Silvernail v. Kent, County of , 385 F.3d 601 ( 2004 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
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