F I L E D
United States Court of Appeals
Tenth Circuit
April 4, 2006
PUBLISH
Elisabeth A. Shumaker
UNITED STATES COURT OF APPEALS Clerk of Court
TENTH CIRCUIT
BRENDA JOHNSON,
Plaintiff-Appellant,
v.
JESSE L. RIDDLE; RIDDLE & No. 04-4036
ASSOCIATES, P.C.; JOHN DOE
OWNERS 1-10; JOHN DOE
COLLECTORS 1-10,
Defendants-Appellees.
Appeal from the United States District Court
for the District of Utah
(D.C. No. 2:98-CV-599-PGC)
Lester A. Perry; Hoole & King; Salt Lake City, UT, for Plaintiff-Appellant.
Keith A. Kelly; Ray, Quinney & Nebeker; Salt Lake City, UT, for Defendants-
Appellees.
Before HENRY, EBEL, and TYMKOVICH, Circuit Judges.
EBEL, Circuit Judge.
Defendants-Appellees Jesse Riddle and Riddle & Associates (collectively,
“Riddle”) violated the Fair Debt Collection Practices Act (“FDCPA” or “Act”),
15 U.S.C. §§ 1692–1692o, by filing suit against Plaintiff-Appellant Brenda
Johnson (“Johnson”) to recover statutory shoplifting penalties for a dishonored
check under Utah law. See Johnson v. Riddle [hereinafter Johnson II], 305 F.3d
1107, 1121 (10th Cir. 2002). This case is now before us on appeal a second time,
after our remand to the district court with instructions to determine whether the
FDCPA’s bona fide error defense shielded Riddle from liability for that violation.
See id. at 1124.
On remand, the district court granted summary judgment in favor of Riddle
after concluding that Riddle “established through undisputed fact a bona fide
error defense to [Johnson’s] FDCPA claims against him.” Johnson v. Riddle
[hereinafter Johnson III], 296 F. Supp. 2d 1283, 1284 (D. Utah 2003). Johnson
appeals.
Exercising jurisdiction pursuant to 28 U.S.C. § 1291, we review the district
court’s grant of summary judgment de novo, applying the same standard used by
the district court. 1 See Burnham v. Humphrey Hospitality Reit Trust, Inc., 403
1
In this case, we note that, in reciting the applicable summary judgment
burdens, the district court incorrectly stated that “[t]he non-moving party must
establish at least ‘an inference of the existence of each element essential to the
case.’” Johnson III, 296 F. Supp. 2d at 1286 & n.16 (citing Croy v. Cobe Labs.,
Inc., 345 F.3d 1199, 1201 (10th Cir. 2003)). That standard of review only applies
when the motion for summary judgment by the defendant is directed at
deficiencies in the plaintiff’s case. See Croy, 345 F.3d at 1201. Where, as here,
the defendant is seeking summary judgment on the basis of an affirmative
defense,
(continued...)
-2-
F.3d 709, 714 (10th Cir. 2005). Applying those standards, we conclude that
neither Riddle nor Johnson is entitled to judgment as a matter of law because
triable issues of fact exist regarding each element of the bona fide error defense.
We therefore REVERSE the district court’s grant of summary judgment in favor
of Riddle, AFFIRM the district court’s denial of summary judgment in favor of
Johnson, and REMAND this case.
I. BACKGROUND
The controversy in this case revolves around the fact that the statutory
penalty allowed to a creditor bringing a dishonored check claim in Utah at the
time relevant to this case was $15 plus the face value of the check. Utah Code
Ann. § 7-15-1 However, if such a claim could somehow be cast as a shoplifting
charge, the allowable statutory penalty would be up to $500. Id. § 78-11-15. In
our earlier opinion, we determined that it was “unmistakably clear” that Utah law
1
(...continued)
[t]he defendant . . . must demonstrate that no disputed material fact
exists regarding the affirmative defense asserted. If the defendant
meets this initial burden, the plaintiff must then demonstrate with
specificity the existence of a disputed material fact. If the plaintiff fails
to make such a showing, the affirmative defense bars his claim, and the
defendant is then entitled to summary judgment as a matter of law.
