Court Opinion

ID: 9703110
Source: CourtListenerOpinion
Date Created: 2023-08-25 23:40:29.25195+00
Date Added: 2024-06-11T18:21:45.814363
License: Public Domain

STREIT, Justice
(dissenting).
I respectfully dissent. Chrysler’s procedures were not “reasonably adapted” to avoid suing defendants in the wrong county. They were doomed to fail.. For this reason, I would affirm the court of appeals and reverse the district court.
It is not disputed that Chrysler violated the Iowa Consumer Credit Code when it sued Bergstrom in the wrong venue. The only question is whether Chrysler is liable for its mistake. Ordinarily a creditor is vicariously liable for the unlawful debt collection practices of its agents, including collection attorneys. Cf. Martinez v. Albuquerque Collection Servs., Inc., 867 F.Supp. 1495, 1502 (D.N.M.1994) (interpreting identically worded federal statute). The bona fide error defense, Iowa Code section 537.5201(7), creates an exception to the general rule of liability. To prove its bona fide error defense, Chrysler bore the burden to show it had maintained proee-*424dures “reasonably adapted” to avoid suing defendants in -wrong venues.
Chrysler’s procedures were not “reasonably adapted” to avoid suing defendants in wrong venues. Merely looking at the USPS directory, looking up what county a city is located in, will inevitably fail too often to be “reasonably adapted.” Chrysler’s attorney’s secretary (hereinafter “Chrysler’s secretary”) testified the directory contained only one county entry for each city listed.5 This will too often result in the plaintiff filing in the wrong venue, because no small number of Iowa cities are located in two counties. For example, West Des Moines, one of Iowa’s most populous cities, is located in both Polk and Dallas Counties. Moreover, the USPS directory alone cannot account for residents of rural areas who, although they are given a mailing address of a nearby town, may, like Bergstrom, live miles away from the city limits and in another county. This is not inconsequential in Iowa, which has ninety-nine counties.6 Chrysler’s procedures were not reasonably adapted to avoid suing debtors in the wrong county; the only result of the directory’s use was that suits were filed in the county where city hall happened to be located.
The majority makes much of the fact that Chrysler’s secretary testified she had never heard of any problems with using the USPS directory before this case. The majority leaps to the conclusion that Chrysler’s procedure “has been used ‘hundreds’ of times ... without adversely affecting the venue rights of litigants.” The majority implicitly assumes Chrysler’s debtors (1) all know their venue rights and (2) would always tell Chrysler’s secretary when those rights were violated. Given the nature of collection actions, it is equally if not more likely that problems were not recognized or not reported to Chrysler’s secretary. The statute, after all, is a remedial consumer protection act designed to protect those who do not or cannot complain.
The mere fact a mistake occurs does not automatically render the creditor’s procedures not reasonably adapted to avoid the error. That the legislature saw fit to create the defense means it must cover some mistakes. Chrysler’s procedures, however, are not “reasonably adapted” because far too many lawsuits will fall through the cracks; to mix metaphors, Chrysler left the floodgates open when its attorney handed his secretary a USPS directory that was too rudimentary to account for two-county cities or rural residents. Cfi Martinez, 867 F.Supp. at 1503 (holding defendant’s bona fide error defense “conclusively fail[ed]”; defendant could not have maintained procedures reasonably adapted to avoid the venue violation which occurred because it “routinely applied the wrong standard in determining where to file suit”). It is not the purpose of the bona fide error defense to shield creditors from liability for systemic errors. Cf id.
The majority’s interpretation of “reasonably adapted” procedures will often leave Iowans without recourse under the consumer credit code — and not just when the creditor violates the venue provision of the act. But see Iowa Code § 537.1102(1) (“This chapter shall be liberally construed and applied to promote its underlying purposes and policies.”). This is particularly *425unfortunate given that Iowa remains the only state that denies consumers a private right of action under its consumer fraud act.7 Procedures that are designed to fail on a widespread basis will be “reasonably adapted,” so long as this Court — employing a five-factor balancing test — makes its own policy determination that the violation was really not that bad. In doing so, the majority sweeps away — without discussion — a long line of authority that holds some sort of double-checking mechanism is required for a procedure to be “reasonably adapted.” See, e.g., Thomka v. A.Z. Chevrolet, Inc., 619 F.2d 246, 251 (3d Cir. 1980) (“reasonably adapted” procedures require creditors to set up “a special system ... to assure that no initial errors occur, and that a checking mechanism be maintained to catch any errors that slip through the system”); Gallegos v. Stokes, 593 F.2d 372, 376 (10th Cir.1979) (similar); Mirabal v. Gen. Motors Acceptance Corp., 537 F.2d 871, 879 (7th Cir.1976) (“Their procedures, although probably designed to provide correct disclosures, did not contain any type of preventative mechanism for catching disclosure errors.”), cert. denied, 439 U.S. 1039, 99 S.Ct. 642, 58 L.Ed.2d 699 (1978), overruled on other grounds by Brown v. Marquette Sav. & Loan Ass’n, 686 F.2d 608 (7th Cir.1982); In re Webster, 300 B.R. 787, 798 (W.D.Okla.2003) (similar); In re Ralls, 230 B.R. 508, 520 (Bkrtcy.E.D.Pa.1999); In re Wright, 11 B.R. 590, 594 (Bkrtcy.S.D.Miss.1981) (similar); see also Hutchings v. Beneficial Fin. Co., 646 F.2d 389, 391 (9th Cir.1981) (following Thomka, but finding procedures “reasonably adapted” because creditor hired second employee to double-check first employee’s calculations). It therefore runs afoul of the manner in which the legislature has expressly directed us to interpret the statute. See Iowa Code § 537.1102(2)⅛') (directing courts . to “[m]ake the law ... more uniform among the various jurisdictions”).
One last point is worth mentioning, in light of the majority’s repeated insistence that it is merely engaging in substantial-evidence review. In the district court, the fighting issue was not whether Chrysler’s procedures were “reasonably adapted” to avoid mistaken filings, but rather whether Chrysler could escape liability if it simply proved its error was unintentional. Chrysler quoted from dicta in Monahan Loan Service, Inc. v. Janssen, which opined that a creditor would not be liable if it showed its mistake was “inadvertently drafted, unintentional, or resulted from a bona fide error.” 349 N.W.2d 752, 755 (Iowa 1984). The district court agreed, found Chrysler’s error was unintentional, and dismissed Bergstrom’s counterclaim. This is why the court of appeals spent the bulk of its opinion distinguishing our dicta in Monahan to rightly conclude that “proof of the maintenance of procedures reasonably adapted to avoid the error in addition to proof that the error was unintentional ...” was necessary.
This history of the case is important because it shows why the district court focused on whether Chrysler’s actions were intentional and did not make any specific legal conclusions or factual findings about what sorts of procedures are reasonably adapted to avoid mistaken venue filings. Indeed, the district court’s entire ruling on Bergstrom’s counterclaim was:
[T]he Court finds that plaintiff has established that the filing of the petition in Howard County was not intentional. The evidence solicited by ... a secre*426tary/receptionist at [Chrysler’s law firm], clearly established that it was her direction and intent that this action be filed in the defendant’s county of residence. According to reliance upon U.S. Postal records, as well as Department of Transportation records, she incorrectly assumed that the county of residence was Howard.
It should also be noted that Riceville is a unique community in North Central Iowa wherein half of the town is located in Mitchell County and half is located in Howard County. The Court can appreciate some measure of confusion for a Des Moines law firm filing such an action in the wrong county.
When the record is viewed in its entirety, it appears the district court did not analyze the “reasonably adapted” procedures element.8
Even if we construe the foregoing as an implicit ruling on the “reasonably adapted” element of the bona fide error defense, however, the district court’s conclusion was based upon a faulty premise. Although certainly special, there is nothing “unique” about Riceville; as previously indicated, many Iowa towns straddle a county line, and many rural Iowans have mailing addresses of a town in another county. The majority repeats this error when it opines without support — in the record or otherwise — that “the number of people likely to be adversely affected is minimal.” There simply is not substantial evidence to support the casual observations of the district court and now the majority.
The district court’s findings also lack evidentiary support in the record insofar as they imply Bergstrom lived in the “half of the town in Mitchell County.” At trial, Bergstrom testified he lived approximately five miles outside the Riceville city limits. He indicated his mailing address was “3199 390th Street, Riceville, Iowa,” which clearly shows that he lived in a rural area. Thus when the majority writes that “Berg-strom resided just outside Riceville” and “Bergstrom lives in the portion of Riceville that lies in Mitchell County,” it falls into the trap first laid by the trial court.
In sum, it is plain that Chrysler’s procedures are not “reasonably adapted” to avoid the sorts of venue mistakes that occurred here. In the absence of the bona fide error defense, Bergstrom was entitled to judgment on his counterclaim. See Monahan, 349 N.W.2d at 754.
TERNUS and WIGGINS, JJ., join this dissent.

