Heard v. Bonneville Billing ( 2000 )

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
JUN 26 2000
TENTH CIRCUIT
PATRICK FISHER
Clerk
TWILA HEARD,
Plaintiff-Appellant and Cross-
Appellee,
v.
BONNEVILLE BILLING AND
Nos. 99-4092, 99-4100
COLLECTIONS, a Utah corporation,
(D.C. No. 97-CV-445-C)
(District of Utah)
Defendant-Appellees and Cross-
Appellants,
and
WILFORD N. HANSEN, JR., P.C., a
Utah professional corporation; WILFORD
N. HANSEN, JR.,
Defendants-Appellees.
TWILA HEARD,
Plaintiff - Appellee,
v.
No. 99-4202
BONNEVILLE BILLING AND
(D.C. No. 97-CV-445-C)
COLLECTIONS, a Utah corporation,
(District of Utah)
Defendant - Appellant,
and
WILFORD N. HANSEN, JR., P.C., a
Utah professional corporation; WILFORD
N. HANSEN, JR.,
Defendants.
ORDER AND JUDGMENT*
Before KELLY, PORFILIO, Circuit Judges; and ALLEY, District Judge.**
Twila Heard filed a complaint under federal and state law alleging Bonneville
Billing and Collections, Inc. engaged in various deceptive practices when it sought
recovery from her on a check as a joint account holder and then unethically split the
statutorily authorized attorneys’ fees awarded. The district court granted summary
judgment for Ms. Heard, concluding Bonneville’s actions violated federal and state law
when it collected a dishonored check from Ms. Heard, who was not the signer nor any
longer on the account. However, the court granted Bonneville’s motion for summary
judgment on Ms. Heard’s claim it engaged in unlawful fee-splitting with attorneys it
*
This order and judgment is not binding precedent, except under the doctrines of
law of the case, res judicata, and collateral estoppel. This court generally disfavors the
citation of orders and judgments; nevertheless, an order and judgment may be cited under
the terms and conditions of 10th Cir. R. 36.3.
**
The Honorable Wayne E. Alley, District Judge for the United States District
Court for the Western District of Oklahoma, sitting by designation.
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retained to do its collection work. Now in these cross appeals, Ms. Heard and Bonneville
challenge their respective adverse rulings. Finding no error in any substantive or
procedural claim raised, however, we affirm.
Nos. 99-4100 and 99-4202
Because the parties are familiar with the underlying facts, we do not reiterate them
here unless they are necessary to explain our disposition. The district court granted
summary judgment to Ms. Heard on her claim Bonneville violated the Fair Debt
Collection Practices Act (FDCPA), 15 U.S.C. §§ 1692-1692o, and the Utah Consumer
Sales Practices Act (UCSPA), Utah Code Ann. § 3-11-4 et seq., and awarded monetary
and injunctive relief. The court found Bonneville persisted in attempting to collect on the
bad checks Ms. Heard’s daughter, Tiana, signed simply because Ms. Heard was listed on
the check as a joint account holder. The court noted the evidence provided in the
deposition testimony that despite Ms. Heard’s telling Bonneville representatives she had
taken her name off the account and her daughter did not reside with her, Bonneville
continued to send her letters, contacted her employer, and named her in the caption of the
complaint it filed in state court. These acts, the district court found, reflected
Bonneville’s routine collection practice for joint account holders in the face of its daily
receipt of some 1500 bad checks to collect.
Based on these uncontroverted facts, the district court held Bonneville’s actions
constituted a misrepresentation under the FDCPA, 15 U.S.C. § 1692e(2)(A), which
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prohibits a debt collector from using “any false, deceptive, or misleading representation
. . . of the character, amount, or legal status of any debt,” by repeatedly representing that
Ms. Heard was liable for her daughter’s bad checks. Further, the court concluded the
uncontroverted evidence established Bonneville could not avoid liability by sheltering its
conduct under the bona fide error provision of § 1692k(c). That conclusion, the court
offered, was supported by Bonneville’s failure to offer any evidence it maintained
procedures designed to safeguard against collecting from joint account holders in all
circumstances. Instead, the court found “the evidence is undisputed that it was
defendants’ routine practice to attempt to collect from both holders of a joint account.”
The court also concluded Bonneville violated the UCSPA which prohibits a
“supplier” from knowingly and intentionally committing deceptive acts or unconscionable
practices in connection with a consumer transaction. Utah Code Ann. §§ 13-11-3(6), 13-
11-4 & 5. The evidence, the court stated, established Bonneville pursued Ms. Heard with
collection notices, telephone calls, certified letters to her address, and naming her in the
lawsuit its attorney filed despite entries in its computer system that Ms. Heard was no
longer on the account of her adult daughter, Tiana Heard. The court concluded
Bonneville’s actions suggested Ms. Heard was liable for her daughter’s debts, a practice
that was both deceptive and unconscionable under the UCSPA.
