De La Torre v. Cashcall, Inc., S241434

CourtUnited States State Supreme Court (California)
Writing for the CourtCUÉLLAR, J.
Citation5 Cal.5th 966,236 Cal.Rptr.3d 353,422 P.3d 1004
Parties Eduardo DE LA TORRE et al., Plaintiffs and Appellants, v. CASHCALL, INC., Defendant and Respondent.
Docket NumberS241434
Decision Date13 August 2018

5 Cal.5th 966
422 P.3d 1004
236 Cal.Rptr.3d 353

Eduardo DE LA TORRE et al., Plaintiffs and Appellants,
v.
CASHCALL, INC., Defendant and Respondent.

S241434

Supreme Court of California.

Filed August 13, 2018


The Strudevant Law Firm, James C. Sturdevant, San Francisco; Rukin Hyland Doria & Tindall, Gibbs Law Group, Steven M. Tindall, Andre M. Mura, Oakland; Rukin Hyland, Rukin Hyland & Riggin, Jessica Riggin, San Francisco; Law Offices of Damon M. Connolly, Damon M. Connolly ; Law Office of Arthur D. Levy and Arthur D. Levy, Oakland, for Plaintiffs and Appellants.

Xavier Becerra, Attorney General, Nicklas A. Akers, Assistant Attorney General, Michele Van Gelderen and Michael Reynolds, Deputy Attorneys General, for Attorney General of the State of California as Amicus Curiae on behalf of Plaintiffs and Appellants.

Caryn Becker ; Seth E. Mermin, Brady C. Williams, Newport Beach; Williams Cuker Berezofsky, Berezofsky Law Group, Michael J. Quirk ; Ellen Harnick; and Scott L. Nelson for Center for Responsible Lending, National Association of Consumer Advocates, Public Citizen, Inc., and Public Good Law Center as Amici Curiae on behalf of Plaintiffs and Appellants.

Manatt, Phelps & Phillips, Brad W. Seiling, Donald R. Brown and Joanna S. McCallum, Los Angeles, for Defendant and Respondent.

Morrison & Foerster, James R. McGuire, San Francisco, and Nancy R. Thomas, Los Angeles, for California Financial Service Providers Association, Financial Service Centers of America, Community Financial Services Association of America and Online Lenders Alliance as Amici Curiae on behalf of Defendant and Respondent.

Fred J. Hiestand, Sacramento; Ericka C. Frank and Heather L. Wallace, Sacramento, for the Civil Justice Association of California and the California Chamber of Commerce as Amici Curiae on behalf of Defendant and Respondent.

CUÉLLAR, J.

422 P.3d 1007
5 Cal.5th 972

Under California law, can a loan contract include an interest rate term so high that it is "unreasonably and unexpectedly harsh," "unduly oppressive," or "so one-sided as to shock the conscience"? (

5 Cal.5th 973

Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 910–911, 190 Cal.Rptr.3d 812, 353 P.3d 741 ( Sanchez ).) What the Ninth Circuit asks us to resolve in this case is a more specific version of that question: Can the interest rate on consumer loans of $2,500 or more render the loans unconscionable under section 22302 of the Financial Code ? The answer is yes. An interest rate on a loan is the price of that loan, and "it is clear that the price term, like any other term in a contract, may be unconscionable." ( Perdue v. Crocker National Bank (1985) 38 Cal.3d 913, 926, 216 Cal.Rptr. 345, 702 P.2d 503 ( Perdue ).)

236 Cal.Rptr.3d 357

Although California sets interest rate caps only on consumer loans less than $2,500, we do not glean from the statute setting those rates—section 22303 of the Financial Code —the implication that a court may never declare unconscionable an interest rate on a loan of $2,500 or more.1 Nothing in our unconscionability doctrine, in section 22303, its neighboring section 22302, or anything else shedding light on the purpose of the relevant statutes supports such a reading. Indeed, when read together, sections 22302 and 22303 tend to show how the Legislature's purpose in enacting these provisions was to free larger-denominated debts from the rigid regulation of usury rates, without rendering irrelevant to those transactions the flexible standard of unconscionability long rooted in both statutes and California common law. We recognize how daunting it can be to pinpoint the precise threshold separating a merely burdensome interest rate from an unconscionable one. But that is no reason to ignore the clear statutory embrace here of a familiar principle—that courts have a responsibility to guard against consumer loan provisions with unduly oppressive terms. ( Perdue , supra , 38 Cal.3d at p. 925, 216 Cal.Rptr. 345, 702 P.2d 503.)

