New Levy Forms – September 1, 2020

By Tony Klein

On September 1, 2020 a new series of levy forms were mandated to comply with Senate Bill 616 (SB 616).  The bill amended and added code sections designed to provide an automatic exemption for a debtor whose bank account was levied without them having to file a claim of exemption form. It also extends the time for a debtor to file a claim.

The statutes mandate a new writ of execution and notice of levy form.

Writ of Execution

The most significant change to the form was adding a mandated designation that the judgment was for “wages owed”, “child or spousal support”, or “other” on line 22. This will probably be the most common mistake in filling out this new form because it appears out of immediate view on the upper third portion of page 2.

The new law amended CCP § 699.520 adding to the list of which items of information must be on a writ of execution.  Bolded and underlined below is what was added:

CCP § 699.520. The writ of execution shall require the levying officer to whom it is directed to enforce the money judgment and shall include the following information:
(a) The date of issuance of the writ.
(b) The title of the court in which the judgment is entered and the cause and number of the action.
(c) Whether the judgment is for wages owed, child support, or spousal support. This paragraph shall become operative on September 1, 2020.
(d) The name and address of the judgment creditor and the name and last known address of the judgment debtor. If the judgment debtor is other than a natural person, the type of legal entity shall be stated.
(e) The date of the entry of the judgment and of any subsequent renewals and where entered in the records of the court.
(f) The total amount of the money judgment as entered or renewed, together with costs thereafter added to the judgment pursuant to Section 685.090 and the accrued interest on the judgment from the date of entry or renewal of the judgment to the date of issuance of the writ, reduced by any partial satisfactions and by any amounts no longer enforceable.
(g) The amount required to satisfy the money judgment on the date the writ is issued.
(h) The amount of interest accruing daily on the principal amount of the judgment from the date the writ is issued.
(i) Whether any person has requested notice of sale under the judgment and, if so, the name and mailing address of that person.
(j) The sum of the fees and costs added to the judgment pursuant to Section 6103.5 or Article 6 (commencing with Section 68630) of Chapter 2 of Title 8 of the Government Code, and which is in addition to the amount owing to the judgment creditor on the judgment.
(k) Whether the writ of execution includes any additional names of the judgment debtor pursuant to an affidavit of identity, as defined in Section 680.135.
(l) A statement indicating whether the case is limited or unlimited.

California Rule of Court Rule 1.42(9) states that a court must not reject a form if “[t]he form is not the latest version of the form adopted or approved by the Judicial Council.” When this rule was adopted, the Judicial Council report further explained that if the form is otherwise legally sufficient, the obsolete form may be used.

Writs are not filed; they are presented to the court to be issued.  Certainly, the calculations of the judgment amount, interest, credits, etc. do not change and have not been affected by the new law, but the law amends CCP 699.520(c) requiring that designation be on the writ. The question is, therefore, does that make the prior writ form now “legally insufficient” if it was issued by a court prior to September 1, 2020?

Because this writ form is an “Approved” and not  “Mandatory”, an easy add-on statement designating the type of judgment could be included to comply with the spirit of the law.  This could be a solution for creditors who have had validly writs issued during the prior 180 days wondering if they need to return the old writ and pay the court $40.00 to issue another on the current form. On the other hand, it may require a return to the court to have the clerk initial the “change” or “alternation” to the issued writ by attaching the designation.

Notice of Levy 

There are significant changes to the form. In addition to the judgment designation, it further explains the automatic exemption and extensively describes the deadlines and the claim process.

This is also an “Approved” and not a “Mandated” form, but it would be impracticable to use the old form for current levies. 

Exemption from the Enforcement of Judgments

The form has been revised, updating federal and state law citations, adding FEMA funds, benefit funds, a hardship exemption, etc.

Current Dollar Amount Exempt from the Enforcement of Judgments

This form adds reference the U.S.C. bankruptcy law and the automatic exemption by statute. This form changes triennially on April 1, and now will have to be changed annually because the automatic exemption dollar amount changes on July 1 each year.

Levies on Multiple Deposit Accounts

There are a series of forms that are new for the creditor or debtor to file a motion when a levy is made and it involves money in multiple bank accounts.

Amount of Automatic Exemption

The original automatic exemption amount contemplated when SB 616 was introduced was $2000. The final chaptered version referenced the automatic exemption in new CCP 704.520 which automatically increases yearly on July 1.   Bolded and underlined below is where it is

CCP § 704.220.
 (a) Money in the judgment debtor’s deposit account in an amount equal to or less than the minimum basic standard of adequate care for a family of four for Region 1, established by Section 11452 of the Welfare and Institutions Code and as annually adjusted by the State Department of Social Services pursuant to Section 11453 of the Welfare and Institutions Code, is exempt without making a claim.
(Emphasis added.)

I spent 45 minutes on the State Department of Social Services’ website in June looking for this amount and found it on a chart.  The amount was $1724.

I checked again in late August and took another 15 minutes looking and couldn’t find it.  I did find it on another non-governmental website. As of this writing, September 2, 2020, the total amount is $1788.  This amount adjusts each year on July 1.

Sheriff Policies

It is unknown how each sheriff will handle these changes.

The CALSPro Legislative Committee are calling the sheriffs across the state to find out what their policies are regarding the new forms, and the change in the laws, and whether they will open a file with a writ that was issued on the old form.

The consensus is developing that if the files were opened and pending prior to September 1, 2020 the sheriff will continue the levy. There is no consensus as to what will happen if the file is opened with a writ that was issued before September 1, 2020.

Certainly, the new notice of levy should be used. The older form does not comply with the new law.


The 79-page Judicial Council Report of May 15, 2020 that created the new forms can be found here:

The proposed “Writ of Execution form” can be viewed on page 16.

The current forms can be found here under Latest Changes, and scroll down to the Forms Approved 5/28/2020, Effective on 9/1/2020 > Enforcement of Judgement link.

New Policy for 3-Day Notice Services Update

Today the California Judicial Council revised its website posting in the Self Help section and removed the statement about service being complete ten days after mailing of a subserved or posted 3-day notice to pay rent or quit.

Presumably, they will be sending this to the courts statewide.

At least one court, Contra Costa Superior Court, is no longer following that directive.

How to Give Notice

You have to serve the notice on the tenant properly. You can do it yourself, or you can ask a friend to do it. You can also hire a process server. The person who serves the notice must be at least 18 years old.

There are 3 ways to serve the notice:

Personal service: You or someone else gives the notice directly to the tenant in person.

Substituted service: If the tenant is not home, you can leave the notice with a member of the household, at least 18 years old, where the tenant lives AND then mail a second copy to the tenant at the property. With substituted service, the notice is considered served the day of mailing of the second copy, and you start counting the notice period the day after mailing.

Posting and mailing (“nail and mail”) service: If there is no one home to leave the papers with, you can tape or nail the notice to the front door or somewhere where it can be seen easily AND send a copy by mail to the tenant at the property. With this type of service, the notice is considered served the day of mailing of the second copy, and you start counting the notice period the day after mailing.

You can see it here:

New Policy for 3-Day Notice Services?

Note: See 2/27/20 Update here:

There is a new interpretation changing the effective service date when deemed complete after a 3-day notice is subserved or posted. It may be finding its way to a court near you.

The California Judicial Council has apparently sent all California courts a new directive about extending that date by 10 days. This directive, which is morphing into policy, is posted on the Judicial Council’s website here:

This new policy is beginning to be adopted by courts in the bay area. Highlighted are the parts that add 10 days to a subserved or posted notice. The courts that are adopting this policy will not allow the unlawful detainer case to be filed unless the service is complete.

It is not uncommon for the Judicial Council to write directives for self-represented litigants in their “Self-Help” pages. They cover several legal topics. They create forms explaining procedural requirements, such as a small claims form entitled How to Serve a Business or Public Entity (which is reasonably accurate), and how to fill out a proof of service. There are several family law topics that are posted on their website.

But this explanation on how to serve a 3-day notice is flawed in so many ways.

The issue of when service is deemed complete after subserving or posting a notice has been to the appellate courts on several occasions in the past 70+ years. The issue has mainly focused on whether the mailing should be extended 5 days, similar to the extensions for mailing a notice to an opposing party in litigation under CCP sec. 1013. That issue has been repeatedly rejected for the service of a 3-day notice, noting that the 3-day notice is a pre-litigation document, the unlawful detainer action is a summary proceeding where time is of the essence, and that service must be made that strictly complies with the requirements in Unlawful Detainer Act.

It has NEVER been 10 days.  It is for service of a summons, but never a 3-day notice.

Furthermore, not only are courts following this. Pro per or pro se litigants or non-professional process servers will also be reading this.  Note, for instance, the phrase “nail and mail”. Although the description is a colloquial term, some might read it literally. Just think what a nail might do to a $10,000 door.

The law governing service on 3-day notices is found in CCP sec. 1162

CCP section 1162.  

(a) Except as provided in subdivision (b), the notices required by Sections 1161 and 1161a may be served by any of the following methods:
(1) By delivering a copy to the tenant personally.
(2) If he or she is absent from his or her place of residence, and from his or her usual place of business, by leaving a copy with some person of suitable age and discretion at either place, and sending a copy through the mail addressed to the tenant at his or her place of residence.
(3) If such place of residence and business cannot be ascertained, or a person of suitable age or discretion there can not be found, then by affixing a copy in a conspicuous place on the property, and also delivering a copy to a person there residing, if such person can be found; and also sending a copy through the mail addressed to the tenant at the place where the property is situated. Service upon a subtenant may be made in the same manner.
(b) The notices required by Section 1161 may be served upon a commercial tenant by any of the following methods:
(1) By delivering a copy to the tenant personally.
(2) If he or she is absent from the commercial rental property, by leaving a copy with some person of suitable age and discretion at the property, and sending a copy through the mail addressed to the tenant at the address where the property is situated.
(3) If, at the time of attempted service, a person of suitable age or discretion is not found at the rental property through the exercise of reasonable diligence, then by affixing a copy in a conspicuous place on the property, and also sending a copy through the mail addressed to the tenant at the address where the property is situated. Service upon a subtenant may be made in the same manner.
(c) For purposes of subdivision (b), “commercial tenant” means a person or entity that hires any real property in this state that is not a dwelling unit, as defined in subdivision (c) of Section 1940 of the Civil Code, or a mobilehome, as defined in Section 798.3 of the Civil Code.(Amended by Stats. 2010, Ch. 144, Sec. 1. (AB 1263) Effective January 1, 2011.)
  • CCP section 1162 says that the posting may be made “by affixing a copy in a conspicuous place on the property” – it does not have to be on the door. It could also be posted on a locked metal gate preventing access to the door, or a window close to the entryway, or on a wooden stake, sunk into the ground, 1/4 mile from the house on a farm.  All of those are conspicuous places on the property. Also, the tape is fine, but a nail could damage the door – bad advice if read literally.  
  • The directive doesn’t mention that you must also attempt service at a known business before you can resort to subservice on a person or by posting the notice.
  • The notice does not need to be served on someone 18 or older – the statute stated that it may be served on a person of “suitable age and discretion.” If no person of “suitable age and discretion” can be found, any “resident” may be served. That could mean a 10-year-old, alone, at home from school. 
  • The mailing is to be made to the tenant at the residence, not the subject property unless it is a commercial tenant.