In its appeal, Bonneville now assails the facts and the law the district court relied
upon to reach that conclusion. First, it contends both the FDCPA and the UCSPA require
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a supplier act “with intent to deceive.” Utah Code Ann. § 3-11-4(2). While
acknowledging the question of unconscionability is one of law which does not require
specific intent under the UCSPA, Bonneville asserts the record does not uncontrovertibly
establish it knew or had reason to know Ms. Heard was liable for the bad check.
Therefore, it insists the court erred by resolving the disputed material fact that once it
learned Ms. Heard “was not the signer of the bad check and that the goods purchased
were not for family use, Bonneville did not attempt to collect the debt from Plaintiff.”
We review the district court’s granting summary judgment de novo. Koch v. Koch
Industries, Inc., 203 F.3d 1202, 1212 (10th Cir. 2000). Fed. R. Civ. P. 56(c) informs us
that summary judgment is appropriate “if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that there
is no genuine issue as to any material fact and that the moving party is entitled to a
judgment as a matter of law.” We look at all of this evidence and the reasonable
inferences that can be drawn from it in the light most favorable to the nonmoving party.
Id.
Bonneville presents an array of facts which intermingle its collection activities on
several of Tiana Heard’s bad checks to support its assertion once it learned Ms. Heard
was not liable, it made no effort to collect the debt from her. However, these facts do not
controvert Ms. Heard’s evidence that once Bonneville entered the two names into its
CUBS database, it persisted in pursuing Ms. Heard as a joint account holder. That she
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did or did not receive the certified letters or was only named in the caption and not the
body of the complaint does not controvert the fact Ms. Heard told Bonneville employees
her adult daughter wrote the checks and she was no longer on the account; however,
neither Bonneville nor its attorney took any affirmative act to dissipate the representation
Ms. Heard was liable for the bad checks. When we couple Ms. Heard’s deposition
testimony that she felt “humiliated and devastated” having to go to the office and make
the payments she believed were necessary to preserve her credit record with the unrefuted
deposition testimony of Bonneville personnel they routinely entered both names from a
bad check and pursued joint account holders, it is inescapable Bonneville cannot provide
evidence to controvert an essential element of plaintiff’s proof.1 “Failure of proof of an
essential element renders all other facts immaterial.” Id. (citing Treff v. Galetka, 74 F.3d
191, 195 (10th Cir. 1996)).
Bonneville’s effort to diminish this evidence by contending it fails to establish an
intent to deceive under Utah Code Ann. § 13-11-4 is equally unavailing. The Utah
legislature amended this section, effective May 1, 1995, and changed “intent to deceive”
to “knowingly or intentionally.” Thus, like the determination of unconscionability,
1
Before the district court, Bonneville argued that older individuals sometimes put
their children’s names on their accounts “as an agency account. And so the child is
authorized, as well as the older individual, to write those checks.” During oral argument
here, when asked to state its theory of liability of a non-signatory on an account,
Bonneville’s counsel stated that “Tiana Heard” and “Twila Heard” could be husband and
wife. According to Bonneville, however, these are the “facts” the court improperly
resolved when it found Bonneville liable.
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defined in § 13-11-5, the court may consider the circumstances “which the supplier knew
or had reason to know” to decide whether an act is deceptive. The district court did not
err in concluding Bonneville’s “practice was both deceptive and unconscionable in
violation of both Utah Code Ann. §§ 13-11-4 and 5.”
Further, given the broad remedial purpose of the FDCPA to protect consumers
from the “use of abusive, deceptive, and unfair debt collection practices,” 15 U.S.C.
§ 1692(a), the district court did not err in concluding Bonneville and its attorney cannot
be shielded by the bona fide error safehaven of 15 U.S.C. § 2692k(c). Under this section:
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.
The district court correctly found Bonneville failed to meet its burden to establish it is
entitled to this affirmative defense. Bonneville offered no evidence of any procedure
“reasonably adapted to avoid any such error.” Unlike the manual and computer system in
place in Lewis v. ACB Business Servs., Inc., 135 F.3d 389, 401 (6th Cir. 1998), which
the Sixth Circuit agreed “in fact were able to catch the error in a very short period of
time,” Bonneville employees testified there was no training or operational manual guiding
their activities. Instead, employees who had previously done the same task worked with
his or her replacement and provided instruction on the CUBS system. Once names were
entered in the database, no effort was made to determine whether joint account holders
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were bound by the family expense doctrine or which party was, in fact, liable on the
check. Although Attorney Wilford Hansen testified he personally checked the complaint
including both Tiana and Twila’s names in the caption and he inadvertently missed the
error, personnel who worked for Mr. Hansen testified the complaints were prepared by
non-attorneys and Mr. Hansen merely looked them over. Most importantly, Bonneville
offered no evidence - other than clerical error - of any system designed to reasonably
avoid the error committed here. Therefore, the district court did not err in concluding
Bonneville failed to meet its burden of proof to escape liability.