That responsibility is one courts must pursue with caution. Unsecured loans made to high-risk borrowers often justify high rates. Both consumers' acceptance of such rates, as well as restrictions on them, may trigger

422 P.3d 1008

unintended consequences. (See, e.g., Bhutta et al., Consumer Borrowing after Payday Loan Bans (2016) 59 J. Law & Econ. 225, 247 [finding that "although payday loan regulations reduce the usage of payday loans, many consumers turn to other forms of high-interest credit"].) Wary of such consequences and cognizant of the limits of its power, a court declares unconscionable only those interest rates that—in light of the totality of a transaction's bargaining context—are so "unreasonably and unexpectedly harsh" as to be "unduly oppressive" or "shock the conscience." (E.g., Sanchez , supra , 61 Cal.4th at pp. 910–911, 190 Cal.Rptr.3d 812, 353 P.3d 741.) But nothing in California law prohibits a court from making an inquiry into the nature of a consumer loan agreement of at least $2,500 and the interest rate provided therein.

5 Cal.5th 974

I.

Defendant CashCall, Inc. (CashCall) is a lender of consumer loans to high-risk borrowers. One of CashCall's signature products was an unsecured $2,600 loan, payable over a 42-month period, and carrying an annual percentage rate (APR) of either 96 percent or, later in the class period, 135 percent. People who took out such loans from CashCall were "consumers with low credit scores," living "under financial stress." ( De La Torre v. CashCall, Inc. (N.D.Cal. 2014) 56 F.Supp.3d 1073, 1085 ( CashCall ).) CashCall attracted many such borrowers through its television advertisements, which "capitalize[d] on the viewer's need to get money quickly." ( Ibid. )

In bringing this lawsuit in the federal district court for the Northern District of California, plaintiffs Eduardo De La Torre and Lori Saysourivong do not contend CashCall's advertising was deceptive. Nor do they claim CashCall failed to disclose accurately the terms of the loan as required by federal law. What plaintiffs allege instead is that CashCall violated California's Unfair Competition Law (UCL). The UCL defines "unfair competition" to include "any unlawful, unfair or fraudulent business act or practice." ( Bus. & Prof. Code, § 17200.) Plaintiffs bring their claim

236 Cal.Rptr.3d 358

under the "unlawful" prong of the UCL and assert that CashCall's lending practice was unlawful because it violated section 22302, the section that applies the unconscionability doctrine to consumer loans.

The district court certified plaintiffs' lawsuit as a class action. It defined the class as those borrowers who took out loans from CashCall of at least $2,500 "at an interest rate of 90% or higher." ( CashCall , supra , 56 F.Supp.3d at p. 1082 [defining as a class " '[a]ll individuals who while residing in California borrowed from $2,500 to $2,600 at an interest rate of 90% or higher from CashCall for personal family or household use at any time from June 30, 2004 through July 10, 2011' "].) Because the class was defined by the interest rate paid by its members, the interest rate became the crucial term on which the parties and the courts trained their attention.

After class certification, CashCall moved for summary judgment on plaintiffs' unfair competition claim. It argued "Plaintiffs have failed to establish that [CashCall's] interest rates are unconscionable as a matter of law." ( CashCall , supra , 56 F.Supp.3d at p. 1086.) The district court initially denied the motion, as "there [were] disputed questions of fact with regard to both the procedural and substantive unconscionability inquiries." ( Id. at p. 1104.)

But the court changed its mind when CashCall made a motion for reconsideration. The court now agreed with CashCall that "the UCL cannot be used as a basis for Plaintiffs' Unconscionability Claim because ruling on

5 Cal.5th 975

that claim would impermissibly require the Court to regulate economic policy." ( De La Torre v. CashCall, Inc. (N.D.Cal. 2014) 56 F.Supp.3d 1105, 1107.) In reaching this conclusion, the court reasoned it could not fashion a remedy under the UCL "without deciding the point at which CashCall's interest rates crossed the line into unconscionability." ( Id. at pp. 1109–1110.) The court emphasized that, in enacting section 22303, "[t]he California Legislature long ago made the policy decision not to cap interest rates on loans exceeding $2,500." ( Id. at p. 1109.) To decide the point at which "CashCall's interest rates crossed the line into unconscionability," said the court, would be to "second-guess" the Legislature and "impermissibly

422 P.3d 1009

intrud[e] upon [its] province" to forge economic policy through legislation. ( Ibid. ) As such, "[e]ven if Plaintiffs were able to prove that the challenged loans were unconscionable," their claim would "fail[ ] as a matter...

