Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_05-cv-04993/USCOURTS-cand-4_05-cv-04993-2/pdf.json

Parties Involved:
Brian Castillo
Plaintiff
Check Recovery Systems, Inc.
Defendant
Brandy Hunt
Plaintiff
Imperial Merchant Services
Defendant

Document Text:

United States District Court

For the Northern District of California

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Defendant’s Motion for Summary Judgment is Docket Nos. 38 and 13, for Case Nos. C-05-4993 MJJ and C-06-

2037 MJJ, respectively. Plaintiffs’ Motion for Summary Judgement is Docket No. 53, for Case No. C-05-4993 MJJ.

United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

HUNT,

 Plaintiff,

 v.

 CHECK RECOVERY SYSTEMS, INC.,

Defendant. /

No. C05-04993 MJJ

No. C05-02037 MJJ

ORDER DENYING DEFENDANT’S

MOTION FOR SUMMARY JUDGMENT

AND GRANTING IN PART PLAINTIFFS’

MOTION FOR SUMMARY JUDGMENT

INTRODUCTION

Before the Court are Defendant Imperial Merchant Services d.b.a. Check Recovery Systems’

(“Defendant” or “Imperial”) and Plaintiffs Brandy Hunt (“Hunt”) and Brian Castillo’s (“Castillo”)

(collectively, “Plaintiffs”) cross motions for summary judgment.1

 The parties oppose each other’s

motions. For the following reasons, the Court DENIES Defendant’s Motion for Summary Judgment

and GRANTS, in part, Plaintiffs’ Motion for Summary Judgment.

FACTUAL BACKGROUND

Except as otherwise noted, the Court finds the following facts to be undisputed.

A. Procedural History

Hunt and Castillo filed their complaints on December 5, 2005 and March 16, 2006,

respectively. On May 9, 2006, this Court issued a Related Case Order relating Plaintiffs’ cases. 

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Both Plaintiffs seek damages under the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq.

(“FDCPA”). Plaintiffs allege that Imperial’s debt collection practices of including an interest

charge, in addition to their attempt to collect both a check amount and a statutory service charge

violates the FDCPA. In particular, Plaintiffs allege that Defendant’s debt collection practices: (1)

use false, deceptive or misleading representations in violation of § 1692e; (2) falsely represent the

character, amount, or legal status of the debt in violation of § 1692e(2)(A); (3) use unfair or

unconscionable means to collect or attempt to collect the debt in violation § 1692f; and (4) exceed

the amount expressly permitted by law in violation of § 1692f(1). Both parties now seek summary

judgment. 

Plaintiffs ask this Court to issue an order granting summary judgment as to the liability of

Defendant for violations of the FDCPA. Plaintiffs do not request an award of a specific amount of

damages, restitution, or interest by this motion. Defendant requests summary judgment, and in the

alternative, for an immediate appeal under 28 U.S.C. § 1292(b).

B. The Parties

On July 5, 2004, Hunt wrote a check in the amount of $137.15 to Pak ‘n Save. (Joint

Statement of Undisputed Fact (“JSUF”), ¶ 2.) On November 28, 2004, Castillo wrote a check in the

amount of $276.36 to Pak ‘n Save. (Id., ¶ 1.) Both checks were written for personal, family, or

household purposes, and both checks were returned unpaid due to insufficient funds. (Id., ¶¶ 1-2, 5.) 

Pak ‘n Save is operated by Safeway, Inc. (“Safeway”). (Id., ¶ 3.) After the Castillo and Hunt 

checks were returned unpaid, Safeway referred the checks to Imperial for collection. (Id., ¶ 4.) The

parties agree that Imperial’s debt collection conduct is governed by the FDCPA. (Id., ¶ 5.) 

C. Defendant’s Debt Collection Practices

The principal purpose of Imperial is to collect debts. (Id., ¶ 5.) When Safeway refers 

unpaid checks written in California to Imperial, Safeway asks Imperial to collect the check amount

and the service charge provided under California Civil Code § 1719. (Id., ¶ 6.) Imperial retains

27% of the amount collected for the check and the statutory service charge. (Id.) After a check has

been referred to Imperial, Imperial adds an interest charge, which is calculated at the rate of 10% per

annum, accruing from the date the check was written. (Id.) Imperial retains 100% of the interest

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that it collects. (Id.) Safeway and Imperial followed these practices in connection with the Hunt and

Castillo checks. (Id.)

1. Castillo’s Check

Safeway referred the Castillo check to Imperial to collect the check amount plus a $25.00

statutory service charge. (Id., ¶ 7.) Imperial mailed Castillo a collection letter dated, March 17,

2005 in which Imperial demanded $276.36 for the check amount, $25.00 as a “Misc.” charge, and

$8.99 as interest. (Id.) Subsequently, Imperial mailed Castillo a collection letter dated, December 2,

2005, in which Imperial demanded $276.36 for the check amount, $25.00 as a “Misc.” charge, and

$30.43 as interest. (Id.)

2. Hunt’s Check

Safeway referred the Hunt check to Imperial to collect the check amount plus a $35.00

statutory service charge. (Id., ¶ 8.) Subsequently, Imperial mailed Hunt two collection demands. 

(Id.) The second demand, dated December 6, 2005, included a demand for the check amount, a

“Misc.” charge of $35.00, and interest of $7.26, for a total of $179.41.

