Palmer v. Stassinos, C-04-03026-RMW.

• Decision Date: 08 November 2005
• Docket Number: No. 04-03027RMW.,No. C-04-03026-RMW.,No. C-04-03237-RMW.,C-04-03026-RMW.,04-03027RMW.,C-04-03237-RMW.
• Court: U.S. District Court — Northern District of California
• Parties: Susanne M. PALMER and Sharon Hammer, Plaintiff, v. Paul R. STASSINOS, Defendant. Susanne M. Palmer, Plaintiff, v. Far West Collection Services, Inc., Defendant. Susanne M. Palmer, Plaintiff, v. I.C. System, Inc.; and B. Brown., Defendant.

419 F.Supp.2d 1151

Susanne M. PALMER and Sharon Hammer, Plaintiff, v. Paul R. STASSINOS, Defendant.

Susanne M. Palmer, Plaintiff, v. Far West Collection Services, Inc., Defendant.

Susanne M. Palmer, Plaintiff, v. I.C. System, Inc.; and B. Brown., Defendant.

No. C-04-03026-RMW.

No. 04-03027RMW.

No. C-04-03237-RMW.

United States District Court, N.D. California, San Jose Division.

November 8, 2005.

COPYRIGHT MATERIAL OMITTED

Ronald Wilcox, Attorney at Law, San Jose, CA, O. Randolph Bragg, Horwitz, Horwitz & Associates, Chicago, IL, Brian Lewis Bromberg, Brian L. Bromberg, P.C., New York City, Paul Arons, Law Office of Paul Arons, Friday Harbor, WA, for Plaintiffs.

June D. Coleman, Mark Ewell Ellis, Andrew Steinheimer, Murphy, Pearson, Bradley & Feeney, Sacramento, CA, for Defendants.

ORDER CLARIFYING DECEMBER 14, 2004, ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS; ORDER GRANTING DEFENDANTS' MOTION FOR RECONSIDERATION

WHYTE, District Judge.

Defendants in the three cases captioned above seek reconsideration of this court's December 14, 2004, consolidated order on two grounds: (1) the enactment of Proposition 64 applies retroactively to deprive Palmer of all standing to sue under California's unfair competition law ("UCL"); (2) the statutory remedies provided in Cal. Civil Code § 1719 are not "mandatory and exclusive." On this second ground, plaintiff seeks reconsideration of the court's determination that pre-judgment interest is not permitted in addition to statutory remedies and that those statutory remedies are not intended to do away with remedies not addressed by the parties, in particular, contractual remedies, attorney's fees, and post-judgment interest.

I. ANALYSIS

A. Clarification

1. "Exclusive and Mandatory" Remedy

As set forth in its December 14, 2004, order, the court held that double recovery was prohibited and that the collection of both the statutory damages provided under § 1719 and pre-judgment interest would result in double recovery against debt collectors. Defendants contend that the court's order was stated so broadly that additional types of recovery (i.e., attorney's fees, post-judgment interest, contractual remedies) would be precluded.

The court stated that the statutory damages in § 1719 were "exclusive and mandatory." Its determination was made in light of the parties' dispute over whether defendants were entitled to both pre-judgment interest and statutory damages on bad checks. The court concluded that § 1719 provided for a mandatory remedy and, because the legislature enacted a new remedy, that mandatory remedy was exclusive. Defendants argue that the legislature's enactment of the relevant provisions of § 1719 was merely a clarification of the existing statutory remedy and not intended to supplant any relief available under California's statutory scheme including pre-judgment interest, post-judgment interest, and, in some instances contractual damages and attorney's fees.

The court finds unpersuasive defendants' arguments for reconsideration of its ruling that pre-judgment interest is not permitted in light of the remedies provided in § 1719. However, with regard to attorney's fees, post-judgment interest and contractual damages, the court clarifies that its analysis of § 1719 was not intended to address or preclude recovery of such relief.

2. Impact on Default Judgments

Defendant Stassinos complains that the court failed to address the impact of its rulings on default judgments awarded by the state courts providing for both prejudgment interest and statutory remedies under § 1719. The court noted in its order at footnote 7 that it need not address the issue of the effect on any default judgment awarded by any state court because defendants never collected any such amounts from plaintiffs. No default judgment entered in favor of Stassinos is at issue in this case, and the court declines, as it did before, to issue an advisory opinion as to the effect of its ruling on any other cases.