Hutchinson v. Pfeil, 105 F.3d 562, 564 (10th Cir. 1997) (citations omitted). Thus,
the plaintiff initially bears no burden on a defendant’s summary judgment motion
testing an affirmative defense. In this case, we therefore apply the summary
judgment standard that “should have been applied by the district court.” Nance v.
Sun Life Assur. Co. of Canada, 294 F.3d 1263, 1266 (10th Cir. 2002) (quotation,
alteration omitted).
-3-
did not authorize an ordinary dishonored check claim to be recast as a shoplifting
charge in order to claim the higher statutory penalties. Johnson II, 305 F.3d at
1119-1120.
Riddle, as attorney for 7-Eleven (the Southland Corporation), brought a
shoplifting claim against Johnson, in a suit asking for $2.64 (the face value of her
dishonored check to 7-Eleven) and $250 (statutory penalties for shoplifting). Id.
at 1112. Ultimately, that suit was dismissed when Johnson paid $17.64; that is,
the value of the check plus the $15 dishonored check penalty. Id. However, that
was not the end of the controversy. Johnson then brought a class-action claim
under the FDCPA against Riddle, claiming that the practice of bringing
shoplifting charges against the maker of a dishonored check violated the FDCPA.
Id. In our earlier opinion, we concluded that this practice did violate the FDCPA,
but we remanded for the district court to determine whether Riddle was entitled to
a bona fide error defense predicated upon a bona-fide mistake of law. Id. at 1120,
1124. The district court concluded that he was and granted summary judgment
for Riddle. Johnson III, 296 F. Supp. 2d at 1284, 1294. We now reverse.
The facts pertaining to the bona fide error defense are as follows: In a
letter Riddle wrote to his client on May 12, 1995, he discussed the possibility of
bringing shoplifting actions in Utah state courts against dishonored check writers.
In that letter, he explained that the Utah shoplifting statute required a showing
-4-
that the merchandise was taken from the merchant without payment and without
permission and that “[o]ne could certainly argue that presenting a check and
taking merchandise is not a taking ‘without the permission of the merchant.’”
The opinion letter continued by stating that:
It would be difficult for [Riddle & Associates] to predict the outcome
of [a] case [seeking shoplifting penalties for a dishonored check]. Utah
case law is silent on the issue, and I can find no other jurisdiction that
has case law interpreting such a statute. The outcome depends on the
courts [sic] interpretation of [the shoplifting] statute. . . . I can see no
legal or ethical reason that we should not file a test case and allow the
courts to decide.
Riddle subsequently filed a complaint in Utah state court seeking a
shoplifting penalty on a dishonored check. See Johnson II, 305 F.3d at 1112.
“When the defendant in the case failed to appear in court,” Judge Burton, the
presiding judge, and Riddle “spent thirty to forty minutes discussing the
applicability of the shoplifting statute to a person who passed a check that was
dishonored. The court issued a default judgment awarding ‘Statutory penalties’
of $354.82.” Id. Default judgments awarding statutory penalties in excess of the
$15 penalty allowed for an ordinary dishonored check claim were issued in three
other unpublished state court cases. See Johnson v. Riddle [hereinafter Johnson
I], No. 2:98CV599C, 2000 WL 33980012, at *1 (D. Utah 2000) (unpublished);
see also Johnson II, 305 F.3d at 1112. None of these default judgments were
appealed. Johnson II, 305 F.3d at 1112.
-5-
In 1997, two months before Riddle filed a shoplifting claim against Johnson
for her dishonored check, Riddle and another collection attorney, DeLoney,
attended a meeting with two judges: Judge Burton, who had issued the default
judgment awarding shoplifting penalties in Riddle’s test case, and Judge Fratto,
who was newly appointed to the bench. Johnson III, 296 F. Supp. 2d at 1288. At
that meeting, Judge Fratto told Riddle that he “had some real problems with the
shoplifting statute applying to a bad check.” Id. (quotation omitted). After that
meeting and prior to filing suit against Johnson, Riddle “was very concerned that
[the shoplifting statute] didn’t apply to a bad check” and “didn’t want to do it
[i.e., attempt to collect such fees,] anymore.” Id. (quotation omitted). Six days
after that meeting, Judge Fratto notified DeLoney, per their agreement at the
meeting, that no further default judgments containing shoplifting penalties would
be signed by the state court. And, at some later date, some Utah state trial judges
“began limiting fee awards in default judgment cases to $15.” Johnson II, 305
F.3d at 1112.