LEGAL STANDARDS

A. Summary Judgment

Rule 56(c) of the Federal Rules of Civil Procedure authorizes summary judgment if there is

no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of

law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). The moving party bears the

initial burden of demonstrating the basis for the motion and identifying the portions of the pleadings,

depositions, answers to interrogatories, affidavits, and admissions on file that establish the absence

of a triable issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving

party meets this initial burden, the burden then shifts to the non-moving party to present specific

facts showing that there is a genuine issue for trial. Fed. R. Civ. P. 56(e); Celotex, 477 U.S. at 324;

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986). The non-movant’s

bare assertions, standing alone, are insufficient to create a material issue of fact and defeat a motion

for summary judgment. Id. at 247-48. An issue of fact is material if, under the substantive law of

the case, resolution of the factual dispute might affect the case’s outcome. Anderson, 477 U.S. at

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248. Factual disputes are genuine if they “properly can be resolved in favor of either party.” Id. at

250. Thus, a genuine issue for trial exists if the non-movant presents evidence from which a

reasonable jury, viewing the evidence in the light most favorable to that party, could resolve the

material issue in his or her favor. Id. “If the evidence is merely colorable, or is not significantly

probative, summary judgment may be granted.” Id. at 249-50 (internal citations omitted). 

B. Judicial Notice

Judicial notice may be taken of “adjudicative facts” such as court records, pleadings and

other facts not subject to reasonable dispute and either “generally known” in the community or

“capable of accurate and ready determination by reference to sources whose accuracy cannot be

reasonably questioned.” Hon. William W. Schwarzer, Federal Civil Procedure Before Trial

§ 14:190 (2006) (citing Fed. Rule Evid. 201(b)). A court may take judicial notice of “matters of

public record” including prior court proceedings. Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th

Cir. 2001); Del Puerto Water District v. U.S. Bureau of Reclamation, 271 F. Supp. 2d 1224, 1232

(E.D. Cal. 2003). A court may also take judicial notice of the legislative history of a statute. See

Fed. R. Evid. 201; Palmer v. Stassinos, 348 F. Supp. 1070, 1077 (N.D. Cal. 2004).

ANALYSIS

A. Judicial Notice

Both Plaintiffs and Defendant have submitted requests for judicial notice in support of their

motions for summary judgment. Both parties request this Court to take judicial notice of the

legislative history of California Civil Code § 1719.

Defendant separately requests the Court take judicial notice of certain court documents from

other pending actions. Defendant requests judicial notice of its Motion for Summary Judgment filed

in United States Bankruptcy Court in the cases of In Re Brandy Hunt, Case No. 05-33473 DM and

Imperial Merchant Services, Inc. v. Hunt, Case No. 05-3499 DM along with certain evidentiary

declarations filed in support of that motion. Defendant also requests judicial notice of the pending

criminal complaint in the case of People v. Brandy G. Hunt, Case No. NM349421A in San Mateo

County. Plaintiffs separately request the Court judicially notice an official legal guide publication

issued by the California Department of Consumer Affairs along with the legislative history of A.B.

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1226 and 2463 as previously filed in the case of Palmer v. Stassinos, Civ. No. 04-3026.

The Court finds that the legislative history and other court documents for which the parties

seek judicial notice constitute judicial facts sufficiently capable of accurate and ready determination

and therefore takes judicial notice of them. However, as to California Department of Consumer

Affairs legal guide, the Court finds that it is not the proper subject of judicial notice, nor is its

interpretation of California law binding on the Court.

B. Interest on Dishonored Checks

The FDCPA prohibits a debt collector from collecting or attempting to collect any amount,

including interest, fees, charges, or expenses incidental to the principal obligation, unless that

amount is expressly authorized by the agreement creating the debt or otherwise permitted by law. 

See 15 U.S.C. § 1692f(1). In the absence of an express agreement, whether charges are permissible

within the meaning of the FDCPA turns on California law. See Newman v. Checkrite California,

Inc., 912 F. Supp. 1354, 1367 (E.D. Cal. 1995). Here, the parties agree that the central issue for

purposes of the pending motions is whether a debt collector, like Defendant, may demand statutory

charges pursuant to California Civil Code § 1719, in addition to the debt amount and interest. The

current issue, the current FDCPA claims, and Defendant’s arguments are nearly identical to the

issue, claims, and arguments raised in Palmer v. Stassinos, 348 F. Supp. 2d 1070 (N.D. Cal. 2004),

clarified on reconsideration by Palmer v. Stassinos, 419 F. Supp. 2d 1151 (N.D. Cal. 2005).

In Stassinos, the court held that § 1719 created a mandatory and exclusive recovery scheme

that did not provide for additional collection of interest on a dishonored check. Stassinos, 348 F.

Supp. 2d at 1083. Stassinos involved three related cases involving overlapping issues regarding the

conduct of certain defendant debt collectors. Id. at 1073. In that case, the defendant debt collectors

sent the plaintiffs a number of letters stating that as a result of plaintiffs’ dishonored checks,

plaintiffs owed the amount of the dishonored check, a service fee, and interest. Id. at 1073-75. The

plaintiffs filed class action complaints alleging violations of the FDCPA. Id. In denying the

defendants’ motion to dismiss, the court found that the defendants violated the FDCPA if they

attempted to collect prejudgment interest from a debtor in addition to a statutory charge or treble

damages. Id. at 1083.

