Imagine being accused of writing a check that bounced. Now imagine that accusation coming in a letter from the District Attorney’s office threatening criminal prosecution unless you paid the amount of the check plus over $200 in fees. Scary, right?
Letters like this were sent, not by the District Attorney’s office, but by a private debt collection company called Victim Services (doing business as Corrective Solutions). The debt collection company pays the District Attorney’s office a fee in order to send debt collection letters on the District Attorney’s letterhead and says it is operating a “diversion program” that allows check writers to avoid criminal prosecution.
While the District Attorney’s name may be used in some cases when collecting for bad checks, California has specific rules that govern how and when it can be used. Further, the American Bar Association has found the practice of threatening criminal prosecution if a debt is not paid to be unethical.
Plaintiffs, a group of California residents, filed suit against the debt collector because they were subject to such false and misleading threats of criminal prosecution.
The debt collection company responded with a series of motions aimed at preventing the Court from deciding Plaintiffs’ claims on the merits. First, it brought a motion under California’s Anti-SLAPP law.
The Anti-SLAPP law was adopted to prevent big businesses and other powerful interests from using lawsuits to intimidate citizens exercising their rights to free speech and civic engagement. For example, a lawsuit filed by a land developer against activists in an effort to suppress objections to the developer’s plans rather than obtain a ruling on the legality of those plans. Under California’s Anti-SLAPP law, such lawsuits are prohibited.
As many other corporations have done, the debt collector here claimed that Plaintiffs were trying to suppress its speech by suing the debt collector over its misleading communications. The District Court disagreed. The court found that the case was appropriately brought to challenge illegal collection methods, and it was brought in the public interest. The debt collector appealed that decision to the Ninth Circuit.
The Ninth Circuit held that, because the District Court found the case to be in the public interest, under California’s Anti-SLAPP law, it had no jurisdiction to review the order. In other words, the Ninth Circuit ruled in Plaintiffs’ favor and permitted the case to proceed.
The debt collection company also asked the District Court to force one of the Plaintiffs to bring her to claim in a secret arbitration proceeding. Both the District Court and the Ninth Circuit held that she did not agree to arbitration when she paid the fees the debt collector demanded by threatening her with criminal prosecution.
The Plaintiffs are represented by Terrell Marshall Law Group PLLC, Law Office of Paul Arons, Gupta Wessler PLLC, and Ram, Olson, Cereghino & Kopczynski.
To read a former blog post describing this case, click here.
Case Documents
For More On This
NCLC Digital Library – Ninth Circuit: Collector Hired by State Agency Cannot Require Arbitration