Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-14-55235/USCOURTS-ca9-14-55235-0/pdf.json

Parties Involved:
ACA International
Amicus Curiae
California Association of Collectors, Inc.
Amicus Curiae
Tamara Diaz
Appellee
Kubler Corporation
Appellant

Document Text:

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

TAMARA DIAZ,

Plaintiff-Appellee,

v.

KUBLER CORPORATION, DBA

Alternative Recovery Management,

Defendant-Appellant.

No. 14-55235

D.C. No.

3:12-cv-01742-

MMA-BGS

OPINION

Appeal from the United States District Court

for the Southern District of California

Michael M. Anello, District Judge, Presiding

Argued and Submitted

April 7, 2015—Pasadena, California

Filed May 12, 2015

Before: Barry G. Silverman and Carlos T. Bea, Circuit

Judges and James Donato,* District Judge.

Opinion by Judge Donato

* The Honorable James Donato, District Judge for the U.S. District

Court for the Northern District of California, sitting by designation.

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2 DIAZ V. KUBLER CORP.

SUMMARY**

Fair Debt Collection Practices Act

Reversing the district court’s summary judgment and

remanding, the panel held that a collection letter seeking ten

percent interest on a debt did not violate the Fair Debt

Collection Practices Act or California’s Rosenthal Act.

The panel held that the letter did not violate 15 U.S.C.

§ 1692f(1), and thus did not violate the Rosenthal Act,

because the amount sought was authorized byCalifornia state

law, which allows recovery of prejudgment interest on a debt

that is certain or capable of being made certain, even if a

judgment has not yet been obtained.

COUNSEL

June D. Coleman (argued), Kronick Moskovitz Tiedemann &

Girard PC, Sacramento, California, for Defendant-Appellant.

Michael L. Crowley (argued) and Andre L. Verdun, Crowley

Law Group, San Diego, California; Eric A. LaGuardia,

LaGuardia Law, San Diego, California, for PlaintiffAppellee.

Thomas P. Griffin, Jr., Hefner, Stark & Marois, LLP,

Sacramento, California; Brian Melendez, Dykema Gossett

** This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

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DIAZ V. KUBLER CORP. 3

PLLC, Minneapolis, Minnesota, for Amici Curiæ ACA

International and California Association of Collectors, Inc.

OPINION

DONATO, District Judge:

This appeal involves a suit by a debtor against a debt

collector, alleging that by sending a collection letter that

sought ten percent interest on the debt, the debt collector

violated the provision of the federal Fair Debt Collection

Practices Act (“FDCPA”) codified at 15 U.S.C. § 1692f(1)

and thereby also violated California’s Fair Debt Collection

Practices Act (the “Rosenthal Act”), Cal. Civ. Code

§§ 1788-1788.33. The district court agreed that the debt

collector violated the FDCPA and the Rosenthal Act, and

granted summary judgment in the debtor’s favor. Exercising

jurisdiction under 28 U.S.C. § 1291, we reverse the district

court’s grant of summary judgment and remand.

I.

Congress passed the FDCPA to “eliminate abusive debt

collection practices by debt collectors.” 15 U.S.C. § 1692(e). 

To that end, the statute prohibits debt collectors from trying

to collect any amount that is not “expressly authorized by the

agreement creating the debt or permitted by law.” 15 U.S.C.

§ 1692f(1). A debt collector does not violate this provision

if the amounts it seeks are authorized by state law. See Allen

ex rel. Martin v. LaSalle Bank, N.A., 629 F.3d 364, 369 (3d

Cir. 2011); Freyermuth v. Credit Bureau Servs., 248 F.3d

767, 770 (8th Cir. 2001); see also Staff Commentary on the

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4 DIAZ V. KUBLER CORP.

Fair Debt Collection Practices Act, 53 Fed. Reg. 50,097,

50,108 (Fed. Trade Comm’n 1988).

The pertinent state laws are sections 3287 and 3289 of the

California Civil Code. Section 3287 allows recovery of prejudgment interest on debts under certain circumstances:

(a) Every person who is entitled to recovery

damages certain, or capable of being made

certain by calculation, and the right to recover

which is vested in him upon a particular day,

is entitled also to recover interest thereon

from that day, except during which time as the

debtor is prevented by law, or by the act of the

creditor from paying the debt. This section is

applicable to recoveryof damages and interest

from any such debtor, including the state or

any county, city, city and county, municipal

corporation, public district, public agency, or

any political subdivision of the state.

(b) Every person who is entitled under any

judgment to receive damages based upon a

cause of action in contract where the claim

was unliquidated, may also recover interest

thereon from a date prior to the entry of

judgment as the court may, in its discretion,

fix, but in no event earlier than the date the

action was filed.

