]ispute the
validity of this debt” within 30 days, but that failing to do so
would result in a presumption of validity. However,
separately, in small print, the summons indicated that to
defend the lawsuit, Arellano must file a formal written
response with the court within 20 days.

Arellano did not file a response, and the collection agency
obtained a default judgment against her in justice court for
$793.39. The debt had doubled in the intervening month
because it now included costs, pre-judgment interest, and
attorney fees.

Subsequently, Arellano filed suit against the collection
agency and its law firm under the Fair Debt Collection
Practices Act (“FDCPA” or “the Act”), 15 U.S.C. § 1692 et
seq. She claimed that they had engaged in misleading


practices under 15 U.S.C. § 1692e(1) by stating that the
debtor could dispute the debt within 30 days of receipt, when
the actual summons required the filing of an answer in court
within 20 days. She further alleged that Clark County
Collection Services’ name impermissibly implied affiliation
with the Clark County government, violating 15 U.S.C.
§ 1692e(1).

The collection agency countered with a bold gambit.
Armed with its default judgment, it requested the justice court
to issue a writ of execution against Arellano in the amount of
$826.72, an increased amount reflecting additional costs.
Like most states, Nevada allows courts to authorize a sheriff
to levy on the property of a judgment debtor to satisfy a
judgment. Butwinick v. Hepner, 291 P.3d 119, 121 (Nev.
2012). With some exceptions not relevant here, the property
subject to a writ of execution in Nevada includes a “right to
bring an action to recover a debt, money, or thing.” Gallegos
v. Malco Enters. of Nev., 255 P.3d 1287, 1289 (Nev. 2011)
(quoting Black’s Law Dictionary 1617, 275 (9th ed. 2009)).

Thus, the collection agency’s strategy in seeking the writ
was not to obtain personal property to satisfy the judgment,
but to acquire the rights to Arelleno’s FDCPA lawsuit against
the agency so it could have it dismissed.

The justice court granted the writ, which directed the
Clark County Sheriff “to satisfy this judgment with interest
and costs as provided by law, out of the personal property of
the judgment debtor.” The writ described the targeted
property as all “claims for relief, causes of action, things in
action, and choses in action in any lawsuit pending in Nevada
including, the rights of Patricia Arellano, in the civil action”
pending against the collection agency and its lawyers.


Thereafter, pursuant to the writ of execution, the sheriff
sold Arellano’s lawsuit in an auction sale on the Clark County
courthouse steps. Clark County Collection Services bought
the claims against itself for $250.

After buying Arellano’s lawsuit, the collection agency
moved in federal district court to dismiss the lawsuit, arguing
that Arellano “no longer possesse[d] any rights of action in
this case, and no longer possesse[d] any standing to sue.”
The district court dismissed Arellano’s cause of action.


State law can be preempted in three circumstances
pursuant to the Supremacy Clause, U.S. Const., Art. VI, cl. 2.
English v. Gen. Elec. Co., 496 U.S. 723, 78 (1990). Only the
third circumstance is relevant here: “state law is pre-empted
to the extent that it actually conflicts with federal law.” Id. at
79. This conflict occurs when “the operation of state law
‘stands as an obstacle to the accomplishment and execution
of the full purposes and objectives of Congress,’” In re
Cybernetic Servs., Inc., 252 F.3d 1039, 1045–46 (9th Cir.
2001) (quoting Kewanee Oil Co. v. Bicron Corp., 416 U.S.
470, 479 (1974)), or when it “interferes with the methods by
which the federal statute was designed to reach [its] goal,”
Int’l Paper Co. v. Ouellette, 497 U.S. 481, 494 (1987). In
other words, state law is preempted when “under the
circumstances of the particular case,” it stands as an obstacle
to Congressional purpose “—whether that ‘obstacle’ goes by
the name of ‘conflicting; contrary to; repugnance; difference;
irreconcilability; inconsistency; violation; curtailment;
interference,’ or the like.” Geier v. Am. Honda Motor Co.,
529 U.S. 861, 873 (2000) (alterations omitted) (quoting Hines
v. Davidowitz, 312 U.S. 52, 67 (1941)).


Federalism requires that we assume federal law was not
intended to supersede the states’ historic police powers
“unless that was the clear and manifest purpose of Congress.”
CTS Corp. v. Waldburger, 134 S. Ct. 2175, 2188 (2014).

Although we read even express preemption provisions
narrowly, a state cannot avoid compliance with a federal
regime “merely by relying upon a connection to an area of
traditional state regulation.” Wos v. E.M.A., 568 U.S. 627,
1400 (2013).1


“[T]he purpose of Congress is the ultimate touchstone in
every pre-emption case.” Altria Grp., Inc. v. Good, 555 U.S.
70, 76 (2008) (citing Medtronic, Inc. v. Lohr, 518 U.S. 470,
485 (1996)). “The FDCPA was enacted as a broad remedial
statute designed to ‘eliminate abusive debt collection
practices by debt collectors, to insure that those debt
collectors who refrain from using abusive debt collection
practices are not competitively disadvantaged, and to promote
consistent State action to protect consumers against debt
collection abuses.’” Gonzales v. Arrow Fin. Servs., LLC,

1 In Boggs v. Boggs, 520 U.S. 833 (1997), the Supreme Court
analyzed the intersection of the Employee Retirement Income Security
Act of 1974 (“ERISA”) and Louisiana’s community property law. That
case illustrates both the potential for narrow preemption as well as the
primacy of federal law even in areas of traditional state regulation.
Simply finding a conflict between the two legal regimes was sufficient to
resolve the case in favor of preemption. Id. at 841. But, of course,
preemption only applied insofar as the community property law elevated
a descendant’s property interest over an ERISA plan participant’s interest
in a way that was incongruous with Congress’s intention to preserve the
economic security of a surviving spouse. See id. at 843–44. In the same
way, preemption in this case applies only to Nevada’s claim execution law
insofar as it permits debt collectors to execute on FDCPA claims.