To continue reading

Request your trial
44 practice notes
  • People v. Powell, S137730
    • United States
    • United States State Supreme Court (California)
    • August 13, 2018
    ...at p. 1007, 131 Cal.Rptr.3d 225, 261 P.3d 243 ; People v. Balderas (1985) 41 Cal.3d 144, 204-205, 222 Cal.Rptr. 184, 711 P.2d 480.)422 P.3d 1004 Nor does section 190.3’s use of adjectives such as "extreme" and "substantial" in factors (d) and (g), respectively, act as a barrier to the jury’......
  • Erhart v. Bofi Holding, Inc., Case No. 15-cv-02287-BAS-NLS consolidated with 15-cv-02353-BAS-NLS
    • United States
    • United States District Courts. 9th Circuit. United States District Court (Southern District of California)
    • April 30, 2019
    ...actionable." Valdez v. Seidner-Miller, Inc. , 33 Cal. App. 5th 600, 245 Cal.Rptr.3d 268 (2019) (quoting De La Torre v. CashCall, Inc. , 5 Cal. 5th 966, 980, 236 Cal.Rptr.3d 353, 422 P.3d 1004 (2018) ). BofI's derivate UCL claim is tenuous, but Erhart does not convincingly demonstrate that t......
  • Oto, L. L.C. v. Kho, S244630
    • United States
    • United States State Supreme Court (California)
    • August 29, 2019
    ..." ( Pinnacle , supra , 55 Cal.4th at p. 247, 145 Cal.Rptr.3d 514, 282 P.3d 1217, italics added; see De La Torre v. CashCall, Inc. (2018) 5 Cal.5th 966, 983, 236 Cal.Rptr.3d 353, 422 P.3d 1004.) This record reveals both oppression and surprise."The circumstances relevant to establishing oppr......
  • Boyd v. FCA US LLC (In re Takata Airbag Prods. Liab. Litig.), MDL No. 2599
    • United States
    • United States District Courts. 11th Circuit. United States District Courts. 11th Circuit. Southern District of Florida
    • June 1, 2020
    ...Plaintiffs are correct that they can seek restitution and injunctive relief. (D.E. 3034 at 148 (citing De La Torre v. CashCall, Inc. , 236 Cal.Rptr.3d 353, 422 P.3d 1004, 1012 (2018) ).) But read in full, the sentence from De la Torre that Plaintiffs cite makes clear that plaintiffs "cannot......
  • Request a trial to view additional results
44 cases
  • People v. Powell, S137730
    • United States
    • United States State Supreme Court (California)
    • August 13, 2018
    ...at p. 1007, 131 Cal.Rptr.3d 225, 261 P.3d 243 ; People v. Balderas (1985) 41 Cal.3d 144, 204-205, 222 Cal.Rptr. 184, 711 P.2d 480.)422 P.3d 1004 Nor does section 190.3’s use of adjectives such as "extreme" and "substantial" in factors (d) and (g), respectively, act as a barrier to the jury’......
  • Erhart v. Bofi Holding, Inc., Case No. 15-cv-02287-BAS-NLS consolidated with 15-cv-02353-BAS-NLS
    • United States
    • United States District Courts. 9th Circuit. United States District Court (Southern District of California)
    • April 30, 2019
    ...actionable." Valdez v. Seidner-Miller, Inc. , 33 Cal. App. 5th 600, 245 Cal.Rptr.3d 268 (2019) (quoting De La Torre v. CashCall, Inc. , 5 Cal. 5th 966, 980, 236 Cal.Rptr.3d 353, 422 P.3d 1004 (2018) ). BofI's derivate UCL claim is tenuous, but Erhart does not convincingly demonstrate that t......
  • Oto, L. L.C. v. Kho, S244630
    • United States
    • United States State Supreme Court (California)
    • August 29, 2019
    ..." ( Pinnacle , supra , 55 Cal.4th at p. 247, 145 Cal.Rptr.3d 514, 282 P.3d 1217, italics added; see De La Torre v. CashCall, Inc. (2018) 5 Cal.5th 966, 983, 236 Cal.Rptr.3d 353, 422 P.3d 1004.) This record reveals both oppression and surprise."The circumstances relevant to establishing oppr......
  • Boyd v. FCA US LLC (In re Takata Airbag Prods. Liab. Litig.), MDL No. 2599
    • United States
    • United States District Courts. 11th Circuit. United States District Courts. 11th Circuit. Southern District of Florida
    • June 1, 2020
    ...Plaintiffs are correct that they can seek restitution and injunctive relief. (D.E. 3034 at 148 (citing De La Torre v. CashCall, Inc. , 236 Cal.Rptr.3d 353, 422 P.3d 1004, 1012 (2018) ).) But read in full, the sentence from De la Torre that Plaintiffs cite makes clear that plaintiffs "cannot......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT