-GGH Schwarm v. District Attorney Technical Services, Ltd et al, No. 2:2005cv01304 - Document 225 (E.D. Cal. 2011)
Court Description: ORDER signed by Judge William B. Shubb on 3/31/11 ORDERING plaintiffs motion for summary judgment with respect to DATS violations is GRANTED; plaintiffs motion for summary judgment with respect to an award of actual damages against DATS in the amount of $741,387.05 be, and the same hereby is, GRANTED; plaintiffs motion for summary judgment with respect to statutory damages be, and the same hereby is, DENIED; plaintiffs motion for summary judgment with respect to attorneys fees and costs is DENIED without prejudice; and Craigheads motion for reconsideration is DENIED. The Clerk of the Court is instructed to enter final judgment in favor of plaintiffs against Craighead and DATS, holding them jointly and severally liable to plaintiffs in the amount of $741,387.05. (Carlos, K)
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-GGH Schwarm v. District Attorney Technical Services, Ltd et al Doc. 225 1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 EASTERN DISTRICT OF CALIFORNIA 9 ----oo0oo---10 11 12 13 KRISTY SCHWARM, PATRICIA FORONDA, and JOSANN ANCELET, on behalf of themselves and others similarly situated, NO. CIV. 05-01304 WBS GGH 14 15 16 17 18 19 20 21 Plaintiffs, v. HENRY CRAIGHEAD, an individual, DISTRICT ATTORNEY TECHNICAL SERVICES, LTD., a Nevada Corporation, dba COMPUTER SUPPORT SERVICES, aka CHECK RESTITUTION/PROSECUTION PROGRAM, JOHN Q. LAWSON, an individual, MARY A. CHASE, an individual; and DOES 1 through 20, inclusive, ORDER RE: MOTION FOR SUMMARY JUDGMENT AND MOTION FOR RECONSIDERATION Defendants. / 22 ----oo0oo---23 Defendant Henry Craighead founded defendant District 24 Attorney Technical Services, Ltd. (“DATS”), to collect debts 25 pursuant to California’s Bad Check Diversion Act (“BCDA”), Cal. 26 Penal Code §§ 1001.60-1001.67. Under the BCDA, district 27 attorneys’ offices could establish diversion programs for debtors 28 1 Dockets.Justia.com 1 who wrote bad checks and contract with private entities, such as 2 DATS, to conduct the programs. 3 on DATS’ collection efforts, plaintiff Kristy Schwarm initiated 4 this class action on June 29, 2005, alleging claims for 1) 5 violations of the Fair Debt Collection Practices Act (“FDCPA”), 6 15 U.S.C. §§ 1692-1692p; 2) violations of the Civil Rights Act, 7 42 U.S.C. § 1983, based on alleged procedural due process 8 violations; 3) state constitutional procedural due process 9 violations; 4) fraudulent misrepresentation; and 5) negligent 10 Cal. Penal Code § 1001.60. Based misrepresentation. 11 On March 4, 2006, this court certified the case as a 12 class action for “[a]ll persons who wrote checks in California to 13 whom DATS mailed collection demands concerning dishonored checks, 14 since June 29, 2003,” and up until the date of the court’s Class 15 Certification Order.1 16 The court named Schwarm as the class representative and 17 subsequently granted plaintiffs’ motion to add plaintiffs 18 Patricia Foronda and Josann Ancelet as class representatives. 19 (May 25, 2007 Order 5 (Docket No. 134).) (Mar. 4, 2006 Order 20 (Docket No. 42).) 20 After DATS filed Chapter 7 bankruptcy, this action was 21 automatically stayed on August 18, 2006, pursuant to 11 U.S.C. § 22 362(a). 23 stay as to Craighead only and, on May 5, 2008, granted On September 20, 2006, this court lifted the automatic 24 25 26 27 28 1 The court also certified the following subclasses: “(1) all members of the umbrella class, from whom DATS attempted to collect, or collected money for checks written for personal, family, or household purposes, since June 29, 2004; and (2) all members of the umbrella class from whom [defendants] attempted to collect, or collected money, since June 29, 2003.” (Mar. 4, 2006 Order 20 (Docket No. 42).) 2 1 plaintiffs’ motion for summary judgment with respect to 2 Craighead’s violations of subsections 1692e(2)-(5), (9)-(11), 3 (14), 1692f(1), and 1692g(a) of the FDCPA. 4 552 F. Supp. 2d 1056 (E.D. Cal. 2008) (“Schwarm I”). 