Breazeale et al v. Victim Services, Inc. d/b/a CorrectiveSolutions et al

Filing 348

ORDER by Judge Vince Chhabria denying 314 Motion for Summary Judgment; granting in part and denying in part 320 Motion for Summary Judgment; and denying 331 Motion to Amend Class Definition. (vclc3, COURT STAFF) (Filed on 11/20/2019)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA

KAREN SOLBERG, et al.,

Case No. 14-cv-05266-VC

Plaintiffs,
v.
VICTIM SERVICES, INC. D/B/A
CORRECTIVESOLUTIONS, et al.,
Defendants.

ORDER GRANTING IN PART AND
DENYING IN PART CROSSMOTIONS FOR SUMMARY
JUDGMENT; DENYING MOTION TO
AMEND CLASS DEFINITION
Re: Dkt. Nos. 314, 320, 331

Many district attorneys throughout California have established diversion programs for
people accused of passing bad checks with fraudulent intent. These programs allow suspects to
avoid the possibility of criminal prosecution if they pay restitution and take a financial
responsibility class. The district attorneys typically contract with private entities to administer
the diversion programs.
In this class action, the plaintiffs contend that a private entity—a company called Victim
Services—administers diversion programs around the state in a way that violates the federal Fair
Debt Collection Practices Act (FDCPA), as well as state law. The parties have filed crossmotions for summary judgment. The motions raise several complicated questions, only some of
which can be answered at this stage:
First, is Victim Services exempt from the FDCPA’s coverage? The answer is no, at least
for the period covered by this class action, because Victim Services failed to satisfy at least one
of the statute’s prerequisites for exclusion from coverage.
Second, did the letter that Victim Services sent to suspects on behalf of district attorneys
mislead debtors in violation of the FDCPA? The answer to this question is no as well—the letters

sent during the class period were not misleading in any material respect.
Third, did Victim Services violate the FDCPA by charging participants fees that are not
authorized by California law for these diversion programs? This question cannot be answered
based on the materials the parties have submitted in connection with their cross-motions for
summary judgment.
Fourth, did Victim Services violate the provisions of California law invoked by the
plaintiffs? The answer to this question is no, with one caveat. If Victim Services charged
unauthorized fees, this of course would be a state-law violation as well as a violation of the
FDCPA.
Accordingly, summary judgment is granted to Victim Services on all claims except those
based on the allegation that it charged fees not authorized by state law. The parties will be
permitted to file renewed cross-motions for summary judgment if they determine that this
question can be answered without regard to any disputed material facts.
I
In California, it is illegal to pass a bad check with fraudulent intent. See Cal. Penal Code
§ 476a. Because bad checkwriting is prevalent but frequently involves small dollar amounts,
district attorneys often lack the resources to effectively deter this crime by prosecution. Many
counties have therefore turned to pre-charge diversion programs that lower the stakes for the
suspect but raise the probability that the suspect will face some consequence for writing a bad
check. The bargain of the diversion program is straightforward: If the suspect makes the alleged
victim whole, pays the diversion program’s administrative fees, and attends a class about
financial responsibility, the district attorney will agree not to prosecute the suspect.
The California Legislature laid the groundwork for these diversion programs by passing
the Bad Check Diversion Act. See Cal. Penal Code § 1001.60 et seq. This statute, in addition to
setting parameters for the programs generally, allows district attorneys to contract with private
entities to handle referrals from victims, collect fees, and teach the classes. Many (if not all)
district attorneys in California use private entities to administer their bad-check diversion

