Carrizosa et al v. Stassinos et al, No. 5:2005cv02280 - Document 311 (N.D. Cal. 2010)
Court Description: ORDER granting 305 MOTION for Summary Judgment. Signed by Judge Whyte on 10/29/10. (rmwlc2, COURT STAFF) (Filed on 10/29/2010)
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Carrizosa et al v. Stassinos et al Doc. 311 1 2 3 4 E-FILED on 10/29/10 5 6 7 IN THE UNITED STATES DISTRICT COURT 9 FOR THE NORTHERN DISTRICT OF CALIFORNIA 10 United States District Court For the Northern District of California 8 SAN JOSE DIVISION 11 12 13 RICHARD L. CARRIZOSA and MARY PEA, on behalf of themselves and others similarly situated, 14 15 16 17 Plaintiff, No. C-05-02280 RMW ORDER GRANTING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT v. PAUL R. STASSINOS, an individual, ALAN MECHAM, an individual, LEGAL RECOVERY SERVICES, INC., a California corporation, and DOES 1-20, [Re Docket No. 305] 18 Defendants. 19 20 21 22 23 Plaintiffs Richard L. Carrizosa and Mary Pea move for summary judgment against defendants Legal Recovery Services, Inc. ("LRS") and Alan Mecham. The motion is unopposed. For the reasons set forth below, the court grants the motion. I. BACKGROUND 24 25 26 27 28 LRS is a debt collection firm started by Alan Mecham and his then-wife. LRS worked with defendant Paul Stassinos, an attorney, to collect on dishonored checks by sending letters demanding payment. A more detailed factual background for this case is set forth in the court's January 9, 2009 order. See Dkt. No. 242 at 2-4. ORDER GRANTING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT—No. C-05-02280 RMW CCL Dockets.Justia.com 1 Plaintiffs Carrizosa and Pea brought suit on behalf of themselves and all others similarly 2 situated against LRS, Mecham, and Stassinos for violation of the Fair Debt Collection Practices Act 3 ("FDCPA") and the California Unfair Competition Law ("UCL"). On March 30, 2009, the court 4 certified the following class: 5 6 7 Umbrella class: All persons who wrote checks in California to whom any defendant mailed letters at any time after June 5, 2001, that contained any of the following elements: a. The letter was on the letterhead of "Law Office," the "Law Office of Paul R.Stassinos," or had a signature block for "Paul R. Stassinos, Attorney at Law." 8 9 b. The letter was on the letterhead of a creditor, such as "P.W. Supermarkets," "Lifetouch," or any other creditor, and not on the letterhead of Paul R. Stassinos or Legal Recovery Services, Inc. United States District Court For the Northern District of California 10 c. The letter included a demand for interest. 11 12 13 14 15 16 17 d. The letter was addressed to two persons, and not just to the person who wrote the check that defendants were attempting to collect. Sub-class 1: [FDCPA class]: All members of the umbrella class, from whom defendant attempted to collect, or collected money for checks written for personal, family, or household purposes, since June 5, 2004. Sub-class 2: [UCL class]: All members of the umbrella class from whom defendant collected interest for checks written for personal, family, or household purposes, since June 5, 2001. Excluded from the class is anyone who has litigation currently pending against any of the defendants, alleging the same claims that are being alleged in this action. 18 Dkt. No. 270 at 5-6. 19 On June 11, 2010, the court stayed the action against Stassinos in light of his pending 20 bankruptcy action. Plaintiffs now move for summary judgment against LRS and Mecham. 21 II. ANALYSIS 22 A. Mecham's Liability 23 The FDCPA defines a "debt collector" as "any person who uses any instrumentality of interstate 24 commerce or the mails in any business the principal purpose of which is the collection of any debts, or 25 who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be 26 owed or due another." 