Because the district court did not err in granting Ms. Heard summary judgment, its
subsequent award of statutory costs and attorneys’ fees under Utah Code Ann. § 3-11-
19(5) in the amount of $42,416.82 was appropriate. As Bonneville concedes in its brief
preserving this issue, No. 92-4202, given our disposition of the merits, the district court’s
award is similarly affirmed.
No. 99-4092
In her appeal, Ms. Heard seeks to resurrect her claim Bonneville violated the
UCSPA and FDCPA as well as the Utah Rules of Professional Conduct by splitting the
attorneys’ fees authorized by statute with its counsel. She alleged that Bonneville’s
attorneys’ payment to Bonneville of virtually 50% of the attorneys’ fees collected
ostensibly for the attorneys’ use of the computer, office space, and participation in a
health insurance plan represented an end-run around the state’s amended ethical rules
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prohibiting an attorney from splitting fees with a non-attorney. After completing
discovery on the claim, Ms. Heard filed a motion for leave to amend her complaint to
allege a class action, to add a defendant and a claim. The court denied the motion to
amend as untimely and possibly duplicative of another pending action and dismissed the
claim on the merits on the ground Ms. Heard lacked standing.
Although Fed. R. Civ. P. 15(a) provides “leave [to amend] shall be freely given
when justice so requires,” its granting remains within the sound discretion of the district
court. Snider v. Circle K Corp., 923 F.2d 1404, 1409 (10th Cir. 1991). Therefore, we
will not disturb that exercise of discretion unless it is disconnected from legal principles
and substantial facts in the record. Dowell by Dowell v. Board of Education of
Oklahoma City Pub. Schs., 890 F.2d 1483, 1489 (10th Cir. 1989), rev’d on other
grounds, 498 U.S. 237 (1991).
Denying Ms. Heard’s motion for leave to amend, the district court, well-versed in
the history of the case, cited its untimeliness, plaintiff’s counsel’s having waited almost a
year with discovery virtually completed. Having set a trial date and aware that plaintiff’s
counsel represented individuals in a similar possible class action which was pending in
federal district court, it found the proposed amendment would prejudice Bonneville. This
conclusion is fully tethered to facts of the case and reflects a proper interpretation of Rule
15. Hom v. Squire, 81 F.3d 969, 973 (10th Cir. 1996); Frank v. U.S. West, Inc., 3 F.3d
1357, 1365 (10th Cir. 1993). Though to be liberally construed, the policy behind Rule 15
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“is not limitless.” Calderon v. Kansas Dept. of Social & Rehab. Serv., 181 F.3d 1180,
1186 (10th Cir. 1999) (Rule 15 must be read in conjunction with all pleading rules.).
Under the circumstances here, the court did not abuse its discretion in denying
amendment of the complaint.
We also agree with the district court’s disposition of the merits of Ms. Heard’s fee-
splitting claim. Whether Ms. Heard has standing to invoke the FDCPA and UCSPA as a
private attorney general challenging the statutory grant of attorneys’ fees under Utah
Code Ann. § 7-15-1 and Utah Court Rule 4-505.01, which sets a statutory amount for
attorneys’ fees based on the amount of the judgment is a question of law which we review
de novo. Shaw v. United States, ___F.3d___, No. 99-6152, 2000 WL 640345, at *1 (10th
Cir. May 18, 2000).
Standing is an essential component of the case-or-controversy requirement for
federal court jurisdiction. Chrisman v. C.I.R., 82 F.3d 371, 373 (10th Cir. 1996). “[T]he
standing inquiry requires us to consider ‘both constitutional limitations on federal court
jurisdiction and prudential limitations on its exercise,’” Sac and Fox Nation of Missouri
v. Pierce, ___F.3d ___, No. 99-3019, 2000 WL 703025, at *5 (10th Cir. May 30, 2000).
Our review here stops with the constitutional question: “whether the plaintiff has ‘alleged
such a personal stake in the outcome of the controversy’ as to warrant [its] invocation of
federal-court jurisdiction and to justify exercise of the court’s remedial powers on [its]
behalf.” Warth v. Seldin, 422 U.S. 490, 498-99 (1975) (quoting Baker v. Carr, 369 U.S.
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186 (1962)).
As the district court noted, Ms. Heard did not allege in her complaint the attorneys’
fees were too high or unconscionable or that the attorney did not do any work to justify
the statutory award. Indeed, Ms. Heard paid the amount demanded before any judgment
was entered on Bonneville’s state complaint. What Bonneville’s attorney did with the
statutory fees may violate state ethical rules. How that injures this plaintiff, however,
eludes us. It is the fundamental deficiency of Ms. Heard’s stake in the outcome of the
fee-splitting issue which defeats her standing. We therefore cannot conclude the district
court erred in dismissing her second claim for unlawful and unethical fee-splitting on the
ground she lacked standing.
AFFIRMED.
ENTERED FOR THE COURT
John C. Porfilio
Senior Circuit Judge
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