Nevertheless, on August 14, 1997, Riddle filed suit in Utah state district
court against Johnson seeking a $250-shoplifting penalty for a dishonored check
Johnson wrote for $2.64 to 7-Eleven in September 1996. Id. After being served
with the complaint and summons in that suit on August 24, 1997, Johnson paid
Riddle $17.64. Riddle then dropped his suit against Johnson. Id.
-6-
On August 24, 1998, Johnson filed a class action suit in federal court
against Riddle on behalf of all persons against whom Riddle had claimed
shoplifting penalties for a dishonored check, alleging that such a practice was not
permitted by Utah law and therefore violated the FDCPA and various state
statutes. Id. Riddle and Johnson then filed cross-motions for summary judgment.
Id. The district court granted summary judgment in favor of Riddle, “reasoning
that Riddle’s practice was ‘permitted by law’ because of earlier unpublished state
trial court default judgments.” Id.; see also Johnson I, 2000 WL 33980012, at *6.
Johnson appealed.
In that first appeal, we reversed on the issue of Riddle’s compliance with
the FDCPA, holding that the district court should have conducted a proper Erie
analysis rather than relying on unpublished state trial court decisions to determine
whether Riddle’s actions were “permitted by law.” Johnson II, 305 F.3d at 1118-
1119, 1121. Specifically, we concluded that the district court erroneously
“regarded itself as bound by unpublished state trial court decisions granting
default judgments for amounts in excess of the statutory fee for dishonored
checks.” Id. at 1118. We explained that “[w]hen the federal courts are called
upon to interpret state law, the federal court must look to the rulings of the
highest state court, and, if no such rulings exist, must endeavor to predict how
that high court would rule.” Id. Conducting such an Erie analysis, we held that
-7-
“[b]y seeking to collect a shoplifting penalty where no shoplifting (as the term is
defined by Utah statute) occurred, Riddle sought to collect an amount not
permitted by law in violation of the FDCPA.” Id. at 1120. 2 However, we further
held that the FDCPA’s bona fide error defense, which shields a debt collector
from liability for a violation, can apply to a mistake of law which resulted in an
attempt to collect amounts not permitted by law, as well as mistakes of fact. Id.
at 1121. We remanded to the district court for a determination in the first instance
of whether Riddle was entitled to this defense. See id. at 1121 n.13, 1124.
2
Under Utah’s dishonored check statute in effect at the time of Riddle’s
suit against Johnson, the holder of a dishonored check was permitted to impose a
“service charge that may not exceed $15” plus the face value of the check. Utah
Code Ann. § 7-15-1.
Under Utah’s shoplifting statute, a separate statute:
An adult who wrongfully takes merchandise by any means, including
but not limited to, concealment or attempted concealment in any
manner, either on or off the premises of the merchant, with a purpose
to deprive a merchant of merchandise or to avoid payment for
merchandise, or both, is liable in a civil action, in addition to actual
damages, for a penalty to the merchant in the amount of the retail price
of the merchandise not to exceed $1,000, plus an additional penalty as
determined by the court not less than $100 nor more than $500, plus
court costs and reasonable attorneys’ fees.
Id. § 78-11-15. The statute defines “wrongful taking of merchandise” as “the
taking of merchandise that has not been purchased from a merchant’s premises
without the permission of the merchant or one of his employees, servants or
agents.” Id. § 78-11-14(5).
-8-
On remand, the district court held that Riddle had “successfully established
the bona fide error defense” and therefore “[could not] be held liable to Johnson
under the FDCPA.” Johnson III, 296 F. Supp. 2d at 1294. The court then denied
Johnson’s motion for summary judgment on the issue of Riddle’s liability under
the FDCPA, granted Riddle’s cross-motion for summary judgment, and dismissed
Johnson’s FDCPA claim with prejudice. Id. Having concluded that Riddle was
not liable under federal law, the district court denied Johnson’s motion for class
certification as moot and declined to exercise supplemental jurisdiction over
Johnson’s remaining state law claims. Id.