15 U.S.C. § 1692a(6). Thus, "under the plain language of the FDCPA, an 27 individual can be considered a 'debt collector' and be held personally liable without piercing the 28 corporate veil if the individual materially participated in the debt collection activities." Del Campo v. ORDER GRANTING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT—No. C-05-02280 RMW CCL 2 1 Am. Corrective Counseling Serv., Inc., 2010 U.S. Dist. LEXIS 62060, at *21 (N.D. Cal. June 3, 2010); 2 see also Kistner v. Law Offices of Michael P. Margelefsky, LLC, 518 F.3d 433, 437-48 (6th Cir. 2008) 3 (sole member of LLC may be found individually liable for violation of the FDCPA without piercing the 4 corporate veil); Pollice v. National Tax Funding, L.P., 225 F.3d 379, 405 n.29 (3d Cir. 2000)("a general 5 partner exercising control over the affairs of such a partnership may be held liable under the FDCPA 6 for the acts of the partnership"). Throughout the class period, Alan Mecham has been a shareholder, director, Vice President, 8 Secretary, and Chief Financial Officer of LRS. Dkt. No. 306 Ex. 4 at 2. As Vice President, Mecham 9 was in charge of overseeing the operation of LRS, and he spent 50 to 60 hours per week on LRS 10 United States District Court For the Northern District of California 7 business. Dkt. No. 307 Ex. 4 ("David Mecham Dep.") 20:17-18; Dkt. No. 306 Ex. 5 at 11. He had the 11 ultimate authority to decide the terms of agreements entered into with merchants and also had the 12 authority to make decisions regarding the timing and type of collection letters that were sent. Dkt. No. 13 307 Ex. 3 ("Alan Mecham Dep.") 33:20-34:4. 153:14-19; David Mecham Dep. 186:3-11. Because 14 Mecham materially participated in the debt collection activities of LRS, he can be held personally liable 15 for LRS's violations of the FDCPA. 16 B. 17 The FDCPA prohibits use of unfair or unconscionable means to collect or attempt to collect any 18 debt, including "[t]he collection of any amount (including any interest, fee, charge, or expense incidental 19 to the principal obligation) unless such amount is expressly authorized by the agreement creating the 20 debt or permitted by law." 15 U.S.C. § 1692f(1). Accordingly, both this court and the California 21 Supreme Court have found that prejudgment interest is not recoverable if treble damages or service 22 charges are assessed by the debt collector. Dkt. No. 242 at 17; see also Imperial Merchant Serv., Inc. 23 v. Hunt, 47 Cal. 4th 381, 384 (2009). Collection of Prejudgment Interest 24 It is undisputed that LRS assessed interest on unpaid checks once they "went into treble 25 damages," meaning payment had not been made within 30 days of written demand for payment. Dkt. 26 No. 307 Ex. 2 ("Stassinos 9/18/07 Dep.") 181:19-24; see Cal. Civ. Code § 1719 (setting forth statutory 27 requirements for collecting treble damages). The court therefore grants summary judgment of liability 28 ORDER GRANTING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT—No. C-05-02280 RMW CCL 3 1 against LRS and Mecham for violating 15 U.S.C. § 1692f(1) by seeking to collect both prejudgment 2 interest and treble damages. C. 4 The FDCPA prohibits use of any false, deceptive, or misleading representations, including "[t]he 5 use of any business, company, or organization name other than the true name of the debt collector's 6 business, company, or organization," in connection with the collection of any debt. 15 U.S.C. § 7 1692e(14). It is undisputed that LRS sometimes sent letters using the creditor's name (e.g. PW 8 Supermarkets, Inc. or Lifetouch) rather than its own name. See Dkt. No. 306 Ex. 6; see also Dkt. No. 9 307 Ex. 1 ("Stassinos 4/1/05 Dep.") 180:7-11. The court therefore grants summary judgment of liability 10 United States District Court For the Northern District of California 3 against LRS and Mecham for violating 15 U.S.C. § 1692e(14) by sending letters in the creditor's name. 11 D. Sending Collection Letters in the Creditor's Name Demanding Treble Damages or Service Charges From Persons Who Had Not Passed a Check on Insufficient Funds 12 As discussed above, the FDCPA prohibits collecting or trying to collect amounts that are neither 13 expressly authorized by the debt agreement nor permitted by law. 15 U.S.C. § 1692f(1). Section 1719 14 of the California Civil Code permits collection of service charges or treble damages against "any person 15 who passes a check on insufficient funds." Cal. Civ. Code § 1719(a)(1),(2). The statute defines "pass 16 a check on insufficient funds" to mean "to make, utter, draw, or deliver any check, draft, or order for 17 the payment of money upon any bank, depository, person, firm, or corporation that refuses to honor the 18 check, draft, or order . . . ." Id. § 1719(a)(6). Accordingly, only the person who wrote or delivered the 19 check is liable for services charges or treble damages, and it is a violation of the FDCPA to seek to 20 collect services charges or treble damages from someone other than the person who wrote or delivered 21 the check. 