A District Court judge in California has denied a defendant’s motion for summary judgment in a Fair Debt Collection Practices Act case on the grounds that there are genuine disputes of material fact regarding the enforceability of a lease termination clause and whether the collection activity was misleading or unfair under the FDCPA.
The background: The plaintiffs leased an apartment and signed an agreement that included prorated rent concessions and a clause outlining termination fees. Before the lease expired, the plaintiffs met with the property manager to discuss vacating early due to job-related relocation. They claim they were told no fees would apply and that their rent was paid in full. They signed a notice of intent to vacate, allegedly leaving the move-out date blank.
- After they vacated the apartment in August 2021, the landlord charged a lease termination fee, a charge-back of the rent concession, and additional rent.
- The debt was later placed with the defendant, which attempted to collect the debt, prompting the plaintiffs to file suit under the FDCPA, Regulation F, and California’s Rosenthal Fair Debt Collection Practices Act.
- The plaintiffs alleged that the defendant’s attempts to collect the fees constituted a violation of the FDCPA, Reg F, and the Rosenthal FDCPA.
- The defendant countered that it did not meet the definition of “debt collector” under the FDCPA even though it did include disclosures in its communications with the plaintiffs.
The ruling: The court found that factual disputes about the lease termination process, verbal assurances allegedly made by the property manager, and whether the plaintiffs owed the debt prevented summary judgment in favor of the defendant.
The key issues raised by Judge Kirk E. Sherriff of the District Court for the Eastern District of California include:
- Whether the defendant qualifies as a “debt collector” under the FDCPA, which Judge Sherriff ruled it does.
- Whether the lease termination clause is unconscionable. Judge Sherriff found that it is, if interpreted to require payment of both a termination fee and rent for the remainder of the lease term.
- Whether the defendant’s conduct violated the FDCPA by attempting to collect on a debt not owed or mischaracterized.
- The judge cited the defendant’s own communications, such as collection letters and phone calls while the debt was in dispute, and noted that it has been involved in similar litigation before. Judge Sherriff also emphasized that “[a]ny agreement or understanding that may have been reached regarding the reason for leaving the move-out date on the notice of intent to vacate form blank is also in dispute.”
- Judge Sherriff severed the unconscionable portion of the lease and will allow the case to proceed to trial.
