A panel of judges in California has ruled that a lawsuit against a collection agency brought by the Kern County (California) district attorney can proceed after the agency previously won a dismissal in a lower court.

Persolve LLC, which uses legal collections to pursue debts, was sued for alleged violations of the Fair Debt Collection Practices Act (FDCPA) and California's Rosenthal Act, a fair collections act. The agency won a dismissal of the suit after invoking its litigation privilege, arguing it was barred from the legal action because the collection communications related to anticipated litigation.

Kern County District Attorney Lisa Green appealed on the basis that applying litigation privilege to public Unfair Competition Law (UCL) actions would make the collection statutes inoperable. Only individuals who are in debt can bring suit under the FDCPA and Rosenthal Act, so Green sued under California's UCL.

The state's Fifth Appellate District Court in Fresno, Calif., sided with Green, writing that litigation privilege is "not without limit." The panel said that the district attorney's action "borrowed' banned practices from the FDCPA and Rosenthal Act, writing:

Where, as here, the “borrowed” statute is more specific than the litigation privilege and the two are irreconcilable, unfair competition law claims based on conduct specifically prohibited by the borrowed statute are excepted from the litigation privilege…Accordingly, the People’s unfair competition law claims that are based on conduct that is specifically prohibited by the [Rosenthal] Act and/or the [FDCPA] are not barred by the litigation privilege.
The three-judge panel reversed the lower court's ruling, sending it to California's Superior Court for further proceedings.

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