Hunt v. Imperial Merchant Services, Inc.

• Decision Date: 31 March 2009
• Docket Number: No. 07-16418.,07-16418.
• Parties: Brandy HUNT, on behalf of herself and others similarly situated; Brian Castillo, Plaintiffs-Appellees, v. IMPERIAL MERCHANT SERVICES, INC., dba Check Recovery Systems, Inc., Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

560 F.3d 1137

Brandy HUNT, on behalf of herself and others similarly situated; Brian Castillo, Plaintiffs-Appellees, v. IMPERIAL MERCHANT SERVICES, INC., dba Check Recovery Systems, Inc., Defendant-Appellant.

No. 07-16418.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted February 13, 2009.

Filed March 31, 2009.

Paul S. Arons, Law Office of Paul Arons, Friday Harbor, WA, and O. Randolph Bragg, Horowitz, Horowitz & Associates, Chicago, IL, for the plaintiffs-appellees.

Clark Garen, Law Offices of Clark Garen, Palm Springs, CA, for the defendant-appellant.

Appeal from the United States District Court for the Northern District of California, Martin J. Jenkins, District Judge, Presiding. D.C. No. CV-05-04993-MJJ.

Before: WILLIAM C. CANBY, JR., RONALD M. GOULD, and JAY S. BYBEE, Circuit Judges.

GOULD, Circuit Judge:

Class action defendant Imperial Merchant Services, Inc. ("IMS") appeals the district court's interlocutory order requiring it to pay the costs of notifying the plaintiff class. The class action alleges that IMS' debt collection practices violated the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. The district court certified a plaintiff class, granted partial summary judgment for the plaintiffs on their Fair Debt Collection Practices Act ("FDCPA") claim, and then ordered IMS to pay the costs of notifying class members because the summary judgment order established that IMS was liable on the merits. We have jurisdiction to review the notice cost order under the collateral order doctrine of 28 U.S.C. § 1291. We affirm the order and hold that a district court has the discretion to require a class action defendant to pay the costs of class notification when the court has already determined that the defendant is liable on the merits.

I

This appeal reaches us in unusual procedural circumstances that have resulted in two active appeals assigned to different panels of our circuit. Brandy Hunt and Brian Castillo (collectively "Hunt") filed a class action complaint against IMS, alleging that it violated the FDCPA by attempting to collect both an interest charge and a statutory service charge on dishonored checks. The district court concluded that whether IMS violated the FDCPA turned on whether California law permits a debt collector to demand both a statutory service charge and interest in addition to the debt amount. Hunt v. Check Recovery Sys., Inc., 478 F.Supp.2d 1157, 1161 (N.D.Cal.2007). The district court granted Hunt partial summary judgment on liability in March 2007, concluding that IMS' collection efforts violated California law and thus the FDCPA. In a separate order filed the same day, the district court certified two subclasses under Federal Rules of Civil Procedure ("Rule") 23(b)(2) and 23(b)(3), with Hunt and Castillo as named plaintiffs.

On August 1, 2007, the district court ordered IMS to pay the cost of mailing notice to the Rule 23(b)(3) subclass members. The district court's decision relied on its partial summary judgment order that established IMS' liability on the merits. IMS timely appealed the order requiring it to pay notice costs, though it devoted much of its briefing to arguments that the class certification should be overturned.

The plaintiffs then at their own expense notified the class members. The district court granted IMS' motion for a stay of its order requiring IMS to reimburse the named plaintiffs for those notice costs. As a condition of the stay, IMS was required to post a $9,000 bond representing the costs of notifying the class. The stay is in effect for the duration of this appeal.

The class action was not the first time Brandy Hunt had pursued her FDCPA claim against IMS. Hunt had declared bankruptcy before filing her class action complaint, and the bankruptcy court determined that IMS could not collect both an interest charge and a statutory service charge from Hunt under California law. IMS appealed the bankruptcy court's decision to the district court, and the appeal was assigned to the same district judge responsible for the consolidated class action cases. The district court affirmed the bankruptcy court's decision, incorporating its March 2007 partial summary judgment order in this class action case as the basis for affirming. IMS appealed the district court's judgment affirming the bankruptcy court, and the appeal was assigned to a different panel of our circuit as case number 07-15976 (the "merits appeal"). On May 12, 2008, the other panel certified to the California Supreme Court the question whether a debt collector recovering on a dishonored check may impose both a service charge and prejudgment interest under California law. Imperial Merchant Servs., Inc. v. Hunt, 528 F.3d 1129, 1130 (9th Cir.2008).

