Diaz v. Kubler Corp.

• Decision Date: 12 May 2015
• Docket Number: No. 14–55235.,14–55235.
• Citation: 785 F.3d 1326
• Parties: Tamara DIAZ, Plaintiff–Appellee, v. KUBLER CORPORATION, dba Alternative Recovery Management, Defendant–Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

785 F.3d 1326

Tamara DIAZ, Plaintiff–Appellee

v.KUBLER CORPORATION, dba Alternative Recovery Management, Defendant–Appellant.

No. 14–55235.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted April 7, 2015.

Filed May 12, 2015.

June D. Coleman (argued), Kronick Moskovitz Tiedemann & Girard PC, Sacramento, CA, for Defendant–Appellant.

Michael L. Crowley (argued) and Andre L. Verdun, Crowley Law Group, San Diego, CA; Eric A. LaGuardia, LaGuardia Law, San Diego, CA, for Plaintiff–Appellee.

Thomas P. Griffin, Jr., Hefner, Stark & Marois, LLP, Sacramento, CA; Brian Melendez, Dykema Gossett PLLC, Minneapolis, MN, for Amici Curiae ACA International and California Association of Collectors, Inc.

Appeal from the United States District Court for the Southern District of California, Michael M. Anello, District Judge, Presiding. D.C. No. 3:12–cv–01742–MMA–BGS.

Before: BARRY G. SILVERMAN and CARLOS T. BEA, Circuit Judges and JAMES DONATO,^* District Judge.

OPINION

DONATO, District Judge:

This appeal involves a suit by a debtor against a debt collector, alleging that by sending a collection letter that sought ten percent interest on the debt, the debt collector violated the provision of the federal Fair Debt Collection Practices Act (“FDCPA”) codified at 15 U.S.C. § 1692f(1) and thereby also violated California's Fair Debt Collection Practices Act (the “Rosenthal Act”), Cal. Civ.Code §§ 1788 –1788.33. The district court agreed that the debt collector violated the FDCPA and the Rosenthal Act, and granted summary judgment in the debtor's favor. Exercising jurisdiction under 28 U.S.C. § 1291, we reverse the district court's grant of summary judgment and remand.

I.

Congress passed the FDCPA to “eliminate abusive debt collection practices by debt collectors.” 15 U.S.C. § 1692(e). To that end, the statute prohibits debt collectors from trying to collect any amount that is not “expressly authorized by the agreement creating the debt or permitted by law.” 15 U.S.C. § 1692f(1). A debt collector does not violate this provision if the amounts it seeks are authorized by state law. See Allen ex rel. Martin v. LaSalle Bank, N.A., 629 F.3d 364, 369 (3d Cir.2011) ; Freyermuth v. Credit Bureau Servs., 248 F.3d 767, 770 (8th Cir.2001) ; see also Staff Commentary on the Fair Debt Collection Practices Act, 53 Fed.Reg. 50,097, 50,108 (Fed. Trade Comm'n 1988).

The pertinent state laws are sections 3287 and 3289 of the California Civil Code. Section 3287 allows recovery of prejudgment interest on debts under certain circumstances:

(a) Every person who is entitled to recovery damages certain, or capable of being made certain by calculation, and the right to recover which is vested in him upon a particular day, is entitled also to recover interest thereon from that day, except during which time as the debtor is prevented by law, or by the act of the creditor from paying the debt. This section is applicable to recovery of damages and interest from any such debtor, including the state or any county, city, city and county, municipal corporation, public district, public agency, or any political subdivision of the state.

(b) Every person who is entitled under any judgment to receive damages based upon a cause of action in contract where the claim was unliquidated, may also recover interest thereon from a date prior to the entry of judgment as the court may, in its discretion, fix, but in no event earlier than the date the action was filed.

Cal. Civ.Code § 3287 (West 1997) (amended 2013).¹ Section 3289 provides that “[i]f a contract entered into after January 1, 1986, does not stipulate a legal rate of interest, the obligation shall bear interest at a rate of 10 percent per annum after a breach.” Cal. Civ.Code § 3289.

The Rosenthal Act “mimics or incorporates by reference the FDCPA's requirements ... and makes available the FDCPA's remedies for violations.” Riggs v. Prober & Raphael, 681 F.3d 1097, 1100 (9th Cir.2012). The parties do not dispute that the Rosenthal Act claims at issue in this appeal rise or fall with the FDCPA claims.

II.

The relevant facts are not disputed. Appellee Tamara Diaz incurred a debt for receiving dental services from Parkway Dental Group in the spring of 2011. Parkway later referred the debt to appellant Kubler Corporation (doing business as Alternative Recovery Management, or “ARM”), a debt collection agency, which began efforts to collect on the debt. As part of these efforts, Kubler sent Diaz a letter in May 2012 demanding that she pay $3,144 in principal and $298.03 in interest. The parties agree that the demand for interest reflects an annual interest rate of ten percent.