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In Stassinos, the court stated, “[t]he parties have not cited, nor has this court located, any other case directly

addressing the availability of prejudgment interest in conjunction with section 1719.” Stassinos, 348 F. Supp. 2d 1078.

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Another court in this circuit has similarly addressed the relationship of § 1719 and the

FDCPA. Irwin v. Mascott, 112 F. Supp. 2d 937 (N.D. Cal. 2000), aff’d on other grounds, Irwin v.

Mascott, 370 F.3d 924 (9th Cir. 2004) (affirming district court’s contempt decision). There, the

court granted the plaintiff debtors’ motion for summary judgment on defendant’s FDCPA liability. 

Id. at 947. Specifically, the court found that the defendant’s letters seeking charges from check

writers in excess of those permitted by § 1719, violated §§ 1692e(2)(A), (10), and 1692f of the

FDCPA. Id. at 947. The court identified three of the defendant’s letters. One letter demanded a

check amount, $25 fee, and interest. Id. at 947. Another letter demanded a $35 “legal notice cost,”

the check amount, service charge, and interest. Id. The final letter demanded a check amount, treble

damages, a $25 “bank charge,” and interest. Id.

The courts’ reasoning from Stassinos and Mascott is applicable to the current case.2

Defendant argues that the court’s analysis in Stassinos is incorrect and does not substantively

respond to the analysis from Mascott. Plaintiffs rely on Stassinos and Mascott and argue that

California law, § 1719, does not permit a debt collector, like Defendant, to seek both statutory

charges and interest in the collection of a dishonored check. As explained below, the Court agrees

with the reasoning in Stassinos and Mascott and finds Defendant’s arguments unavailing.

1. California Civil Code § 1719

Section 1719 sets forth the procedures, under California law, for collecting dishonored

checks. Cal. Civ. Code § 1719. Under § 1719, any person who passes a check on insufficient funds

is liable for a statutory service charge of $25. Cal. Civ. Code § 1719(a)(1). If a debt collector seeks

to collect the debt owed on a dishonored check, it may collect this $25 service fee, or treble the

amount of the bounced check provided certain statutory requirements are met. Id. More

specifically, § 1719(a) permits a creditor to collect (1) a service charge of $25, and (2) treble the

amount of the bounced check if the creditor sends the debtor a certified letter giving him or her thirty

days to pay the amount due. Id. If the debtor pays the amount of the check within thirty days, he or

she must also pay the service charge and the cost of mailing the certified letter, but is not liable for

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treble damages. Id.; Mascott, 370 F.3d at 927. In dictum, the Ninth Circuit stated, “[t]hese are the

only remedies available to a creditor when a California resident bounces a check.” Id. (citing Cal.

Civ. Code § 1719(h)). The Court now turns to the issue of whether § 1719 provides for the

availability of interest in addition to the statutory service charge. 

2. Remedies Under § 1719

Defendant argues that the rules for statutory interpretation and the legislative history of

§ 1719 demonstrate that § 1719 does not prohibit the collection of interest in addition to the

collection of the statutory service charge. Plaintiffs insist that statutory interpretation and legislative

history preclude debt collectors from collecting both amounts. “Unfortunately, section 1719 is silent

as to the availability of interest in light of the service charge [ ] provision[ ], making the plain

meaning rule of no assistance.” Stassinos, 348 F. Supp. 2d at 1078. The Court therefore addresses

the statutory construction and legislative history of § 1719 in turn.

a. Statutory Construction of § 1719

In support of their statutory construction argument, Plaintiffs argue that § 1719 restricts a

debt collector to three types of remedies: (1) those expressly provided in § 1719, (2) the California

Penal Code, and (3) Division 3 of the Commercial Code governing negotiable instruments. See Cal.

Civ. Code §§ 1719(a)(1), (a)(2), and § 1719(k). Defendant argues that § 1719 should be read in

conjunction with California Civil Code § 3287, which authorizes the collection of interest. The

parties raised nearly identical arguments in Stassinos. For the same reasons explained in Stassinos,

this Court finds Defendant’s argument unavailing.

“[S]tatutes must be interpreted, if possible, to give each word some operative effect.” 

Walters v. Metro. Educ. Enters., Inc., 519 U.S. 202, 209 (1997). A district court seeking to interpret

state law should look to that state for principles of statutory interpretation. Stassinos, 348 F. Supp.

2d at 1081. Under California law, the fundamental task in construing a statute is to ascertain the

intent of the lawmakers so as to effectuate the purpose of the statute. Torres v. Automobile Club of

So. California, 15 Cal. 4th 771, 777 (1997). In doing so, a court will examine the statutory

language, giving the words their usual and ordinary meaning. People v. Lawrence, 24 Cal. 4th 219,

230 (2000). The words in question “must be construed in context, keeping in mind the nature and

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obvious purpose of the statute where they appear.” Moyer v. Workmen’s Comp. Appeals Bd., 10

Cal. 3d 222, 230 (1973). “If the words of the statute are clear, the court should not add to or alter

them to accomplish a purpose that does not appear on the face of the statute or from its legislative

history. [Citations omitted].” Id. If there is no ambiguity, then the plain meaning of the language

governs. Id.; People v. Coronado, 12 Cal. 4th 145, 151 (1995). If, however, the statutory terms are

ambiguous, then the court resorts to extrinsic sources, including the ostensible objects to be achieved

and the legislative history. Coronado, 12 Cal. 4th at 151. In such circumstances, courts will 

“‘select the construction that comports most closely with the apparent intent of the Legislature, with

a view to promoting rather than defeating the general purpose of the statute, and avoid an

interpretation that would lead to absurd consequences.’ [Citation.]” Id. 