II. Bona Fide Error Defense
The bona fide error defense is an affirmative defense that insulates debt
collectors from liability even when they have violated the FDCPA. Specifically,
the bona fide error provision provides that:
A debt collector may not be held liable in any action brought under this
subchapter if the debt collector shows by a preponderance of evidence
that the violation was not intentional and resulted from a bona fide error
notwithstanding the maintenance of procedures reasonably adapted to
avoid any such error.
15 U.S.C. § 1692k(c). Accordingly, and as we explained in the prior appeal of
this case, an FDCPA defendant seeking the protection of the bona fide error
defense carries the burden of proving that the violation was 1) unintentional, 2) a
bona fide error, and 3) made despite the maintenance of procedures reasonably
-9-
adapted to avoid the error. See Johnson III, 296 F. Supp.2d at 1287; see also
Johnson II, 305 F.3d at 1121. Because we conclude that genuine issues of
material fact exist with regard to each element of the defense, we conclude that
this case should go to the jury.
A. Subjective prong: Whether the violation was unintentional.
“[T]he case law . . . is somewhat unsettled” as to what makes a violation
intentional; that is, whether it is the general intent to collect a debt or whether it
is the specific intent to violate the FDCPA. Caputo v. Prof’l Recovery Servs.,
Inc., 261 F. Supp. 2d 1249, 1255 (D. Kan. 2003). Compare Kort v. Diversified
Collection Servs., Inc., 394 F.3d 530, 537 (7th Cir. 2005) (holding that the bona
fide error defense requires only negation of specific intent); Lewis v. ACB Bus.
Serv., Inc., 135 F.3d 389, 402 (6th Cir. 1998) (same), with Shapiro v. Haenn, 222
F. Supp. 2d 29, 43 n.8 (D. Me. 2002) (“Because the FDCPA is a strict liability
statute . . . , debt collectors are liable if they perform any intentional act that
results in a violation, regardless of fault.”) (citation omitted); Irwin v. Mascott,
112 F. Supp. 2d 937, 963 (N.D. Cal. 2000) (noting that a FDCPA plaintiff “need
only prove that (1) the [d]efendants knew what practices they were engaged in,
and (2) the practices violated the FDCPA”). We conclude, in accordance with the
- 10 -
Sixth and Seventh Circuits, that the only workable interpretation of the intent
prong of the FDCPA’s bona fide error defense is that a debt collector must show
that the violation was unintentional, not that the underlying act itself was
unintentional. In other words, a violation is unintentional for purposes of the
FDCPA’s bona fide error defense if the debt collector can establish the lack of
specific intent to violate the Act.
We find it informative, in this regard, that § 1692K(c) requires proof that
“the violation” was not intentional, as opposed to proof that “the conduct” was
not intentional. See S. Rep. No. 95-382, at 5 (1977), reprinted in 1977
U.S.C.C.A.N. 1695, 1700 (“A debt collector has no liability, however, if he
violates the act in any manner, including with regard to the act’s coverage, when
such a violation is unintentional and occurred despite procedures designed to
avoid such violations.”) (emphasis added); see also Caputo, 261 F. Supp. 2d at
1255 (recognizing that both the language of the FDCPA and the legislative history
are more consistent with a specific intent requirement). Furthermore, we
expressly decided that the FDCPA’s bona fide error defense covers mistakes of
law, and it would make little sense to require a debt collector to negate general
intent for an error of law defense. See Lewis, 135 F.3d at 402 (“To hold
otherwise would effectively negate the bona fide error defense.”); Johnson III,
296 F. Supp. 2d at 1287 (concluding that mere “intentional pursuit of a debt in a
- 11 -
certain manner does not defeat the bona fide error defense, particularly in the
context of a legal error”) (emphasis added).
Using this specific intent approach, we agree that “‘the issue of intent
becomes principally a credibility question as to the defendants’ subjective intent
to violate the [FDCPA].’” Johnson III, 296 F. Supp. 2d at 1287 (quoting Caputo,
261 F. Supp. 2d at 1257) (emphasis added). In other words, the intent prong of
the bona fide error defense is a subjective test. Here, although the record
indicates that Riddle explicitly denied any intent to violate the FDCPA, id.,
subjective intent can often only be shown by inferential evidence. 3 Thus, the
extent to which Riddle should have objectively realized that his actions were in
violation of law may be inferentially probative of the subjective intentional nature
of that violation. We therefore immediately turn to the objective analysis
required by the second and third prongs of the bona fide error defense.
B. Objective prongs: Whether the error was bona fide and whether the
debt collector maintained procedures reasonably adapted to avoid
error.
To be entitled to the bona fide error defense, a debt collector’s error must
be bona fide and he must have maintained procedures reasonably adapted to avoid
error. See 15 U.S.C. § 1692k(c); see also Johnson II, 305 F.3d at 1121. Whereas
3
We note that even under criminal law specific intent analysis, “a jury is
permitted to draw inferences of subjective intent from a defendant’s objective
acts.” Wingfield v. Massie, 122 F.3d 1329, 1333 (10th Cir. 1997).
- 12 -
the intent prong of the bona fide error defense is a subjective test, the bona fide
and the procedures prongs are necessarily objective tests. See Kort, 394 F.3d at
538; Rosado v. Taylor, 324 F. Supp. 2d 917, 933 (N.D. Ind. 2004); Caputo, 276 F.
Supp. 2d at 1257-58; Shapiro, 222 F. Supp. 2d at 43; Hartman v. Meridian Fin.
Servs., Inc., 191 F. Supp. 2d 1031, 1045 (W.D. Wis. 2002); Edwards v.
McCormick, 136 F. Supp. 2d 795, 801 n.8 (S.D. Ohio 2001). The district court
explained, and we agree, that “‘[i]n effect, [the bona fide] component serves to
impose an objective standard of reasonableness upon the asserted unintentional
violation.’” Johnson III, 296 F. Supp. 2d at 1288 (quoting Caputo, 261 F. Supp.
2d at 1257); see also Nance v. Ulferts, 282 F. Supp. 2d 912, 920 (N.D. Ind. 2003)
(“[M]istakes of law . . . must not only be unintentional, they must also be
reasonable.”). And the procedures prong, by the express language of the statute,
must be “reasonably adapted to avoid” the error that occurred. 15 U.S.C.
§ 1692k(c) (emphasis added).
Where, as here, the case involves a mistake of law, whether the debt
collector’s mistake was bona fide will often turn on the debt collector’s due
diligence practices. As a result, the bona fide prong and the procedures prong
will often merge; here, one inquiry drives the other. We therefore focus our
analysis on whether Riddle’s procedures were reasonable based on the facts of
this case.
- 13 -
As the text of § 1692k(c) indicates, the procedures component of the bona
fide error defense involves a two-step inquiry: first, whether the debt collector
“maintained”—i.e., actually employed or implemented—procedures to avoid
errors; and, second, whether the procedures were “reasonably adapted” to avoid
the specific error at issue. See 15 U.S.C. § 1692k(c); see also Jenkins v. Heintz,
124 F.3d 824, 834, 835 (7th Cir. 1997) (finding debt collector conclusively
established procedures prong where the debt collector actually employed both
general procedures to comply with the FDCPA and specific procedures designed
to avoid the error at issue); Frye, 193 F. Supp. 2d at 1088-89 (finding procedure
prong satisfied based on debt collector’s unrebutted evidence that it maintained
both general and specific procedures); Taylor v. Luper, Sheriff, & Niedenthal Co.,
L.P.A., 74 F. Supp. 2d 761, 766-67 (S.D. Ohio 1999) (granting summary
judgment to the debt collector based, in part, upon evidence of general and
specific procedures).
We have noted that “it is more common to speak of procedures adapted to
avoid clerical errors than to speak of procedures adopted to avoid mistakes of
law.” See Johnson II, 305 F.3d at 1123. Furthermore, as only “a growing
minority of courts” are finding that mistakes of law can also be bona fide errors
under § 1692k(c), see id. at 1121, most case law addressing the procedures prong
of the bona fide error defense concerns clerical or factual errors. But see, e.g.,
- 14 -
Kort, 394 F.3d at 538 (legal error); Jenkins, 124 F.3d at 834 (same); Frye, 193 F.
