Johnson v. Riddle

• Decision Date: 04 April 2006
• Docket Number: No. 04-4036.,04-4036.
• Citation: 443 F.3d 723
• Parties: Brenda JOHNSON, Plaintiff-Appellant, v. Jesse L. RIDDLE; Riddle & Associates, P.C.; John Doe Owners 1-10; John Doe Collectors 1-10, Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 723

443 F.3d 723

Brenda JOHNSON, Plaintiff-Appellant, v. Jesse L. RIDDLE; Riddle & Associates, P.C.; John Doe Owners 1-10; John Doe Collectors 1-10, Defendants-Appellees.

No. 04-4036.

United States Court of Appeals, Tenth Circuit.

April 4, 2006.

Lester A. Perry; Hoole & King; Salt Lake City, UT, for Plaintiff-Appellant.

Keith A. Kelly; Ray, Quinney & Nebeker; Salt Lake City, UT, for Defendants-Appellees.

Before HENRY, EBEL, and TYMKOVICH, Circuit Judges.

EBEL, Circuit Judge.

Defendants-Appellees Jesse Riddle and Riddle & Associates (collectively, "Riddle") violated the Fair Debt Collection Practices Act ("FDCPA" or "Act"), 15 U.S.C. §§ 1692-1692o, by filing suit against Plaintiff-Appellant Brenda Johnson ("Johnson") to recover statutory shoplifting penalties for a dishonored check under Utah law. See Johnson v. Riddle [hereinafter Johnson II], 305 F.3d 1107, 1121 (10th Cir. 2002). This case is now before us on appeal a second time, after our remand to the district court with instructions to determine whether the FDCPA's bona fide error defense shielded Riddle from liability for that violation. See id. at 1124.

On remand, the district court granted summary judgment in favor of Riddle after concluding that Riddle "established through undisputed fact a bona fide error defense to [Johnson's] FDCPA claims against him." Johnson v. Riddle [hereinafter Johnson III], 296 F.Supp.2d 1283, 1284 (D.Utah 2003). Johnson appeals.

Exercising jurisdiction pursuant to 28 U.S.C. § 1291, we review the district court's grant of summary judgment de novo, applying the same standard used by the district court.¹ See Burnham v. Humphrey Hospitality Reit Trust, Inc., 403 F.3d 709, 714 (10th Cir.2005). Applying those standards, we conclude that neither Riddle nor Johnson is entitled to judgment as a matter of law because triable issues of fact exist regarding each element of the bona fide error defense. We therefore REVERSE the district court's grant of summary judgment in favor of Riddle, AFFIRM the district court's denial of summary judgment in favor of Johnson, and REMAND this case.

I. BACKGROUND

The controversy in this case revolves around the fact that the statutory penalty allowed to a creditor bringing a dishonored check claim in Utah at the time relevant to this case was $15 plus the face value of the check. Utah Code Ann. § 7-15-1 However, if such a claim could somehow be cast as a shoplifting charge, the allowable statutory penalty would be up to $500. Id. § 78-11-15. In our earlier opinion, we determined that it was "unmistakably clear" that Utah law did not authorize an ordinary dishonored check claim to be recast as a shoplifting charge in order to claim the higher statutory penalties. Johnson II, 305 F.3d at 1119-1120.

Riddle, as attorney for 7-Eleven (the Southland Corporation), brought a shoplifting claim against Johnson, in a suit asking for $2.64 (the face value of her dishonored check to 7-Eleven) and $250 (statutory penalties for shoplifting). Id. at 1112. Ultimately, that suit was dismissed when Johnson paid $17.64; that is, the value of the check plus the $15 dishonored check penalty. Id. However, that was not the end of the controversy. Johnson then brought a class-action claim under the FDCPA against Riddle, claiming that the practice of bringing shoplifting charges against the maker of a dishonored check violated the FDCPA. Id. In our earlier opinion, we concluded that this practice did violate the FDCPA, but we remanded for the district court to determine whether Riddle was entitled to a bona fide error defense predicated upon a bona-fide mistake of law. Id. at 1120, 1124. The district court concluded that he was and granted summary judgment for Riddle. Johnson III, 296 F.Supp.2d at 1284, 1294. We now reverse.

The facts pertaining to the bona fide error defense are as follows: In a letter Riddle wrote to his client on May 12, 1995, he discussed the possibility of bringing shoplifting actions in Utah state courts against dishonored check writers. In that letter, he explained that the Utah shoplifting statute required a showing that the merchandise was taken from the merchant without payment and without permission and that "[o]ne could certainly argue that presenting a check and taking merchandise is not a taking `without the permission of the merchant.'" The opinion letter continued by stating that:

It would be difficult for [Riddle & Associates] to predict the outcome of [a] case [seeking shoplifting penalties for a dishonored check]. Utah case law is silent on the issue, and I can find no other jurisdiction that has case law interpreting such a statute. The outcome depends on the courts [sic] interpretation of [the shoplifting] statute.... I can see no legal or ethical reason that we should not file a test case and allow the courts to decide.

