Johnson v. Riddle
| Decision Date | 28 June 2002 |
| Docket Number | 10,01-4028 |
| Parties | BRENDA JOHNSON, for and on behalf of herself and all persons similarly situated, Plaintiff-Appellant, v. JESSE L. RIDDLE; RIDDLE & ASSOCIATES, P.C.; JOHN DOE OWNERS 1-10; JOHN DOE COLLECTORS 1-10, Defendants-Appellees.UNITED STATES COURT OF APPEALS TENTH CIRCUIT |
| Court | U.S. Court of Appeals — Tenth Circuit |
Appeal from the United States District Court for the District of Utah
Lester A. Perry of Kesler & Rust, Salt Lake City, Utah, for Plaintiff-Appellant.
Keith A. Kelly of Ray, Quinney & Nebeker (Joni J. Jones with him on the brief), Salt Lake City, Utah, for Defendants-Appellees.
Before EBEL and PORFILIO, Circuit Judges, and SHADUR, District Judge.*
Under Utah statutory law, the holder of a dishonored check may collect from the person who wrote the check its face amount and "a service charge that may not exceed $15." Utah Code 7-15-1 (1997).1 The defendants in this suit attempted to collect a service charge of $250 on a dishonored check. The central question presented by this case is whether the defendants are liable under the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. 1692 et seq., which establishes civil liability for debt collectors who attempt to collect amounts not "permitted by law," id. 1692f(1). The district court held that the defendants' actions were "permitted by law" because unpublished default judgments issued by state trial courts in earlier collection actions on dishonored checks had awarded service charges in excess of the $15 maximum. Johnson v. Riddle, No. 2:98CV599C, slip op. at 12 (D. Utah Dec. 20, 2000). We conclude that the district court misconstrued the term "permitted by law." We hold that, under a correct application of that standard, Riddle's attempt to collect a shoplifting penalty from Johnson was not permitted by law. But because it remains necessary to determine whether Riddle may avoid liability because his error was bona fide in statutory terms, we reverse and remand for further proceedings consistent with this opinion.
Defendant-appellee Jesse L. Riddle is a Utah attorney whose law firm, defendant-appellee Riddle & Associates, specializes in collecting unpaid dishonored checks. In this opinion, the defendant-appellees are referred to collectively as "Riddle." Riddle receives between 700,000 and 1.2 million unpaid dishonored checks per year, and his clients include large corporations such as K-Mart, Circle K, and 7-Eleven (the Southland Corporation). Riddle's debt collection practice spans multiple states, including Utah.
Like many states, Utah has enacted statutory provisions that allow a debt collector to collect, not merely the amount of the debt, but also a statutory penalty or service charge. Under Utah's dishonored check statute, Utah Code 7-15-1 (1997), the holder of a dishonored check is permitted to impose a "service charge that may not exceed $15," in addition to collecting the face amount of the check. A separate Utah statute, the shoplifting statute, Utah Code 78-11-15, governs the civil liability of shoplifters. The shoplifting statute provides:
An adult who wrongfully takes merchandise by any means, including but not limited to, concealment or attempted concealment in any manner, either on or off the premises of the merchant, with a purpose to deprive a merchant of merchandise or to avoid payment for merchandise, or both, is liable in a civil action, in addition to actual damages, for a penalty to the merchant in the amount of the retail price of the merchandise not to exceed $1,000, plus an additional penalty as determined by the court not less than $100 nor more than $500, plus court costs and reasonable attorneys' fees.
78-11-15. "Wrongful taking of merchandise," as used in the shoplifting statute, is defined as "the taking of merchandise that has not been purchased from a merchant's premises without the permission of the merchant or one of his employees, servants or agents." Utah Code 78-11-14(5).
The facts relevant to this case are undisputed. Based upon his own reading of the Utah statutes, Riddle concluded that the shoplifting statute applied to persons who passed checks which later were dishonored, and thus that he could seek penalties of up to $500 against them, rather than being limited to the $15 limit on service charges set by the dishonored check statute. In 1995, Riddle filed a complaint in Utah state district court seeking a shoplifting penalty on a dishonored check. Circle K v. Coles, No. 96-0000392CV (Sept. 23, 1996). When the defendant in the case failed to appear in court, the presiding judge and Riddle spent thirty to forty minutes discussing the applicability of the shoplifting statute to a person who passed a check that was dishonored. The court issued a default judgment awarding "Statutory penalties" of $354.82. Default judgments involving dishonored checks awarding statutory penalties in excess of $15 were also issued in several other state court cases during this time. See Johnson, No. 2:98CV599C, slip op. at 10 (). None of these default judgments were appealed. At some later date, several Utah state trial judges began to develop misgivings about allowing shoplifting fees in dishonored check cases, and some began limiting fee awards in default judgment cases to $15.