Finally, the directive adds a phantom 10 days to the mailing of the notice yet fails to mention that the September 1, 2019 law that changed the time calculation for service because it cannot include a weekend or holiday. (See CCP sec. 1161(2))

We’ll see how many courts adopt this. It will make for a bumpy ride for lawyers filing unlawful detainer cases in different counties. Process servers may be affected by this too.

Changes Are Coming to Process Serving Businesses in California

This article intends to provide a historical context of the changes to the legal definition of an independent contractor for process serving agencies and process servers and the impact of AB5

At the time of writing this, several large process serving agencies are warning independent contractor process servers that they will only contract with those who incorporate and will no longer continue business relationships with individuals operating otherwise. Whether you are a process server, or a process serving agency owner, you should start planning.

Each process server and process serving agency should consult with a lawyer and accountant and decide whether to change their business structure, convert servers to employees, or continue to contract with independent contractors. Each company need to evaluate that which is best suited for their unique situation. This law is new, and there will be considerable risks and costs associated with the decisions made about this issue. Solutions suggested in this article may not be appropriate in each circumstance.

What AB5 Does

Assembly Bill 5 (AB5) was signed by Governor Newsom and amends and adds California Labor Code §§ 3351 and 2750.3 and Unemployment Insurance Code §§ 606.5 and 621.  It codified the holding in  Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) 4 Cal.5th 903 (Dynamex). It creates a presumption that a worker who performs services for a hirer is an employee for purposes of claims for wages and benefits arising under wage orders issued by the Industrial Welfare Commission. In essence, the laws redefine an independent contractor in California.

By amending the California Labor and Unemployment Insurance Codes, it expands the application of Dynamex, which was based on a wage-order claim, and applies it to all workers.

Borello Decision

The seminal case defining independent contractor status of a worker, prior to Dynamex, was set forth in S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341 (Borello). That decision instituted a multi-factor test, and opined, inter alia, that a worker is an independent contractor who is free from the control and direction of the hiring entity in connection with the performance of the work,

Process Server Industry Specific Tax Regulation

In 1995, after several tax audits had targeted process serving agencies, the California Employment Development Department (EDD) promulgated an industry-specific tax regulation for the process serving industry. It recognized, with significant CAPPS’ input, that process serving agencies customarily operated using individual process servers as independent contractors.  The regulation considered 15 factors and assigned a certain weight to each, evidencing whether the worker would be considered an employee or an independent contractor. (Title 22, CPR. Section 4304-11

The tax regulation tracked the specifically unique features of the process serving business in light of the holding in Borello. The legal status of this specific tax regulation is unknown at this point because Dynamex rejected the Borello decision for a more worker-friendly standard. This regulation is no longer a guide for process serving agencies and individual process servers.  It may offer a reliance defense if Dynamex is deemed to be applied retroactively.

The Dynamex Decision

The Dynamex decision redefined an independent contractor with what is referred to as the three-pronged “ABC Test”.

  1. The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
  2. that the worker performs work that is outside the usual course of the hiring entity’s business; and
  3. that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed

The hirer, the contracting entity, is obligated to show, based on these three factors, that the worker was not an employee but a bone fide independent contractor.

Part B of this “ABC Test” is the most difficult hurdle for a process serving agency because an individual independent contractor process server, heretofore allowed under Borello and the aforementioned tax regulation, would now not be performing work “outside the usual course of the hiring entity’s business.” They will now be presumed to be an employee.


In May 2019, the U.S. Court of Appeals, Ninth Circuit ruled that Dynamex should be applied retroactively. (Vazquez v. Jan-Pro Franchising Int’l, Inc., 923 F.3d 575, 586-90 (9th Cir. 2019)) However, in July the court suspended its decision, granted the defendant’s petition for rehearing, and certified the question of retroactivity to the California Supreme Court to decide the question.

The California Supreme Court is currently considering that issue which was not addressed in the 2018 Dynamex decision. You can view the progress of that case here.

Legislation – AB5

 There was a cluster of State Senate and Assembly bills introduced to overturn or alternatively, codify Dynamex. AB5 was the bill that ultimately prevailed.

 The law codified Dynamex and created exemptions for over fifty professions and types of businesses which allowed operation under the previous Borello decision.   These exempt occupations would include, among others, licensed insurance agents, certain licensed health care professionals, registered securities broker-dealers or investment advisers, direct sales salespersons, private investigators, real estate licensees, commercial fishermen, workers providing licensed barber or cosmetology services, and others performing work under a contract for professional services, with another business entity, or pursuant to a subcontract in the construction industry.

Since the process serving industry did not receive a specific exemption, they are affected by the new law which changed the definition of an independent contractor. This also affects other businesses that operate in California and use independent contractors such as UBER, LYFT, the construction industry, etc.

This legislation is also a reaction to a changing reality of the workforce.   In 2017, a report from the U.S. Bureau of Labor Statistics estimated that nationally, 35 percent of workers participate in some form in the “gig economy.” 

This will have an enormous impact on the California economy. Businesses might just leave California to avoid it. Those that stay will be paying more in taxes. Workers will lose the flexibility to set their own hours and control when and how they work.  

On the other hand, workers will be protected from work-related injuries, and the worker and the state will not be subsidizing uncovered medical costs. Furthermore, the state and local governments will be receiving more tax money.

The law also authorizes the California Attorney city attorneys and local prosecutors to sue companies for non-compliance. That might be bad news for offending businesses because enforcement may originate locally.

Business to Business Exemption

The law also provides an exemption for business to business contracting relationships and sets forth specific guidelines. Those are codified in new Labor Code § 2750.3(e):

(e) Subdivision (a) and the holding in Dynamex do not apply to a bona fide business-to-business contracting relationship, as defined below, under the following conditions:

(1) If a business entity formed as a sole proprietorship, partnership, limited liability company, limited liability partnership, or corporation (“business service provider”) contracts to provide services to another such business (“contracting business”), the determination of employee or independent contractor status of the business services provider shall be governed by Borello, if the contracting business demonstrates that all of the following criteria are satisfied:

(A) The business service provider is free from the control and direction of the contracting business entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.

(B) The business service provider is providing services directly to the contracting business rather than to customers of the contracting business.

(C) The contract with the business service provider is in writing.

(D) If the work is performed in a jurisdiction that requires the business service provider to have a business license or business tax registration, the business service provider has the required business license or business tax registration.

(E) The business service provider maintains a business location that is separate from the business or work location of the contracting business.

(F) The business service provider is customarily engaged in an independently established business of the same nature as that involved in the work performed.

(G) The business service provider actually contracts with other businesses to provide the same or similar services and maintains a clientele without restrictions from the hiring entity.

(H) The business service provider advertises and holds itself out to the public as available to provide the same or similar services.

(I) The business service provider provides its own tools, vehicles, and equipment to perform the services.

(J) The business service provider can negotiate its own rates.

(K) Consistent with the nature of the work, the business service provider can set its own hours and location of work.

(L) The business service provider is not performing the type of work for which a license from the Contractor’s State License Board is required, pursuant to Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code.

                The following is a summary of this section. If a process serving agency contracts with a legitimate business that operates in accord with Labor Code § 2750.3(e), they may operate under Borello.  Under the law, the burden is on the contracting business to show:

  • The process serving business must be legitimate, minimally operating as a sole proprietorship
  • The process serving business is free from the control of the manner and means of the contracting business
  • The process serving business is providing service to the contracting business and not directly to its customers
  • There is a contract evidenced with a writing  
  • If the work is performed in a jurisdiction requiring a business registration or license, it has obtained one
  • The process serving business maintains a separate location from that the contracting business
  • The process serving business is customarily operating as an independently established business of the same nature as the contracting business
  • The process serving business contracts similar services to the other businesses and maintains clientele without restriction from the hiring entity
  • The process serving business advertises and holds itself to the public to provide the same or similar service
  • The process serving business provides its own tools, vehicles, and equipment to provide the services
  • The business can negotiate its own rates
  • Consistent with the nature of the work, the business sets it own hours and location of work

If a process server is truly in business, then a process serving agency will be contracting with another business.

This, however, can make it harder to take on a new person who is looking for a job or wants to become a process server. A person who makes more than ten services of process must register as a process server.  Taking on a new person to provide service assignments will force a business to treat them first as an employee.  Only if they eventually form a business under the directives in Labor Code § 2750.3(e) can they contract as a bona fide business. “Converting” employees to independent contractors is a red flag for EDD auditors.

Individual Independent Contractors   

Labor Code § 2750.3(e)(2) addresses individuals who have not formed a business and are retained by a contracting business for services.  Those individual workers are deemed to be employees under the Labor Code.  

(2) This subdivision does not apply to an individual worker, as opposed to a business entity, who performs labor or services for a contracting business.

This presents an apparent ambiguity in the law. An individual has always been able to and may continue to operate as a sole proprietorship without filing a fictitious business name, as long as they operate as a business. (See link for a summary discussion of a sole proprietorship.) According to the description on the California Franchise Board’s website, the key is that a sole proprietor must pick a name for tax reporting purposes, and obtain all the appropriate licenses, zoning, or permits required.,

Furthermore, operating a business from a home is also not an indicator that negates the status of a bona fide business. The IRS recognizes a proportional deduction for using a home for business purposes.

The following subsection, Labor Code § 2750.3(e)(2) reads as follows:

(3) The determination of whether an individual working for a business service provider is an employee or independent contractor of the business service provider is governed by paragraph (1) of subdivision (a).

That means that if the individual independent contractor complies with the business to business requirements, they are truly an independent contractor and not an employee.

The problem will arise when a contracting agency files a form 1099 reflecting payments of $600 or more to an individual independent contractor who does not have a business name. That would be a red flag to the EDD and could lead to an audit for suspected misclassification of the worker. The issue would be determining whether the person is truly a business or an individual worker. Again, the burden of proof is now on the contracting agency.

Costs for Misclassification

The costs for misclassification of a worker can be devastating to a business.  If an EDD auditor contacts the business and demands to see all of the 1099 forms, they may demand records from the prior four years. If they determine that some or all of the workers were suspected of misclassification, they can make an assessment for unpaid taxes on the full amount paid to the worker, which would also include penalties and interest.