The California Supreme Court granted certification in July 2008, but has not yet issued its decision, and so the merits appeal is still active. The class action case has been stayed since June 2008, pending resolution of both this appeal and the merits appeal.

II

We review de novo whether a district court has authority to issue an order and review for an abuse of discretion the district court's exercise of that authority. See, e.g., Idaho Watersheds Project v. Hahn, 307 F.3d 815, 823 (9th Cir.2002) ("A district court's authority to grant an injunction is reviewed de novo, but the court's exercise of that power is reviewed for an abuse of discretion."); United States ex rel. Newsham v. Lockheed Missiles & Space Co., Inc., 190 F.3d 963, 968 (9th Cir.1999) ("The district court's denial of costs is reviewed for an abuse of discretion. Whether the district court has the authority to award costs, however, is a question of law reviewed de novo.") (citation omitted). We agree with the parties that de novo review is appropriate to the extent that IMS challenges the district court's legal power to impose class notice costs on a defendant when the district court's separate judgment on liability forms the basis for that decision and is still under appellate review. If we conclude that the district court has this authority, then we will review for abuse of discretion its decision to shift class notice costs. See Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 359, 98 S.Ct. 2380, 57 L.Ed.2d 253 (1978) (reversing an order shifting class notice costs because "the District Court abused its discretion in requiring petitioners to bear the expense of identifying class members").

III

A

IMS asks us to overturn the district court's class certification and notice cost orders, while Hunt contends that we lack jurisdiction to review either order. We review questions of our own jurisdiction de novo. Sandoval-Lua v. Gonzales, 499 F.3d 1121, 1126 (9th Cir.2007). We conclude that we lack jurisdiction to review the class certification order but that we may review the notice cost order.

"Class certification orders generally are not immediately appealable." Plata v. Davis, 329 F.3d 1101, 1106 (9th Cir.2003). We have discretion to permit interlocutory appeals of class certification orders under Rule 23(f), but IMS concedes it has not met the Rule's procedural requirements. Instead, IMS contends, without citing precedent, that by issuing the notice cost order the district court gave IMS a right to appeal the class certification order because IMS must be able to argue any issue that would establish that the notice cost order was incorrect. We have occasionally permitted appeals on class certification orders when they are "inextricably bound up" with a class-wide injunction appealable under 28 U.S.C. § 1292(a)(1), even if the appellant did not comply with Rule 23(f). See Bates v. United Parcel Serv., Inc., 465 F.3d 1069, 1075-76 & n. 5 (9th Cir.2006); Paige v. California, 102 F.3d 1035, 1039-40 (9th Cir.1996). Here, however, IMS attempts to piggyback its class certification appeal onto a notice cost order affecting only the parties, not an injunction affecting every class member. Cf. Cunningham v. Gates, 229 F.3d 1271, 1284 (9th Cir.2000) ("We have consistently interpreted `inextricably intertwined' very narrowly."). We reject IMS' argument that a district court's order shifting notice costs creates appellate jurisdiction over its earlier class certification order, and we conclude that we lack jurisdiction to review IMS' objections to class certification.

In Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 171-72, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974), the Supreme Court held that a district court's order imposing most of the class notice costs on the defendants was immediately appealable under the collateral order doctrine.¹

We see no meaningful distinction between this case and Eisen for jurisdictional purposes and hold that the collateral order doctrine gives us jurisdiction under 28 U.S.C. § 1291 to consider an order placing class notice costs on a defendant. See S. Ute Indian Tribe v. Amoco Prod. Co., 2 F.3d 1023, 1027-28 (10th Cir.1993) (relying on Eisen to hold that jurisdiction existed to review order requiring parties to split class notice costs); In re Victor Techs. Sec. Litig., 792 F.2d 862, 863-64 (9th Cir.1986) (relying in part on Eisen in holding that the collateral order doctrine establishes appellate jurisdiction over an interlocutory order requiring a class action plaintiff to reimburse a third party for costs incurred during class notification).

Eisen does not end our jurisdictional inquiry. It is possible that the notice cost issue will become moot once the merits appeal is decided. "The mootness doctrine asks the basic question whether decision of a once living dispute continues to be justified by a sufficient prospect that the decision will have an impact on the parties." Flagstaff Med. Ctr., Inc. v. Sullivan, 962 F.2d 879, 884 (9th Cir.1992) (internal quotation omitted). At oral argument both parties argued that this case is not moot, "a factor that weighs in favor of our jurisdiction because a party moving for dismissal on...