National Collection Cases
CATHERINE K. KING, Plaintiff - Appellee, v.
INTERNATIONAL DATA SERVICES (IDS), a Hawaii Limited Partnership dba
Asset Recovery Group, Defendant - Appellant.
UNITED STATES COURT OF APPEALS FOR THE
2004 U.S. App. LEXIS
May 7, 2004, Argued
and Submitted, Honolulu, Hawaii
June 7, 2004,
RULES OF THE NINTH CIRCUIT
COURT OF APPEALS MAY LIMIT CITATION TO UNPUBLISHED OPINIONS. PLEASE
REFER TO THE RULES OF THE UNITED STATES COURT OF APPEALS FOR THIS
Appeal from the United States
District Court for the District of Hawaii. D.C. No.
CV-01-00380-HG(LEK). Helen Gillmor, District Judge, Presiding. King v. Int'l Data
Servs., 2002 U.S. Dist. LEXIS 26426 (D. Haw., Oct. 29,
CATHERINE K. KING, Plaintiff - Appellee: John Harris Paer, Esq.,
For INTERNATIONAL DATA
SERVICES (IDS) dba Asset Recovery Group, Defendant - Appellant:
Gregory T. Grab, LAW OFFICES OF GREGORY T. GRAB, Honolulu, HI.
Before: FARRIS, NOONAN, and RAWLINSON,
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - -
- - - -
* This disposition is
not appropriate for publication and may not be cited to or by the
courts of this circuit except as provided by Ninth Circuit Rule
- - - - - - - - - - - - End Footnotes- - - - - - - - - - -
- - -
International Data Services ("IDS")
appeals the district court's judgment awarding plaintiff Catherine
King $ 1,000 in statutory damages as well as attorneys' fees and
costs under the Fair
Debt Collection Practices
The district court did not abuse its discretion in awarding
maximum statutory damages. 15 U.S.C. §
1692k(a)(2)(A) provides that a debt
collector in violation of the FDCPA is liable for "such additional
damages as the court may allow, but not exceeding $ 1,000." In
determining the amount of damages to award, the court is directed to
consider "among other relevant factors ... the frequency and
persistence of noncompliance by the debt collector, the nature of
such noncompliance, and the extent to which such noncompliance was
intentional[.]" 15 U.S.C. §
1692k(b). The district court found IDS'
violations to be both serious and deliberate. It was within the
discretion of the district court to find that these factors called
for an award of maximum statutory damages. Because these factors
were sufficient to justify an award of maximum statutory damages, we
decline to decide the question of whether a court may consider a
collection agency's violations involving other debtors in its
determination of whether the agency has acted with "frequency and
persistence" within the meaning of 15 U.S.C. §
The district court did not award excessive attorneys' fees. 15 U.S.C. §
1692k(a)(3) provides that in any
successful action to enforce liability, plaintiff shall collect "the
costs of the action, together with a reasonable attorney's fee as
determined by the court." A Special Master reduced the submitted
attorneys' fees to reflect only those claims on which plaintiff
prevailed. The Supreme Court has held that in reducing an award of
attorneys' fees, "there is no precise rule or formula for making
these determinations. The district court may attempt to identify
specific hours that should be eliminated, or it may simply reduce
the award to account for the limited success." Hensley v. Eckerhart, 461
U.S. 424, 436-37, 76 L. Ed. 2d 40, 103 S. Ct. 1933
(1983). The district court's reduction
fell within these guidelines.
We award King
additional attorneys' fees and costs for this appeal. The language
of 15 U.S.C. §
1692k(a)(3) allows for attorneys' fees
and costs in "any successful action to enforce the foregoing
liability[.]" King's response to IDS' appeal was necessary to defend
the judgment below awarding damages. This circuit has
interpreted the same statutory language to allow
for attorneys' fees and costs on appeal in the Truth in Lending Act. Dias v. Bank of Hawaii,
732 F.2d 1401, 1403 (9th Cir. 1984) (interpreting 15 U.S.C. §
1640(a)(3)). This court will determine
the fee award after receiving the appropriate documentation.
KATHLEEN R. IRWIN, an individual; NANCY HETH, an
individual; LORRAINE L. CASTANEDA, an individual on behalf of
themselves and all others similarly situated, Plaintiffs-Appellees,
v. OWEN T. MASCOTT, an individual; COMMONWEALTH EQUITY ADJUSTMENTS,
INC., a California corporation; ERIC W. BROWNING, an individual,
Defendants-Appellants, and ROBERT HYDE, Appellant.
