Court Opinion

ID: 2971385
Source: CourtListenerOpinion
Date Created: 2015-09-22 16:34:16.592113+00
Date Added: 2024-06-11T11:43:35.841672
License: Public Domain

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            Pursuant to Sixth Circuit Rule 206            2       Silvernail, et al. v. County of Kent, et al. No. 03-1413
   ELECTRONIC CITATION: 2004 FED App. 0322P (6th Cir.)
               File Name: 04a0322p.06                                            _________________
                                                                                       COUNSEL
UNITED STATES COURT OF APPEALS
                                                          ARGUED: O. Randolph Bragg, HORWITZ, HORWITZ &
              FOR THE SIXTH CIRCUIT                       ASSOC., Chicago, Illinois, for Appellants. Timothy E.
                _________________                         Eagle, VARNUM, RIDDERING, SCHMIDT & HOWLETT,
                                                          Grand Rapids, Michigan, for Appellees. ON BRIEF: O.
MICHELE SILVERNA IL and          X                        Randolph Bragg, HORWITZ, HORWITZ & ASSOC.,
SARAH L. PAQUIN -DODGE,           -                       Chicago, Illinois, for Appellants. Timothy E. Eagle,
                                                          VARNUM, RIDDERING, SCHMIDT & HOWLETT, Grand
          Plaintiffs-Appellants, -                        Rapids, Michigan, for Appellees.
                                  -   No. 03-1413
                                  -
            v.                     >                        ROGERS, J., delivered the opinion of the court, in which
                                  ,                       NORRIS, J., joined. COLE, J. (pp. 8-14), delivered a
                                  -                       separate dissenting opinion.
COUNT Y OF KENT ; KENT            -
COUNTY SHERIFF ’S OFFICE;         -                                              _________________
KENT COUNTY SHERIFF ’S            -
DEPARTMENT; LAWRENCE A.           -                                                  OPINION
                                  -                                              _________________
STELMA; JAMES R. DOUGAN ;
                                  -
CHECK ENFORCEMENT UNIT ,          -                         ROGERS, Circuit Judge. Michele Silvernail and Sarah
INC.; TERRY HEISS; and            -                       Paquin-Dodge appeal the district court’s dismissal of their
DIANE CAYO ,                      -                       complaint alleging that the bad check collection scheme
         Defendants-Appellees. -                          utilized by Kent County (“the County”) violated their due
                                  -                       process rights under the United States and Michigan
                                 N                        Constitutions.    Because the challenged process was
       Appeal from the United States District Court       constitutionally sufficient, we affirm the judgment of the
  for the Western District of Michigan at Grand Rapids.   district court.
     No. 02-00559—Gordon J. Quist, District Judge.          Plaintiffs wrote bad checks to merchants in Kent County.
                                                          Under municipal ordinances, a $25 fee is assessed for the
                Argued: June 18, 2004                     passing of bad checks.1 The County contracts with Check
       Decided and Filed: September 22, 2004
                                                              1
Before: NORRIS, COLE, and ROGERS, Circuit Judges.               The complaint alleges that “Kent County and/or various townships
                                                          located therein” have enacted ordinances assessing a twenty-five dollar
                                                          fee for dishonored checks. It does not appear that Kent County itself has
                                                          such an ordinance, but townships within Kent County do have such

                           1
No. 03-1413 Silvernail, et al. v. County of Kent, et al.             3    4        Silvernail, et al. v. County of Kent, et al. No. 03-1413

Enforcement Unit, Inc. (“CEU”) to process dishonored checks                   it unlawful to intentionally write checks drawn on
and collect the fee. As the district court explained:                         accounts with insufficient funds.