If the workers are determined to be employees and not independent contractors, the employer will be responsible for paying both the employee and employers’ contribution of Social Security and payroll taxes, unemployment insurance and employment taxes.

The employee contribution amounts may be offset by obtaining affidavits from the employee stating that they filed their taxes predicated on the previous amounts reported on the 1099 form they received from the business. They must provide separate affidavits for each yearly quarter at issue.

Nevertheless, the amounts a business may be obligated to pay can be substantial.

Furthermore, misclassified workers would likely be reported to another agency to audit a determination of whether worker’s compensation insurance was paid and add yet another round of assessments to the business.

These audits don’t always come directly from the agencies.  A worker, disgruntled or not, may make a claim to the California Labor Commission alleging they did not make minimum wage, or were given appropriate breaks, or were underpaid for overtime hours. An independent contractor might make a claim to the EDD for unemployment benefits, and if they prevail, the case could ripen into a tax audit and a tax case. That happened to me 30 years ago.

As mentioned earlier, some process serving agencies are urging process servers to incorporate or form a limited liability company. They will ensure compliance with the law in two ways because a) they are operating under the business-to-business exemption under Borello and, most importantly, b) they do not have to send a corporation or LLC a 1099 form. On the other hand, this abrupt change in employment status could trigger a wrongful discharge suit.

Costs for Forming a Corporation

Costs for forming a corporation or LLC vary, but the filing fee is about $100 and the filing of a Statement of information is $25.  It can be done without a lawyer, or an estimate of about $500 through  One lawyer estimated that forming through a lawyer would run about $1500.

Additionally, there are more operating costs by forming as a corporation.

  • There is a minimum yearly tax of $800, credited toward any taxes owed.
  • Yearly documentation to operate (estimated $500 per year for a lawyer to maintain proper records)
  • Maintain books and records which include shareholders, corporate minutes, accounting ledgers, opening and annual meeting minutes
    • Record all corporate decisions and actions of the corporation
    • Corporate resolutions to authorize corporate expenditures
  • Obtain an EIN and pay employees (including officers or managing members)
  • 2 tax returns to file by the business and owner: corporate and individual
  • Annual registration and annual fees

Finally, now is the time for process serving agencies to begin thinking about how to operate starting January 1, 2020.

A business will be taking on a greater burden by converting independent contractors as employees.  If the law changes again making it more advantageous to operate with independent contractors, converting back to treating employees as independent contractors, whether it is the same employee or those performing the same function as an employee will surely trigger an audit.  The presumption is that if the employee did perform or current performs the same job as an employee, all similarly situated workers would be deemed an employee.

There is not only tax liability.  There is also tort liability.  As an employer, a business is vicariously liable for the damages incurred by or to an employee.  If the employee is involved in an accident on the job, the employer is also responsible.  If the employee process server gets into a fistfight with the person being served, the damages incurred by that person is also the employer’s responsibility.  If the employee is injured involving these scenarios, the employer’s workers’ compensation policy will be there to compensate the employee for his or her injuries.

My Solution?

I will be notifying the few independent contractor process servers that, based upon a legitimate business decision, that I intend to contract only with businesses.

I will then form a checklist, predicated on the business-to-business directive, asking for the items on the list. If the server wants to be in business, we’ll do business. I now have a duty to show that the business is a bone fide business,

  • Form of Business
  • Business address
  • confirmation of process server registration.
  • Confirmation of a business license.
  • Employer Identification Number (EIN).
  • Price List and negotiate it.
  • etc.

You get the idea.

Amendment to CCP § 415.20 will allow substituted service at a CMRA on the first attempt

An amendment to California Code of Civil Procedure [CCP] § 415.20, (effective 1/1/18) has been added allowing substituted service of a lawsuit of an individual defendant on the first and only attempt at a commercial mail receiving agency [CMRA] (e.g., The UPS Store, Postal Annex, etc.). The amendment authorizes service “in the manner described in subdivision (d) of Section 17538.5 of the Business and Professions Code [B&P Code].”

Existing law allows for substituted service of a summons on a) business, and b) an individual. Substituted service on a business may be served on the first attempt by leaving a copy with anyone apparently in charge of the business or at a mailing address. Service on an individual defendant generally requires multiple attempts – due diligence – before substituted service may be made at a home, business, or mailing address. Although due diligence is not defined by statute or case law – only what it isn’t – each venue in California defines it locally.  Generally, 3 to 4 attempts would suffice, provided the time of the attempts and days are varied.  Substituted service requires a follow-up First Class mailing to the address where the service was made whereupon service is deemed complete 10 days after the date of mailing.

The new amendment adds a new manner of service, subsection CCP § 415.20(c), when serving an individual at a CMRA.  The amendment only applies to mailing addresses at a CMRA.  It does not apply to any other mailing address, such as the former co-tenant who collects mail for the defendant who moved out, or the mother of the homeless son or daughter who collects his or her mail, or the father of a student, where a car is registered, who lives on a campus at a distant university.

The main feature of this amendment is that substituted service may be made without due diligence, and is deemed effected upon delivery, pursuant to B&P § 17538.5. Service, however, is not complete until a CMRA complies with B&P § 17538.5(d).


What is B&P § 17538.5?

B&P Code § 17538.5, governs how a CMRA must operate. It sets forth requirements and obligations.

It imparts several duties on a CMRA, and upon receipt of service, it shields them from liability to the box holder. As a condition to accept mail for a mail receiving customer, the CMRA must accept 2 forms of ID before renting the customer a box. The mail receiving customer must sign an agreement affirmatively appointing the CMRA as its agent for service.   That form, or any amendment or correction to the form, contains a home or personal address.

Because of this affirmative appointment of the CMRA as its agent for service, it could be argued that service on the CMRA is a personal service, not a substituted service.  Service under B&P Code § 17538.5(d) could be construed as a form of personal service, akin to CCP § 416.90 wherein a defendant authorizes another to accept service on their behalf.  This can only be valid if – and only if – the 3d party, here, the CMRA, fully complies with the B&P § 17538.5(d).

Under B&P Code § 17538.5(d), the CMRA is required to

  • accept any service of process for the mail receiving customer for up to 2 years after the customer terminates the agreement;
  • Within 48 hours after receiving process the CMRA must place a copy of the process in the box of the mail receiving customer (unless the agreement has been terminated);
  • Within 5 days, the CMRA must mail a copy of the served documents to the mail receiving customer to their last known home or personal address;
  • The CMRA must purchase a Certificate of Mailing  (PS Form 3817) for $1.35 which can only be obtained by standing in line and mailing the documents at a US Postal Service office;
  • If the CMRA has complied with these requirements, the CMRA must provide any involved party a declaration under penalty of perjury of the mailing and attach a copy of the Certificate of Mailing, stamped by the USPS.

Service under the new CCP § 415.20(c) is deemed effected 10 days after the CMRA mails the copy to the defendant at the last known home or personal address on the agreement form.


What does B&P § 17538.5 really do?

If the CMRA complies with the requirements in B&P § 17538.5 they are not liable to the mail receiving customer if a judgment is rendered against them for failure to receive notice of the action.  This section really isn’t a service of process statute, but describes what a CMRA must do to escape liability to the box holder/defendant.

There is no duty owed to the plaintiff or the process server for failure to comply.  The inference is that liability would only attach if a judgment was rendered against the mail receiving customer.

Cross referencing this section under new CCP § 415.20(c) elevates compliance with B&P § 17538.5, limiting liability exposure, to when and whether substituted service is deemed effective.


Why is this statute flawed?

This statute is flawed because CMRAs seldom, if at all, fully complied with these requirements. Generally, they accept the papers and place them in the mail receiving customer’s box. That is all. Many flip the server a ration of attitude and toss the papers in the trash and attempt to refuse service.  Last month I had a CMRA proprietor throw the papers back at me which hit me in the face, then land in the gutter.  There they remained as a got into my car and drove off.

Furthermore, I have heard of several instances where service on a CMRA was invalidated because the CMRA did not comply.  If there is no mailing, the court cannot determine the date that the defendant is in default.


Why will this a change in the law lead to confusion?

Because this amendment references this flawed statute, process servers will be unwittingly serving CMRAs on the first attempt, without due diligence, relying on the CMRA to comply with B&P § 17538.5(d).

Substituted service under CCP § 415.20(b) at a mailing address, and service under B&P § 17538.5 are two in-congruent manners of service which cannot be reconciled. Substituted service under CCP § 415.20(b) requires a delivery and a mailing to the defendant’s address where the service is made – in this case, the CMRA location.

Under the new law, B&P § 17538.5 requires delivery to the CMRA, and CMRA must mail to “the mail receiving customer to their last known home or personal address” listed on the agreement signed by both the CMRA and the box holder. In the context of B&P § 17538.5, that “last know home or personal address” is one known only to the CMRA – not the process server.

The server cannot cure a defect in service under CCP § 415.20(c) by mailing to the defendant at the place where the service was made, because it must be mailed by the CMRA to the defendant’s address they have on file.

Therefore, this amendment to CCP § 415.20 does not make it easier and more efficient for process servers.  It will likely induce process servers, and litigants directing their process servers, to sub-serve the mail receiving customer on the first attempt, with a futile reliance that the CMRA will follow through with their statutory obligations. It may lead to defendants filing motions to quash service, or set aside defaults, resulting in delays to commence court cases. It may expose process servers to liability and/or additional costs for re-service.


How can you properly serve the mail receiving customer at a CMRA?

A server should continue to rely on CCP § 415.20(b), existing law, by establishing (pointless) due diligence at personal service, and sub-serve the defendant on the 3d or 4th attempt, and mail a copy to that address via First Class Mail.

If the service is made without due diligence under CCP § 415.20(c), and CMRA fails to comply with B&P § 17538.5, it will not likely result in a valid service.


Does AB 2244 Benefit Process Servers?

The passage of AB 2244 in 2016 has been hailed as a ringing success for CALSPro and the process serving industry.  I take issue with that.

CALSPro’s support for AB 2244 has concerned me all year.  The Coalition for Improving Court Access was formed as a separate entity and hired CALSPro’s lobbyist to facilitate access to the court and shepherd this bill through the legislative process, primarily because of inconsistent applications of the efiling rules. It was intended to level the playing field for efiling companies and to facilitate more universally accepted platforms.

The CALSPro Board unanimously agreed to participate as a member of the coalition.  They were joined by 17 other individual members and companies.

What bothered me about this CALSPro’s participation, on behalf of ALL its members, is whether it really benefited the membership as a whole. I feel that this legislation really only benefited a few of our members and non-members who operate or work for efiling companies. It does little for process servers.

This is intended to explain why.

First of all, it must be acknowledged that participation by the Coalition and CALSPro substantially assisted the legislature and Judicial Council in its understanding of how the whole process worked.  Based upon the presentations made at the 2016 CALSPro Conference, and private conversations I had with members in the know, CALSPro and the Coalition clarified in real life examples how efiling worked and explained how excess charges that were being assessed to litigants.