In considering the defendants’ identical statutory construction arguments in Stassinos, the

court stated, “[i]n construing this statute, the court finds three subsections of section 1719 to be

particularly relevant; subsections (a), (h), and (k).” Stassinos, 348 F. Supp. 2d at 1079. Subsection

(a), which provides for the $25 service charge and for treble damages, states that these remedies

apply “[n]otwithstanding any penal sanctions that may apply.” Id. (citing Cal. Civ. Code §

1719(a)(1)-(2)). Subsection (h) mandates the application of remedies in § 1719 where the statutory

requirements are met. Id. (citing § 1719(h)). Subsection (k) provides that nothing in § 1719 “is

intended to condition, curtail, or otherwise prejudice the rights, claims, remedies, and defenses under

Division 3 of the Commercial Code of a drawer, payee, assignee, or holder in connection with the

enforcement of this section.” Id. (citing § 1719(k)).

The plaintiffs in Stassinos, just like Plaintiffs in this case, argued, that sections 1719(a)(1)

and (a)(2) apply “notwithstanding any penal sanctions that may apply.” Id. Also like the plaintiffs

in Stassinos, here Plaintiffs point to section 1719(k), which states: “Nothing in this section is

intended to condition, curtail, or otherwise prejudice the rights, claims, remedies, and defenses under

Division 3 of the Commercial Code in connection with this section.” Citing the rule of construction

expressio unius est exclusio alterius, Plaintiffs argue that the inclusion of these two provisions

restricts a debt collector to three types of remedies: (1) those expressly provided in § 1719, (2)

California criminal law, and (3) Division 3 of the Commercial Code governing negotiable

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instruments. As the Stassinos court noted, “None of these remedies provides for the collection of

prejudgment interest.” Stassinos, 348 F. Supp. 2d at 1079-80 (emphasis added). As a result, the

Court finds nothing in § 1719 permitting Defendant, as a matter of law, to demand interest in

addition to the statutory service charge.

Defendant makes another argument regarding the statutory interpretation of § 1719. The

same argument was rejected by the court in Stassinos. Id. at 1080. In particular, Defendant argues

that § 1719 should be read in conjunction with California Civil Code § 3287 to allow the collection

of interest. Plaintiffs counter that § 1719 should not be read in conjunction with § 3287, because

§ 1719 expressly precludes civil remedies other than those expressly provided for in § 1719.

In addressing this issue, the Stassinos court noted that § 3287(a) provides that every person

who is entitled to recover 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 such time as the debtor is prevented by law, or by the act of the

creditor from paying the debt. Id. at 1079 (citing Cal. Civ. Code § 3287). Section 3287 is applicable

to recovery of 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. Id. at 1079-80; see also Cal. Civ. Code § 3287. Defendant argues, as did the defendants in

Stassinos, that because a check is a contract under California law, § 3289, which governs the interest

rate for breach of contract, sets the interest rate at ten percent per annum after a breach. See id.

(citing Cal. Civ.Code § 3289(b)). Defendants thus contend that debt collectors are entitled to

prejudgment interest as a matter of California law and that nothing in § 1719 requires the court to

construe its statutory remedies to be exclusive. 

In support, Defendant cites one case and argues that where a statute is silent on the

availability of interest, interest is presumed to be available as provided in Civil Code section

3287(a). Currie v. Workers’ Comp. Appeals Bd., 24 Cal. 4th 1109, 1116 (2001). Plaintiffs argue

that Currie does not stand for such a broad proposition. The Stassinos court considered Defendant’s

identical argument and found it unavailing. Stassinos, 348 F. Supp. 2d at 1080. Similarly, the Court

does not find Currie instructive on whether § 1719 allows for the payment of interest and the

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statutory service charge.

In Currie, the California Supreme Court addressed the application of interest to an entirely

different statutory scheme where there was no possibility of double recovery. There, the court held

that the Workers’ Compensation Appeals Board (“WCAB”) erred in failing to award an employee

prejudgment interest under California Labor Code Section 132a. Currie, 24 Cal. 4th at 1119. 

Section 132a provides for the employee’s reimbursement of lost wages and work benefits, caused by

an employer’s discriminatory conduct. Cal. Lab. Code § 132a. The court stated that no other

provision, including § 132a, precluded addition of interest to a backpay award, and addition of

interest would serve the remedial purpose of § 132a. Id. Since there was no express or implied

prohibition on including interest to an award of backpay, the court found the interest provision in

§ 3287 to be applicable. In contrast, in this case, both the statutory construction and legislative

history of § 1719, as discussed below, demonstrate that allowing the collection of interest and the

statutory service charge would result in double recovery. As a result, the Court finds Defendant’s

argument regarding § 3287 and the application of Currie to be unconvincing.

The Court notes that the existence of §§ 1719(k) and (h) weigh in favor of Plaintiffs’

statutory construction argument. As explained above, §1719(k) expressly allows a debt collector to

utilize specific civil remedies in addition to the existing remedies provided in § 1719. If, as

Defendant argues, § 1719 were intended to allow the use of other civil remedies such as § 3287, then

§ 1719(k) would be superfluous. Additionally, § 1719(h) provides that the requirements of § 1719

are “mandatory.” Cal. Civ. Code § 1719(h). As the court noted in Stassinos, “where a statutory

remedy is mandatory, it can in some instances be inferred that the remedy is meant to be exclusive.” 