5 order, the court denied plaintiffs’ motion for summary judgment 6 on their claims based on alleged violations of their federal and 7 state procedural due process rights. 8 months later, plaintiffs sought summary judgment on the issue of 9 damages, and the court awarded plaintiffs actual damages against Schwarm v. Craighead, Id. at 1082-87. In the same Three 10 Craighead in the amount of $741,387.05. 11 No. 2:05-1304, 2008 WL 3286797 (E.D. Cal. Aug. 6, 2008) (“Schwarm 12 II”). 13 Schwarm v. Craighead, In granting plaintiffs’ motions for summary judgment, 14 the court found that Craighead was personally liable for 15 violations of the FDCPA and the resulting damages based on his 16 collection efforts on behalf of DATS. 17 at 1070-74. 18 findings would neither have a preclusive effect nor serve as the 19 law of the case as to DATS because the case against it was stayed 20 due to its pending bankruptcy. 21 WL 3286797, at *1. Schwarm I, 552 F. Supp. 2d In both cases, the court emphasized that its Id. at 1068 n.8; Schwarm II, 2008 In DATS’ pending bankruptcy, plaintiffs filed claims in 22 23 excess of four million dollars and ultimately received 24 $160,242.43 from the bankruptcy estate.2 (Pls.’ Req. for 25 26 27 28 2 The court takes judicial notice of the Trustee’s Final Report (Pls.’ Req. for Judicial Notice Ex. 3) and the Final Decree (id. Ex. 4) from DATS’ bankruptcy case. See Reusser v. Wachovia Bank, N.A., 525 F.3d 855, 857 n.1 (9th Cir. 2008) (“We take judicial notice of the bankruptcy court order, because it is 3 1 Judicial Notice Ex. 3.) 2 Final Decree indicating that the administration of the estate was 3 complete, the automatic stay as to DATS was lifted. 4 213.) 5 After the bankruptcy court issued a (Docket No. Now, plaintiffs move for summary judgment against DATS 6 based on the exact conduct and damages at issue in their prior 7 motions for summary judgment against Craighead. 8 plaintiffs seek summary judgment against DATS with respect to its 9 alleged violations of subsections 1692e(2)-(5), (9)-(11), (14), Specifically, 10 1692f(1), and 1692g(a) of the FDCPA and joint liability for 11 $741,387.05 in actual damages. 12 against Craighead and DATS of $1,000.00 in statutory damages for 13 each named plaintiff under subsection 1692k(a)(2)(A). 14 plaintiffs request the court to enter final judgment against 15 Craighead and DATS, holding them jointly and severally liable for 16 actual damages of $741,387.05 and statutory damages of $3,000.00 17 and attorney’s fees and costs pursuant to § 1692k(a)(3). 18 filed a Statement of Non-Opposition to the motion and Craighead 19 filed a document titled “Motion to Dismiss Summary Judgment upon 20 New Evidence for the Defense,” which the court will construe as a 21 motion for reconsideration of the court’s decisions in Schwarm I 22 and Schwarm II. 23 24 1. Plaintiffs also seek an award Lastly, DATS Violations of the FDCPA The FDCPA governs the conduct of debt collectors, which 25 the Act defines as “any person who uses any instrumentality of 26 interstate commerce . . . in any business the principal purpose 27 28 a matter of public record.”). 4 1 of which is the collection of any debts, or who regularly 2 collects or attempts to collect, directly or indirectly, debts 3 owed or due or asserted to be owed or due another.” 4 1692a(6). 5 constitute “persons” under subsection 1692(a)(6) and may thereby 6 be liable as a “debt collectors” under the Act. 7 Citicorp Credit Servs., Inc., 15 F.3d 1507 (9th Cir. 1994); see 8 also 1 U.S.C. § 1 (“In determining the meaning of any Act of 9 Congress, unless the context indicates otherwise . . . the words 15 U.S.C. § Courts have routinely concluded that corporations E.g., Fox v. 10 ‘person’ and ‘whoever’ include corporations, companies, 11 associations, firms, partnerships, societies, and joint stock 12 companies, as well as individuals . . . .”); FCC v. AT&T Inc., 13 --- S.Ct. ----, ----, 2011 WL 691243, at *5 (2011) (“We have no 14 doubt that ‘person,’ in a legal setting, often refers to 15 artificial entities. 