The decision makers in the legislative committees and Judicial Council expressed sincere appreciation for that effort.

In earlier discussions, a white paper was distributed and the progenitors of the Coalition gave valuable input to the standards for efiling and eservice.  For instance, the paper made no distinction between primary and secondary service when eservice was addressed. Not doing so could have easily introduced eservice of primary service (service of a summons) into efiling standards.

Nevertheless, the Coalition and CALSPro’s participation was instrumental in the passage of AB 2244, but the result benefited the efiling companies – not the rest of the members in CALSPro or process servers.

What Does AB 2244 do?

Convenience fees for court costs

CCP § 1010.6 is amended to allow the Court, Electronic Filing Manager (EFM), or EFSP to collect a “convenience fee” for processing a payment of a filing or other fee when required to complete the filing. The convenience fee is limited to the actual costs for processing the transaction. That means fees for using a credit card, or any other form of payment that is normally charged to the merchant in a transaction can be legally passed on to the end user. Those fees may range between 2% and 3.5%. This is expected to bring it closer to 2%.

The reason for this restriction was implemented to address the practice of a prominent EFM, a third party vendor that creates the portal through which an EFSP electronically files documents into the court’s case management system, that was routinely charging a 3.5% fee for these court fees. The EFM dictated that the court fee be paid specifically by credit card.

This amendment benefits the EFSPs by allowing them to pass on convenience fees to the end user. It also locks the fees to the actual cost, not an apparent arbitrary fee charged by the Court or EFM. Fees charged are subject to audit.

Fees for efiling

The amendment requires that the EFSP’s fees for e-filing to be “reasonable.” It also requires the EFSP to charge no fee for litigants who have a fee waiver in place, or in instances when the court deems a waiver of fees is appropriate.

Recoverable costs

CCP § 1033.5 is being amended to make the costs for electronic filing recoverable for the prevailing party.

The legislation authorizes that the fee paid for efiling and eservice to an Electronic Filing Service Provider (EFSP) may be a recoverable cost, if the particular court mandates efiling. This legislation results in a “sea change” for the awarding of recoverable costs to the prevailing party for efiling charges.

Heretofore, a filing with the court was accomplished by

  • signing them
  • printing the documents and making copies to be conformed by the court after the original was filed, and perhaps an internal file copy
  • serving them.

Then, getting the documents to the court

  • walking them into the court by the lawyer or staff
  • mail
  • Federal Express or courier
  • messenger
  • internal or out-sourced daily court runner, or
  • on-demand process server

All added to the cost of filing.  None of these fees were ever recoverable costs, and “postage, telephone, and photocopying charges, except for exhibits” were expressly not allowed by statute. These costs were absorbed by the litigant. Filing over-the-counter with a daily court runner, whether in-house or through a monthly retainer agreement with a service provider, or an on-demand special filing by courier was never considered a recoverable cost.

Since all parties must efile in courts that require it, each are incurring efiling costs, this could increase more litigation if a motion to tax costs is filed challenging excessive efiling and eservice fees.

For instance, there are a variety of add-ons to a bill from an EFSP: rush fees, special handling fees, copies made, deliveries to the department, or even personal service on opposing counsel are all potentially line item charges.  One prominent efiling company offered $50 “Loyalty Program” gift certificates to law firm secretaries for frequent filings and expensive, perhaps unnecessary, services.  The more rushes, needed or not, and the more efilings pushed through the system benefited both the EFSP and the secretaries. These bills, of course, were passed onto the client. The lawyers used that benefit to funnel indirect raises to their staff.

The question, subject to a motion to tax costs, is what is a “reasonable fee” charged by the EFSP? Were the add-on fees necessary? Were they reasonable? Given that fees charged by an EFSP range from free to around $10, a benchmark “reasonable fee” will vary considerably.

Unlike the recoverable fee for service by a registered process server that has been matched with a statutory fee for service by the sheriff (currently $40), efiling fees have no analogy. The fee is established by private industry, which in turn, is set by demand and competition.

The EFSP as an agent of the Court

Gov’t Code § 6159 is amended to say that the EFSP is an agent of the court, and mandates that they must periodically report its actual costs for processing court filing fees. They are subject to audit by the Judicial Council, and permit access to its premises for interviewing employees, and inspect and copy relevant records. Records must be maintained for at least four years.

An EFSP is prohibited from collecting filing fees or court fees from a party whose fees have been waived.

The law is being amended to limit the fee to the “actual cost” for processing the transaction for court fees charged by the Court, EFM and the EFSP. It will mandate the court or the EFM to accept other forms of payment such as electronic fund transfers, Automated Clearing House (ACH), and payment methods that do not charge a transaction cost, such as an electronic check.

Unfortunately, history has demonstrated that EFSPs have not been acting like an agent of the court.  They have been acting like private companies (which of course they are), and have made huge investments and are currently scrambling for market share.  During the formative years of efilng, EFSPs refused to allow process servers to efile through their portals into the court. One major EFSP continues to restrict efiling by litigants themselves, foreclosing any ability for a process server to participate in efiling in a court that approved them as a preferred vendor.  EFSPs have deliberately arranged unannounced secret meetings with the courts, and made invitation only, exclusive presentations to the legal community to capture market share of the efiling business destined to the court.

Once the EFSP is in place in a court, they provide a court portal which displays not only their efiling and eservice, but a variety of other service – process serving – local, nationwide, and international – court reporting, investigations, mobile photocopy, records searches, etc.

This has been my initial primary objection to EFSPs and the courts’ apparent acquiescent relationship to them.

Who are Electronic Filing Service Providers (EFSPs)?

There are about 20, give or take, EFSPs in California that have the ability to directly file documents into a court through an EFM.  Not all EFSPs have arrangements with all courts to file electronically. Due to the accident of history, the California Judicial Council blew half a billion dollars on a failed effort to develop a statewide e-filing system, and the state legislature cut the funding.  As a result, each county court was forced to look to private industry to implement efiling, and make exclusive contracts with one or a few EFSP vendor.

There are several other companies, primarily process servers or process serving agencies, which have contracts with those EFSPs providers that contract with the particular court. The EFSP charges a retail end user between free and $10.  The companies that are not EFSPs market this service and file through an EFSP are charged an amount as the end user, depending on the relationship, volume, handling, etc., and mark the fee up to their clients ranging from $9 to $45.

Process serving companies facilitate the process so that their existing clients can efile through their website without using an EFSP directly. After all, the EFSP is a competitor, and if contacted directly by the client, it makes it easier to capture just the efiling assignment, but then convert it into a process service or investigative assignment.

Costs vary considerably for a process serving agency not already in the efiling business to set up an arraignment for a seamless portal that passes efilings through to an EFSP.  One EFSP will build a portal on a process server’s website for free.  One company will do it for $10,000.  Another will do so for a fee, but bundles the build with an integrated process serving program for generating service instructions, proofs of service, declarations for the server, billing and statements, and online statuses, and with the setup fee, will take a fee for each and every invoice generated during the term of the contract.

A lawyer or law firm may efile through the branded portal on their website, or the process server may file for the client through an EFSP. Does that make the process serving agency an EFSP also? There are several inferences throughout CCP § 1010.6 that refer to the EFSP as the entity that files electronically through the EFM. There is apparently no definition of an EFSP in either the law or court rule.

At the very least, process servers to file through an EFSP are an agent of the EFSP, and hence, a sub-agent of the court. To distinguish these, hereinafter in this article I will refer to them as an Electronic Filing Service Provider Agent (EFSPA).  Local courts make no distinction between an EFSP and an EFSPA.

  • Is an EFSPA bound by these changes in the law?
  • Is an EFSPA subject to audit by the Judicial Council?
  • Is an EFSPA obligated to file at no charge for parties that have obtained a fee waiver?
  • Is an EFSPA able to pass on an additional “convenience fee” if they pay an EFSP with a credit card, resulting in 2 “convenience fees”?
  • Is an EFSPA’s add-on markup fee for efiling through an EFSP a “reasonable cost”, subject to recovery?
  • If not, could these charges be subject to challenge with a motion to tax costs?

Most of the owners of the EFSPAs I spoke to at the CALSPro conference in October, 2016 who have entered into this arrangement have yet to break even.

So here are my questions.  CALSPro devoted considerable resources, time, energy, and support to this bill.  Did this effort benefit the membership and process servers? If so, how?

Forms Committee Report – March, 2017

March 20, 2017

CALSPro Board Meeting 3/25/17

There are 2 form proposals I am monitoring and commenting on which will have an impact on process servers in 2018.

  • Request for Entry of Default (revise form CIV-100; adopt form CIV-105)

 There are proposals to revise the existing Request for Entry of Default form, and to adopt another specifically for default judgments against defendants whose debt was purchased and assigned to a third party.

Requirements of the Fair Debt Buying Practices Act

The Fair Debt Buying Practices Act, which took effect January 1, 2014, imposes a number of requirements on debt buyers pursuing collection efforts, including that no default judgment may be entered against a debtor defendant unless the debt buyer plaintiff submits certain documents, authenticated through a sworn declaration, to establish specified facts (Civ. Code § 1788.60(a), (b)). If the debt buyer has not complied with the Act’s requirements, the court cannot enter a default judgment for the debt buyer (Civ. Code § 1788.60(c)).

  • Writ of Execution (revise form EJ-130)

The writ of execution form changes were initiated last year, and were not revised due to a number of comments received.

The form is going through a significant revision.  The identifier as to whether the case is a limited or unlimited case has been refined, eliminating the apparent confusion and rejection for a failure to distinguish small claims case and family law case as limited or unlimited cases.  The designation is critical for the sheriff to determine timeliness for the time to appeal (30 vs. 60 days) when a claim of exemption is filed.

The item numbers are being rearranged, a belief that making the entries fall more logically while calculating debits, accrued interest, and how credits are applied.

To accommodate notice to the Judgment debtor, a third page is being added.

The committee is also revising and cross-referencing the Memorandum of Costs After Judgment, Acknowledgment of Credit, and Declaration of Accrued Interest (form MC-012) to more fully integrate the information on this form to prepare the writ form more accurately.

The committee is also developing a proposing a new form, Information Sheet for Calculating Interest and Amount Owed on a Judgment (new form MC-013-INFO) to explain how credit payments received from the debtor towards interest, costs, and judgment principal, and refers the creditor to form MC-012.

The Judicial Council Invitation to Comment Memos are linked below and explain these changes in more detail, and displays the proposed changes to the existing forms, and the proposed new forms.  You may also register comments.

Civil Practice and Procedure: Request for Entry of Default

Civil Practice and Procedure: Writ of Execution

Tony Klein

Contra Costa Superior Court Enforces Fax Filing Rules

Contra Costa Superior Court is enforcing fax filing rules that will impact attorney services.

