Tourgeman v. Nelson & Kennard

• Decision Date: 20 August 2018
• Docket Number: No. 16-56190,16-56190
• Citation: 900 F.3d 1105
• Parties: David TOURGEMAN, Plaintiff-Appellant, v. NELSON & KENNARD, a partnership, Defendant-Appellee, and Collins Financial Services, Inc., dba Precision Recovery Analytics, Inc., a Texas corporation; Collins Financial Services USA, Inc.; Paragon Way, Inc.; Dell Financial Services, LP, Defendants.
• Court: U.S. Court of Appeals — Ninth Circuit

900 F.3d 1105

David TOURGEMAN, Plaintiff-Appellant,

v.NELSON & KENNARD, a partnership, Defendant-Appellee,andCollins Financial Services, Inc., dba Precision Recovery Analytics, Inc., a Texas corporation; Collins Financial Services USA, Inc.; Paragon Way, Inc.; Dell Financial Services, LP, Defendants.

No. 16-56190

United States Court of Appeals, Ninth Circuit.

Argued and Submitted June 7, 2018 Pasadena, California

Filed August 20, 2018

Brett M. Weaver (argued), San Diego, California; Daniel P. Murphy, San Diego, California; for Plaintiff-Appellant.

Tomio Buck Narita (argued) and Jeffrey A. Topor, Simmonds & Narita LLP, San Francisco, California, for Defendant-Appellee.

Before: Richard C. Tallman and Jacqueline H. Nguyen, Circuit Judges, and Mark W. Bennett,^* District Judge.

TALLMAN, Circuit Judge:

David Tourgeman appeals the dismissal of his consumer class action under the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692, et seq. The FDCPA provides for class statutory damages "not to exceed the lesser of $500,000 or 1 per centum of the net worth of the debt collector[.]" § 1692k(a)(2)(B). The statute is silent as to which party bears the burden of introducing evidence at trial to establish the debt collector’s net worth. Tourgeman appeals the district court’s conclusion that he bore this burden. Because the FDCPA makes evidence of the defendant’s net worth essential to an award of class statutory damages, we agree with the district court and affirm.¹

I

Tourgeman financed the purchase of a Dell computer through a loan agreement.² Dell Financial Services arranged for and serviced the loan, which originated with CIT Online Bank. After Tourgeman’s account allegedly became delinquent, Dell Financial Services charged off and sold the purported debt to Collins Financial Services. Paragon Way, Inc., Collins’s affiliated debt-collection company, sent several letters encouraging Tourgeman to pay the alleged debt. Collins then referred Tourgeman’s file to the law firm of Nelson & Kennard, which sent Tourgeman another collection letter. All of these letters identified the original creditor as American Investment Bank, rather than CIT Online Bank. When Tourgeman did not respond to Nelson & Kennard’s letter, the law firm filed a collection complaint against Tourgeman in state court. The state court complaint, like the collection letters, misidentified Tourgeman’s original creditor as American Investment Bank. Tourgeman responded to the complaint by retaining counsel. Nelson & Kennard ultimately dismissed the lawsuit.

Tourgeman brought suit against Nelson & Kennard and other entities allegedly involved in collecting his disputed debt.³ He claimed that the letters and complaint violated the FDCPA by using "false, deceptive, or misleading representation[s] or means in connection with the collection of any debt." 15 U.S.C. § 1692e. The court later certified a class of consumer plaintiffs.

The district court dismissed Tourgeman’s lawsuit on summary judgment, but we reversed and remanded. Tourgeman v. Collins Fin. Servs., Inc. , 755 F.3d 1109, 1125 (9th Cir. 2014). We held that the misidentifications were material under the FDCPA as a matter of law, subjecting Nelson & Kennard to strict liability. Id. at 1118, 1123–24. On remand, the district court dismissed Tourgeman’s letter-based claims on standing grounds, allowing only his complaint-based claim to proceed to trial. The focus at trial was to be evidence supporting the class award of statutory damages and Nelson & Kennard’s bona fide error defense.⁴

In response to the parties’ pretrial motions in limine to exclude evidence and argument regarding net worth, the district court instructed the parties to address a related issue: which party would carry the burden at trial of introducing evidence regarding Defendant’s net worth. The district court ultimately held that Tourgeman carried this burden. Because Tourgeman lacked competent evidence of Nelson & Kennard’s net worth, the district court dismissed his complaint-based class claim. Tourgeman moved to dismiss his remaining individual claim with prejudice. The district court granted the motion, and Tourgeman timely appealed.

II

We have jurisdiction under 28 U.S.C. § 1291. Whether the district court properly allocated the burden of proof is a conclusion of law reviewed de novo. Molski v. Foley Estates Vineyard & Winery, LLC , 531 F.3d 1043, 1046 (9th Cir. 2008). We review the district court’s interpretation of the FDCPA de novo. Evon v. Law Offices of Sidney Mickell , 688 F.3d 1015, 1024 (9th Cir. 2012).