Stassinos, 348 F. Supp. 2d at 1080 (citing Grover Escrow Corp. v. Gole, 71 Cal. 2d 61, 63 (1969)

(construing Cal. Bus. & Prof. Code § 24074 as both mandatory and exclusive)). Thus, in construing

the context of § 1719 and in considering the nature and purpose of the statute on its face, the

statutory construction supports Plaintiffs’ interpretation. The Court now turns to the legislative

history of § 1719.

b. Legislative History of § 1719

Defendant argues that the legislative history of § 1719 demonstrates an intent to allow the

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recipient of a dishonored check to recover all damages, including interest. Plaintiffs argue that the

legislative history demonstrates an intent to allow the recipient of a dishonored check the alternative

of proceeding under § 1719 or seeking other civil remedies.

“When the statute is ambiguous or the statutory language does not resolve an interpretive

issue, ‘our approach to statutory interpretation is to look to legislative history.’ [citation omitted]”

SEC v. McCarthy, 322 F.3d 650, 655 (9th Cir. 2003). The California Court of Appeal has stated,

“Where the words of the statute do not provide an unambiguous answer to the question presented,

then we may resort to extrinsic sources, including the ostensible objects to be achieved and the

legislative history. In such circumstances, we select the construction that comports most closely

with the apparent intent of the Legislature, with a view to promoting rather than defeating the

general purpose of the statute, and avoid an interpretation that would lead to absurd consequences.”

Leavitt v. County of Madera, 20 Cal. Rptr. 3d 578 (2004) (citing Day v. City of Fontana, 25 Cal. 4th

268, 272 (Cal. 2001)) (citations and quotation marks omitted). 

Here, the legislative history, like the statute itself, does not specifically address the

availability of interest in addition to statutory remedies. However, like Stassinos, the Court finds the

statute’s legislative evolution and the reasoning behind the statute’s amendments to be helpful in

determining whether § 1719 provides the exclusive remedies for collecting on a bad check. 

Stassinos, 348 F. Supp. 2d at 1081. 

The first relevant amendment to § 1719 was the addition of subsection (h). S.B.1933 (Cal.

1995); A.B. 522 (Cal. 1995). Added in 1995, subsection (h) provides that the remedies set forth in §

1719 are mandatory upon a court, codifying the decision in Mughrabi v. Suzuki, 197 Cal. App. 3d

1212, 1214 (1988). California Senate Rules Comm., Comm. Rep. 1995 Cal. A.B. 522, 1995-96 Reg.

Sess. (June 29, 1995). In Mughrabi, the California Court of Appeal reversed a trial court’s decision

to withhold treble damages in spite of the debt collector’s compliance with § 1719. Stassinos, 348 F.

Supp. 2d at 1081. The Court of Appeal determined that “[t]he manifest purpose of section 1719 is to

discourage the issuance of bank checks, drafts or orders when the maker’s funds are insufficient. By

increasing the stakes for a defendant, it serves as a statutory incentive to refrain from the writing of

bad checks.” Mughrabi, 197 Cal. App. 3d at 1215. Accordingly, the court held that the award of

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treble damages under § 1719 was mandatory whenever the statutory requirements had been met. Id.

at 1216. The Court finds that by making mandatory what was previously discretionary, the

California Legislature indicated its intent to change the purpose of the statutory scheme from one

that was exclusively penal in nature to one designed to fix damages available under the statute. 

The second relevant change to § 1719 came in 1996 when the California Legislature

substantially rewrote subsection (a) to add provisions for a fixed-amount statutory service charge. . 

Stassinos, 348 F. Supp. 2d at 1081 (citing A.B. 2643 (Cal. 1995)). The addition of the fixed-amount

statutory service fee was in response to Newman v. Checkrite, 912 F. Supp. 1354 (E.D. Cal. 1995),

which held that collecting a service charge was permissible under California law but only a

“reasonable” fee could be charged. Checkrite, 912 F. Supp. at 1368. Fearing that California courts

would be forced to determine on a case-by-case basis whether a merchant’s service charge was

reasonable, the Legislature created a cause of action for a fixed-amount service charge of $25. Cal.

Civ. Code § 1719(a)(1); see also Comm. Rep. 1995 Cal. A.B. 2643, 1995-96 Reg. Sess. (Aug. 30,

1996). The cause of action provided that the $25 service charge could not be collected in the event

that treble damages were recoverable. See Cal. Civ. Code § 1719(a)(2)) (“When a person becomes

liable for treble damages for a check that is the subject of a written demand, that person shall no

longer be liable for any service charge for that check and any costs to mail the written demand.”). In

similar fashion to the Stassinos case, the Court here finds that this statutory change suggests that the

treble damage provision is intended to cover all losses suffered as a result of the bad check. 