It will affect all efilings, but the rule particularizes and singles out attorney services who  file fax filings that are not in compliance with California Rule of Court sec. 3.1110(f) when the filings are not properly tabbed.

It will require any fax filing to be 1) stamped with the name, address, and phone number of the attorney service filing documents by fax, and 2) a certification of an employee that the document filed complies with CRC sec. 3.1110.

For those fax filings that do not comply with the local rule, the clerk will submit the non-compliant filing to the presiding judge who may then levy sanctions.

What is particularly offensive about this rule is that it targets attorney services, and authorizes sanctions for violating the local and California Rule of Court.  This appears to be unprecedented. Also, it seems to demonstrate a pointed frustration with attorney services who have been submitting non-compliant documents to the court.

This is the new rule, and the portion that will affect attorney services is bolded in red:

Contra Costa Superior Court Rule 3.42. Papers to Comply with State Rules

(1) Moving, opposing and reply papers must be filed and served with the Court and parties within the time prescribed by law. The Court will not consider late filed papers unless good cause is shown at the hearing.

(2) All memoranda and other papers filed in support of, and in opposition to, motions shall comply with the requirements of the California Rules of Court.

(3) Despite rule 3.1110 of the California Rules of Court, subdivision (f), a large number of documents filed with the Court include exhibits that are not properly tabbed. The majority of these non-compliant documents are fax-filed through an attorney service. The attorney service prints out the documents and files them without tabbing the exhibits. The purpose of this rule is to discourage such rule violations, which impose a substantial burden on judges and staff.

(A) Every fax-filed document shall be stamped on the first page with the name, address, and telephone number of the attorney service that prepared the document for filing.

(B) Every fax-filed document or set of fax-filed documents shall include, as a separately filed document, a certification by an employee of the attorney service that the document or documents have been reviewed for compliance with rule 3.1110 of the California Rules of Court, subdivision (f), and that all exhibits have been properly tabbed.

(C) If a particular attorney service repeatedly files documents with untabbed or improperly tabbed exhibits, the matter will be referred to the presiding judge for appropriate action.

(D) Counsel of record should take note the Court has and will continue to impose monetary sanctions on attorneys who file documents with untabbed or improperly tabbed exhibits, regardless of whether such documents were fax-filed through an attorney service, and in some instances will disregard those documents or drop a hearing from calendar based on the rule violation.

(Rule 3.42(3) new effective 1/1/17)
(Rule 3.42 revised effective 1/1/17)

The California Rule of Court sec. 3.1110(f) referenced in the local rule is included below:

. . .

(f) Format of exhibits

Each exhibit must be separated by a hard 81/2 x 11 sheet with hard paper or plastic tabs extending below the bottom of the page, bearing the exhibit designation. An index to exhibits must be provided. Pages from a single deposition and associated exhibits must be designated as a single exhibit.

 . . .


This will likely spread to other courts if it hasn’t already.

This highlights a rather onerous effort to perform a fax filing. Perhaps it was always there and I didn’t realize it.

  • Does the stamping of the name of the attorney service, address, and phone number constitute an alternation of the faxed document? It isn’t a material alteration of the content of the document, but comes close to an alteration nonetheless.
  • Does this local rule contradict the California Rule of Court for fax filings?
  • Does adding “a hard 8-1/2 x 11 sheet with hard paper or plastic tabs” constitute an alteration if the faxed copy does not?
  • If not, who is subject to reprimand and/or sanction?
  • Has anyone priced plastic exhibit tabs lately?

The CRC apparently does not require tabs for courtesy copies to the Dept. Once efiling takes hold, all of this would be moot.

Furthermore, each fax filing now must accompany a stand-alone certification by an employee of the attorney service will add yet more time and handling for fax filings.

  • Does that signed Certification limit the use of independent contractors for fax filings​?
  • Does that make the employee liable for sanction by the court?
  • Vicarious liability imputed​ to the employer is not presumed in the rule.
  • Are we now required to pick through several the 200+ pages of exhibits after a firm shoves the documents into an email or fax machine without delineating where the exhibits start and stop?
  • Are attorney services required to plow through the exhibits and separate out the
    Exhibits A,B, or C, that are attached to Exhibits A, B and C appended to the actual exhibits to the filed document?

Fax filings are going to get a whole lot more expensive with all of this handling.

Fair Debt Collection Practices Act

There are a growing number of actions being filed against process servers and agencies for violating the Fair Debt Collection Practices Act (FDCPA) which governs and restricts practices for collecting consumer debt.

Below are reported cases challenging the exemption for process server in the definition of a “debt collector” found in 15 U.S.C. 1692a(6)(D), the specific exception for a person serving process.  The cases allege that when a process server signs a false proof of service, they lose the exemption, and become subject to the FDCPA as a “debt collector”.  Quoting Freeman v. ABC Legal Services Inc., 827 Fed. Supp. 2d 1065, 1074, “if process servers falsely claimed they had effected personal service and executed a false proof of service document, then their actions would take them beyond their role as process servers and render them ineligible for the exception.”

Court Opinions

Sykes v. Mel Harris & Assocs., LLC, 757 F. Supp. 2d 413, 423 (S.D.N.Y. 2010)

Freeman v. ABC Legal Services, Inc., 827 F. Supp. 2d 1065, 1074 (N.D. Cal. 2011)

Holmes v. Electronic Document Processing, Inc., 966 F.Supp.2d 925 (N.D. Cal. 2013) This was a trial court order denying the defendant process server agency’s motion to dismiss the action. One issue the court addressed was whether the filing of a false proof of service to obtain a judgment constituted an act that made the process server a debt collection, and not exempt under the FDCPA.  Another issue the court ruled on was that when the agency “[k]nowingly and intentionally withhold[s] their true names and process server registration numbers from process server returns, [it is] in violation of California Bus. & Prof. Code § 22356.5(a), with the intent to deceive.” 

Holmes v. Electronic Document Processing, Inc., 966 F.Supp.2d 925 (2013)

Case No.: 12-CV-06193-LHK.

Cheryl Anatole HOLMES, Plaintiff, v. ELECTRONIC DOCUMENT PROCESSING, INC. and Tanaya V. Sulcer, Defendants.

United States District Court, N.D. California, San Jose Division.

August 15, 2013.

Attorney(s) appearing for the Case

Fred W. Schwinn, Raeon Rodrigo Roulston, Consumer Law Center, Inc., 12 South First Street, Suite 1014, San Jose, CA 95113-2418, for Plaintiff.

Steven S. Nimoy, Soltman, Levitt, Flaherty & Wattles LLP, 2535 Townsgate Road, Suite 307, Westlake Village, CA 91361, for Defendants.


LUCY H. KOH, United States District Judge

Plaintiff Cheryl Anatole Holmes (“Holmes” or “Plaintiff”) brings this action against Defendants Electronic Document Processing, Inc. (“EDP”) and Tanaya V. Sulcer (“Sulcer”) (collectively, “Defendants”) for alleged violations of the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692 et seq. (“FDCPA”); the Rosenthal Fair Debt Collection Practices Act, California Civil Code §§ 1788 et seq. (“RFDCPA” or “Rosenthal Act”); and California Business and Professions Code §§ 17200 et seq. (“Unfair Competition Law” or “UCL”). Holmes contends that, in an attempt to collect a debt, Defendants filed a false proof of service in a state court action.

Before the Court is Defendants’ Motion to Dismiss Plaintiff’s Complaint, ECF No. 13 (“Mot. to Dismiss”), and Defendants’ Motion to Strike Portions of Plaintiff’s Complaint, ECF No. 14 (“Mot. to Strike”). Pursuant to Civil Local Rule 7-1(b), the Court found this matter appropriate for determination without oral argument. Having considered the submissions of the parties, the relevant law, and the record in this case, the Court hereby DENIES Defendants’ Motion to Dismiss, and DENIES Defendants’ Motion to Strike.

  2. Factual Allegations

Plaintiff Holmes allegedly incurred a consumer credit debt (“the alleged debt”) at some unknown time for personal, family, or household purposes. See Compl. ¶ 44, ECF No. 1. The debt was consigned and/or otherwise assigned to Lang, Richert & Patch, a debt collection law firm. Compl. ¶ 45.

On June 14, 2012, Lang, Richert & Patch filed a lawsuit against Holmes in the Santa Clara Superior County, Unifund CCR Partners v. Cheryl Anatole Holmes, Santa Clara County Case No. 1-12-CV-226523 (the “State Court Action”), in an attempt to collect the debt. See Compl. ¶ 46. Thereafter, Lang, Richert & Patch allegedly hired Electronic Document Processing, Inc. (“EDP”) — a California corporation engaged in the business of composing and selling forms, documents, and other media to be used for debt collection — to serve Holmes by delivering to her a copy of the State Court Summons and Complaint. See Compl. ¶¶ 10, 47. Tanaya V. Sulcer (“Sulcer”) is a process server who is or was an employee and/or agent of EDP. See Compl. ¶¶ 11, 21(b).

Holmes contends that, on or about July 18, 2012, EDP composed a false Proof of Service of Summons and filed it in the Santa Clara Superior Court in order to obtain a default judgment against her. See Compl. ¶¶ 48, 49; id. at Ex. 1. This Proof of Service of Summons represents, under penalty of perjury, that Sulcer personally served Holmes with a copy of the Summons and Complaint for the Superior Court lawsuit. See Compl. ¶¶ 48-49. However, Holmes disputes that she was served personally. Rather, on or about July 10, 2012, “Plaintiff returned home from work and found the Summons and Complaint wedged under her front door.” Compl. ¶ 54. In addition, the Proof of Service of Summons describes the person served as a female Caucasian, 50-years-old, with brown hair and brown eyes, 5 feet 8 inches tall, and weighing 165 pounds. See Compl. ¶ 54. However, Holmes is 62-years-old, with blond hair and blue eyes, and weighs 125 pounds. See id.

Holmes further alleges that EDP authorized Sulcer to use EDP’s address and telephone number on process server returns in order to shield Sulcer from service of process if she were sued. See Compl. ¶ 27. Holmes contends that EDP also intentionally withheld its own name and process server registration number from the process server returns in order to misrepresent the true nature of EDP’s services and EDP’s relationship with Sulcer. See Compl. ¶ 26.