22 It is undisputed that if a check listed the names of two individuals (as joint account holders), 23 LRS's standard practice was to address its demand letters, including letters seeking to collect service 24 charges or treble damages, to both individuals, even if the check had only been signed by one person. 25 See Stassinos 9/18/07 Dep. 193:24-194:1, 197:19-22. As a matter of common experience, most personal 26 checks are signed by just one individual. See id. 194:22-24. Consequently, LRS's standard practice 27 often resulted in seeking to collect service charges or treble damages from persons who had not passed 28 a check on insufficient funds. The experience of defendant Pea is one such example. As discussed in ORDER GRANTING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT—No. C-05-02280 RMW CCL 4 1 the court's January 9, 2009 order, Pea was not a person who had passed a check on insufficient funds, 2 but because her name was listed on the bounced check, the demand letter seeking treble damages on the 3 check was addressed to her. See Dkt. No. 242 at 13; Stassinos 9/18/07 Dep. 196:13-17. The court thus 4 grants summary judgment of liability against LRS and Mecham for violating 15 U.S.C. § 1692f(1) by 5 seeking to collect service charges or treble damages from individuals other than the person who passed 6 a check on insufficient funds. E. 8 The California Unfair Competition Law ("UCL") prohibits "any unlawful, unfair or fraudulent 9 business act or practice." Cal. Bus. & Prof. Code § 17200. "In proscribing 'any unlawful . . . business 10 United States District Court For the Northern District of California 7 act or practice,' Business and Professions Code section 17200 'borrows' violations of other laws and 11 treats these violations, when committed pursuant to a business activity, as unlawful practices 12 independently actionable under the UCL and subject to the distinct remedies provided thereunder." 13 Cruz v. PacifiCare Health Sys., Inc., 30 Cal. 4th 303, 339 (2003). Because LRS and Mecham's 14 violations of the FDCPA are committed pursuant to the business activity of debt collection, the court 15 grants summary judgment of liability against LRS and Mecham for violation of the UCL. Violation of the UCL 16 F. 17 The FDCPA provides for both actual damages and statutory damages: 18 Except as otherwise provided by this section, any debt collector who fails to comply with any provision of this title with respect to any person is liable to such person in an amount equal to the sum of-- 19 20 21 Damages & Restitution (1) any actual damage sustained by such person as a result of such failure; (2) (A) in the case of any action by an individual, such additional damages as the court may allow, but not exceeding $ 1,000; or 22 24 (B) in the case of a class action, (i) such amount for each named plaintiff as could be recovered under subparagraph (A), and (ii) such amount as the court may allow for all other class members, without regard to a minimum individual recovery, not to exceed the lesser of $ 500,000 or 1 per centum of the net worth of the debt collector . . . . 25 15 U.S.C. § 1692k(a). The UCL provides for restitution "as may be necessary to restore to any person 26 in interest any money or property, real or personal, which may have been acquired by means of such 27 unfair competition." Cal. Bus. & Prof. Code § 17203. 23 28 ORDER GRANTING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT—No. C-05-02280 RMW CCL 5 Plaintiffs seek actual damages and restitution in the amount of money that LRS collected in 2 unlawful prejudgment interest. LRS collected $150,154.08 in unlawful interest charges from class 3 members. See Dkt. No. 306 ¶ 2, Ex. 1. Thus, the class is entitled to $150,154.08 in actual damages and 4 restitution. Plaintiffs also seek prejudgment interest on their award of restitution. Under California 5 Civil Code § 3287, "every person who is entitled to recover damages certain, or capable of being made 6 certain by calculation, and the right to recover which is vested in him upon a particular day, is entitled 7 also to recover interest thereon from that day." The California Constitution provides that "[i]n the 8 absence of the setting of such rate by the Legislature, the rate of interest on any judgment rendered in 9 any court of the state shall be 7 percent per annum." Cal. Const. Art. XV § 1. This provision applies 10 United States District Court For the Northern District of California 1 to both prejudgment interest and post-judgment interest. Lund v. Albrecht, 936 F.2d 459, 465 (9th Cir. 11 1991). Since there is no California legislation specifying the rate of prejudgment interest for UCL 12 claims, the interest rate of 7% applies. Accordingly, the class is entitled to recover $73.499.27 in 13 prejudgment interest. See Dkt. No. 306 ¶ 2, Ex. 1. 