The third change in § 1719 was also part of the 1996 amendment. The 1996 amendment

added subsections (i) and (k). Stassinos, 348 F. Supp. 2d at 1081-82 (citing A.B. 2643). Although

the legislative history is silent on the matter, the addition of subsection (i) appears to have been

responsive to the holding in Newman, which left open whether an assignee of a bad check debt may

also collect service charges to the same extent as the original payee. Newman, 912 F. Supp. at 1368

(“I need not resolve the question of whether an assignee of the underlying debt assumes the right to

collect service charges since, assuming arguendo such a right, these defendants cannot prevail on the

record.”)). Subsection (i) provides that “[t]he assignee of the payee or a holder of the check may

demand, recover, or enforce the service charge, damages and costs specified in this section to the

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same extent as the payee.” Cal. Civ. Code § 1719(i).

The next change in § 1719 relevant to inquiry was the addition of subsection (k). Although

the legislative history is likewise silent, subsection (k) may have been added, among other reasons,

to address the holding in Cohen v. Disner, 36 Cal. App. 4th 855 (1995). Stassinos, 348 F. Supp. 2d

at 1081-82. In that case, the plaintiffs argued that the “stop payment” defense in § 1719(a) was

exclusive, foreclosing all other defenses applicable to negotiable instruments available under the

Commercial Code. Disner, 36 Cal. App. 4th at 859. The court, however, rejected this argument,

holding that the language of the statute permitted defendants to assert UCC defenses regarding the

enforceability of the negotiable instrument. Id. at 861. Soon after that case, the 1996 amendment

added subsection (k), providing that the rights, claims, remedies, and defenses under Division 3 of

the Commercial Code remain in full effect notwithstanding any of the provisions of section 1719.

Cal. Civ.Code § 1719(k). The Stassinos court concluded that this series of amendments

demonstrated a legislative intent to make § 1719’s remedies exclusive. Stassinos, 348 F. Supp. 2d at

1081-82. This Court agrees for the same reasons, as set out below.

First, the legislative history reveals that permitting interest in addition to the statutory

remedies would permit double recovery. The law generally bars multiple recoveries for the same

loss. See e.g., Greater Westchester Homeowners Assn. v. Los Angeles, 26 Cal. 3d 86, 103 (1979). 

The statutory scheme in § 1719 reflects this by providing that: (1) the face amount of a check can

only be recovered once; (2) once the bad check writer is obligated to pay treble damages, only the

face amount of the check can be recovered under § 1719(a)(2); (3) only one service charge can be

recovered with respect to the same check, id. § 1719(a)(1), (j)(2); and (4) liability for treble damages

bars collection of a service charge and mailing costs, id. § 1719(a)(2). 

Second, “[b]oth by making the statutory damages mandatory upon courts in subsection (h)

and making the § 1719 remedies available to assignees by adding subsection (i), the Legislature

indicated its intent to change the nature of the statutory remedies.” Stassinos, 348 F. Supp. 2d at

1083. Treble damages are typically punitive under California law, Hoban v. Ryan, 130 Cal. 96, 99

(1900), and punitive damages inure only to the person damaged, People v. Superior Court, 9 Cal. 3d

283, 287 (1973). As with § 1719, “when the statute requires the court to grant recovery to a party

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Defendant argues that the August 10, 1996 Amendment to A.B. 2643 supports a legislative intent to allow the

recovery of interest and the statutory service charge. The Court disagrees. The legislative history evidences an intent to

prevent the costs associated with bad check collection to be passed to other consumers. However, there is no documented

intent to achieve such a result by allowing the recovery of interest and a statutory charge. Instead, the legislative history

demonstrates that if a merchant elects to use § 1719, then the enumerated statutory service charges are commercially

reasonable, as a matter of law, and intended to prevent other consumers from having to bear the costs associated with bad

check debt collection.

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not traditionally entitled to such recovery, the Legislature has effectively conveyed its intention to

replace previous forms of recovery with the statutory remedy provided.” Stassinos, 348 F. Supp. 2d

at 1083. Since the statutory remedy replaced previous forms of recovery, permitting interest on the

check would result in double recovery. As a result, this Court similarly concludes that under § 1719,

a payee may not collect both statutory service charges and interest.

Third, “the Legislature’s pattern of amendment demonstrates its intent to create an exclusive

remedy for bad check collection.” Id. The Legislature proceeded to amend § 1719 as the California

and federal courts decided relevant issues3

 regarding the construction of § 1719. These inclusions

demonstrate that the Legislature intends that section 1719 represent the sole recovery mechanism for

bad debt collectors and that courts should not look beyond the statute unless failing to do so would

result in an absurd interpretation. The court in Stassinos stated, 

By expressly providing for penal remedies and civil remedies of a

either (1) a service charge and mailing fees where a debtor pays within

the thirty-day period or (2) treble damages but no service charge or

mailing costs where the debtor does not, the Legislature has created a

mandatory recovery scheme that does not provide for additional

collection of interest.

Id. at 1083 (emphasis added). 

This Court agrees with the court’s analysis in Stassinos regarding § 1719’s legislative

history. After examining the legislative history, the Court finds that “except as otherwise provided

in subsections (a) and (k), the section 1719 remedies are both mandatory and exclusive.” Id. Here,

it is not in dispute that Defendant’s demand letters to Hunt and Castillo demanded both interest and

the statutory service charge. (JSUF, ¶¶ 7-8.) As a result, Defendant’s actions violated § 1719.

3. Other Possible Grounds for Interest on Dishonored Checks 

Defendant makes a series of additional arguments to support its collection of an interest fee

and a statutory service charge. However, as explained below, the Court finds these arguments

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unpersuasive.

First, Defendant argues that the court’s reconsideration in Palmer v. Stassinos, 419 F. Supp.

2d 1151 demands a different result. Specifically, Defendant seizes on the court’s clarification that

§ 1719 was not intended to preclude recovery for attorneys’ fees, post-judgment interest, and

contractual damages. See id. at 1153. From this clarification, Defendant concludes that it is entitled

to charge interest fees and statutory service charges. The Court disagrees. Defendant fails to

explain how the court’s reconsideration changes the underlying statutory construction and legislative

intent of § 1719.

Next, Defendant argues that Pak ‘n Save had three possible theories of recovery against

Plaintiffs to recovery for the losses incurred as a result of Plaintiffs’ bad checks, and that each theory

allows for prejudgment interest. Defendants state that Pak ‘n Save, or its assignor, could have

utilized: (1) § 1719; (2) a cause of action for breach of contract; or (3) a common count for goods

had and received. From this, Defendant concludes that it is entitled to an interest fee in addition to

the statutory service charge. Again, the Court disagrees with Defendant. Assuming without

deciding, that these theories would afford the recovery of interest in this context, these theories

would certainly not allow a debt collector to also collect a statutory service charge, in addition to an

award of interest. Furthermore, there is no evidence in the record that Defendant has proceeded

against Plaintiff under any of these alternative theories. Instead, proceeding under an alternate

theory of collection, Defendant chose to demand the statutory service charge amounts of $25 and

$35 enumerated in § 1719. 

 Finally, Defendant contends that the decision in Newman v. Checkrite, 912 F. Supp. 1354 

(E.D. Cal. 1995) saves it from liability. However, Defendant’s reliance on Newman is similarly

misplaced. In Newman, the court did not decide whether defendants had the ability to collect

statutory service charges and interest fees. Instead, the court stated that a merchant may recover

only “commercially reasonable charges [or] expenses . . . resulting from the breach.” Id. at 1368

(citing Cal. Civ. Code § 2710). As described above, the 1996 amendment to § 1719 was in response

to the Newman decision. Fearing that California courts would be forced to determine on a

case-by-case basis whether a merchant’s service charge was reasonable, the Legislature created a

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cause of action for a fixed-amount service charge of $25. Cal. Civ. Code § 1719(a)(1); see also

Comm. Rep. 1995 Cal. A.B. 2643, 1995-96 Reg. Sess. (Aug. 30, 1996). Thus, the 1996 amendment

created a fixed service charge to prevent a case-by-case review of the commercial reasonableness of

individual merchants’ service charges. Neither the amendment or the Newman decision provided

merchants with the ability to seek interest fees in addition to commercially reasonable service fees.

C. Fair Debt Collections Practices Act, 15 U.S.C. § 1692 et seq.

1. Liability under the FDCPA

The FDCPA is the primary federal legislation dealing with unfair and deceptive consumer

debt collection practices. Debt collectors are subject to civil liability for violations of the FDCPA. 

See Mascott, 112 F. Supp. 2d 937. The FDCPA is considered a “strict liability” statute because debt

collectors generally are liable for violating the FDCPA’s requirements without regard to intent,

knowledge or willfulness. Russell v. Equifax A.R.S., 74 F.3d 30, 33 (2d Cir. 1996); Booth v.

Collection Experts, Inc., 969 F. Supp. 1161, 1165 (E.D. Wisc. 1997). Plaintiffs need only prove that

(1) the defendant knew what practices it was engaged in, and (2) the practices violated the FDCPA. 

Irwin, 112 F. Supp. at 963. However, the FDCPA does provide for a “bona fide error” defense.

As indicated above, the court in Irwin granted the plaintiff debtors’ motion for summary

judgment on defendant’s FDCPA liability. Specifically, the court found that defendant’s letters

seeking charges from check writers in excess of those permitted by § 1719, violated §§ 1692e(2)(A),

(10), and 1692f of the FDCPA. Id. at 947. The court identified three of defendant’s letters. One

letter demanded a check amount, $25 fee, and interest. Id. at 947. Another letter demanded a $35

“legal notice cost,” the check amount, service charge, and interest. Id. The final letter demanded a

check amount, treble damages, a $25 “bank charge,” and interest. Id.

Here, the facts are undisputed as to the contents of Defendant’s letters. As to Castillo,

Defendant sent two letters. (JSUF, ¶ 7.) First, in a collection letter dated March 17, 2005,

Defendant demanded the check amount, a $25.00 “Misc.” charge, and $8.99 as interest. (Id.) 

Second, in a collection letter dated December 2, 2005, Defendant demanded the check amount, a

“Misc.” charge of $35.00, and interest of $7.26. (Id.) As to Hunt, Defendant also sent two letters. 

(Id., at ¶ 8.) In the second letter dated December 6, 2005, Defendant demanded the check amount, a

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Plaintiffs’ complaints also allege violations of §§ 1692e and 1692f, however Plaintiff’s fail to identify the specific

portions of the record that establish the absence of a triable issue of material fact as to Defendant’s liability under those

sections.

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Plaintiffs also argue that summary judgment is appropriate because Defendant, as a debt collector, cannot have the

same set of rights as a merchant seller. The Court disagrees with this argument and finds it irrelevant to the Court’s decision.

Under California Commercial Code § 3310(b)(3) a seller may either enforce the instrument or the obligation. Cal. Comm.

