Campo v. Kennedy

Citation517 F.3d 1070
Decision Date06 February 2008
Docket NumberNo. 07-15048.,07-15048.
PartiesElena M. DEL CAMPO, on behalf of herself and all others similarly situated; Lois Artz; Miriam Campos; Lisa Johnston; Ashorina Medina, Plaintiffs-Appellees, v. George KENNEDY, District Attorney; Don R. Mealing; Bruce D. Raye; ACCS Administration, Inc.; R.D. Davis; Green, Mister; Kramer, Mister; Lopez, Mrs.; Fulfillment Unlimited, Inc.; Fundamental Performance Strategies; Lynn R. Hasney; Fundamentals, Inc., Defendants, and American Corrective Counseling Services, Inc., Defendant-Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

John R. Poyner, Colusa, CA, for amicus curiae California District Attorneys Association.

Robert J. Hobbs, Boston, MA, for amici curiae National Consumer Law Center, Inc., and National Association of Consumer Advocates.

Appeal from the United States District Court for the Northern District of California; James Ware, District Judge, Presiding. D.C. No. CV-01-21151-JW.

Before: JOHN R. GIBSON,* A. WALLACE TASHIMA, and MARSHA S. BERZON, Circuit Judges.

BERZON, Circuit Judge:

Our question is whether a private company contracting with a district attorney for services related to a diversion program is entitled to state sovereign immunity. We decide that it is not.

I.

American Corrective Counseling Services ("ACCS"), a private corporation, contracted with the District Attorney for Santa Clara County, California, (the "DA") to run a bad check diversion program. Its conduct of that program generated this litigation.

California criminalizes the making, drawing, uttering, or delivery of any check, draft, or money order "willfully, with intent to defraud" and with knowledge that insufficient funds are available. CAL. PENAL CODE § 476a(a). California has authorized a DA to create a bad check diversion program in which the DA may agree not to prosecute for bad check offenses if the potential defendant provides restitution to the victim of the bad check, completes a course, and pays applicable collection fees. CAL. PENAL CODE §§ 1001.60-67. Such a program "may be conducted by the [DA] or by a private entity under contract." CAL. PENAL CODE § 1001.60. ACCS has built its business around such contracts, based upon the collection of program fees from participants in the diversion program, id. at § 1001.65, which ACCS shares with the DA.

This case grows out of ACCS's contract with the Santa Clara County DA. Under that contract, ACCS is entitled to collect a $100 class fee, 60% of all administrative fees, and various additional fees and late charges.1 In exchange for these fees, ACCS runs nearly every aspect of the bad check program. It provides "daily management of all clerical and accounting functions," including sending "demand notices to suspected bad check writers, collection and disbursement of victim restitution and administrative revenue and all financial reporting." It provides staff to contact county businesses about the program, runs financial education courses for bad check writers, and maintains all program files. The DA provides "intake criteria" — a two-page checklist — designating the checks that are appropriate for the program. The contract imposes no obligation upon the DA initially to decide which overdrawn checks should be referred to the program because they appear to indicate that a crime has been committed, requiring only that the DA "review all cases transferred by ACCS [to the DA] for failure to comply" with its program.

The contract makes clear that ACCS is an "INDEPENDENT CONTRACTOR" (emphasis in original) and that "[n]othing within this agreement shall be construed as creating a relationship of employer or employee, or principal and agent, between the County of Santa Clara and ACCS" or its employees or agents. ACCS is required to indemnify the county, and must carry its own insurance.

ACCS operated the program aggressively. When Elena del Campo bounced a check for $95.02, ACCS sent her a letter on the Santa Clara County DA's stationary, purporting to be from the DA's office, warning that his office had received "an INCIDENT REPORT alleging that you have violated Penal Code 476(a) of the California State Statute: Passing a Worthless Check" (emphasis in original). It claimed that "YOU MAY AVOID A COURT APPEARANCE if you agree to enroll [in the bad check program]" (emphasis in original) and demanded, after taking into account ACCS's various fees, $265.02 in payment.