Riddle subsequently filed a complaint in Utah state court seeking a shoplifting penalty on a dishonored check. See Johnson II, 305 F.3d at 1112. "When the defendant in the case failed to appear in court," Judge Burton, 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." Id. Default judgments awarding statutory penalties in excess of the $15 penalty allowed for an ordinary dishonored check claim were issued in three other unpublished state court cases. See Johnson v. Riddle [hereinafter Johnson I], 2000 WL 33980012, at *1 (D.Utah 2000) (unpublished); see also Johnson II, 305 F.3d at 1112. None of these default judgments were appealed. Johnson II, 305 F.3d at 1112.

In 1997, two months before Riddle filed a shoplifting claim against Johnson for her dishonored check, Riddle and another collection attorney, DeLoney, attended a meeting with two judges: Judge Burton, who had issued the default judgment awarding shoplifting penalties in Riddle's test case, and Judge Fratto, who was newly appointed to the bench. Johnson III, 296 F.Supp.2d at 1288. At that meeting, Judge Fratto told Riddle that he "had some real problems with the shoplifting statute applying to a bad check." Id. (quotation omitted). After that meeting and prior to filing suit against Johnson, Riddle "was very concerned that [the shoplifting statute] didn't apply to a bad check" and "didn't want to do it [i.e., attempt to collect such fees,] anymore." Id. (quotation omitted). Six days after that meeting, Judge Fratto notified DeLoney, per their agreement at the meeting, that no further default judgments containing shoplifting penalties would be signed by the state court. And, at some later date, some Utah state trial judges "began limiting fee awards in default judgment cases to $15." Johnson II, 305 F.3d at 1112.

Nevertheless, on August 14, 1997, Riddle filed suit in Utah state district court against Johnson seeking a $250-shoplifting penalty for a dishonored check Johnson wrote for $2.64 to 7-Eleven in September 1996. Id. After being served with the complaint and summons in that suit on August 24, 1997, Johnson paid Riddle $17.64. Riddle then dropped his suit against Johnson. Id.

On August 24, 1998, Johnson filed a class action suit in federal court against Riddle on behalf of all persons against whom Riddle had claimed shoplifting penalties for a dishonored check, alleging that such a practice was not permitted by Utah law and therefore violated the FDCPA and various state statutes. Id. Riddle and Johnson then filed cross-motions for summary judgment. Id. The district court granted summary judgment in favor of Riddle, "reasoning that Riddle's practice was `permitted by law' because of earlier unpublished state trial court default judgments." Id.; see also Johnson I, 2000 WL 33980012, at *6. Johnson appealed.

In that first appeal, we reversed on the issue of Riddle's compliance with the FDCPA, holding that the district court should have conducted a proper Erie analysis rather than relying on unpublished state trial court decisions to determine whether Riddle's actions were "permitted by law." Johnson II, 305 F.3d at 1118-1119, 1121. Specifically, we concluded that the district court erroneously "regarded itself as bound by unpublished state trial court decisions granting default judgments for amounts in excess of the statutory fee for dishonored checks." Id. at 1118. We explained that "[w]hen the federal courts are called upon to interpret state law, the federal court must look to the rulings of the highest state court, and, if no such rulings exist, must endeavor to predict how that high court would rule." Id. Conducting such an Erie analysis, we held that "[b]y seeking to collect a shoplifting penalty where no shoplifting (as the term is defined by Utah statute) occurred, Riddle sought to collect an amount not permitted by law in violation of the FDCPA." Id. at 1120.² However, we further held that the FDCPA's bona fide error defense, which shields a debt collector from liability for a violation, can apply to a mistake of law which resulted in an attempt to collect amounts not permitted by law, as well as mistakes of fact. Id. at 1121. We remanded to the district court for a determination in the first instance of whether Riddle was entitled to this defense. See id. at 1121 n. 13, 1124.

On remand, the district court held that Riddle had "successfully established the bona fide error defense" and therefore "[could not] be held liable to Johnson under the FDCPA." Johnson III, 296 F.Supp.2d at 1294. The court then denied Johnson's motion for summary judgment on the issue of Riddle's liability under the FDCPA, granted Riddle's cross-motion for summary judgment, and dismissed Johnson's FDCPA claim with prejudice. Id. Having concluded that Riddle was not liable under federal law, the district court denied Johnson's motion for class certification as moot and declined to exercise supplemental...