According to Holmes, EDP and Sulcer are engaged in the “practice of `sewer service’ — i.e., failing to serve a debtor and filing a fraudulent affidavit attesting to service so that when the debtor later fails to appear in court, a default judgment can be entered against her.” Compl. ¶ 1.1 The Proof of Service of Summons in this case indicates that Defendants sold the process server return to Lang, Richert & Patch for $59.00. Compl. ¶ 53. Because EDP will pay Sulcer and other process servers only for service attempts that are reported as completed, and will pay substantially less or nothing for service that is not reported as completed, Holmes alleges that “process servers like Sulcer have a strong financial incentive to falsify process server returns.” Compl. ¶ 55. According to Holmes, “EDP knowingly promotes the use of false process server returns through its flat rate or fixed fee compensation.” Compl. ¶ 55. Holmes also alleges that “[d]ebt collection law firms and debt buyers plainly benefit from the sewer services provided by unscrupulous process servers like the Defendants in this case” because they are “able to generate hundreds of judgments by default on cases where they could never prevail on the merits.” Compl. ¶ 57. “Once default judgments are fraudulently obtained, they are sued to levy consumer’s bank accounts, garnish their wages, seize their property, damage their credit reports, and/or pressure them into unaffordable payment plans.” Id.

  1. Procedural History

Holmes filed her Complaint on December 6, 2012. ECF No. 1. On February 19, 2013, Defendants filed their Motion to Dismiss and Motion to Strike the Complaint. See ECF Nos. 6, 7. The following day, the case was reassigned to the undersigned judge. ECF No. 12. On February 26, 2013, Defendants amended and re-noticed their Motion to Dismiss and Motion to Strike Plaintiff’s Complaint. See Mot. to Dismiss, ECF No. 13; Mot. to Strike, ECF No. 14. On April 12, 2013, Holmes filed her Opposition to the Motion to Dismiss, see Opp’n to Mot. to Dismiss, ECF No. 18, and her Opposition to the Motion to Strike, see Opp’n to Mot. to Strike, ECF No. 19.2 On April 26, 2013, Defendants filed their Reply in support of the Motion to Dismiss, see Reply Supp. Mot. to Dismiss, ECF No. 21, and their Reply in support of the Motion to Strike, see Reply Supp. Mot. to Strike, ECF No. 20.

  2. Motion to Dismiss Under Rule 12(b)(6)

Pursuant to Federal Rule of Civil Procedure 12(b)(6), a defendant may move to dismiss an action for failure to allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a `probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal citations omitted). For purposes of ruling on a Rule 12(b)(6) motion, the Court “accept[s] factual allegations in the complaint as true and construe[s] the pleadings in the light most favorable to the non-moving party.” Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir.2008).

However, a court need not accept as true allegations contradicted by judicially noticeable facts, Shwarz v. United States, 234 F.3d 428, 435 (9th Cir.2000), and a “court may look beyond the plaintiff’s complaint to matters of public record” without converting the Rule 12(b)(6) motion into one for summary judgment, Shaw v. Hahn, 56 F.3d 1128, 1129 n. 1 (9th Cir.1995). Nor is a court required to “`assume the truth of legal conclusions merely because they are cast in the form of factual allegations.'” Fayer v. Vaughn, 649 F.3d 1061, 1064 (9th Cir.2011) (per curiam) (quoting W. Min. Council v. Watt, 643 F.2d 618, 624 (9th Cir.1981)). Mere “conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss.” Adams v. Johnson, 355 F.3d 1179, 1183 (9th Cir.2004); accord Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. Furthermore, “a plaintiff may plead herself out of court” if she “plead[s] facts which establish that [s]he cannot prevail on h[er]… claim.” Weisbuch v. Cnty. of L.A., 119 F.3d 778, 783 n. 1 (9th Cir.1997) (internal quotation marks and citation omitted).

  1. Motion to Strike

Federal Rule of Civil Procedure 12(f) permits a court to “strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” See Fed.R.Civ.P. 12(f). “[T]he function of a 12(f) motion to strike is to avoid the expenditure of time and money that must arise from litigating spurious issues by dispensing with those issues prior to trial.” Sidney-Vinstein v. A.H. Robins Co., 697 F.2d 880, 885 (9th Cir. 1983). Motions to strike are generally disfavored and “should not be granted unless the matter to be stricken clearly could have no possible bearing on the subject of the litigation … If there is any doubt whether the portion to be stricken might bear on an issue in the litigation, the court should deny the motion.” Platte Anchor Bolt, Inc. v. IHI, Inc., 352 F.Supp.2d 1048, 1057 (N.D.Cal.2004) (internal citations omitted). “With a motion to strike, just as with a motion to dismiss, the court should view the pleading in the light most favorable to the nonmoving party.” Id. “Ultimately, whether to grant a motion to strike lies within the sound discretion of the district court.” Cruz v. Bank of New York Mellon, No. 12-00846, 2012 WL 2838957, at *2 (N.D.Cal. July 10, 2012) (citing Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970, 973 (9th Cir.2010)).


Defendants’ Motion to Dismiss argues that: (1) Holmes fails to state a claim under the FDCPA because Defendants are entitled to the “process server exception” pursuant to 15 U.S.C. § 1692a(6)(D); and (2) Plaintiff’s claims are barred by California’s litigation privilege, pursuant to California Civil Procedure Code § 47(b). The Court will address each argument in turn.

  1. Failure to State a Claim under the FDCPA

To state a claim alleging violation of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 (“FDCPA”), a plaintiff must show: “(1) that [s] he is a consumer; (2) that the debt arises out of a transaction entered into for personal purposes; (3) that the defendant is a debt collector; and (4) that the defendant violated one of the provisions of the FDCPA.” Freeman v. ABC Legal Services, Inc., 827 F.Supp.2d 1065, 1071 (N.D.Cal.2011). For purposes of this motion, Defendants do not challenge the first two elements. See Mot. to Dismiss at 4. Thus, the Court will only address the third and fourth elements of Plaintiff’s FDCPA claim.

  1. Whether Defendants Are “Debt Collectors”
  2. “Debt Collector” as Defined by 15 U.S.C. § 1692a(6)

Holmes asserts that Sulcer and EDP act indirectly as “debt collectors” because they regularly serve process for debt collection lawsuits. Compl. ¶¶ 10, 11, 21, 22, 25-28, 37. Specifically, Holmes alleges that, by manufacturing false Proofs of Service, EDP and Sulcer assist other debt collectors in obtaining default judgments when debtors fail to appear in court. Id. Moreover, EDP’s purported advertising and marketing of process service to debt collectors suggest that EDP targets at least some of its service of legal process to assist debt collectors. See Compl. ¶ 21. Defendants dispute that they are “debt collectors” under the FDCPA simply because “a portion of [EDP’s] [attorney] services relate to collection actions of consumer debt.” Mot. to Dismiss at 8.

Pursuant to 15 U.S.C. § 1692a(6), a “debt collector” is defined as any person whose principal purpose of business is to collect debt, or “who regularly collects or attempts to collect, directly or indirectly, debts owed or due.” 15 U.S.C. § 1692a(6). Notably, the term “debt collector” is not limited to formal debt collection agencies. See, e.g., Heintz v. Jenkins, 514 U.S. 291, 292, 115 S.Ct. 1489, 131 L.Ed.2d 395 (1995) (including within the definition of a “debt collector” a lawyer who regularly, through litigation, tries to enforce consumer debts). In fact, Congress intended the scope of the Act “to cover all third persons who regularly collect debts for others.” S.Rep. No. 95-382, 95th Cong. 1st Sess. 2 (1977), reprinted in 1977 U.S.C.C.A.N. 1695, 1697-98 (stating that “[t]he requirement that debt collection be done `regularly’ … exclude[s] a person who collects debt for another in an isolated instance, but … include[s] those who collect [debts] for others in the regular course of business.”). Therefore, the language and the legislative history of the FDCPA suggest that an entity qualifies as a “debt collector” if it regularly performs debt collection services, regardless of what percentage of its services relate to debt collection. See S.Rep. No. 95-382, at 3; see also Romine v. Diversified Collection Servs., Inc., 155 F.3d 1142, 1146 (9th Cir.1998) (“Had Congress intended to limit the Act to licensed or registered collection agencies, it would have confined the statutory language to businesses for which debt collection is the `principal purpose.'”). As Holmes alleges that Defendants regularly perform debt collection services, the Court finds that Holmes has sufficiently alleged that Defendants’ actions are those covered by the term “debt collector,” as defined by 15 U.S.C. § 1692a(6).

  1. Process Server Exemption

Nevertheless, the FDCPA does carve out certain exceptions to the term “debt collector,” which Defendants argue renders them exempt from the allegations in this case. See 15 U.S.C. § 1692a(6)(A)-(F). Pursuant to 15 U.S.C. § 1692a(6)(D), for instance, the term “debt collector” does not apply to “any person while serving or attempting to serve legal process on any other person in connection with the judicial enforcement of any debt.” 15 U.S.C. § 1692a(6)(D). As Sulcer was attempting to serve legal process on Holmes in connection with the judicial enforcement of a debt, Defendants maintain that they fall squarely within this “process server” exemption. See Mot. to Dismiss at 2; Reply Supp. Mot. to Dismiss at 2.

Holmes disputes that Defendants are exempt from the purview of the FDCPA and contends that Defendants’ alleged filing of a false process server return brings Defendants outside of the role of a process server. As Judge Edward Chen noted in Freeman v. ABC Legal Services, Inc., 827 F.Supp.2d 1065 (N.D.Cal.2011) — a similar FDCPA case in which the plaintiff alleged that a legal services corporation filed a false proof of service in superior court in order to obtain a default judgment against plaintiff — “when someone who would otherwise qualify for the exemption `goes beyond being merely a messenger in serving process and engages in prohibited abusive or harassing activities to force an individual to repay a debt,’ the exemption no longer applies and the process server is subject to FDCPA liability.” Id. at 1073 (quoting Flamm v. Sarner & Assoc. P.C., No. 02-4302, 2002 WL 31618443, at *5 (E.D.Pa. Nov. 6, 2002)).

Importantly, 15 U.S.C. § 1692d, which is entitled “Harassment or Abuse,” proscribes debt collectors from “engag[ing] in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt.” 15 U.S.C. § 1692d. “Without limiting the general application of the foregoing,” Section 1692d lists examples of conduct that is considered unlawful. See 15 U.S.C. § 1692d(1)-(6). For example, a debt collector may not attempt to collect a debt by threatening or using violence to harm a person, using obscene or profane language as a form of abuse, engaging in public shaming, or harassing people with continuous telephone calls. Id.

While Defendants acknowledge that the process server exemption does not apply when someone engages in prohibited abusive or harassing activities as enumerated in 15 U.S.C. § 1692d, Defendants urge this Court to adopt a narrow interpretation of the “abusive and harassing” behavior which forfeits the process server exemption. See Mot. to Dismiss at 5. In particular, Defendants claim that alleged sewer service does not forfeit the exemption because sewer service is not specifically listed in 15 U.S.C. § 1692d as one of the proscribed harassing, oppressive, or abusive behaviors.