. It is important to point out that the directory upon which the majority relies in its substantial-evidence review is not in the record. Our only indication of what the directory might contain comes from the secretary’s testimony.

. Indeed, as many as three of the seven members of this court have mailing addresses containing a city or town that could fall within two counties.

. See Tom Miller, Give Iowans a Key Consumer Protection Tool, available at http:// www.state.ia.us/governmen1/ag /lat-est_news/releases/jan_2002/Pri-vate_Right_rel.htm (last visited Aug. 24, 2005).

. Chrysler strategically reframed the issue on further review. At oral argument, Chrysler suggested that because the district court set forth the text of the statute in its ruling it therefore impliedly determined Chrysler had proved it had maintained the "reasonably adapted” procedures. Although in some cases we may assume the district court impliedly ruled on an issue without discussing it, cf. Meier v. Senecaut, 641 N.W.2d 532, 539-40 (Iowa 2002), we ought not presume findings of fact when it is apparent the district court did not make them. See, e.g., Sager v. Farm Bureau Mut. Ins. Co., 680 N.W.2d 8, 15 (Iowa 2004).
A close reading of the majority's decision reveals it implicitly accepts Chrysler’s refram-ing of the issues. The silent shift the majority now makes is important — especially given its repeated insistence that we ought to defer to the district court's factual findings. Yet what are these factual findings? The majority does not say what they are because they do not exist.
When one recognizes the procedural posture of the case, it also becomes apparent that the majority asks the impossible of Berg-strom. For example, the majority faults Bergstrom for not presenting evidence at trial regarding the probability a debtor might be sued in the wrong county when the creditor uses the USPS directory, even though what constituted "reasonably adapted” procedure was not the fighting issue in the district court. (It is also wrong for two other reasons: (1) Chrysler, not Bergstrom, bore the burden of proof to establish its affirmative defense and (2) it would be wrong to expect Bergstrom to engage in a statistical analysis that finds no textual basis in the statute.)