Yu v. Signet Bank/Virginia

• Decision Date: 30 October 2002
• Docket Number: No. A094519.,No. A095102.,A094519.,A095102.
• Citation: 126 Cal.Rptr.2d 516,103 Cal.App.4th 298
• Court: California Court of Appeals
• Parties: William YU, et al., Plaintiffs and Respondents, v. SIGNET BANK/VIRGINIA, et al., Defendants and Appellants.

126 Cal.Rptr.2d 516

103 Cal.App.4th 298

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

No. A094519.

No. A095102.

Court of Appeal, First District, Division 4.

October 30, 2002.

As Modified on Denial of Rehearing November 25, 2002.

Review Denied January 15, 2003.

Morrison & Foerster, James F. McCabe, Gregory P. Dresser, James R. McGuire, San Francisco, for Defendants/Appellants

The Sturdevant Law Firm, James C. Sturdevant, San Francisco, Mark T. Johnson, Law Office of William E. Kennedy, William E. Kennedy, Santa Clara, for Plaintiffs/Respondents.

The Sturdevant Law Firm, James C. Sturdevant, San Francisco, Law Office of William E. Kennedy, William E. Kennedy, Santa Clara, for Plaintiffs/Appellants.

Morrison & Foerster, James F. McCabe, Gregory P. Dresser, James R. McGuire, San Francisco, for Defendants/Respondents.

KAY, P.J.

In Yu v. Signet Bank/Virginia (1999) 69 Cal.App.4th 1377, 82 Cal.Rptr.2d 304 (Yu I), we reversed a summary judgment entered for defendants Signet Bank/Virginia and Capital One Bank (collectively Banks) on causes of action in the second amended complaint of plaintiffs William and Darlene Yu for abuse of process, and unlawful and unfair business [practice (Bus. & Prof. Code, § 17200). In the present appeal by the Yus (A095102), we reverse the judgment entered for Banks on these causes of action after their demurrer to the third amended complaint was sustained without leave to amend. In Banks' appeal (A094519), we affirm the order denying their motion to strike the action under the anti-SLAPP (strategic lawsuit against public participation) statute (Code Civ. Proc, § 425.16; hereafter § 425.16).

I. BACKGROUND

A. Our Prior Decision

As described in Yu I, this lawsuit seeks to redress an improper debt collection practice of Virginia banks against California residents. The Yus accepted a credit card from Signet in 1989, used it to make purchases, and defaulted on repayments. Signet sued them on the debt in Virginia in 1994, obtained a default judgment, and served a "garnishment summons" on a Virginia office of William Yu's employer, with directions that it be forwarded to his place of employment in California. Mr. Yu's wages were garnished from November 1994 to May 1995 to satisfy the judgment. The Yus had no contact with Virginia other than their credit card with Signet.

The Yus filed this suit as a class action against Signet and its successor, Capital One, alleging that Banks'"long-arm program" of pursuing collection actions in Virginia against California credit card holders constituted "distant forum abuse," the practice of collecting consumer obligations by suing debtors in distant locations to deprive them of the opportunity to defend themselves. (Yu I, supra, 69 Cal.App.4th at p. 1389, 82 Cal.Rptr.2d 304, citing Chen, Due Process as Consumer Protection: State Remedies for Distant Forum Abuse (1986) 20 Akron L.Rev. 9, 10-13.) Distant forum abuse is "unconscionable" (Barquis v. Merchants Collection Assn. (1972) 7 Cal.3d 94, 107, 101 Cal.Rptr. 745, 496 P.2d 817) and "insidious" (Chen, supra, 20 Akron L.Rev. at p. 15) conduct employing "an ostensibly legitimate legal process to deprive consumers of basic opportunities which should be afforded all litigants" (ibid). "[M]isuse of the courts in this manner contributes to an undermining of confidence in the judiciary by reinforcing the unfortunate image of courts as `distant' entities, available only to wealthy or large interests," and leads consumers "to conclude that the legal system is merely a 'rubber stamp' for the improper practices utilized by predatory agencies." (Barquis v. Merchants Collection Assn., supra, at p. 108, 101 Cal.Rptr. 745, 496 P.2d 817.) Thus, "courts have a strong interest in ensuring that [such] abuses of the legal process by collection agencies are not perpetuated." (Ibid.)

The Yus asserted causes of action for violations of due process and of California debt collection statutes, for intentional and negligent infliction of emotional distress, and for abuse of process and unlawful business practice. Judgment was entered for Banks after their motion for summary judgment was granted. In Yu I, we reversed the judgment on the abuse of process and unlawful business practice claims, concluding that there were triable issues as to those claims under our Supreme Court's decision in the Barquis case.