The Court is not persuaded by Defendants’ argument that “the filing of a false proof of service cannot be equated with the type of abusive and oppressive conduct specifically identified by the statute.” Mot. at 6. Importantly, the list of proscribed abusive and harassing activities in Section 1692d is non-exhaustive. See 15 U.S.C. § 1692d (listing six harassing and abusive behaviors that violate the statute “[w]ithout limiting the general application” of the statute’s prohibition on harassing, oppressive, or abusive conduct); see also Gonzales v. Arrow Fin. Servs., LLC, 660 F.3d 1055, 1061 (9th Cir.2011) (“The Act includes a non-exhaustive list of examples of proscribed conduct.”). Moreover, courts have specifically held that engaging in sewer service can forfeit the process server exemption. See, e.g., Freeman, 827 F.Supp.2d at 1074 (holding that plaintiff

“sufficiently alleged that Defendants engaged in the practice of `sewer service’ so as to forfeit the process server exemption.”). Similarly, in Spiegel v. Judicial Atty. Servs., No. 09-7163, 2011 WL 382809, at *1 (N.D.Ill. Feb. 1, 2011), a plaintiff filed suit against Judicial Attorney Services, Inc. and an individual process server, claiming that defendants violated the FDCPA’s prohibition on “unfair, harassing, and deceptive” debt collection practices by falsely claiming that they effected personal service on plaintiff in connection with a debt collection lawsuit. The Northern District of Illinois denied defendants’ motion to dismiss based on defendants’ argument that they were exempt from the FDCPA by virtue of the process server exemption because, “if [plaintiff’s] allegations were true, the defendants’ actions would have taken them beyond their role as process servers and rendered them ineligible for the exception.” Id.

Even if sewer service constitutes the type of “abusive and harassing activity” that forfeits the process server exemption, Defendants still dispute that one instance of sewer service suffices. See Mot. to Dismiss at 6. However, Defendants provide no legal support for their “suggestion” that “[a] single isolated incident does not equal the `practice of sewer service’ such that it should obliviate [sic] the process server exemption under the FDCPA.” Id. Moreover, courts have indicated that “the execution of one false proof of service” could “be enough to forfeit the process server exemption.” Freeman, 827 F.Supp.2d at 1074; see also Spiegel, 2011 WL 382809, at *1 (denying defendants’ motion to dismiss based on defendants’ argument that they were exempt from the FDCPA by virtue of the process server exemption even though plaintiff alleged only one act of “sewer service”). Defendants have not provided any cases suggesting the contrary.

In light of Freeman and Spiegel, the Court finds that Holmes has alleged sufficient facts to state a claim that Defendants are not covered by the process server exemption. The Complaint alleges that Defendants engaged in at least one act of sewer service because they “failed to serve court process entrusted to them and instead provide[d] a perjured Proof of Service of Summons.” Compl. ¶ 4. Rather than serving Holmes personally — as Defendants claimed in the Proof of Service — Defendants merely wedged the Summons and Complaint under Holmes’s front door. Further, Holmes alleges that the Proof of Service of Summons describes the person served as a female Caucasian, 50-years-old, with brown hair and brown eyes, 5 feet 8 inches tall, and weighing 165 pounds. See Compl. ¶ 54. However, Holmes is 62-years-old, with blond hair and blue eyes, and weighs 125 pounds. See id. Moreover, Holmes asserts that the Defendants included only limited information on the process server return in an effort shield Defendants from liability if sued. See Compl. ¶ 26. As it may be possible for even one instance of sewer service to forfeit the process server exemption, the Court finds that Holmes has sufficiently alleged that Defendants are “debt collectors” under the FDCPA who are ineligible for the process server exception because of their engagement in “sewer service.” See Freeman, 827 F.Supp.2d at 1074.3

Thus, Defendants’ Motion to Dismiss Plaintiff’s Complaint based on the contention they are not “debt collectors” pursuant to 15 U.S.C. § 1692a(6) of the FDCPA is DENIED.

  1. Whether Defendants Violated any Provisions of the FDCPA

The second issue for the Court to resolve is whether Holmes has alleged conduct that violates any provisions of the FDCPA. Holmes claims that, by filing a false Proof of Service and withholding EDP’s name and process server registration number from the Proof of Service, Defendants violated Sections 1692d, 1692e, 1692e(2), 1692e(10) and 1692f of the FDCPA. See Compl. ¶ 69.

As noted above, Section 1692d prohibits “any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt.” 15 U.S.C. § 1692d. In addition, Section 1692e prohibits a debt collector from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt.” 15 U.S.C. § 1692e. Further, Section 1692f prohibits the use of “unfair or unconscionable means to collect or attempt to collect a debt.” 15 U.S.C. § 1692f.

Holmes asserts that Defendants violated Sections 1692d, 1692e, 1692e(2), 1692e(10) and 1692f of the FDCPA by virtue of their engagement in sewer service. Specifically, Holmes asserts that Defendants violated the FDCPA “by making false and misleading representations, and engaging in unfair and abusive practices” which “include, but are not limited to” the following:

(1) manufacturing and selling a fraudulent Proof of Service of Summons that falsely stated that Plaintiff was personally served with a Summons and Complaint when in fact Plaintiff was not;

(2) manufacturing and selling fraudulent, deceptive, and misleading statements and documents which are used in the collection of consumer debts;

(3) knowingly and intentionally withholding their true name and process server registration numbers from process server returns in violation of California Business and Professions Code § 22356.5(a) with the intent to deceive, misrepresent the true nature of the services being provided, and to conceal and obscure Defendants’ joint responsibility for service of process irregularities; and

(4) aiding, abetting and ratifying the fraud, perjury, breach of official duty and other wrongful acts committed by the other Defendants in this case.

See Compl. ¶ 69.

Despite these contentions, Defendants submit that Holmes has failed to sufficiently allege violations of the FDCPA. In addition to the arguments already raised by Defendants as to why they believe that their actions should not constitute “abusive and harassing” conduct as prohibited by 15 U.S.C. § 1692d, see supra Part III.A.1.b, Defendants argue that Plaintiff’s claim must fail because Defendants have presented a prima facie case of valid service, see Reply Supp. Mot. to Dismiss at 5. As the same factual allegations of “sewer service”

[966 F.Supp.2d 935]

discussed above form the basis for Plaintiff’s allegations of FDCPA violations, the Court finds that Holmes has adequately alleged violations of the FDCPA on this basis. See also Freeman, 827 F.Supp.2d at 1075-76 (finding that allegations of sewer service sufficiently stated a claim under FDCPA Sections 1692d, 1692e, and 1692f).4 Thus, the Court now addresses Defendants’ second argument regarding the presumption of valid service.

The Ninth Circuit has held that “a signed return of service constitutes prima facie evidence of valid service which can be overcome only by strong and convincing evidence.” SEC v. Internet Solutions for Bus., Inc., 509 F.3d 1161, 1163 (9th Cir. 2007). Because Defendants filed a signed Proof of Service, see Compl., Ex. 1, Defendants contend that Plaintiff’s mere declaration that she was not served without an additional showing of evidence is insufficient to refute the presumption of validity. See Reply to Mot. to Dismiss at 5-6.

However, a Rule 12(b)(6) Motion to Dismiss challenges the legal sufficiency of the alleged claims, rather than whether a plaintiff’s evidence establishes a likelihood of prevailing at trial. See Fed.R.Civ.P. 12(b)(6); Freeman, 827 F.Supp.2d at 1069 (“The question presented by a motion to dismiss is not whether the plaintiff will prevail in the action, but whether the plaintiff is entitled to offer evidence in support of the claim.”). Moreover, courts have held that the presumption of validity of a proof of service may be overcome at trial through the presentation of contradictory evidence. See Sherlock v. Montefiore Med. Ctr., 84 F.3d 522, 526 (2d Cir.1996). As a result, the Court is not persuaded that the Complaint should be dismissed for failure to present “strong and convincing evidence” that overcomes the presumption of validity.

Because Holmes has sufficiently alleged that Defendants are “debt collectors” and that Defendants have violated provisions of the FDCPA, Holmes has set forth a prima facie case for violation of the FDCPA. Therefore, the Court DENIES Defendants’ Motion to Dismiss on this basis.

  1. The Rosenthal Act and California’s Litigation Privilege

Next, Defendants argue that Plaintiff’s claim under the Rosenthal Act is barred by California’s litigation privilege, California Civil Code § 47(b). Mot. to Dismiss at 10. Section 47(b) of the California Civil Code provides in relevant part that, “[a] privileged publication or broadcast is one made … [i]n any … judicial proceeding….” Cal. Civ.Code § 47(b). Defendants argue that the alleged filing of a false proof of service constitutes a “privileged communication” made in a judicial proceeding, and thus falls within the scope of California’s litigation privilege.

The California Supreme Court has held that the litigation privilege “applies to any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action.” Rusheen v. Cohen, 37 Cal.4th 1048, 1057, 39 Cal.Rptr.3d 516, 128 P.3d 713 (2006). “The purposes of section 47, subdivision (b), are to afford litigants and witnesses free access to courts without fear of being harassed subsequently by derivative actions, to encourage open channels of communication and zealous advocacy, to promote complete and truthful testimony, to give finality to judgments, and to avoid unending litigation.” Komarova v. Nat’l Credit Acceptance, Inc., 175 Cal.App.4th 324, 336, 95 Cal.Rptr.3d 880 (2009) (quoting Rusheen, 37 Cal.4th at 1063, 39 Cal.Rptr.3d 516, 128 P.3d 713) (internal quotation marks omitted). “To effectuate these purposes, the litigation privilege is absolute and applies regardless of malice.” Id. Consequently, in Rusheen v. Cohen, the California Supreme Court denied an abuse of process claim and held that, “where the gravamen of the complaint is a privileged communication (i.e., allegedly perjured declarations of service) the privilege extends to necessarily related acts (i.e., act of levying).” 37 Cal.4th at 1062, 39 Cal.Rptr.3d 516, 128 P.3d 713.

However, courts have recognized exceptions to the litigation privilege under statutes that: “(1) are `more specific’ than the privilege, and (2) would be `significantly or wholly inoperable’ if the privilege applied.” Komarova, 175 Cal.App.4th at 337, 95 Cal.Rptr.3d 880 (quoting Action Apartment Ass’n, Inc. v. City of Santa Monica, 41 Cal.4th 1232, 1246, 63 Cal.Rptr.3d 398, 163 P.3d 89 (2007)). Until recently, California state courts had not discussed whether the litigation privilege applies to actions brought under the RFDCPA, and federal district courts were divided on the issue. See id. (citing each line of conflicting district court cases).