In July 2012, Diaz filed suit against Kubler in federal district court, and subsequently amended her complaint to claim that Kubler violated 15 U.S.C. § 1692f(1)and the Rosenthal Act by seeking interest in the May 2012 letter. She later moved for summary judgment. The district court granted summary judgment and held that “[w]ithout a judgment for breach of contract awarding prejudgment interest, Defendant cannot seek to collect prejudgment interest on Plaintiff's debt at the rate set forth in California Civil Code section 3289.” Diaz v. Kubler Corp., 982 F.Supp.2d 1146, 1156 (S.D.Cal.2013) (citations omitted).

Afterwards, Diaz chose not to try her remaining claims to a jury, and instead sought statutory damages for the claims on which she had prevailed at summary judgment. The district court awarded her $500 in statutory damages, as well as attorneys' fees and costs. Kubler timely appealed.

III.

We review de novo the district court's order granting summary judgment, see John Doe 1 v. Abbott Labs., 571 F.3d 930, 933 (9th Cir.2009), and its interpretation of state law, see Paulson v. City of San Diego, 294 F.3d 1124, 1128 (9th Cir.2002) (en banc). “When interpreting state law, we are bound to follow the decisions of the state's highest court,” and “[w]hen the state supreme court has not spoken on an issue, we must determine what result the court would reach based on state appellate court opinions, statutes and treatises.” Id. (citations omitted).

It is quite plain that Kubler would have been entitled to prejudgment interest under California law when it sent its collection letter if the debt in question was certain or capable of being made certain at that time, even if Kubler had not yet obtained a judgment from a court. Section 3287(a) allows recovery of interest from the time the creditor's right to recover “is vested,” and we have previously explained that “California cases uniformly have interpreted the ‘vesting’ requirement as being satisfied at the time that the amount of damages become certain or capable of being made certain, not the time liability to pay those amounts is determined.” Evanston Ins. Co. v. OEA, Inc., 566 F.3d 915, 921 (9th Cir.2009) (collecting cases); see also Cataphora Inc. v. Parker, 848 F.Supp.2d 1064, 1072 (N.D.Cal.2012) (discussing California cases and reaching same conclusion). “Damages are deemed certain or capable of being made certain within the provisions of subdivision (a) of section 3287 where there is essentially no dispute between the parties concerning the basis of computation of damages if any are recoverable but where their dispute centers on the issue of liability giving rise to damage.” Leff v. Gunter, 33 Cal.3d 508, 189 Cal.Rptr. 377, 658 P.2d 740, 748 (1983) (citation omitted). Consequently, prejudgment interest under section 3287(a) becomes available as of the day the amount at issue becomes “calculable ... mechanically, on the basis of uncontested and conceded evidence,” and it is available “as a matter of right,” rather than at the discretion of a court. Id. 189 Cal.Rptr. 377, 658 P.2d at 748, 749.

Our conclusion that section 3287(a) can entitle a creditor to interest even without a prior judgment is confirmed by the text of section 3287(b), which applies where the amount of damages is not certain or capable of being made certain. That provision explicitly states that it only permits prejudgment interest where a person is “entitled under any judgment to receive damages based upon a cause of action in contract where the claim was unliquidated.” Cal. Civ.Code § 3287(b) (emphasis added). The obvious implication is that the word “entitled” when used on its own (as it is in section 3287(a) ) does not carry with it any implicit requirement that the entitlement be pursuant to a judgment. Cf. Romero–Ruiz v. Mukasey, 538 F.3d 1057, 1063–64 (9th Cir.2008) (“It is a well-established principle of statutory construction that legislative enactments should not be construed to render their provisions ‘mere surplusage.’ ”); People v. Woodhead, 43 Cal.3d 1002, 239 Cal.Rptr. 656, 741 P.2d 154, 157 (1987) (“[W]hen the drafters of a statute have employed a term in one place and omitted it in another, it should not be inferred where it has been excluded.”). It follows that a judgment awarding interest pursuant to section 3287(a) merely vindicates a pre-existing right to interest instead of creating it. Kubler might well have had a right to pre-judgment interest pursuant to section 3287(a) in May 2012, despite not having obtained a judgment saying so. And given the absence of any provision in the contract stipulating to a particular rate of interest, the interest rate that would apply is section 3289's default of ten percent.

Diaz relies on Unocal Corp. v. United States, 222 F.3d 528 (9th Cir.2000), to defend the district court's findings but that case provides her with no meaningful support. Unocal states that “[s]ection 3287 provides for an award of prejudgment interest whenever a plaintiff prevails in a breach of...