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Calif. App. Court (4th Dist) Reverses Dismissal, Holds Rosenthal Act Covers Debts ‘Alleged to be Due and Owing’

Rosenthal ActThe Court of Appeal of California (Fourth District) recently reversed a trial court’s dismissal of a putative class action alleging a solar energy system provider violated the Rosenthal Act, California’s parallel version of the federal Fair Debt Collection Practices Act.

In so ruling, the Fourth District concluded that the operative complaint stated a cause of action under the Rosenthal Act because the plaintiff properly alleged injury due to a “consumer credit transaction” that was “alleged to be due or owing”, and not simply debt that is in fact due or owing. 

A copy of the opinion in Hagey v. Solar Service Experts, LLC is available at:  Link to Opinion.

The plaintiff purchased a home with a solar energy system. At the time of the plaintiff’s purchase, the prior homeowner was under contract with a company (“defendant”) that owned the solar energy system. The contract between the defendant and prior homeowner required the prior homeowner to purchase energy produced by the system by submitting monthly payments to the company. The prior homeowner and the plaintiff agreed to prepayment of all remaining monthly payments and a transfer of all solar agreement rights and obligations to the plaintiff, except for the monthly payment responsibility.

In conjunction with the sale of the house, prepayment occurred, and the parties entered into a transfer of the contract. After the sale of the property, the defendant began sending the plaintiff monthly bills.

The defendant demanded the plaintiff make the monthly payments under the solar agreement. The plaintiff called the defendant and explained the situation. However, the plaintiff continued to receive additional bills and at least one late payment notice where the defendant identified itself as a debt collector. The plaintiff contacted the defendant via phone and email but was unable to resolve the issue.

Ultimately, the plaintiff filed a putative class action lawsuit against the defendant alleging the defendant’s conduct violated California’s Unfair Competition Law, Consumer Legal Remedies Act (CLRA) and the Rosenthal Act. The trial court dismissed the plaintiff’s complaint for failure to state a claim. The plaintiff appealed.

On appeal, the Court of Appeal noted that the issue presented on appeal hinged on the statutory interpretation of certain provisions of the Rosenthal Act. The plaintiff argued the trial court erred in concluding the operative complaint did not state a cause of action under the statutory scheme because the plaintiff failed to allege a consumer credit transaction, as that term is defined by statute.

In addition, the plaintiff contended the trial court overlooked a key aspect of the statutory definitions which encompassed debt alleged to be due or owing, not simply debt that is in fact due or owing.

The defendant argued that the trial court’s ruling was correct and the plaintiff did not acquire anything on credit and, therefore, was not party to a consumer credit transaction to which the statutory scheme applies.

In California, the Rosenthal Act aims “to prohibit debt collectors from engaging in unfair or deceptive acts or practices in the collection of consumer debts and to require debtors to act fairly in entering into and honoring such debts.” (§ 1788.1, subd. (b).) A “consumer debt” is defined to be “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.” (§ 1788.2, subd. (f).)  Additionally, it requires, “debt collector[s] collecting or attempting to collect a consumer debt” to comply with the provisions of its federal counterpart, the Fair Debt Collection Practices Act (FDCPA) (15 U.S.C. § 1692 et seq.). (§ 1788.17; Davidson, supra, 21 Cal.App.5th at p. 295.)

The Rosenthal Act also defines a debt collector as “any person who, in the ordinary course of business, regularly, on behalf of that person or others, engages in debt collection.” (§ 1788.2, subd. (c).) and a “consumer credit transaction” as “a transaction between a natural person and another person in which property, services, or money is acquired on credit by that natural person from the other person primarily for personal, family, or household purposes.” (§ 1788.2, subd. (e).

Under the Rosenthal Act, for a debt collection activity concerning money to be covered it must involve money due or owing, or alleged to be due or owing, by reason of a transaction in which property, services, or money is acquired on credit primarily for personal, family, or household purposes.

The Court of Appeal held that the allegations in the plaintiff’s complaint that the defendant sent the plaintiff bills and late payment notices about money which the defendant claimed the plaintiff owed satisfied the “alleged to be due or owing” component of the Rosenthal Act. It was undisputed that the plaintiff was not the individual who owed money to the defendant, but the Court of Appeal noted that this distinction did not mean that the plaintiff could not state a claim against the defendant under the Rosenthal Act.

Next, the Court of Appeal noted how services under the solar agreement were services covered under the Rosenthal Act because the services were acquired on credit primarily for personal, family, or household purposes and therefore constituted a consumer credit action. See Davidson v. Seterus, Inc. (2018) 21 Cal.App.5th 283, 294. The Court further noted that it was irrelevant that all money due under the solar agreement was already paid and irrelevant that the plaintiff was not a party to the solar agreement. The Court of Appeal clarified that their focus on appeal was what defendant’s debt collection practices said about the supposed debt, and how defendant alleged the debt was due owing under the solar agreement.

Accordingly, the Fourth District held that the plaintiff stated a cause of action under the Rosenthal Act, ordered the trial court’s judgment reversed with instructions for the trial court to vacate the judgment with instructions to enter a new order overruling the demurrer as to the plaintiff’s Rosenthal Act cause of action.

Photo: Steve Cukrov –

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Jake VanAusdall is Senior Counsel in the Nashville office of Maurice Wutscher LLP. He practices in the firm’s Consumer Credit Litigation and Commercial Litigation groups predominantly representing financial institutions. Jake also has substantial litigation experience representing clients involved in intellectual property, construction, contract, and business disputes. Jake has been recognized as a “Mid-South Super Lawyers – Rising Star” in the area of Business Litigation (2018-2022), and is a former member of the Tennessee John Marshall American Inn of Court. For more information, see

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