UNITED STATES COURT OF APPEALS FOR THE
370 F.3d 924; 2004 U.S. App. LEXIS
November 6, 2003,
Argued and Submitted, San Francisco, California
June 4, 2004, Filed
Appeal from the United
States District Court for the Northern District of California. D.C.
No. CV-97-04737-JL/JCS. James Larson, Magistrate, Presiding. Irwin v. Mascott, 2001
U.S. Dist. LEXIS 3285 (N.D. Cal., Feb. 27,
Ellis and June D. Coleman, Murphy Pearson Bradley & Feeney,
Sacramento, California, for the appellants.
Paul Arons, Redding, California, O. Randolph Bragg,
Horowitz Horowitz & Associates, Chicago, Illinois, Lorraine
Ellen Baur, Ukiah, California, for the appellees.
William C. Canby, Jr., William A. Fletcher, and Richard C. Tallman,
Circuit Judges. Opinion by Judge William A. Fletcher.
William A. Fletcher
W. FLETCHER, Circuit
Plaintiffs are a class of California
residents who received debt collection letters from defendant
Commonwealth Equity Adjustments, Inc. ("Commonwealth"), a debt
collection agency. The class action complaint alleged that the
content and delivery method of Commonwealth's collection letters
violated federal and state law. The parties consented to proceed to
judgment before a magistrate judge, who found for the plaintiff
class and issued a permanent injunction against Commonwealth and its
agents and affiliates. Commonwealth, Eric Browning, its president, and Robert Hyde, a non-party corporate
officer of Commonwealth, were subsequently found in contempt for
violating the injunction and sanctioned by the magistrate judge.
Commonwealth, Browning, and Hyde appeal the finding of contempt and
the sanctions, claiming that they "substantially complied" with the
injunction. Hyde asserts, in addition, that the magistrate judge
lacked jurisdiction over him. We disagree with both contentions and
affirm the magistrate judge in all respects.
Commonwealth is a
debt collection agency located in California. It sends automated
debt collection notices to persons who "bounce" checks made payable
to retail stores. Plaintiffs are a class of California residents who
received form debt collection letters from Commonwealth. The class
action complaint alleged that Commonwealth's form letters did not
conform to the requirements of the federal Fair Debt Collection Practices
Act ("FDCPA"), 15 U.S.C. §§ 1692 et
seq., and California Civil Code §
1719. The parties consented to proceed
before a magistrate judge for all purposes, see 28 U.S.C. §
636(c), and the plaintiff
class was certified.
Following extensive discovery and a motion for partial
summary judgment, the magistrate judge found that defendants had
blatantly violated explicit provisions of the FDCPA and California Civil Code §
1719. Irwin v. Mascott,
112 F. Supp. 2d 937 (N.D. Cal. 2000).
The FDCPA prohibits, inter alia, the "threat to take any
action . . . that is not intended to be taken." 15 U.S.C. §
1692e(5). Many of Commonwealth's form
letters included a threat that Commonwealth would bring suit against
the debtor. Indeed, many letters included a sample complaint. With
respect to the vast majority of debts for which it sent letters,
however, Commonwealth violated §
1692e(5) because it did not truly intend
to sue the debtors. California Civil Code §
1719(a) permits a creditor to collect
(1) a service charge of $ 25 and (2) treble the amount of the
bounced check if the creditor sends the debtor a certified letter
giving him or her thirty days to pay the amount due. If the debtor
pays the amount of the check within thirty days, he or she must also
pay the service charge and the cost of mailing the certified
letter, but is not liable for treble damages. These are the only
remedies available to a creditor when a California resident bounces
a check. Id. §
1719(h). Commonwealth violated §
1719 by mailing letters by ordinary mail
that immediately demanded treble damages, interest, and an amount greater than the cost of
postage as the cost of mailing.
magistrate judge granted partial summary judgment to the plaintiff
class and permanently enjoined Commonwealth, "its subsidiaries,
principals, officers, agents, employees, successors, and assigns"
from sending unlawful collection letters (the "Injunction").
Commonwealth changed some of its practices in response to the
Injunction, but also continued to violate it in several ways. In
late 2000, the plaintiff class moved for a finding that defendants
had violated the Injunction and consequently were in contempt, and
requested prospective remedies in anticipation of further
violations. Defendants argued that they had "substantially complied"
with the Injunction, but the magistrate judge found otherwise. See General Signal Corp.
v. Donallco, Inc., 787 F.2d 1376, 1379 (9th Cir.
1986) ("substantial compliance
is a defense to an action in civil
The magistrate judge declined
to punish defendants for their past transgressions but, rather, gave
them one last chance to comply with the Injunction. Accordingly, he
entered an order (the "Prospective Order") advising defendants that
certain specific practices violated the Injunction, ordering them to
distribute a copy of the Injunction to all Commonwealth employees,
and specifically providing that any future violations of the
Injunction would lead to a sanction of $ 10,000 to be paid to the
plaintiff class for each version of offending letter that had been
sent. Defendants did not appeal the Prospective Order, and the
parties subsequently settled the class action. Because of the
settlement, an appeal of the underlying Injunction was withdrawn.
The settlement provided that defendants were obliged to continue to
obey the Injunction, and that plaintiffs were authorized to enforce
Despite the provision in the
Prospective Order stating that further noncompliance would result in
monetary sanctions, Commonwealth continued to send demand letters
that violated the Injunction. In addition, when one class member
refused to pay the unlawful extra charges demanded by
Commonwealth, it reported the unpaid charges to a credit reporting
agency. In early 2002, plaintiffs moved for contempt sanctions. This
motion was brought against Commonwealth, defendant Browning, and
Hyde, though not a party,
was Commonwealth's vice president of operations. He was the primary
officer charged with overseeing the content and mailing methods of
its collection letters. He was also intimately involved with the
class action litigation. He submitted two declarations to the
magistrate judge in opposition to plaintiffs' motion that led to the
Prospective Order, submitted a declaration in opposition to
plaintiffs' subsequent motion for contempt sanctions, and sat for
two depositions. Apart from Browning, Hyde was the only Commonwealth
employee who submitted a declaration in opposition to plaintiffs'
motions for sanctions and prospective relief.
In his declarations, Hyde stated that he had worked for
Commonwealth since 1996 and had received notice of the Injunction.
He also signed an "Acknowledgment of Receipt" form indicating that
he had received a copy of the Injunction and the FDCPA. In his
declarations, Hyde described, in detail, the modifications
and revisions he had made to Commonwealth's form demand letters in
response to the Injunction, and stated that he had instructed all of
Commonwealth's debt collectors to comply with the Injunction. He
also stated that he was personally responsible for
checking the amounts demanded on the approximately twenty
non-mass-mailed letters sent each day.
After hearing oral argument, the magistrate judge found
Commonwealth, Browning, and Hyde to be in contempt of the Injunction
and the Prospective Order, and ordered them to pay $ 10,000, costs,
and attorneys' fees to the plaintiff class. Defendants and Hyde
appeal, asserting that they had substantially complied with the
magistrate judge's orders. Hyde also appeals on the separate ground
that the magistrate judge lacked jurisdiction over him.
Jurisdiction Over Hyde
We first decide
whether the magistrate judge had jurisdiction over Hyde. Before a
magistrate judge can adjudicate a civil action such as the one
before us, the parties must consent to his or her exercise of
jurisdiction. 28 U.S.C. §
636(c); see In re Marriage of
Nasca, 160 F.3d 578, 579 (9th Cir.
1998) (parties' consent must be
"explicit, clear and unambiguous"). We review de novo the issue of
whether the magistrate judge had jurisdiction over Hyde. See, e.g., United States v. Real
Prop., 135 F.3d 1312, 1314 (9th Cir.
1998) (whether magistrate judge has
jurisdiction to enter default judgment in civil forfeiture action is
reviewed de novo); Bingman v. Ward,
100 F.3d 653, 656 (9th Cir. 1996) (whether magistrate judge has jurisdiction to impose criminal
contempt sanction is reviewed de novo). The question in this case is
whether, in the absence of his own explicit consent, Hyde may
nonetheless be deemed to have consented to the exercise of
jurisdiction by the magistrate judge.
non-party can be bound by the litigation choices made by his virtual
representative. For example, "this Circuit has held that when two
parties are so closely aligned in interest that one is the virtual
representative of the other, a claim by or against one will serve to
bar the same claim by or against the other." Nordhorn v. Ladish
Co., Inc., 9 F.3d 1402, 1405 (9th Cir.
1993) (citing, inter alia, In re Dominelli,
820 F.2d 313 (9th Cir.
1987), and United States v. ITT
Rayonier, Inc., 627 F.2d 996 (9th Cir.
