Yu v. Signet Bank/Virginia

• Citation: 69 Cal.App.4th 1377,82 Cal.Rptr.2d 304
• Decision Date: 16 February 1999
• Docket Number: No. A077911,A077911
• Court: California Court of Appeals Court of Appeals
• Parties: , 99 Cal. Daily Op. Serv. 1199, 1999 Daily Journal D.A.R. 1498 William YU et al., Plaintiffs and Appellants, v. SIGNET BANK/VIRGINIA et al., Defendants and Respondents.

Page 304

82 Cal.Rptr.2d 304

69 Cal.App.4th 1377, 99 Cal. Daily Op. Serv. 1199,

1999 Daily Journal D.A.R. 1498

William YU et al., Plaintiffs and Appellants, v. SIGNET BANK/VIRGINIA et al., Defendants and Respondents.

No. A077911.

Court of Appeal, First District, Division 4, California.

Feb. 16, 1999.

Review Denied May 26, 1999.

James C. Sturdevant, Kim E. Card, The Sturdevant Law Firm, San Francisco, William E. Kennedy Law Office William E. Kennedy, Santa Clara, for Appellants.

Kathleen V. Fisher, James F. McCabe, Annemarie C. O'Shea, Morrison & Foerster, San Francisco, for Respondents.

HANLON, P.J.

Appellants William and Darlene Yu filed this action individually and on behalf of others similarly situated against respondents Signet Bank/Virginia and Capital One Bank challenging respondents' debt collection practices with respect to credit cards they issued to California residents. This appeal arises from the judgment entered for respondents after their motion for summary judgment was granted. We reverse the judgment as to appellants' abuse of process and unlawful business practice claims, and affirm as to the other causes of action.

I. BACKGROUND

Respondents are Virginia corporations with their principal places of business in Virginia. Appellants lived in Fremont, California during the events at issue in this lawsuit.

In 1989, appellants accepted a Signet credit card in response to a pre-approved solicitation they received in the mail. When they signed up for the credit card, appellants executed a certificate accepting terms and conditions which provided that payments on the card would be made to a Virginia address, and that the credit agreement would be governed by Virginia and federal law.

Appellants used the credit card to purchase goods and services primarily for personal, family and household purposes. They never went to Virginia or used the credit card in Virginia. They failed to make payments owed on the card in 1990, and the account was declared delinquent.

Signet had what it called a "long-arm program" for dealing with out-of-state debtors who defaulted on their credit cards. This "long-arm program" was to file collection suits in Virginia state district trial courts against cardholders from other states. The "long-arm program" was begun by Signet around 1983 and carried on by Capital One from March of 1995, after a "spin-off" of Signet's credit card operations to Capital One. More than 90 percent of respondents' long arm suits resulted in default judgments against the cardholders.

When a Virginia suit was filed, respondents sent what they called a "change of jurisdiction" letter to the out-of-state cardholder. The letter advised the cardholder that "[w]e intend to file suit against you in Virginia," and that "[i]f you would prefer the trial to be in your state, we must receive written notice from you within twenty-one days of this letter." If the cardholder requested a change of jurisdiction within the specified time limit, then the Virginia action would be dismissed. Out-of state cardholders who indicated that they could not appear in court for "lack of money; too far to travel; etc." were not considered to have made a valid request for change of jurisdiction, and the Virginia suits would proceed against those customers.

One of respondents' criteria for determining whether a long-arm suit would be filed was whether the cardholder had a "garnishable place of employment." If the cardholder's employer had an office in Virginia, then respondents would serve a post-judgment wage garnishment order on the employer in Virginia.

Respondents' collection guidelines listed "[p]eople in the limelight, celebrities, attorneys" among the cardholders who were "Not candidates for Legal Action." In his deposition, a Capital One vice-president testified that suing out-of-state attorneys was regarded as "a bad business decision." With respect to "celebrities," the officer said that "we didn't want to expose the company to any press because we hadn't done everything we needed to do." A document produced in connection with the officer's deposition listed "Class Action Risk" among the "Real & Assumed Cost[s]" of the long-arm program in 1994. "Signet needs to realize the potential risk of a class action suit," the document stated, "and do the right thing in order to prevent a future loss to the bank."

Appellants did not hear from Signet for four years, but began receiving collection notices on the account in mid-1994. It is disputed whether appellants received a "change of jurisdiction" letter advising that Signet intended to sue them in Virginia.