  CEU’s sole business activity is the collection through its              Silvernail v. County of Kent, No. 1:02-CV-559, 2003 WL
  Check Operational Procedure of dishonored checks                        1869206, at *1 (W.D. Mich. Feb. 24, 2003). After receiving
  received by area merchants. CEU provides its services                   a dishonored check, CEU issues a “Due Process Notice” to
  through contractual arrangements with various                           the check writer, which demands separate payments by
  municipalities throughout the state of Michigan.                        cashier’s check or money order for the amount of the
  Although CEU provides its services to merchants, it does                dishonored check and bank fees (payable to the merchant) and
  so in collaboration with the municipalities’ law                        for the $25 government assessment fee (payable to the
  enforcement agencies. Merchants enroll in CEU’s Check                   County). The notice states that:
  Operational Procedure by paying CEU an $85
  registration fee.     When a check received by a                            Violations of the check laws are administered for the
  participating merchant is dishonored, the check is                          Police/Sheriff Department by the Check Enforcement
  forwarded to CEU by the merchant’s bank or financial                        Unit, Inc. Repayment of the check(s) plus the bank fee
  institution. After CEU receives the dishonored check, it                    and government assessment fee is required. Should you
  sends out a series of notices and letters to the check                      have any questions regarding this letter or the amount
  writer printed on the letterhead of the municipality’s law                  due, please feel free to call [phone number] . . . .
  enforcement agency. These notices and letters demand
  payment of the check amount, bank fees, and a fee                       The notice also cautions that “FAILURE TO MAKE
  payable to the municipality. The County and CEU                         PAYMENT CAN RESULT IN A WARRANT FOR YOUR
  entered into a contract, pursuant to which CEU agreed to                ARREST.”
  provide services to the County for the processing and
  recovery of bad checks and the investigation of bad                        Plaintiffs received this notice from CEU and each paid the
  check violations under local township bad check                         government assessment fee of $25. They subsequently filed
  ordinances that were based on Michigan statutes making                  the instant action in the Western District of Michigan,
                                                                          alleging that the County and CEU violated their due process
                                                                          rights under the Fourteenth Amendment to the United States
                                                                          Constitution and the Due Process Clause of the Michigan
                                                                          Constitution, because the County’s bad check collection
ordinanc es. See Grand Rapids Charter Township, Michigan, Ordinance       scheme deprived them of their property —the $25 assessment
No. 348 (M ay 6, 1997) (prohibiting the drawing of checks without         fee— without adequate notice or an opportunity to be heard.2
sufficient funds or on closed accounts and specifying penalties); Grand   The defendants filed motions to dismiss for failure to state a
Rapids Charter Township, Michigan, Ordinance No. 349 (May 6, 1997)        claim under Federal Rule of Civil Procedure 12(b)(6). The
(providing for the collection of expenses relating to the handling and    district court concluded that plaintiffs had failed to allege a
enforcement of dishonored checks); Grand Rapids Charter Township,
Michigan, A Resolution to Set the Cost Recovery Fees for Enforcement
of Dishonored Checks Ordinance (May 6, 1997) (authorizing County of
Kent to collect as its agent $3.50 per dishonored check for costs and          2
setting contractual fee of $21.50 per dishonored check for any check           Plaintiffs filed a motion for class certification, but the district court
enforcement unit).                                                        dismissed the action without ruling on the motion.
No. 03-1413 Silvernail, et al. v. County of Kent, et al.                   5    6      Silvernail, et al. v. County of Kent, et al. No. 03-1413

due process violation, because they had failed to show a                        government’s interest—including the administrative burdens
deprivation of property and alternatively because the process                   additional safeguards would impose.
supplied was adequate. Accordingly, the district court
granted the motion and dismissed the case. Plaintiffs appeal.                     Although the due process notices issued by CEU did not
                                                                                inform the check writers of the availability of a hearing or the
  The district court properly dismissed plaintiffs’ complaint                   procedure for requesting one, the district court nevertheless
because the complaint failed to state a claim upon which                        concluded that the notices satisfied the requirements of due
relief could be granted.3 To state a claim for a violation of                   process because they “were reasonably calculated to inform
procedural due process under 42 U.S.C. § 1983, plaintiffs                       the Plaintiffs of the allegations against them and provided a
must show that they were deprived of a liberty or property                      means for responding to the allegations.” Silvernail, 2003
interest, see Bd. of Regents v. Roth, 408 U.S. 564 (1972),                      WL 1869206 at *5. The district court noted that the private
and that the procedures afforded to protect that interest were                  interest at stake—the $25 assessment fee—was minimal.