1980)); see also United States v.
Geophysical Corp. of Alaska, 732 F.2d 693, 697 (9th Cir.
1984) ("A person technically not a party
to the prior action may be bound by the prior decision if his
interests are so similar to a party's that that party was his
'virtual representative' in the prior action.") (quoting ITT Rayonier, 627
F.2d at 1003). A finding of virtual
representation is typically based on the confluence of several
A close relationship between the
named party and the non-party supports a finding of virtual
representation. See Trevino v. Gates,
99 F.3d 911, 924 (9th Cir. 1996) (grandmother-granddaughter relationship found to be "sufficient in
this case"); ITT Rayonier, 627
F.2d at 1003 (Washington State
Department of Ecology and Environmental Protection Agency); see
also In re Gottheiner,
703 F.2d 1136, 1140 (9th Cir. 1983) (finding "privity" between corporation and its sole and controlling
shareholder). An identity of relevant interests between the named
party and the non-party is necessary to such a finding. See Trevino, 99 F.3d
at 924 (finding virtual representation
where the interests of the named party and non-party were
"identical"); Shaw v. Hahn, 56
F.3d 1128, 1132 (9th Cir. 1995) (holding
that a "litigant raising a Batson objection [ ] shares a
sufficient commonality of interest with the [excluded] venire person
to act as her 'virtual representative' for purposes of litigating
her equal protection claim"); see also Gottheiner, [*930] 703 F.2d at
1140 ("When a person owns most or all of the
shares in a corporation and controls the affairs of the corporation,
it is presumed that in any litigation involving that corporation the
individual has sufficient commonality of interest [to support a
finding of privity].") (citing Sparks Nugget, Inc. v.
Commissioner of Internal Revenue, 458 F.2d 631, 639 (9th Cir.
1972)); cf. Cunningham v.
Gates, 312 F.3d 1148, 1155-56 (2003) (refusing to find virtual representation where it appeared that the
interests of the named party and non-party might have "sharply
diverged") (applying California law). But cf. Green v. City of
Tucson, 255 F.3d 1086, 1101 (9th Cir.
2001) (en banc) (noting that
"the mere fact that a litigant in another case represented
'essentially identical' interests to those of the plaintiff [cannot]
pose a bar to a separate plaintiff pursuing his own cause of
action") (citing, inter alia, Richards v. Jefferson
County, 517 U.S. 793, 796, 135 L. Ed. 2d 76, 116 S. Ct. 1761
Substantial participation or control by the non-party in
the named party's suit weighs heavily in favor of a finding of
virtual representation. See ITT Rayonier, 627
F.2d at 1003 ("One who is not a party of
record may be bound if he had a sufficient interest and participated in the prior action.") (citing Montana v. United
States, 440 U.S. 147, 153, 59 L. Ed. 2d 210, 99 S. Ct. 970
(1979)) (emphasis added); cf. Nordhorn, 9 F.3d
at 1405 (refusing to find virtual
representation where non-party "had no participation in or control
over" the prior suit). Earlier tactical maneuvering by the named
party will support a finding of virtual representation of
closely-aligned non-parties. See Pedrina v. Chun,
97 F.3d 1296, 1301-02 (9th Cir. 1996) (where most of the federal plaintiffs had been
unsuccessful parties in two prior state court
actions over same dispute, prior state plaintiffs held to be virtual
representatives of the newly-added plaintiffs).
Finally, adequate representation by the named party is a
pre-requisite to a finding of virtual representation. See Pedrina, 97 F.3d
at 1302 ("Privity," which includes the
concept of virtual representation, "will be found only where the
interests of the non-party were adequately represented in the
earlier action[.]") (citing Hansberry v. Lee,
311 U.S. 32, 44-45, 85 L. Ed. 22, 61 S. Ct. 115
(1940)); see also ITT Rayonier, 627
F.2d at 1003 (finding virtual
representation where the non-party "does not contend that [the
virtual representative] failed to assert vigorously its position" in
the prior proceedings); see generally Martin v. Wilks,
490 U.S. 755, 762 n.2, 104 L. Ed. 2d 835, 109 S. Ct. 2180
(1989) ("We have recognized an exception
to the general rule [that "everyone should have his own day in
court"] when, in certain limited circumstances, a person, although
not a party, has his interests adequately represented by
someone with the same interests who is a p