Around August of 1994, appellants received a document in the mail entitled "Warrant In Debt," stating that they owed Signet $2,191.38, plus interest at the rate of 19.8 percent from March of 1991. The Warrant In Debt had been filed in the state district court in Richmond, Virginia, and was the equivalent of a California civil summons and complaint. Signet had served the Warrant In Debt on appellants, as non-residents of Virginia, by lodging it with the Secretary of the Commonwealth of Virginia. The back of the document advised defendants that they could "move to object to venue" by filing a written request to have the case moved to a different "general district court." Appellants have testified that they did not understand the nature or legal effect of the Warrant In Debt.

Signet obtained a default judgment against appellants in the Richmond district court on August 9, 1994, and a "garnishment summons" from that court in October 1994. Signet served the garnishment summons on the Hampton, Virginia office of appellant William Yu's employer, Silicon Graphics. An instruction on the form directed that it be forwarded to Silicon Graphics' office in Mountain View, California where Mr. Yu worked. From November 1994 to May 1995, a total of approximately $3,900 were garnished from Mr. Yu's wages in Mountain View.

Appellants filed their class action suit against respondents herein in July of 1995. Their second amended complaint asserted eight causes of action, for: (1) tortious violation of Code of Civil Procedure section 395, subdivision (b), which specifies the venue for actions on consumer contracts; (2) abuse of process; (3) tortious violation of Code of Civil Procedure sections 1710.10 et seq. and 1913, subdivision (a), which establish the procedure for enforcing foreign judgments; (4) violation of due process; (5) restitution and injunctive relief under Business and Professions Code section 17200 for an unlawful, unfair or fraudulent business practice; (6) violation of Civil Code section 1788.15, which outlaws certain consumer debt collection practices; (7) negligent infliction of emotional distress; and (8) intentional infliction of emotional distress.

Shortly after this class action was filed Capital One ended the "long arm program." Capital One's "Risk Operations" department wrote a memorandum dated November 22, 1995, to the collections staff, stating that "[t]he Bank will no longer file nor threaten to file long-arm lawsuits.... If the Bank decides to take legal action against a debtor, we will file suit in the Court whose jurisdiction and venue are appropriate to that debtor's domicile.... [p] The Bank will not garnish property in any case where the Bank holds a long-arm judgment against a debtor. If the Bank has obtained a judgment against a debtor in the Court whose jurisdiction and venue are appropriate to the debtor's domicile, we will only garnish property in or through that Court."

Respondents moved for summary judgment or summary adjudication in December 1996, and the motion for summary judgment was granted in February 1997. The court adopted in full respondents' proposed order granting the motion for summary judgment, adding the words we have placed in italics:

"1. The Court holds as a matter of law that Plaintiffs state no cause of action against Defendants. Defendants obtained and enforced a judgment in Virginia in accordance with Virginia laws and the Commonwealth of Virginia had personal jurisdiction over the defendants (sic [the court presumably meant to say "plaintiffs," because Virginia's jurisdiction over the defendant banks was not at issue] ). It is irrelevant that Defendants did not domesticate the Virginia judgment in California pursuant to Code of Civil Procedure § 1913 and the Sister State Money Judgment Act, Code of Civil Procedure § 1710, et seq., because Defendants did not attempt to garnish Plaintiff's wages in California. The situs of Plaintiff's debt for garnishment purposes was not only California, the state of Plaintiff's residence, but also Virginia, the state in which his employer Silicon Graphics--the garnishee--could be found. State of Oregon v. Control Data Corp. (Or.1986) 300 Or. 471, 713 P.2d 30, 32. The proper forum to address Plaintiffs' jurisdictional challenges is the appellate courts of the Commonwealth of Virginia, not this Court.

"2. Plaintiffs as a matter of law are not entitled to seek affirmative relief against Defendants for failure to comply with Code of Civil Procedure § 1913 and the Sister State Money Judgment Act, Code of Civil Procedure § 1710, et seq. Defendants may not be held liable under California law for conduct in Virginia that is legal under Virginia law, regardless of whether that same conduct would or would not be legal under California law. (World Wide Imports v. Bartel (1983) 145 Cal.App.3d 1006, 193 Cal.Rptr. 830.)

"3. Causes of action for emotional distress do not lie for economic losses."

The court entered judgment for respondents, and did not rule on a pending motion for class certification. The class certification motion was supported by evidence that, during the proposed class period from July 15, 1991, respondents had obtained at least 7,575 judgments in Virginia courts against 8,812 California residents, and collected at least $3.5 million on those accounts.

II. DISCUSSION

A....