16 compare 15 U.S.C. § 1692a(6), with 15 U.S.C. § 1692a(3) (defining 17 “consumer” as “any natural person obligated or allegedly 18 obligated to pay any debt”) (emphasis added). 19 corporation that exclusively engaged in the practice of 20 collecting debts, is therefore subject to the FDCPA. The Dictionary Act makes that clear.”);; DATS, a 21 In its May 2, 2008, Order, the court held Craighead 22 personally liable for violations of subsections 1692e(2)-(5), 23 (9)-(11), (14), 1692f(1), and 1692g(a) of the FDCPA based on 24 DATS’ collection efforts. 25 from his role within DATS, which included serving as its founder, 26 chief executive officer, president, and on its Board of 27 Directors, designing its automated software, managing and 28 maintaining its software program and computer system, marketing Craighead’s personal liability derived 5 1 its products, negotiating its contracts with district attorneys’ 2 offices, managing its collection efforts, and interfacing with 3 clients and debtors. 4 Although the court’s prior findings are not the law of the case 5 as to DATS and do not have preclusive effect, the court’s 6 discussion throughout its order illustrates that Craighead’s 7 conduct giving rise to his liability under the FDCPA was 8 indistinguishable from that of DATS. Schwarm I, 552 F. Supp. 2d at 1073-74. 9 More importantly, in light of DATS’ non-opposition to 10 plaintiffs’ motion for summary judgment, the court incorporates 11 its prior analysis herein, id. at 1074-82, and thereby concludes 12 that DATS’ conduct violated subsections 1692e(2)-(5), (9)-(11), 13 (14), 1692f(1), 1692f(1), and 1692g(a) of the FDCPA for the 14 reasons explained in detail in its prior order. 15 Similarly, the court’s prior award of $741,387.05 in 16 actual damages against Craighead was based exclusively on the 17 diversion fees that DATS collected. 18 dispute the amount or its liability based on those fees in the 19 pending motion, it has declined to do so and the court therefore 20 incorporates its prior analysis herein. 21 3286797, at *2-3. While DATS was able to See Schwarm II, 2008 WL Accordingly, the court will grant plaintiffs’ motion 22 23 for summary judgment with respect to DATS’ violations of the 24 aforementioned subsections of the FDCPA and liability for actual 25 damages in the amount of $741,387.05. 26 2. Statutory Damages 27 Based on a single violation, the FDCPA allows the court 28 to award named plaintiffs “additional damages . . . not exceeding 6 1 $1,000.” 2 to award statutory damages and the amount of any such award, the 3 court must consider “the frequency and persistence of 4 noncompliance by the debt collector, the nature of such 5 noncompliance, and the extent to which such noncompliance was 6 intentional.” 7 15 U.S.C. § 1692k(a)(2)(A)-(B). In determining whether Id. § 1692k(b)(1). Plaintiffs previously sought an award of statutory 8 damages for the named plaintiffs and the court denied their 9 motion on that issue, concluding that whether Craighead’s 10 “noncompliance was intentional” was a disputed factual issue. 11 opposition to that motion, Craighead represented that he believed 12 he was lawfully implementing the BCDA at the request of and under 13 the direction of California district attorneys’ offices. 14 Although he has not filed a similar declaration in opposition to 15 the pending motion, the court will not interpret the silence of a 16 pro se party as a concession. 17 if Craighead believed he was lawfully implementing the BCDA at 18 the request of and under the direction of California district 19 attorneys’ offices, plaintiffs would be entitled to little, if 20 any, statutory damages under § 1692k(a)(2). 21 In As the court previously concluded, It is also difficult for the court to find that the 22 “nature” of Craighead and DATS’ noncompliance is severe enough to 23 merit statutory damages when DATS’ collection efforts were 24 performed pursuant to contracts with district attorneys’ offices. 25 While DATS’ procedures did not comply with the FDCPA and did not 26 follow all the procedures required for a bad check diversion 27 program under the BCDA, see Schwarm I, 552 F. Supp. 2d at 1078- 28 79, the court cannot overlook the fact that DATS and Craighead 7 1 operated under contracts with district attorneys’ offices. 2 individual contracting to work with a district attorney’s office 3 should be able to maintain some level of confidence that his 4 conduct pursuant to that contract comports with the law.3 5 A lay Accordingly, the court will deny plaintiffs’ motion for 6 summary judgment on the issue of statutory damages because a 7 genuine issue of material fact exists with respect to whether 8 Craighead’s violations of the FDCPA were intentional and 9 plaintiffs have failed to show that the “nature” of the 10 11 noncompliance merits an award. 3. 12 Abandonment of Plaintiffs’ Remaining Claims In addition to their claims for violations of the FDCPA 13 and federal and state procedural due process rights, plaintiffs’ 14 First Amended Complaint also alleges state law claims for 15 fraudulent and negligent misrepresentation. 16 indicate that they do not intend to pursue their remaining state 17 law claims as the actual damages awarded against DATS and 18 Craighead exceed defendants’ assets. Plaintiffs now Plaintiffs also appear to 19 20 3 21 22 23 24 25 26 27 28 The significance of the district attorneys’ involvement with the process is further illustrated by Congress’s amendment of the FDCPA in 2006 to exempt qualifying private entities that contract with district attorneys to operate “bad check enforcement programs.” 15 U.S.C. § 1692p; see also Schwarm I, 552 F. Supp 2d at 1069 (concluding that § 1692p does not apply retroactively to shield Craighead from liability under the FDCPA). To counter the significance of the involvement of the district attorneys’ offices, plaintiffs submit a letter from the Mendocino County District Attorney’s Office, informing DATS and Craighead that the office had “reviewed the lawsuit pending against” them and expressing concerns about DATS’ collection letters and procedures. (Pls.’ App’x Ex. 5 (Docket No. 208).) Notably, however, none of the district attorneys’ offices expressed concerns about DATS collection procedures prior to this lawsuit. 8 1 have abandoned their remaining claims for actual damages stemming 2 from bad check fees DATS collected, see Schwarm I, 552 F. Supp. 3 2d at 1080 n.17, the claims pertaining to Subclass 2, and their 4 claim for statutory damages for the class. 5 Pursuant to Federal Rule of Civil Procedure 23(e), 6 however, “claims, issues, or defenses of a certified class may be 7 settled, voluntarily dismissed, or compromised only with the 8 court’s approval.” 9 also Diaz v. Trust Terr. of Pac. Islands, 876 F.2d 1401, 1408 Fed. R. Civ. P. 23(e) (emphasis added); see 10 (9th Cir. 1989) (“The district court must ensure that the 11 representative plaintiff fulfills his fiduciary duty toward the 12 absent class members, and therefore must inquire into the terms 13 and circumstances of any dismissal or compromise to ensure that 14 it is not collusive or prejudicial.”) (citations omitted). 15 16 Rule 23(e) specifically provides: The following procedures apply to a proposed settlement, voluntary dismissal, or compromise: 17 18 19 20 21 22 23 24 25 26 27 (1) The court must direct notice in a reasonable manner to all class members who would be bound by the proposal. (2) If the proposal would bind class members, the court may approve it only after a hearing and on finding that it is fair, reasonable, and adequate. (3) The parties seeking approval must file a statement identifying any agreement made in connection with the proposal. (4) If the class action was previously certified under Rule 23(b)(3), the court may refuse to approve a settlement unless it affords a new opportunity to request exclusion to individual class members who had an earlier opportunity to request exclusion but did not do so. (5) Any class member may object to the proposal if it requires court approval under this subdivision (e); the objection may be withdrawn only with the court’s approval. 28 9 1 While Rule 23(e) does not provide exceptions to its 2 notice requirements, courts have excused compliance with the 3 notice requirements when doing so would not prejudice the class. 4 See Gomez by Hernandez v. O’Connell, No. 93 C 3268, 1996 WL 5 51202, at *8 (N.D. Ill. Jan. 30, 1996) (“Although the language of 6 Rule 23(e) is mandatory in character, there are exceptions to the 7 notice requirements. . . . One exception is when the court finds 8 dismissal will not result in any prejudice to the interests of 9 absent class members.”); Austin v. Pa. Dep’t of Corr., 876 F. 10 Supp. 1437, 1455 (E.D. Pa. Jan. 17, 1995) (“Although Rule 23(e) 11 states without exception that ‘notice of the proposed dismissal 12 or compromise shall be given,’ courts have consistently held that 13 notice to class members is required only when consistent with the 14 rule’s purpose--the protection of absent class members.”). Here, DATS’ bankruptcy estate is closed and plaintiffs 15 16 have received only $160,242.43 from the estate--only slightly 17 more than twenty percent of the actual damages awarded to 18 plaintiffs herein. 19 about plaintiffs’ abandonment of the aforementioned claims and 20 issues would be a futile exercise when defendants’ financial 21 status would prevent any further recovery for plaintiffs if these 22 claims were successfully pursued. 23 plaintiffs’ decision to abandon the remainder of its claims and 24 issues. 25 4. 26 Requiring notice to the 36,407 class members The court therefore approves Attorney’s Fees and Costs Plaintiffs request an award of attorney’s fees pursuant 27 to 15 U.S.C. § 1692k(a)(3), which entitles plaintiffs in a 28 successful action under the FDCPA to “the costs of the action, 10 1 together with a reasonable attorney’s fee as determined by the 2 court.” 3 attorney’s fees and costs, the court will address any such award 4 when plaintiffs file a motion for attorney’s fees and their Bill 5 of Costs. 6 5. While § 1692k(a)(3) clearly entitles plaintiffs to their Craighead’s Motion for Reconsideration A district court may grant a motion for reconsideration 7 8 under Federal Rule of Civil Procedure 59(e) “if the district 9 court (1) is presented with newly discovered evidence, (2) 10 committed clear error or the initial decision was manifestly 11 unjust, or (3) if there is an intervening change in controlling 12 law.” 13 (internal quotation marks omitted). 14 reconsideration, Craighead indicates that, in a case alleging 15 FDCPA and state law claims against an entity similar to DATS, the 16 jury returned a verdict in favor of defendant. 17 claims and facts in that case are analogous to the claims and 18 facts in the case at hand, a jury verdict contrary to this 19 court’s prior decision does not amount to “an intervening change 20 in controlling law.” 21 identified a reason warranting reconsideration under Rule 59(e), 22 the court will deny his motion for reconsideration of the court’s 23 decisions in Schwarm I and Schwarm II. Zamani v. Carnes, 491 F.3d 990, 997 (9th Cir. 2007) In his motion for Assuming the Accordingly, because Craighead has not 24 IT IS HEREBY ORDERED that 25 (1) plaintiffs’ motion for summary judgment with 26 respect to DATS’ violations of subsections 1692e(2)-(5), (9)- 27 (11), (14), 1692f(1), and 1692g(a) of the FDCPA be, and the same 28 hereby is, GRANTED; 11 1 (2) plaintiffs’ motion for summary judgment with 2 respect to an award of actual damages against DATS in the amount 3 of $741,387.05 be, and the same hereby is, GRANTED; 4 5 (3) plaintiffs’ motion for summary judgment with respect to statutory damages be, and the same hereby is, DENIED; 6 (4) plaintiffs’ motion for summary judgment with 7 respect to attorney’s fees and costs is DENIED without prejudice; 8 and 9 10 (5) Craighead’s motion for reconsideration is DENIED. The Clerk of the Court is instructed to enter final 11 judgment in favor of plaintiffs against Craighead and DATS, 12 holding them jointly and severally liable to plaintiffs in the 13 amount of $741,387.05. 14 DATED: March 31, 2011 15 16 17 18 19 20 21 22 23 24 25 26 27 28 12
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