Code § 3310(b)(3); Abels v. JBC Legal Group, P.C., 434 F. Supp 2d 763, 765-66 (N.D. Cal. 2006). A seller’s rights can

be assigned, pursuant to California Commercial Code § 2210(2), so long as it does not change the duty or risks to the other

party. Abels, 434 F. Supp 2d at 766. Thus, a seller may assign to a third party all rights, including those to damages for

breach of contract or performance of the obligation. Id. A seller may also assign less than all of its rights. As the court held

in Ballard v. Equifax Check Serv., Inc., 27 F. Supp. 2d 1201 (E.D. Cal. 1998), a debt collector could not apply a service

charge as an incidental damage in the place of a seller under§ 2710, where the debt collector only owned the face value of

the check and not the complete set of rights of the seller. Id. at 1207. Here, regardless of the scope of the assignment, neither

Safeway or Defendant are permitted to collect both interest fees and the statutory service charge when they demanded

payment from Plaintiffs under § 1719. 

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“Misc.” charge of $35.00, and interest of $7.26. (Id.) 

Relying on this undisputed evidence, this Court finds that, as a matter of law, there being no

material facts in dispute, Defendant’s collection letters violated the FDCPA in that the letters

demand charges in excess of those permitted by § 1719 in violation of §§ 1692e(2)(A) and

1692f(1).4

 For these reasons, the Court GRANTS Plaintiffs’ Motion for Summary Judgment as to

Defendant’s liability under §§ 1692e(2)(A) and 1692f(1) of the FDCPA.5

2. Defendant’s Defense Under § 1692k

Defendant argues that “the unclear state of law” regarding § 1719 is sufficient to raise a

triable issue of fact under the “bona fide error” defense of the FDCPA. Plaintiff counter, and argue

that a defendant’s incorrect interpretation of the law is not sufficient to raise the “bona fide error”

defense. The Court agrees with Plaintiffs.

A debt collector may not be held civilly liable for a violation of the FDCPA if the debt

collector demonstrates by a preponderance of the evidence that the violation: (1) was unintentional;

and (2) resulted from a “bona fide error,” even though the collector maintains procedures

“reasonably adapted” to avoid such error. 15 U.S.C. § 1692k(c). The “bona fide error” defense does

not excuse mistakes of law such as errors resulting from debt collector’s reliance on counsel’s

advice or where the mistake relates to FDCPA requirements. Baker v. G.C., Service Corp., 677 F.2d

775, 779 (9th Cir. 1982); Irwin, 112 F. Supp. 2d at 959; see also Picht v. John R. Hawks, Ltd., 236

F.3d 446, 451-52 (8th Cir. 2001). Where a party bears the burden of proof in asserting an

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affirmative defense, he asserts a defense to liability, he must establish beyond peradventure all of the

essential elements of the claim or defense to warrant judgment in his favor. See Fontenot v. Upjohn

Co., F.2d 1190, 1194 (5th Cir. 1986) 780; Southern Calif. Gas Co. v. City of Santa Ana, 336 F.3d

885, 888 (9th Cir. 2003). 

 Here, Defendants have failed to identify any facts in the record that would raise the 

applicability of the FDCPA’s “bona fide error” defense. Defendants argue, without factual support,

that it was entitled to charge interest according to its reading of Stassinos. Defendant’s mistake of

the law will not suffice to create a triable of issue fact regarding the “bond fide error” defense.

D. Request for Immediate Appeal Under § 1292(b)

Defendant requests this Court to enter partial summary judgment under Rule 54(b) or certify

the case for immediate appeal under 28 U.S.C. § 1292(b). Plaintiffs assert that both requests are

improper.

Upon a showing that there is no genuine issue of material fact as to particular claims or

defenses, the court may grant summary judgment in the party’s favor “upon all or any part thereof.” 

Fed. Rule Civ. Proc. 56(a) and (b). Partial judgments under Rule 54(b) are reserved for unusual

cases where the risk of “scattershot disposition of litigation” is outweighed by the pressing need for

an early judgment. Morrison-Knudsen Co. v. Archer, 655 F.2d 962, 965 (9th Cir. 1981). Partial

judgment under Rule 54(b) is proper where there are distinct and severable claims and immediate

review of the portions ruled upon will not result in later duplicative proceedings in the trial or

appellate court. White Mountain Apache Tribe v. Hodel, 784 F.2d 921 (9th Cir. 1986). 

Additionally, an order denying the motion may be reviewed by permissive interlocutory appeal. 28

U.S.C. 1292(b). Permission is appropriate if the district court certifies that the order (1) involves a

controlling question of law, (2) as to which there is substantial ground for difference of opinion, and

(3) an immediate appeal may materially advance ultimate termination of the litigation. Id. 

Here, the Court finds no substantial ground for difference of opinion. The available authority

supports the Court’s finding that a debt collector may not demand statutory service charges pursuant

to California Civil Code § 1719, in addition to the debt amount and interest. Additionally, the Court

finds that this case does not present such an unusual case where the risk of “scattershot disposition

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of litigation” is outweighed by the pressing need for an early judgment. For these reasons, the Court

DENIES Defendant’s requests for partial judgment and interlocutory appeal. 

CONCLUSION

For the foregoing reasons, the Court DENIES Defendant’s Motion for Summary Judgment

and GRANTS, in part, Plaintiffs’ Motion for Summary Judgment.

IT IS SO ORDERED.

Dated: March 20, 2007 

MARTIN J. JENKINS

UNITED STATES DISTRICT JUDGE

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