Supp. 2d at 1088-89 (same); Taylor, 74 F. Supp. 2d at 766 (same); Aronson v.
Commercial Fin. Servs., Inc., No. Civ. A 96-2113, 1997 WL 1038818, at *5
(W.D. Pa. Dec. 22, 1997) (unpublished) (same), aff’d without opinion, 162 F.3d
1150 (3d Cir. 1998).
Cases applying the procedures prong to a clerical error are not particularly
helpful to our review of a situation where, as here, the error was the result of a
core legal decision. Procedures which may be reasonably adapted to avoiding a
clerical error—e.g., sending employees and staff to training seminars or
subjecting employees and staff to compliance testing—cannot shield an attorney
from liability for legal errors because such clerical procedures are mostly about
the mechanics for collecting debts. Furthermore, only Riddle, as the attorney in
charge, rather than his staff or employees, may make a core legal decision as to
whether a particular practice is permitted by law. Thus, in order for his mistake
to have been bona fide, Riddle himself must have employed procedures to avoid
committing an error, and those procedures must have been reasonably adapted to
avoiding the core legal error that occurred.
In this case, Riddle attempted to employ two procedures to avoid his legal
error. First, in his opinion letter to his client, he researched relevant statutes and
case law to determine whether Utah permitted the practice of claiming shoplifting
- 15 -
penalties for a dishonored check. Second, he filed what he believed was a test
case. While we agree that such procedures are conceivably sufficient to satisfy
the bona fide error requirement, we conclude that triable issues of fact exist in
this case regarding whether Riddle’s implementation of these procedures was
adequate.
Riddle’s opinion letter regarding the propriety of filing a suit to collect
shoplifting penalties for dishonored checks suggests that he read the relevant Utah
statutes, and researched Utah and other states’ case law but found that none
existed. However, rather than predicting how the Utah Supreme Court would
decide the issue, Riddle merely included a disclaimer in the letter that “[i]t would
be difficult for our firm to predict the outcome of this case” and noted that
whether the practice was ultimately permitted by law would “depend on the courts
[sic] interpretation of [the shoplifting] statute.” A reasonable jury could find that
such limited analysis does not entitle Riddle to the bona fide error defense. 4 On
the other hand, a reasonable jury could also find that the letter represents a
4
Had Riddle conducted an Erie analysis to predict how the Utah Supreme
Court would decide the issue, rather than merely including a disclaimer in his
opinion letter, he likely would have come to the same “unmistakably clear” and
“unambiguous” conclusion we reached in undertaking such an analysis in our
prior review in this case: Utah law does not permit a debt collector to claim
shoplifting penalties for an ordinary dishonored check. See Johnson II, 305 F.2d
at 1119-20. However, conducting an Erie analysis might not represent the only
due diligence capable of rendering a mistake of law objectively reasonable; we
leave that determination for the jury.
- 16 -
reasonable, albeit erroneous, determination by a lawyer, with national and local
expertise in collecting debts, that the practice of collecting shoplifting penalties
was defensible under the law.
Riddle claims that his filing of a test case is further evidence that he
maintained procedures to avoid his legal error in this case, rendering his legal
error bona fide. The district court stated that the “filing of a ‘test case’ to
determine the parameters of state law is a quintessential example of a procedure
reasonably adapted to avoid error—in the context of this case, it was specifically
designed to avoid legal error under the FDCPA.” Johnson III, 296 F.3d at 1294.
But again, although we agree that filing a test case potentially represents a
sufficient procedure, we conclude that a reasonable jury could find that Riddle did
not actually “maintain,” that is, utilize, such a procedure in this case. Riddle’s
alleged “test case” resulted only in one unpublished, default judgment issued by a
first-instance trial court after an ex parte hearing. Furthermore, we do not know
whether the facts of Riddle’s test case mirror the facts of Riddle’s suit against
debtors such as Johnson. 5 Accordingly, the test case may or may not have tested
whether Utah law permitted shoplifting penalties for ordinary dishonored checks
5
In support of her argument on appeal, Johnson included the complaint
filed in Riddle’s test case. Because the complaint was not submitted to the
district court as part of summary judgment briefing or supporting documentation,
we will not review on it on appeal. See Aero-Med., Inc. v. United States, 23 F.3d
328, 329 n.2 (10th Cir. 1994).