insufficient under the balancing test of Mathews v. Eldridge,                   With respect to the value of additional procedures, the district
424 U.S. 319 (1976). The district court ruled that plaintiffs                   court stated:
lacked a protected interest because they voluntarily paid the
$25 fee. Silvernail, 2003 WL 1869206 at *4-*5. We need                              [T]here is no indication that additional procedural
not decide whether the district court was correct on that point,                    safeguards would reduce the risk of an erroneous
because plaintiffs received sufficient process even if we                           deprivation of Plaintiffs[’] money. As indicated in the
assume that they were deprived of their property.                                   Due Process Notice, the proof of a bad check violation is
                                                                                    the returned check itself. Plaintiffs had notice of the
   The essential elements of due process are notice and an                          returned check and were provided with a telephone
opportunity to be heard. Cleveland Bd. of Educ. v.                                  number to call if their checks were stolen, if their
Loudermill, 470 U.S. 532, 546 (1985). Due process is a                              accounts had been garnished, or if there was any other
flexible concept, and the process required is context specific.                     reason why they should not be required to pay the
Zinermon v. Burch, 494 U.S. 113, 127 (1990). In                                     Government Assessment Fee. Plaintiffs did not attempt
determining what process is due under Eldridge, supra, the                          to call the telephone number, and they have not
court must consider the nature of the private interest, the risk                    suggested that additional safeguards would reduce the
of an erroneous deprivation under the procedures in place and                       likelihood of an erroneous deprivation. Moreover, as the
the value of any additional procedural safeguards, and the                          County Defendants note, if Plaintiffs had failed to pay
                                                                                    the Government Assessment Fee, the County Defendants
                                                                                    could not have deprived Plaintiffs of their property
    3                                                                               unless they made a determination to file a criminal
      This court reviews de no vo the district co urt’s grant of a mo tion to       complaint, in which case Plaintiffs would have been
dismiss pursuant to R ule 12 (b)(6 ). Powell v. Jacor Communications
Corp ., 320 F.3d 599 , 601 (6th C ir. 200 3). In conducting its review, the
                                                                                    entitled to a full trial.
court “must construe the complaint in the light most favorable to the
plaintiff, accept all of the com plaint’s factual allega tions as true, and     Silvernail, 2003 WL 1869206 at *6. Finally, the district court
determine whethe r the plaintiff undoubted ly can prove no set o f facts in     recognized that the County had a significant interest “in
support of his claim that would entitle him to relief.” Id. at 601-02           resolving bad check complaints outside of the criminal
(quoting Ziegler v. IBP Hog Market, Inc., 249 F.3d 50 9, 512 (6th Cir.          system, thereby reducing administrative costs associated with
200 1)).
No. 03-1413 Silvernail, et al. v. County of Kent, et al.                7    8     Silvernail, et al. v. County of Kent, et al. No. 03-1413

such violations and avoid unnecessary criminal or civil                                             ______________
proceedings.” Requiring the County to implement additional
procedures, such as a full hearing for each bad check passed                                           DISSENT
in the county, would impose significant costs and                                                   ______________
administrative burdens without any accompanying benefit. Id.
                                                                                R. GUY COLE, JR., Circuit Judge, dissenting. I disagree
  We concur in the reasoning of the district court. Rather                   with the majority’s conclusion that this case should be
than institute burdensome criminal procedures for each bad                   dismissed pursuant to Rule 12(b)(6). The majority’s opinion
check passed, the County has implemented a system which                      misreads the statutory scheme – which, if read correctly,
permits check writers to take corrective actions without                     illustrates that the letter sent to the plaintiffs was misleading,
criminal sanctions. Plaintiffs have not alleged that erroneous               and that paying the fee was in no way an alternative to
assessments of the $25 fee were not correctable by the                       criminal prosecution.