III

Tourgeman argues the district court misallocated the burden of proof as to Nelson & Kennard’s net worth. We disagree. In light of the statutory text and structure, we conclude that Congress intended the plaintiff to carry the burden at trial of introducing evidence of the defendant’s net worth.⁵

A

Section 1692k of the FDCPA imposes civil liability against "any debt collector who fails to comply with any provision of this subchapter with respect to any person[.]" § 1692k(a). Class members are entitled to "additional," or statutory damages.⁶ § 1692k(a)(2). The statute provides a two-step determination for awarding statutory damages to class members, excluding named plaintiffs. See § 1692k(a)–(b). First, the factfinder determines the damages ceiling: a class may recover statutory damages "not to exceed the lesser of $500,000 or 1 per centum of the net worth of the debt collector[.]" § 1692k(a)(2)(B). Within that range, the exact amount of damages is determined based on various non-exhaustive factors, including:

the frequency and persistence of noncompliance by the debt collector, the nature of such noncompliance, the resources of the debt collector, the number of persons adversely affected, and the extent to which the debt collector’s noncompliance was intentional.

§ 1692k(b)(2). The damages provision is silent as to which party carries the burden of producing evidence at trial of the defendant’s net worth. See § 1692k.⁷

The parties agree that one percent of Nelson & Kennard’s net worth is less than $500,000. Accordingly, the limit on statutory damages available to the class must be one percent of Nelson & Kennard’s net worth. Tourgeman conceded below that he could not produce any competent evidence of this amount at trial. He asserts, however, that Nelson & Kennard should have carried the burden of introducing evidence of its own net worth.

B

It is "one of the most basic propositions of law ... that the plaintiff bears the burden of proving his case, including the amount of damages." Faria v. M/V Louise , 945 F.2d 1142, 1143 (9th Cir. 1991) (citation omitted); see also Schaffer ex rel. Schaffer v. Weast , 546 U.S. 49, 56, 126 S.Ct. 528, 163 L.Ed.2d 387 (2005) ("Perhaps the broadest and most accepted idea is that the person who seeks court action should justify the request, which means that the plaintiffs bear the burdens on the elements in their claims." (quoting C. Mueller & L. Kirkpatrick, Evidence § 3.1, p. 104 (3d ed. 2003) ) ). This is because the party who "seeks to change the present state of affairs ... naturally should be expected to bear the risk of failure of proof or persuasion." Schaffer , 546 U.S. at 56, 126 S.Ct. 528 (quoting 2 J. Strong, McCormick on Evidence § 337, p. 412 (5th ed. 1999) ).

This fundamental rule is not without exceptions. For example, "certain elements of a plaintiff’s claim may be shifted to defendants, when such elements can fairly be characterized as affirmative defenses or exemptions." Id. at 57, 126 S.Ct. 528 (citation omitted); see also FTC v. Morton Salt Co. , 334 U.S. 37, 44–45, 68 S.Ct. 822, 92 L.Ed. 1196 (1948) ("[T]he burden of proving justification or exemption under a special exception to the prohibitions of a statute generally rests on one who claims its benefits[.]"). But where the plain text of the statute is silent as to which party carries the burden of proof, as is the case here, we "begin with the ordinary default rule that plaintiffs bear the risk of failing to prove their claims." Schaffer , 546 U.S. at 56, 126 S.Ct. 528 (citations omitted). "Absent some reason to believe that Congress intended otherwise, therefore, we will conclude that the burden of [proof] lies where it usually falls, upon the party seeking relief." Id. at 57–58, 126 S.Ct. 528.

When allocating the burden of proof, "the touchstone of our inquiry is, of course, the statute." Id. at 56, 126 S.Ct. 528. We first consider the text of the FDCPA. See Bros. v. First Leasing , 724 F.2d 789, 792 (9th Cir. 1984) ("In construing a statute in a case of first impression, [we] look to the traditional signposts for statutory interpretation: first, the language of the statute itself[.]" (citation and internal quotations omitted) ); Gross v. FBL Fin. Servs., Inc. , 557 U.S. 167, 175–76, 129 S.Ct. 2343, 174 L.Ed.2d 119 (2009) ("Statutory construction must begin with the language employed by Congress and the assumption that the ordinary meaning of that language accurately expresses the legislative purpose." (citation and internal quotations omitted) ).

Section 1692k limits statutory damages for the class to "the lesser of " $500,000 or one percent of the defendant’s net worth. § 1692k(a)(2)(B) (emphasis added). Congress’s use of "the lesser of" is key because it requires the factfinder to determine the defendant’s net worth in calculating statutory damages. In other words, Congress made evidence of the defendant’s net worth a prerequisite to establishing statutory damages. Sanders v. Jackson , 209 F.3d 998, 999 (7th Cir. 2000) ("The FDCPA makes class action damages dependent upon the ‘net worth’ of the defendant.").

If Congress had intended to depart from the default rule and make net worth an affirmative defense or exemption, Schaffer , 546 U.S. at 57, 126 S.Ct. 528, it could have limited liability to $500,000 unless the defendant could establish that one percent of its net worth is less than that amount. See Evankavitch...