14 Plaintiffs seek statutory damages of $1,000 per debt collector per named plaintiff. In 15 determining the amount of statutory damages to award, courts are to consider "the frequency and 16 persistence of noncompliance by the debt collector, the nature of such noncompliance, the resources of 17 the debt collector, the number of persons adversely affected, and the extent to which the debt collector's 18 noncompliance was intentional." 15 U.S.C. § 1692k(b)(2). In this case, LRS violated the FDCPA as 19 part of its standard operating procedure. See Stassinos 9/18/07 Dep. 181:19-24, 193:24-194:1, 197:19- 20 22; Dkt. No. 306 Ex. 6; Stassinos 4/1/05 Dep. 180:7-11. Large numbers of persons were affected. See 21 Dkt. No. 306 ¶ 2, Ex. 1. However, plaintiffs have not presented evidence regarding the resources of the 22 debt collector or showing the extent to which the debt collector's noncompliance was intentional. The 23 court finds that LRS and Mecham are jointly and severally liable for $1,000 in statutory damages for 24 each named plaintiff. 25 G. Injunctive Relief 26 The UCL allows courts to provide injunctive relief. Cal. Bus. & Prof. Code § 17203. Plaintiffs 27 seek a permanent injunction prohibiting LRS and Mecham from engaging in the violations of the 28 FDCPA discussed above. The court finds that injunctive relief is appropriate. In connection with ORDER GRANTING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT—No. C-05-02280 RMW CCL 6 1 checks written for a personal, family or household purpose, LRS and Mecham are permanently enjoined 2 from: (a) seeking to collect prejudgment interest on a check in addition to service charges or treble 3 damages pursuant to California Civil Code Section 1719, (b) sending collection letters in the name of 4 the creditor that referred the account for collection, and (c) demanding payment of service charges or 5 treble damages pursuant to California Civil Code Section 1719 from any person who has not passed a 6 check on insufficient funds. 7 III. ORDER 8 For the foregoing reasons, the court's ruling is as follows: 9 1. The court grants summary judgment of liability against LRS and Mecham for: (a) United States District Court For the Northern District of California 10 violating 15 U.S.C. § 1692f(1) and the UCL by seeking to collect both prejudgment 11 interest and treble damages, (b) violating 15 U.S.C. § 1692e(14) and the UCL by sending 12 letters in the creditor's name, and (c) violating 15 U.S.C. § 1692f(1) and the UCL by 13 seeking to collect service charges or treble damages from individuals other than the 14 person who passed a check on insufficient funds. 15 2. LRS and Mecham are jointly and severally liable to the class for $150,154.08 in actual 16 damages and restitution and $73,499.27 in prejudgment interest, for a total of 17 $223,653.35. 18 3. 19 20 LRS and Mecham are jointly and severally liable to each named plaintiff for $1,000 in statutory damages. 4. In connection with checks written for a personal, family or household purpose, LRS and 21 Mecham are permanently enjoined from: (a) seeking to collect prejudgment interest on 22 a check in addition to service charges or treble damages pursuant to California Civil 23 Code Section 1719, (b) sending collection letters in the name of the creditor that referred 24 the account for collection, and (c) demanding payment of service charges or treble 25 damages pursuant to California Civil Code Section 1719 from any person who has not 26 passed a check on insufficient funds. 27 DATED: 28 10/29/10 RONALD M. WHYTE United States District Judge ORDER GRANTING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT—No. C-05-02280 RMW CCL 7
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