- 17 -
because we cannot determine on the summary judgment record whether there were
significant factual differences between the test case and Riddle’s ensuing claims
against Johnson and others. Riddle’s test case therefore could be determined by a
jury to be either a sham to set up the bona fide error defense or a true judicial
scrutiny of unsettled practices.
In short, the record reflects genuine issues of material fact regarding
whether Riddle is entitled to the bona fide error defense. Weighing in favor of
Riddle is the fact that Riddle’s firm specializes in collections work; he researched
relevant statutes and case law to determine whether a debt collector could seek
shoplifting damages for a dishonored check; he filed a test case to test such a
practice; and he received a default judgment awarding shoplifting penalties.
Additionally, two other state court cases allowed statutory penalties in excess of
$15, and no “state judge ever told [Riddle] to stop . . . filing such lawsuits.”
Johnson III, 296 F. Supp. 2d at 1289 (quotation omitted). A jury could reasonably
conclude that this combination of factors means that Riddle is entitled to the bona
fide error defense.
On the other hand, Riddle did not attempt to actually predict whether the
Utah Supreme Court would permit the practice of collecting shoplifting penalties
for a dishonored check, and he included a disclaimer in his opinion letter
admitting that one could certainly argue the practice was prohibited. His test case
- 18 -
resulted only in an unpublished, default judgment on facts that may or may not be
fairly representative of Riddle’s later shoplifting claims. Additionally, the default
judgment was issued by a trial court that was itself divided on the issue: Judge
Burton, the judge who originally issued a default judgment awarding Riddle
shoplifting penalties for a dishonored check, was uncertain whether he would
continue to allow such a practice, and Judge Fratto decidedly disallowed the
practice. After learning of the state court’s concern regarding the practice of
collecting more than $15 for a dishonored check, Riddle expressed reluctance
toward continuing to seek such penalties and yet filed suit against Johnson
seeking shoplifting penalties. Additionally, although it is not necessary in every
case, before suing Johnson, Riddle did not seek guidance from an independent
third party, who might not have had the same self-interest as Riddle to collect the
higher statutory penalty. 6 A reasonable jury relying on this combination of factors
could conclude that Riddle is not entitled to the bona fide error defense.
C. Conclusion
On the record, it is a very close question regarding whether the bona fide
legal error defense shields Riddle from liability for attempting to collect an
amount not permitted by Utah law in violation of the FDCPA. We conclude that
6
Riddle collected on 700,000 to 1.5 million checks per year and therefore
had a strong self-interest in collecting the higher shoplifting penalty rather than
the $15 bad-check penalty for each check.
- 19 -
triable issues of fact exist regarding each prong of the defense, although the issue
of whether Riddle maintained procedures reasonably adapted to avoid his legal
error may be determinative of Riddle’s subjective and objective intent.
Accordingly, summary judgment is not proper for either party on this issue. The
jury should decide whether the bona fide error defense shields Riddle from
liability for violating the FDCPA.
III. CLASS CERTIFICATION
Having granted summary judgment in favor of Riddle, the district court
denied Johnson’s motion for class certification as moot. Johnson III, 296 F.
Supp. 2d at 1294. Because we instead conclude that a jury should decide whether
Riddle is entitled to the defense, we reverse the district court’s class certification
decision.
IV. STATE LAW CLAIMS
After dismissing Johnson’s federal claim, the district court declined to
exercise supplemental jurisdiction over her remaining state law claims under 28
U.S.C. § 1367(c)(3). Because we conclude that summary judgment in favor of
Riddle was erroneous, we reverse this decision as well.
V. CONCLUSION
- 20 -
For the foregoing reasons, we REVERSE the district court order granting
summary judgment in favor of Riddle, AFFIRM the judgment of the district court
denying summary judgment in favor of Johnson, and REMAND for further
proceedings consistent with this opinion.
- 21 -
Johnson v. Riddle
Court: Court of Appeals for the Tenth Circuit
Date filed: 2006-04-04
Citations: 443 F.3d 723
Copy CitationsCombined Opinion