procedures provided—a telephone call to CEU. In any event,
had plaintiffs failed to pay the assessment fee, they would                     The majority asserts both that the plaintiffs could have been
have been entitled to the full panoply of due process                        heard through the criminal justice system if they had refused
protections when and if the County instituted a criminal                     to pay the fee, Maj. Op. at 7 (stating that “had plaintiffs
action to collect the fee. Accordingly, under the balancing of               failed to pay the assessment fee, they would have been
the interests required by Eldridge, the process provided by the              entitled to the full panoply of due process protections when
County’s bad check collection scheme is constitutionally                     and if the County instituted a criminal action to collect the
sufficient.4 The judgment of the district court is AFFIRMED.                 fee”), and that, as a corollary, “the County has implemented
                                                                             a system which permits check writers to take corrective action
                                                                             without criminal sanctions.” Maj. Op. at 7. The majority is
                                                                             wrong to view the collection process as an alternative to the
                                                                             criminal process. Although CEU’s letter suggests that this is
                                                                             the case, the relevant Michigan statute and the Grand Rapids
                                                                             Ordinances mentioned by the majority say otherwise.
                                                                                The Michigan Penal Code criminalizes uttering bad checks
                                                                             with the intent to defraud. M.C.L.A. § 750.131. Bad checks
                                                                             uttered for less than $100 are punishable by up to 93 days in
                                                                             jail and a fine not to exceed $500.                M.C.L.A.
                                                                             § 750.131(3)(a)(i). The punishment for larger checks and
                                                                             subsequent offense ranges considerably higher. M.C.L.A.
                                                                             § 750.131(3)(a)(ii)-(c).
    4
       The court’s holding also disposes of plaintiffs’ due process claim
under the Michigan Constitution, as the Michigan Constitution affords no       Aside from this criminal scheme, Michigan law provides a
greater protection than does the United States Constitution. See Williams    specific civil cause of action to payees who have received bad
v. Ho fley M fg. Co ., 424 N.W.2d 278 (Mich. 1988) (applying federal cases   checks. M.C.L.A. § 600.2952. This cause of action is “[i]n
to, and analyzing together, claims made under the Michigan and federal       addition to applicable penal sanctions.”             M.C.L.A.
due process clauses).
No. 03-1413 Silvernail, et al. v. County of Kent, et al.       9   10    Silvernail, et al. v. County of Kent, et al. No. 03-1413

§ 600.2952(1). It makes a bad check writer liable for the            for payment of the check, draft, or order and civil
amount of the check, plus a $25 processing fee, civil                damages and costs allowed by law.
damages, and costs. Id. Unlike the criminal statute, this civil
statute does not have an intent requirement. The statute             If you dispute the dishonoring of this check, draft, or
further authorizes the payee or an agent of the payee to send        order, you should also contact your bank or financial
a demand for payment of the check and the processing fee.            institution immediately.’
M.C.L.A. § 600.2952(2).
                                                                   M.C.L.A. 600.2952(2). Of course, in the typical context, a
   Indeed, M.C.L.A. § 600.2952 provides the “text of the           sender of this letter is a private payee, not constrained by due
written demand,” and this text differs significantly from the      process requirements. But, even if sent by a government
letter sent by CEU. The text in the statute makes it crystal       entity, this letter indicates that the failure to pay will result in
clear that repaying the check and paying the processing fee        a hearing – a civil action – before a deprivation occurs.
will settle civil liability:
                                                                     The Grand Rapids Ordinances cited by the majority track
  ‘A check, draft, or order for payment of money drawn by          the structure of the Michigan statute. Ordinance No. 348
  you for $__________ was returned to me/us/our client             criminalizes uttering bad checks and provides criminal
  (client's name) dishonored for:                                  penalties, akin to M.C.L.A. § 750.131. And, like M.C.L.A.