B. Proposition 64

On the November 2, 2004, after the court had issued its order granting in part and denying in part defendants' motion to dismiss, the voters in California passed Proposition 64. Proposition 64, which became effective the day after its approval by the electorate, see Cal. Const., art. II, § 10, subd. (a), limits the standing of plaintiffs to sue under the UCL. It eliminated the provision of Cal. Bus. & Prof.Code § 17204 authorizing initiation of a complaint by "any person acting for the interests of itself, its members, or the general public," substituting a provision for enforcement only by "any person who has suffered injury in fact and has lost money or property as a result of such unfair competition." Cal. Bus. & Prof.Code § 17204 (2005). Proposition 64 also amended § 17203, which deals with injunctive relief. This section now provides that a private person "may pursue representative claims or relief on behalf of others only if the claimant meets the standing requirements of Section 17203 and complies with Section 382 of the Code of Civil Procedure," which governs class actions. Cal. Bus. & Prof.Code § 17203. The amended statute thus bars representative actions that cannot meet the class certification requirements imposed by Cal.Civ. Proc.Code § 382. Cal. Bus. & Prof.Code § 17203.

Proposition 64 makes clear that, in order to sue for injunctive relief under California's unfair business practices laws, a party must have "suffered injury in fact and [have] lost money or property as a result of such unfair competition." Id. § 17204. In addition, Proposition 64 allows representative actions for injunctive relief only if a claimant meets the section's standing requirements and the class being represented meets the California class action lawsuit standards set forth in Cal.Civ.Proc. Code § 382. See Cal. Bus. & Prof.Code § 17535.

It is undisputed that plaintiff did not lose money or property as a result of the unfair competition activities alleged in these actions, nor has she suffered any other cognizable injury in fact. Defendants ask this court to reconsider its ruling as to whether plaintiff's UCL claims must be dismissed for lack of standing following the passage of Proposition 64.

The retroactivity of Proposition 64 is now hotly contested in California state courts. In April 2005 the California Supreme Court granted review in five of the cases in which the Proposition 64 retroactivity question has been raised. All five cases involve California Court of Appeal opinions: Californians for Disability Rights v. Mervyn's, LLC, 126 Cal.App.4th 386, 24 Cal.Rptr.3d 301 (2005);¹ Benson v. Kwikset, 126 Cal.App.4th 887, 24 Cal. Rptr.3d 683 (2005);² Branick v. Downey Say. & Loan Ass'n, 126 Cal.App.4th 828, 24 Cal.Rptr.3d 406 (2005);³ Bivens v. Co rel Corp., 126 Cal.App.4th 1392, 24 Cal Rptr.3d 847 (2005);⁴ Lytwyn v. Fry's Electronics, Inc., 126 Cal.App.4th 1455, 25 Cal.Rptr.3d 791 (2005).⁵ These courts of appeal decisions have since been depublished pending review by the California Supreme Court and are no longer citable authority. See Cal. Rules of Court 976(d), 977(a). In spite of the California Supreme Court's intention to address this issue, defendants seek this court's reconsideration of whether plaintiff's UCL causes of action should be dismissed entirely for lack of standing. Because plaintiff continues to press forward with her cases and now has moved for class certification in Palmer v. Stassinos and Palmer v. Far West, the court finds that it is appropriate to rule on this matter, rather than awaiting a California Supreme Court determination.

When reviewing issues of state law, a federal court is "bound to follow the decisions of a state's highest court in interpreting that state's law." Olympic Sports Prod. v. Universal Athletic Sales Co., 760 F.2d 910, 912-13 (9th Cir.1986) (citing Aydin Corp. v. Loral Corp., 718 F.2d 897, 904 (9th Cir.1983)). A federal court should apply state law as it believes the highest court of the State would apply it. See Jones-Hamilton Co. v. Beazer Materials & Servs., Inc., 973 F.2d 688, 692 (9th Cir. 1992).

Litigants in this case generally advance the same arguments as litigants in other cases in which the retroactive application the Proposition 64 is a central issue. Plaintiff urges that, in the absence of clear voter intent, the court should apply the usual presumption that statutory enactments do not operate retroactively. Evangelatos v. Superior Court, 44 Cal.3d 1188, 1208, 246 Cal.Rptr. 629, 753 P.2d 585 (1988) ("[B]oth this court and the Courts of Appeal have generally commenced analysis of the question of whether a statute applies retroactively with a restatement of the fundamental principle that `legislative enactments are generally presumed to operate prospectively and not retroactively unless the Legislature expresses a different intention.'"). Defendants assert that the materials advocating support of Proposition 64 demonstrate that California voters clearly intended for Proposition 64 to apply retroactively.

The court need not determine whether the legislative intent is clear. As one defendant argues, Proposition 64 falls squarely within a rule on repeal of statutes: absent a savings clause, repeals of statutory enactments must apply retroactively to pending cases. Cal. Gov't Code § 9606. The California Supreme Court explained the application of § 9606 notwithstanding customary presumption against retroactivity in Callet v. Alioto, 210 Cal. 65, 290 P. 438 (1930). However, under Gov't Code § 9606, this presumption does not apply when a statutory enactment repeals a statute that provides a purely statutory cause of action. Gov't Code § 9606 provides that "[a]ny statute may be repealed at any time, except when vested rights would be impaired. Persons acting under any statute act in contemplation of this power of repeal." The California Supreme Court explained the rule and its application—despite the general...