We turn now to the specific facts of this case. In September 1996, Brenda Johnson made a purchase at a 7-Eleven and paid with a check for $2.64. The check bounced, and the matter was referred to Riddle. Riddle sent Johnson a letter in January 1997, demanding payment of the face amount of the check plus a statutory penalty of $69. A week later Riddle sent Johnson a second letter, now demanding a statutory fee of $200. On August 14, 1997, Riddle filed a complaint in Utah state district court seeking a $250 penalty. Johnson was served with the complaint and summons in this suit on August 24, 1997. Johnson paid Riddle $17.64 (i.e. the face amount of the check plus the $15 service charge permitted under the dishonored checks statute), and Riddle dropped his suit against Johnson.
On August 24, 1998, Johnson filed the instant suit in federal district court for the District of Utah against Riddle, alleging that he violated the FDCPA and various state statutes by attempting to collect a statutory penalty in excess of that permitted by the dishonored check statute. Johnson filed the suit as a class action on behalf of all persons who wrote a subsequently dishonored check from whom Riddle sought to collect a fee or penalty of more than $15.2 Riddle moved to dismiss the suit on statute of limitations grounds, and the district court denied the motion. Riddle and Johnson then filed cross-motions for summary judgment. By written order, the district court granted summary judgment in favor of Riddle on the FDCPA claim, reasoning that Riddle's suit seeking the shoplifting penalty was "permitted by law" because of the earlier unpublished state trial court default judgments. The district court declined to exercise supplemental jurisdiction over Johnson's remaining state law claims. Johnson timely appealed.
Before reaching the substantive issues of this case, it first is necessary to consider two arguments made by Riddle as alternative grounds for affirming the district court's summary judgment. Riddle argues that Johnson's FDCPA claim is barred by the applicable statute of limitations and by the Rooker-Feldman doctrine. The district court was not persuaded by either argument, and neither are we.
The statute of limitations for FDCPA claims is found in 15 U.S.C. 1692k(d). The heading for this subsection is "Jurisdiction." It states, in its entirety: "An action to enforce any liability created by [the FDCPA] may be brought in any appropriate United States district court without regard to the amount in controversy, or in any other court of competent jurisdiction, within one year from the date on which the violation occurs."
Here, Riddle sent letters demanding penalties of $69 and $200 on January 17 and January 24, 1997, respectively. Riddle filed the collection suit against Johnson in Utah state court seeking a $250 penalty on August 14, 1997. Johnson was served with the complaint and summons in the collection suit on August 24, 1997. Johnson filed the instant action against Riddle in Utah federal court on August 24, 1998. In other words, the present suit was filed on the one-year anniversary of the date on which Riddle served Johnson in the collection suit, and more than one year after Riddle sent the demand letters and filed the collection suit. Johnson does not challenge the district court's conclusion that her personal FDCPA claims arising from Riddle's demand letters are untimely. Johnson, No. 2:98CV599C, slip op. at 5-6. Thus, the only statute of limitations issue is whether the district court correctly held that Johnson's FDCPA claim arising from the collection suit Riddle brought against her was timely.
Riddle offers two alternative arguments for why Johnson's FDCPA claim is time-barred. He argues that Johnson's FDCPA claim was untimely because "the date on which the violation occurr[ed]," 15 U.S.C. 1692k(d), was the date when Riddle filed the collection suit against her, not the date when Johnson was served. Alternatively, he argues that, even if the violation occurred when Johnson was served, her suit is still untimely because, by filing suit on the one-year anniversary of service, she failed to file "within one year," id. Neither argument is persuasive.
We reject Riddle's argument that the violation occurred upon filing rather than upon service. We hold that, where the plaintiff's FDCPA claim arises from the instigation of a debt collection suit, the plaintiff does not have a "complete and present cause of action," Bay Area Laundry & Dry Cleaning Pension Trust Fund v. Ferbar Corp., 522 U.S. 192, 201 (1997), and thus no...
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