                                                                   § 600.2952, Ordinance No. 349 provides for non-criminal
  [ ] Insufficient funds                                           check collection. According to Ordinance No. 349(c), the
  [ ] No account                                                   “expense of a dishonored check response” constitutes “a debt
                                                                   of that person and is collectable by the Charter Township of
  This notice is a formal demand for payment of the full           Grand Rapids and the County of Kent in the same manner as
  amount of the dishonored check, draft, or order plus a           in the case of an obligation under a contract, expressed or
  processing fee of $25.00 for a total amount of                   implied.” In the event of a failure to pay the expenses of a
  $__________. [I]f you pay this total amount within 7             dishonored check response, “the Charter Township of Grand
  days, excluding weekends and holidays, after the date            Rapids or the County of Kent may commence civil suit to
  this notice was mailed, no further civil action will be          recover the expenses and any costs allowed by law.”
  taken against you.                                               Ordinance No. 349(e) (emphasis added). The Grand Rapids
                                                                   Board set the “expense of a dishonored check response” at
  If you do not pay the $__________ as requested above,            $25 in a May 6, 1997, Resolution.
  but within 30 days after the date this notice was mailed
  you pay the amount of the dishonored check, draft, or              Had CEU sent the letter provided in the Michigan statute or
  order plus a $35.00 processing fee, for a total amount of        something similar to it, I would be inclined to think that no
  $__________, no further civil action will be taken               due process violation occurred. I would agree that the check
  against you.                                                     writer voluntarily paid the processing fee and waived his or
                                                                   her right to a civil hearing by choosing to resolve the dispute
  If you fail to pay either amount indicated above, I/we/our       prior to a civil action. Yet, the letter provided by CEU
  client will be authorized by state law to bring a civil          nowhere indicates that payment is settles civil liability
  action against you to determine your legal responsibility        authorized by state law or contract liability created by city
No. 03-1413 Silvernail, et al. v. County of Kent, et al.       11    12    Silvernail, et al. v. County of Kent, et al. No. 03-1413

ordinance, or that – more importantly – paying the fee in no           statements in the citation and overdue notice she
way precludes a criminal prosecution. CEU’s letter, which              received. If these notices failed to comport with the
appears on the letterhead of the Kent County Sheriff                   requirements of procedural due process, the City
Department, states that:                                               arguably violated Herrada’s rights, because she paid her
                                                                       fines only after receiving the notices. We must therefore
  Violations of the check law are administered for the                 determine whether the notices that she received were
  Police/Sheriff’s Department by [CEU]. Repayment of                   constitutionally sufficient.
  the check(s) plus the bank fee and government
  assessment fee is required. Should you have any                    Here, the letter from CEU informed the plaintiffs that
  questions regarding this letter or the amount due, please          payment “was required,” and the letterhead and portions of
  feel free to call: [phone number].                                 the letter imply that paying the fee would stave off
                                                                     prosecution, which is not the case. The letter certainly did not
In fact, under neither the state statute nor the city ordinance      inform the check writers that the fee was a civil liability and
are the fines being administered for the “Police/Sherriff’s          that paying it forfeited the right to challenge the fee in a civil
Department.” Under the Michigan statute, the violations are          proceeding, as the state mandated letter does. In sum, CEU
being administered for the payees – not the police – by CEU,         and the County sent out letters that misinform the recipients
albeit with County facilitation and County collection of the         of the nature and consequences of payment of the $25 fee, and
processing fee. Under the city ordinance, the fines are being        the plaintiffs who paid the fee on that basis were deprived of
administered on behalf of the “Township Supervisor.”                 their property.
Ordinance No. 349(e). Repayment of the processing fee is
not “required”; it is a civil liability and/or contract obligation      Having concluded that plaintiffs have alleged a deprivation,
that, if not voluntarily paid, must be grounded in a civil           I turn to whether the procedures accompanying that
action. Finally, the notice states: “FAILURE TO MAKE                 deprivation were insufficient. As the majority notes, the
PAYMENT CAN RESULT IN A WARRANT FOR YOUR                             essential elements of due process are notice and an
ARREST.” Such a notice can easily mislead a reader into              opportunity to be heard. Cleveland Bd. of Educ. v.