To quote from our opinion in Yu I, Barquis v. Merchants Collection Assn., supra, 7 Cal.3d at p. 98, 101 Cal.Rptr. 745, 496 P.2d 817, "held that a creditor who files consumer debt collection actions in an improper venue, knowing that the venue is improper, for the purpose of impairing the debtors' ability to defend themselves, is guilty of `a gross "abuse of process"' and an `"unlawful ... business practice"' within the meaning of what is now Business and Professions Code section 17200. In support of this conclusion, the court observed that the venue rules for relatively small claims stemmed from `recognition of the serious potential for harassment that arises if a plaintiff, in a small monetary action, commences his action in a distant forum.... [Defendants in such cases will often be financially unable to expend the money to travel to a distant forum, or to hire an attorney to do so, even simply to move for a change of venue. Without the protection of [the venue statute], a plaintiff, aware of these practical limitations, could exploit the situation by filing all such actions in distant counties where a defendant could not afford either to defend or to move for change of venue, and could thereby unfairly obtain default judgments or favorable settlements in such actions.' (7 Cal.3d at p. 118, 101 Cal.Rptr. 745, 496 P.2d 817.)[¶] The practice of `distant forum abuse' [citation] alleged in [the Yus'] case is even worse than the one condemned in Barquis, because the practice there involved suits in the wrong venue within California, whereas the practice here involves suits in the wrong jurisdiction—the even more distant forum of another state." (Yu I, supra, 69 Cal.App.4th at p. 1389, 82 Cal.Rptr.2d 304.)

We held that the Yus' claims and supporting evidence "raise[d] triable issues of fact concerning [Banks'] knowledge and intent [under Barquis's standards] which cannot be resolved on a motion for summary judgment." (Yu I, supra, 69 Cal. App.4th at p. 1390, 82 Cal.Rptr.2d 304.) We concluded that the Virginia courts did not have personal jurisdiction over the Yus, and reasoned, in view of a 1990 Georgia decision against Signet on the same issue and facts, that Banks could be found to have been aware of this problem with their "long-arm program" before they used the program against the Yus. (Yu I, supra, at pp. 1384-1388, 1390, 82 Cal.Rptr.2d 304, citing Signet Bank/Virginia v. Tillis (1990) 196 Ga.App. 433, 396 S.E.2d 54.) Further evidence of culpable knowledge and intent included Banks' exemption of "[`p]eople in the limelight, celebrities, attorneys" from the long-arm program. (Yu I at pp. 1382, 1390, 82 Cal.Rptr.2d 304.) A Capital One officer had testified that suing out-of-state attorneys was viewed as a "bad business decision," and that celebrities were exempted because "`we didn't want to expose the company to any press because we hadn't done everything we needed to do.'" (Id. at p. 1382, 82 Cal.Rptr.2d 304.) This evidence, which has been likened to "wearing a sign that says, `Sue me'" (Jaworski, Subprime Lending Under Siege in the Courts—A Summary of Illustrative Cases (2001) 55 Consumer Fin. L.Q.Rep. 70, 72 [commenting on Yu I]), along with evidence that Banks "obtain[ed] assemblyline default judgments as a regular business practice" through their long-arm program (Chen, supra, 20 Akron L.Rev. at p. 15 [describing the "ideal scenario" for a creditor practicing distant forum abuse]; Yu I, supra, at pp. 1382, 1390, 82 Cal. Rptr.2d 304 [ninety percent of Banks' long-arm suits resulted in default judgments] ), precluded entry of summary judgment for Banks consistent with the decision in Barquis.

We rejected Banks' contention that Barquis was distinguishable because the Yus' default was obtained in compliance with Virginia law. (Yu I, supra, 69 Cal.App.4th at pp. 1390-1391, 82 Cal.Rptr.2d 304 [noting that no Virginia appellate court had ever purported to authorize "long-arm" jurisdiction over out-of-state consumers for debt collection purposes].) We also rejected Banks' various arguments as to why Barquis could not be applied to their conduct. The summary judgment was based largely on the theory that Virginia courts had personal jurisdiction over the Yus, and we explained why that theory was incorrect. We pointed out the Yus' lack of minimum contacts with Virginia, and rejected Banks' claim that we could not properly inquire into the Virginia court's jurisdiction. (Yu I, at pp. 1384-1388, 82 Cal.Rptr.2d 304.) We also rejected Banks' related arguments that, notwithstanding Barquis: (1) no abuse of process could be found because California cannot regulate out-of-state conduct that was lawful where it occurred; (2) principles of sovereignty and comity precluded imposition of liability based on a sister state judgment; and (3) inquiry into the validity of the Virginia judgment could not be used to award any relief apart from refusal to enforce the judgment. (Yu I, at pp. 1391-1393, 82 Cal.Rptr.2d 304.) We ultimately concluded "that Barquis's holding can be applied to [Banks'] conduct, even though the distant [forum] abuse occurred in another state and involved the procuring of a foreign judgment." (Id. at p. 1394, 82 Cal. Rptr.2d 304.)

B. Subsequent Proceedings

When the case returned to the trial court after Banks' petitions to the California Supreme Court for review and to the United States Supreme Court for certiorari were denied, Banks moved for judgment on the pleadings. Banks argued that Barquis was wrongly decided insofar as it would subject them to...