When del Campo sent payment only for the amount of her check, she received a second letter entitled "Notice of Failure to Comply" and warning that "[y]our failure to respond may now result in the filing of this incident report by the District Attorney in MUNICIPAL COURT!" (emphasis in original). Instead of paying, del Campo filed this action against the DA, ACCS, and several related companies and officials.2

She alleged equal protection and due process violations under 42 U.S.C. § 1983, various violations of the California Constitution, violations of the California Unfair Business Practices Act ("CUBPA"), CAL. BUS. & PROF. CODE §§ 17200 et seq., and violations of the federal Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692 et seq.

The district court dismissed the causes of action under § 1983 and the California Constitution but allowed the FDCPA3 and CUBPA causes of action to go forward.

The litigation was then stayed for several years because of an injunction issued by a district court hearing a similar case in the Southern District of Iowa. See generally Liles v. American Corrective Counseling Services, Civ. No. 4-00-CV-10497 (S.D.Iowa). During that time, new plaintiffs filed suit against ACCS and the Santa Clara County DA in the Northern District of California. After the stay was lifted in 2005, the second Santa Clara County case was consolidated with del Campo's in 2006 (we collectively refer to the plaintiffs as "del Campo"). The consolidated complaint realleges all the causes of action in the original complaint and adds allegations of conversion, negligent misrepresentation, and fraudulent misrepresentation.

The defendants then moved to dismiss for lack of subject matter jurisdiction and for failure to state a claim. Both ACCS and the DA claimed state sovereign immunity. The district court declined to extend such immunity.

The district court's decision turned in large part on its characterization of the bad check program. California DAs serve both state and county functions: They act as state officials, and so possess Eleventh Amendment immunity, when "acting in [their] prosecutorial capacity." Weiner v. San Diego County, 210 F.3d 1025, 1028 (9th Cir.2000); see also Pitts v. County of Kern, 17 Cal.4th 340, 70 Cal.Rptr.2d 823, 949 P.2d 920 (1998). The district court held that the bad check diversion program was one of several county-based diversion programs created by the California legislature, see generally Davis v. Municipal Court for the S.F. Judicial Dist., 46 Cal.3d 64, 249 Cal.Rptr. 300, 757 P.2d 11 (1988) (describing such programs), and that the Santa Clara County DA's role in the program was administrative. It therefore held that the DA acted in his county capacity while administering the program and so was not entitled to state sovereign immunity. The court concluded, however, that its earlier dismissal of the § 1983 and California constitutional causes of action was res judicata and dismissed them. Because the DA faced only those causes of action, the court dismissed the DA from the suit.4

The district court's characterization of the bad check program also controlled its analysis of ACCS's claim of state sovereign immunity. ACCS argued that it acted as an arm of the state when implementing the diversion program. As the court had "determined that the diversion program in Santa Clara County is a county program and not a state program," it held that "ACCS's involvement in the diversion program cannot be a central function of the state government" and denied immunity.

ACCS timely appealed the district court's immunity decision.5

II.

ACCS contends that it is entitled to state sovereign immunity, even though it is a private entity. For the second time in four years "we decline the invitation to expand state sovereign immunity dramatically by extending it to corporate actors," United States ex rel. Ali v. Daniel, Mann, Johnson, & Mendenhall ("DMJM"), 355 F.3d 1140, 1147 (9th Cir.2004), or to private entities generally.

1. Jurisdiction and Standard of Review

There has been no final judgment in this case. We nonetheless have "jurisdiction to review the district court's denial of . . . Eleventh Amendment immunity under the collateral order doctrine." Schulman v. California (In re Lazar), 237 F.3d 967, 974 (9th Cir.2001) (citing Puerto Rico Aqueduct & Sewer Auth. v. Metcalf & Eddy, Inc., 506 U.S. 139, 147, 113 S.Ct. 684, 121 L.Ed.2d 605 (1993)).

Del Campo argues that we should decline to exercise jurisdiction under the collateral order doctrine because Puerto Rico Aqueduct and Sewer Authority in fact concerns "States and state entities possessing a claim to share in that immunity," 506 U.S. at 147, 113 S.Ct. 684 (emphasis added), and ACCS, as a private company, is manifestly not a state or state entity. It is true that the "`narrow exception' [of the collateral order doctrine] should stay that way and never be allowed to swallow the general rule that a party is entitled to a...

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