believing that the notice and fee are an alternative to criminal     Loudermill, 470 U.S. 532, 546 (1985). The majority
proceedings rather than civil proceedings.                           concludes the letter provided adequate notice even though it
                                                                     concedes that the letter “did not inform the check writers of
  With this background in mind, I turn to the alleged due            the availability of a hearing or the procedure for requesting
process violation. Our first question is: Were the plaintiffs        one,” Maj. Op. at 6, because the notice provided a phone
deprived of property when they paid the $25 fee to the               number for “any questions regarding this letter or the amount
County? I conclude that they were, because, although they            due.” The majority cites no authority for the proposition that
voluntarily paid the money, they were misled about the nature        a notice that does not indicate that the recipient has any right
and consequences of their payment. In Herrada v. City of             to dispute the fee, and in fact states that payment “is
Detroit, 275 F.3d 553, 557 (6th Cir. 2001), we held that such        required,” is sufficient. In our most analogous case, Herrada
a payment could be a deprivation for due process purposes:           v. City of Detroit, this Court concluded that notice was
                                                                     sufficient because “the citation clearly states that a hearing is
  Herrada contends that the City interfered with her                 available to contest the City’s allegation,” adding that “the
  property interest by making false and misleading                   citation and overdue notice also provide telephone numbers
No. 03-1413 Silvernail, et al. v. County of Kent, et al.       13    14    Silvernail, et al. v. County of Kent, et al. No. 03-1413

to call for more information.” Herrada, 275 F.3d at 557              side of the line provides a procedure for challenging the bad
(emphasis added). The case cannot be read to indicate that           check determination, a computerized menu, or a perpetual
providing a phone number alone is enough. Indeed, in                 busy signal.
considering the impact of potentially misleading statements,
the Herrada Court explicitly noted that the statements did not         Due process is a flexible context. Zinermon v. Burch, 494
render notice insufficient because they “do not raise doubts         U.S. 113, 127 (1990). Procedure may not have to be
about an owner’s ability to contest the allegations in a             elaborate in a case like this where the property interest is
hearing, or about the result of paying the fine and thereby          small, but there has to be some kind of notice and some kind
waiving a hearing.” Id. at 558. In this case, the check writers      of hearing. For purposes of Rule 12(b)(6), the plaintiffs have
were never informed of their right to a hearing, the results of      sufficiently alleged a due process violation.
paying the fee, or the resulting waiver of a hearing. Further,
in addition to not giving notice, the statements which suggest          I am not unmindful of the majority’s concerns for the added
that the fee was related to criminal proceedings affirmatively       administrative costs of “[r]equiring the County to implement
lead a reader away from the conclusion that check writers            additional procedures.” Maj. Op. at 7. Yet, I believe that the
may challenge their liability for the processing fee in civil        due process concerns could be alleviated by using the text of
court.                                                               the letter in the Michigan statute. Using a clear and
                                                                     informative letter instead of a misleading and/or false one
   Even if the letter gave proper notice, it cannot be said at       would be of little cost to the County. Payments made in
this stage of the litigation that plaintiffs had an opportunity to   response to a proper letter would not be deprivations. Check
be heard. There are three potential opportunities to be heard        writers who choose not to voluntarily pay would have notice
in this case: the phone number provided by CEU, a criminal           and a right to be heard in civil court. The County has no
proceeding, or a civil proceeding. There is no indication that       legitimate interest in maintaining the text of a misleading
a check writer could challenge the fee in a criminal                 letter.
proceeding – at a criminal proceeding, the burden of proof is
different and there is an intent element required for criminal          I cannot say that plaintiffs have failed to state a claim, and
conviction that is not required under M.C.L.A. 600.2952 for          I therefore respectfully dissent.
collection of the fee. The defendants likewise cannot claim
that these plaintiffs could have contested the fee in a civil
proceeding, because the letter certainly did not give notice
that such a thing existed. That leaves the phone number. We
simply do not know whether it is true that a check writer who
calls this phone number can dispute the fee. This case comes
to us on Rule 12(b)(6) motion. All that is in the record is the
complaint and the letter sent by CEU, attached to the
complaint. Thus, we know that the plaintiffs allege in their
complaint that the County does not provide an opportunity to
be heard and that the letter sent by CEU includes a phone
number. We do not know what happens when a check writer
calls this phone number. We do not know whether the other