A District Court judge in California has dismissed a Rosenthal Fair Debt Collection Practices Act claim against a healthcare provider accused of directing a collection agency’s efforts to recover a disputed medical debt, while allowing a state unfair competition claim built on federal billing transparency rules to move forward.
The background: Last year, the plaintiff made two ophthalmology visits to the defendant’s medical center, believing the services were covered by insurance, and later received bills exceeding $26,000.
- The plaintiff disputed the charges and requested validation, which he claims the provider never supplied. He also alleged the amount owed kept changing, which he said materially impaired his ability to respond intelligently to collection efforts.
- The provider allegedly sent escalating notices threatening to assign the account to a collection agency, which then attempted to collect the disputed balance.
- The plaintiff, representing himself, sued both defendants, asserting claims under the Fair Debt Collection Practices Act, the Rosenthal Act, California’s Unfair Competition Law, and for medical malpractice. Earlier this year, the judge dismissed the plaintiff’s Fair Credit Reporting Act claims with leave to amend.
- In its second motion to dismiss, the provider argued it is not a debt collector under the Rosenthal Act. The plaintiff argued the provider directed, controlled, and ratified the agency’s collection activity.
The ruling: Judge Haywood S. Gilliam, Jr. of the District Court for the Northern District of California granted the motion in part, dismissing the Rosenthal Act claim against the provider without leave to amend, but allowed the unfair competition claim to proceed.
- Judge Gilliam, who wrote that the plaintiff alleged no facts plausibly suggesting the provider regularly engages in collecting money as part of its ordinary course of business, found that issuing notices threatening assignment to an agency was not enough to make the provider a debt collector.
- The plaintiff’s alternative theory, that the provider and the agency operated as a single economic enterprise, fared no better. Unlike cases involving common ownership or a shared compliance officer, the plaintiff offered only conclusory assertions of control.
- Because the plaintiff was on his fourth amended complaint and had been warned this was likely his last chance to amend and that he should “plead his very best case,” the claim was dismissed for good.
- The unfair competition claim survived. The provider argued it could not be predicated on the No Surprises Act or the Hospital Price Transparency Rule because neither provides a private right of action, but the judge explained that another law must actually bar such a claim, not merely fail to allow it.
- Judge Gilliam also noted that the plaintiff’s opposition did not address the legal issues at all, focusing instead on “which party has engaged in more expansive and escalatory litigation tactics,” and observed there is nothing improper about a defendant moving to dismiss while also engaging in mediation.