660 F.3d 1055, 1060 (9th Cir. 2011) (quoting 15 U.S.C.
§ 1692(e)). The Act’s purpose is “to protect vulnerable and
unsophisticated debtors from abuse, harassment, and
deceptive debt collection practices.” Guerrero v. RJM
Acquisitions, LLC, 499 F.3d 926, 938 (9th Cir. 2007) (citing
S. Rep. 95–389, at 2, 4 (1977), as reprinted in 1977
U.S.C.C.A.N. 1695, 1696, 1699). And the “FDCPA protects
all consumers, the gullible as well as the shrewd . . . the
ignorant, the unthinking and the credulous.” Clark v. Capital
Credit & Collection Servs., Inc., 460 F.3d 1162, 1171 (9th
Cir. 2006) (quoting Clomon v. Jackson, 988 F.2d 1314,
1318–19 (2d Cir. 1993)).

In order to achieve these goals, the Act regulates
communication between debt collectors and debtors,
15 U.S.C. §§ 1692b, c, g, and creates a federal cause of action
for debtors under 15 U.S.C. § 1692k. Debt collectors may be
subject to civil liability for engaging in harassment or abuse,
15 U.S.C. § 1692d, making false or misleading
representations of various sorts, 15 U.S.C. §§ 1692e, j, or
engaging in unfair practices while attempting to collect debt,
15 U.S.C. § 1692f. The FDCPA also includes an express
preemption and savings clause:

This subchapter does not annul, alter, or
affect, or exempt any person subject to the
provisions of this subchapter from complying
with the laws of any State with respect to debt
collection practices, except to the extent that
those laws are inconsistent with any provision
of this subchapter, and then only to the extent
of the inconsistency. For purposes of this
section, a State law is not inconsistent with
this subchapter if the protection such law
affords any consumer is greater than the
protection provided by this subchapter.
15 U.S.C. § 1692n.

To enforce the FDCPA, Congress chose “a private
attorney general approach.” Camacho v. Bridgeport Fin.,
Inc., 523 F.3d 973, 978 (9th Cir. 2008) (citing Tolentino v.
Friedman, 46 F.3d 645, 651 (7th Cir. 1995)); see also
Graziano v. Harrison, 950 F.2d 107, 113 (3d Cir. 1991)
(noting that it was “Congress’s intent that the Act should be
enforced by debtors acting as private attorneys general.”).
“Prevailing plaintiffs . . . are entitled to actual damages,
statutory damages, and attorney’s fees and costs.” Gonzales,
660 F.3d at 1061 (citing 15 U.S.C. § 1692k(a)).


The collection agency argues that because the FDCPA
does not speak directly to the execution of claims, there can
be no federal preemption. This argument denies the existence
of conflict preemption. “And conflict preemption . . . turns
on the identification of ‘actual conflict,’ and not on an
express statement of pre-emptive intent.” Geier, 529 U.S. at
884. Indeed, “the Court has never before required a specific,
formal agency statement identifying conflict in order to
conclude that such a conflict in fact exists.” Id.

Where the Act “itself does not speak directly to the issue,
the Court must be guided by the goals and policies of the Act
in determining whether it in fact pre-empts an action based on
the law of an affected State.” Int’l Paper Co., 479 U.S. at
493. Just as in International Paper Co., the federal law in
question directly regulates the substantive law at issue (debt


collection practices) and specifically empowers debtors to
bring suit against debt collectors. 15 U.S.C. § 1692i; see Int’l
Paper Co., 479 U.S. at 495 (holding that Vermont nuisance
law was preempted to the extent that it conflicted with water
pollution standards set forth in the Clean Water Act). And
while the Act itself need not “speak directly to the issue,”
Int’l Paper Co., 479 U.S. at 493, the FDCPA does expressly
preempt state laws “to the extent that those laws are
inconsistent with any provision of this subchapter, and then
only to the extent of the inconsistency,” 15 U.S.C. § 1692n.

In addition to evading liability and preventing Arellano
from pursuing her potential federal claims, the collection
agency has literally used the execution mechanism to collect
debt from Arellano, and argues that she “has received the
benefit of [the $250] reduction in her judgment.” But a debt
collector cannot be allowed to use state law strategically to
execute on a debtor’s FDCPA claims against it under the
guise of legitimate debt collection. Though the FDCPA does
preserve debt collectors’ rights to collect what they are owed,
the Act does not “authorize the bringing of legal actions by
debt collectors.” See 15 U.S.C. § 1692i(b). Debt collectors
cannot evade the restrictions of the Act by forcing a debtor’s
claims to be auctioned, acquiring the claims, and dismissing
them. To allow otherwise would thwart enforcement of
the FDCPA and undermine its purpose. See 15 U.S.C.
§§ 1692k, l.


Resolving this case does not require any additional or
supplemental rule beyond the text of the Act. A state remedy
of execution cannot be used for the purpose of avoiding the
impact of federal law. Therefore, we reverse the district


court, and remand for proceedings consistent with this
opinion, holding that federal law preempts a private party’s
use of state execution procedures to acquire and destroy a
debtor’s FDCPA claims against it. We need not, and do not,
reach any other issue urged by the parties.


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