To support Defendants’ assertion that the litigation privilege applies here, Defendants cite the minority line of district court cases which stand for the proposition that a claim brought under the RFDCPA is barred by California’s litigation privilege. See Reply Supp. Mot. to Dismiss at 4-5 (citing Lopez Reyes v. Kenosian & Miele, LLP, 525 F.Supp.2d 1158 (N.D.Cal.2007), which held that the RFDCPA claim was not exempt from California’s litigation privilege because the claim was based exclusively on communications made within judicial proceedings), see also id. (citing Nickoloff v. Wolpoff & Abramson, LLP, 511 F.Supp.2d 1043 (C.D.Cal.2007), and Taylor v. Quall, 458 F.Supp.2d 1065 (C.D.Cal.2006), for the same general proposition). Defendants also rely heavily on Rusheen v. Cohen for the proposition that the litigation privilege applies to actions taken in collecting a judgment. See Mot. to Dismiss at 11. Yet, while Rusheen discussed the litigation privilege generally, it did not involve an RFDCPA claim. Thus, Rusheen is distinguishable from the instant action on that basis. See Rusheen, 37 Cal.4th 1048, 39 Cal.Rptr.3d 516, 128 P.3d 713.

However, the California Court of Appeal in Komarova v. Nat’l Credit Acceptance, Inc., 175 Cal.App.4th 324, 95 Cal.Rptr.3d 880 (2009), clarified the issue by adopting the majority viewpoint that the litigation privilege does not bar RFDCPA claims. Id. at 337-338, 95 Cal.Rptr.3d 880; see also Santos v. LVNV Funding, LLC, No. 11-02683, 2012 WL 216398, at *2-3 (N.D.Cal. Jan. 24, 2012) (citing Komarova to support the finding that the litigation privilege does not apply to RFDCPA claims); see also Blackburn v. ABC Legal Servs., Inc., No. 11-01298, 2011 WL 8609453, at *2-3 (N.D.Cal. June 16, 2011) (“[T]he Court follows Komarova and holds that the litigation privilege does not apply to bar Plaintiff’s claim under the Rosenthal Act.”). Specifically, the Komarova Court held “that the [litigation] privilege cannot be used to shield violations of the [RFDCPA]” when the two statutes conflict. Komarova, 175 Cal.App.4th at 337-338, 95 Cal.Rptr.3d 880. In so doing, the Court of Appeal in Komarova reasoned that applying the privilege “would effectively vitiate the Rosenthal Act and render the protections it affords meaningless.” Id. at 338, 95 Cal.Rptr.3d 880. Therefore, the Court of Appeal “applie[d] the familiar principle of statutory construction that, in cases of irreconcilable conflict, the specific statute prevails over the general one.” Id. (quoting Oie v. N. Star Capital Acquisitions, L.L.C., 486 F.Supp.2d 1089, 1100 (C.D.Cal.2006)). Here, the litigation privilege similarly conflicts with the RFDCPA as applied in this action, because the privilege would completely shield Defendants from liability for the improper collection of debt.

Nevertheless, Defendants maintain that Komarova is not controlling in the instant action. See Reply Supp. Mot. to Dismiss at 5. Defendants argue that neither Komarova nor any “of the cases cited by Plaintiff where the court denied application of the litigation privilege to state law claims involved cases where the entirety of the alleged conduct took place within the context of litigation such as the filing of a false proof of service.” Reply Supp. Mot. to Dismiss at 5.

Notably, “[t] he California Supreme Court has not ruled on the issue of whether the litigation privilege bars Rosenthal Act claims founded on unfair debt collection practices that occur during the course of litigation.” Huy Thanh Vo v. Nelson & Kennard, 2013 WL 1091207, at *14 (E.D.Cal. Mar. 15, 2013). Nevertheless, the Court finds significant that since the issuance of Komarova — the sole published decision by a California appellate court to address the litigation privilege in the context of the RFDCPA — not “a single federal court has found Rosenthal Act claims to be barred by the litigation privilege.” Id. at *14. In fact, district courts have generally interpreted Komarova as holding broadly that “[t] he California litigation privilege … does not apply to RFDCPA violations.” Santos, No. 11-2683, 2012 WL 216398, at *3; see Blackburn, No. 11-01298, 2011 WL 8609453, at *2 (“The California Court of Appeal … held that the litigation privilege does not apply to bar claims under the Rosenthal Act.”). The Court also finds the reasoning of Komarova to be persuasive in light of the fact that the RFDCPA is a remedial statute, and thus “should be interpreted broadly in order to effectuate its purpose.” Komarova, 175 Cal.App.4th at 340, 95 Cal.Rptr.3d 880 (internal quotation marks and citations omitted); see generally People ex rel. Lungren v. Superior Court, 14 Cal.4th 294, 313, 58 Cal.Rptr.2d 855, 926 P.2d 1042 (1996) (“civil statutes for the protection of the public are, generally, broadly construed in favor of that protective purpose”); see also Welker v. Law Office of Horwitz, 626 F.Supp.2d 1068, 1072 (S.D.Cal.2009) (“[T]he Court finds ample authority that the [California litigation] privilege should not be applied to claims arising under the FDCPA or California’s Rosenthal Act.”).

For the foregoing reasons, the Court declines to dismiss Plaintiff’s RFDCPA claim as barred by the litigation privilege.5 Accordingly, the Court DENIES Defendants’ Motion to Dismiss.

  1. Motion to Strike

Next, Defendants move to strike various portions of Plaintiff’s Complaint as immaterial or scandalous. First, Defendants move to strike as immaterial Holmes’s allegations regarding the filing of a false proof of service because Defendants contend that the allegations are barred by the litigation privilege. Mot. to Strike, ECF No. 7, at 3. As discussed above, the Court rejects this argument. See Komarova, 175 Cal.App.4th at 337-38, 95 Cal.Rptr.3d 880. The Court therefore DENIES Defendants’ Motion to Strike allegations that Defendants filed a false proof of service.

Second, Defendants move to strike as scandalous and immaterial Holmes’s allegations that Defendants engaged in sewer service and other improper business practices. See Mot. to Strike at 5. Scandalous material has been defined as allegations that cast a “cruelly derogatory light” on a party or person. See Righthaven LLC v. Democratic Underground, LLC, 791 F.Supp.2d 968, 977 (D.Nev.2011); In re, Inc. Sec. Litig., 114 F.Supp.2d 955, 965 (C.D.Cal.2000). Immaterial matter is “that which has no essential or important relationship to the claim for relief or the defenses being pleaded.” Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir. 1993), rev’d on other grounds, 510 U.S. 517, 114 S.Ct. 1023, 127 L.Ed.2d 455 (1994) (quoting 5 Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1382, at 706-07 (1990)). The Court finds that Holmes’s allegations do not rise to the level of casting Defendants in a “cruelly derogatory light” and are therefore not “scandalous.” The Court further finds that Defendants have not demonstrated that the allegations of sewer service or improper business practices are entirely unrelated to the claims or that these allegations prejudice Defendants. See id. at 1528; see also Cal. Dep’t of Toxic Substances Control v. Alco Pac., Inc., 217 F.Supp.2d 1028, 1033 (C.D.Cal.2002) (“Given their disfavored status, courts often require a showing of prejudice by the moving party before granting [a motion to strike].”) (internal quotation marks and citation omitted); see also Wailua Assocs. v. Aetna Casualty and Surety Co., 183 F.R.D. 550, 553-54 (D.Haw.1998) (“Matter will not be stricken from a pleading unless it is clear that it can have no possible bearing upon the subject matter of the litigation; if there is any doubt as to whether under any contingency the matter may raise an issue, the motion may be denied ….”) (internal quotation marks and citation omitted). For example, Holmes’s allegations of improper business practices could serve to establish that EDP aided, abetted, and ratified Sulcer’s actions or that Defendants have forfeited the process server exemption. Accordingly, the Court finds that the allegations of sewer service and improper business practices are not immaterial.

Given that motions to strike are generally disfavored and the challenged portions of the Complaint are relevant to the claims, the Court DENIES Defendants’ Motion to Strike. See Cruz, No. 12-CV-00846, 2012 WL 2838957, at *2.


For the foregoing reasons, the Court hereby DENIES Defendants’ Motion to Dismiss, and DENIES Defendants’ Motion to Strike.





  1. As explained in Richardson v. Alliance Tire & Rubber Co., 158 F.R.D. 475 (D.Kan. 1994), the term “sewer service” originated in jurisdictions in which process could be served by professional process servers rather than public officials, and derived from those “process servers [who] once followed a practice of disposing of process given to them to serve (e.g., by throwing it down a sewer) and then falsely returning that they had duly served it.” Id. at 480 n. 5 (quoting 1 Robert C. Casad, Jurisdiction in Civil Actions § 3.01[7][d] (2nd ed.1991)).
  2. On February 28, 2013, the parties filed a joint stipulation to amend the briefing schedule, which the Court hereby grants. See Stipulation, ECF No. 15.
  3. Although Defendants contend that “[e]xtending the provisions of the FDCPA to process servers … would have a chilling effect on process servers and grind the already slow wheels of justice to a halt, or at least a trickle,” Mot. at 2, the Court doubts that such a catastrophic effect will indeed transpire. Notably, pursuant to 15 U.S.C. § 1692k, “[a] debt collector may not be held liable in any action … if the debt collector shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.” 15 U.S.C. § 1692k(c). Thus, while it may ultimately prove true that Sulcer merely made a mistake when serving Holmes and did not indeed engage in “sewer service,” such a determination will turn on evidence that must be evaluated at a different stage of this case. See Fox v. Citicorp Credit Servs., Inc., 15 F.3d 1507, 1514 (9th Cir.1994) (“The language of Section 1692k(c) indicates that the bona fide error exception is an affirmative defense, for which [defendant] has the burden of proof at trial.”).
  4. Defendants also raise for the first time in their Reply in support of the Motion to Dismiss that “[n]either the FDCPA nor the RFDCPA directly regulate service of process,” and “[t]he RFDCPA does not apply to Defendants.” see Reply Supp. Mot. to Dismiss at 7-8. This Court “need not consider arguments raised for the first time in a reply brief.” Zamani v. Carnes, 491 F.3d 990, 997 (9th Cir.2007); see also Gold v. Wolpert, 876 F.2d 1327, 1331 n. 6 (7th Cir.1989) (“It is well settled that new arguments cannot be made for the first time in reply. This goes for new facts too.”). Thus, the Court declines to consider these arguments.
  5. In addition, it is well established that “[t]he California litigation privilege … does not apply to FDCPA claims.” Santos, Case No. 11-02683, 2012 WL 216398 (citing Welker, 626 F.Supp.2d at 1072). Moreover, the litigation privilege also conflicts with and would nullify the UCL. “[B]ecause Plaintiff’s [UCL] claim is premised on violations of the Rosenthal Act… and on violations of the FDCPA, a federal claim to which California’s litigation privilege is inapplicable, Plaintiff’s [UCL] claim is not barred by the litigation privilege either.” Blackburn, 2011 WL 8609453, at *2-3 (following Komarova).
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