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DIAZ V. KUBLER CORP. 5

Cal. Civ. Code § 3287 (West 1997) (amended 2013).1

Section 3289 provides that “[i]f a contract entered into after

January 1, 1986, does not stipulate a legal rate of interest, the

obligation shall bear interest at a rate of 10 percent per annum

after a breach.” Cal. Civ. Code § 3289.

The Rosenthal Act “mimics or incorporates by reference

the FDCPA’s requirements . . . and makes available the

FDCPA’s remedies for violations.” Riggs v. Prober &

Raphael, 681 F.3d 1097, 1100 (9th Cir. 2012). The parties do

not dispute that the Rosenthal Act claims at issue in this

appeal rise or fall with the FDCPA claims.

II.

The relevant facts are not disputed. Appellee Tamara

Diaz incurred a debt for receiving dental services from

Parkway Dental Group in the spring of 2011. Parkway later

referred the debt to appellant Kubler Corporation (doing

business as Alternative Recovery Management, or “ARM”),

a debt collection agency, which began efforts to collect on the

debt. As part of these efforts, Kubler sent Diaz a letter in

May 2012 demanding that she pay $3,144 in principal and

$298.03 in interest. The parties agree that the demand for

interest reflects an annual interest rate of ten percent.

In July 2012, Diaz filed suit against Kubler in federal

district court, and subsequently amended her complaint to

claim that Kubler violated 15 U.S.C. § 1692f(1) and the

1 The statute is quoted as it stood during the events that gave rise to this

case. In 2013, the statute underwent several minor changes, none of

which are material to the issues in this appeal. Cal. Civ. Code § 3287

(West Supp. 2015).

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6 DIAZ V. KUBLER CORP.

Rosenthal Act by seeking interest in the May 2012 letter. She

later moved for summary judgment. The district court

granted summary judgment and held that “[w]ithout a

judgment for breach of contract awarding prejudgment

interest, Defendant cannot seek to collect prejudgment

interest on Plaintiff’s debt at the rate set forth in California

Civil Code section 3289.” Diaz v. Kubler Corp., 982 F. Supp.

2d 1146, 1156 (S.D. Cal. 2013) (citations omitted).

Afterwards, Diaz chose not to try her remaining claims to

a jury, and instead sought statutory damages for the claims on

which she had prevailed at summary judgment. The district

court awarded her $500 in statutory damages, as well as

attorneys’ fees and costs. Kubler timely appealed.

III.

We review de novo the district court’s order granting

summary judgment, see John Doe 1 v. Abbott Labs., 571 F.3d

930, 933 (9th Cir. 2009), and its interpretation of state law,

see Paulson v. City of San Diego, 294 F.3d 1124, 1128 (9th

Cir. 2002) (en banc). “When interpreting state law, we are

bound to follow the decisions of the state’s highest court,”

and “[w]hen the state supreme court has not spoken on an

issue, we must determine what result the court would reach

based on state appellate court opinions, statutes and

treatises.” Id. (citations omitted).

It is quite plain that Kubler would have been entitled to

prejudgment interest under California law when it sent its

collection letter if the debt in question was certain or capable

of being made certain at that time, even if Kubler had not yet

obtained a judgment from a court. Section 3287(a) allows

recovery of interest from the time the creditor’s right to

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DIAZ V. KUBLER CORP. 7

recover “is vested,” and we have previously explained that

“California cases uniformly have interpreted the ‘vesting’

requirement as being satisfied at the time that the amount of

damages become certain or capable of being made certain,

not the time liability to pay those amounts is determined.” 

Evanston Ins. Co. v. OEA, Inc., 566 F.3d 915, 921 (9th Cir.

2009) (collecting cases); see also Cataphora Inc. v. Parker,

848 F. Supp. 2d 1064, 1072 (N.D. Cal. 2012) (discussing

California cases and reaching same conclusion). “Damages

are deemed certain or capable of being made certain within

the provisions of subdivision (a) of section 3287 where there

is essentially no dispute between the parties concerning the

basis of computation of damages if any are recoverable but

where their dispute centers on the issue of liability giving rise

to damage.” Leff v. Gunter, 658 P.2d 740, 748 (Cal. 1983)

(citation omitted). Consequently, prejudgment interest under

section 3287(a) becomes available as of the day the amount

at issue becomes “calculable . . . mechanically, on the basis

of uncontested and conceded evidence,” and it is available “as

a matter of right,” rather than at the discretion of a court. Id.

at 748, 749.

Our conclusion that section 3287(a) can entitle a creditor

to interest even without a prior judgment is confirmed by the

text of section 3287(b), which applies where the amount of

damages is not certain or capable of being made certain. That

provision explicitly states that it only permits prejudgment

interest where a person is “entitled under any judgment to

receive damages based upon a cause of action in contract

where the claim was unliquidated.” Cal. Civ. Code § 3287(b)

(emphasis added). The obvious implication is that the word

“entitled” when used on its own (as it is in section 3287(a))

does not carry with it any implicit requirement that the

entitlement be pursuant to a judgment. Cf. Romero-Ruiz v.

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8 DIAZ V. KUBLER CORP.

Mukasey, 538 F.3d 1057, 1063–64 (9th Cir. 2008) (“It is a

well-established principle of statutory construction that

legislative enactments should not be construed to render their

provisions ‘mere surplusage.’”); People v. Woodhead,

741 P.2d 154, 157 (Cal. 1987) (“[W]hen the drafters of a

statute have employed a term in one place and omitted it in

another, it should not be inferred where it has been

excluded.”). It follows that a judgment awarding interest

pursuant to section 3287(a) merely vindicates a pre-existing

right to interest instead of creating it. Kubler might well have

had a right to pre-judgment interest pursuant to section

3287(a) in May 2012, despite not having obtained a judgment

saying so. And given the absence of any provision in the

contract stipulating to a particular rate of interest, the interest

rate that would apply is section 3289’s default of ten percent.

Diaz relies on Unocal Corp. v. United States, 222 F.3d

528 (9th Cir. 2000), to defend the district court’s findings but

that case provides her with no meaningful support. Unocal

states that “[s]ection 3287 provides for an award of

prejudgment interest whenever a plaintiff prevails in a breach

of contract claim for an amount of damages that is certain or

is capable of being made certain by calculation.” Id. at 541. 

But just because prejudgment interest can be awarded if a

plaintiff prevails in court does not mean the plaintiff was not

entitled to prejudgment interest even before.

The district court’s grant of summary judgment was based

on an incorrect reading of section 3287. Summary judgment

in Diaz’s favor might still have been appropriate if it were

undisputed that Diaz’s debt was not certain or capable of

being made so, thus rendering section 3287(a) inapplicable. 

But the district court made no such determination, apart from

citing a declaration from Diaz in a footnote to its recitation of

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DIAZ V. KUBLER CORP. 9

facts, in which she claimed that she believed Parkway was

“attempting to collect more than what [she] owed.” Given

Kubler’s insistence that the debt was in fact certain – a claim

supported by documents from Diaz’s insurer and a small

claims court settlement with Parkway that she entered into –

Diaz’s conclusory statement is not the grist of undisputed

material fact. If Kubler is correct that the debt was certain by

May 2012, the attempt to seek prejudgment interest in the

collection letter was “permitted by law,” and did not cross

15 U.S.C. § 1692f(1) or the Rosenthal Act.

Nor is it the case that a debt collector must generally be

entitled by judgment to a type of relief in order for that relief

to be “permitted by law” within the meaning of 15 U.S.C.

§ 1692f(1). To hold that a debt collector must have a

judgment in hand in order for the relief it seeks to be

“permitted by law” would lead to untenable results, given the

fact that § 1692f(1) can be violated by the filing of a lawsuit

that seeks to collect an amount not authorized by the debt

agreement or permitted by law. See Heintz v. Jenkins,

514 U.S. 291, 294 (1995) (holding that the FDCPA “applies

to the litigating activities of lawyers”); Donohue v. Quick

Collect, Inc., 592 F.3d 1027, 1031–32 (9th Cir. 2010) (“We

. . . conclude that a complaint served directly on a consumer

to facilitate debt-collection efforts is a communication subject

to the requirements of §§ 1692e and 1692f.”). If a prior court

judgment were a sine qua non for relief to be “permitted by

law,” a person would not be able to file a lawsuit seeking

prejudgment interest unless she had already obtained a

judgment awarding prejudgment interest. Nothing in

§ 1692f(1) requires this Catch-22.

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10 DIAZ V. KUBLER CORP.

We conclude that Kubler’s debt collection letter did not

violate 15 U.S.C. § 1692f(1) or the Rosenthal Act.2 We

reverse the district court’s grant of summary judgment

against Kubler and remand for further proceedings consistent

with this opinion.

REVERSED AND REMANDED.

2 At oral argument, Diaz argued for the first time that Kubler’s letter

violated the FDCPA by not including details like what time period the

requested interest was calculated over and whether Kubler was demanding

interest that might accrue in the future. Because this argument was not

made in Diaz’s appellate brief, it was waived, and we do not address it. 

See Butler v. Curry, 528 F.3d 624, 642 (9th Cir. 2008).

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