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programs.
Karen Solberg, Nancy Morin, and Narisha Bonakdar each wrote a bad check and were
subsequently contacted for participation in one of these diversion programs. The contact was
made by Victim Services, Inc., a private entity that administered the bad-check diversion
programs for the district attorneys in the checkwriters’ respective counties. Only Bonakdar took
up the offer to participate in a diversion program and pay restitution; the other two disputed that
they had committed a bad-check offense. But all three checkwriters eventually concluded that
Victim Services’ administration of the diversion program violates a federal statute that regulates
debt collection, the Fair Debt Collection Practices Act (FDCPA).
Thus, in December 2014, the three checkwriters (and two other people who have since
dismissed their claims) filed this class action against Victim Services, three related corporate
entities, and two corporate officers that jointly administered bad-check diversion programs on
behalf of district attorneys in 32 California counties. For short, this ruling refers to the
defendants collectively as Victim Services. The plaintiffs bring claims under the FDCPA based
on Victim Services’ allegedly false and misleading demand letters, and based on Victim
Services’ collection of fees allegedly not authorized by state law. On top of the FDCPA claims,
the plaintiffs pursue claims for unfair business practices under California’s Unfair Competition
Law (UCL) and for fraudulent and negligent misrepresentation under California’s general tort
law. They seek damages of more than $6 million on behalf of a statewide class of checkwriters
contacted by Victim Services.
For the past five years, the plaintiffs and Victim Services have engaged in protracted
litigation over pretrial motions. Victim Services first made unsuccessful attempts to dismiss the
complaint and to strike the state-law claims under California’s anti-SLAPP statute, which
protects defendants’ exercise of their First Amendment rights. As Ninth Circuit law permits,
Victim Services immediately appealed the denial of its anti-SLAPP motion.
There was also a skirmish over arbitration. As mentioned earlier, Bonakdar was the only
plaintiff to enter into a non-prosecution agreement with the district attorney. Her contract to

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participate in the diversion program contained an arbitration provision, and Victim Services
moved to compel arbitration with Bonakdar on this basis. This Court concluded that the Federal
Arbitration Act does not apply to contracts between a district attorney and a suspect to resolve a
question of criminal liability, and that California law does not permit arbitration of a dispute
regarding the performance of a core government function by the government’s agent. Breazeale
v. Victim Services, Inc., 198 F. Supp. 3d 1070 (N.D. Cal. 2016). As with an anti-SLAPP motion,
the denial of motion to compel arbitration is immediately appealable. The Ninth Circuit affirmed
the anti-SLAPP and arbitration rulings in a consolidated appeal. Breazeale v. Victim Services,
Inc., 878 F.3d 759 (9th Cir. 2017).
Next, the parties fought over class certification. After narrowing the plaintiffs’ requested
class definition, this Court certified two overlapping statewide classes. See Dkt. No. 297. The
first class, which is for the FDCPA claims, consists of people who received a letter from Victim
Services from December 1, 2013, to May 7, 2015. The second class, for the UCL claims,
contains all people who paid fees to Victim Services in response to the letter between September
1, 2011, and May 7, 2015. Victim Services then filed a motion with the Ninth Circuit seeking
permission to immediately appeal the class certification order under Federal Rule of Civil
Procedure 23(f), but this motion was denied.
That winding procedural history brings this case to its present stage, in which the
plaintiffs and Victim Services each move for summary judgment on the FDCPA, UCL, and statelaw misrepresentation claims.
II
The plaintiffs’ primary argument is that Victim Services, acting as an agent of district
attorneys, engaged in unlawful debt collection practices. At the outset, one might question
whether this case even involves “debt collection.” These diversion programs recover restitution
for alleged violations of California Penal Code section 476a, the offense of passing a bad check
with intent to defraud. An effort by a prosecutor, as an actor in the criminal justice system, to
seek restitution on behalf of a victim is quite different from an effort by a private party to collect

4

from a debtor. Cf. Lagos v. United States, 138 S. Ct. 1684, 1688 (2018) (distinguishing
“government investigations and criminal proceedings” from “private investigations and civil or
bankruptcy litigation” for purposes of statute authorizing restitution). Even though the restitution
will equal the face value of the bad check plus any bank charges, it is counterintuitive (at best) to
put restitution sought by a prosecutor in the same conceptual bucket as debt collection.
Nor does the recovery of restitution in this context seem like recovery of a “debt” as that
term is used in the federal debt collection statute that the plaintiffs invoke. Consider how the
FDCPA defines “debt”: “any obligation or alleged obligation of a consumer to pay money
arising out of a transaction in which the money, property, insurance, or services which are the
subject of the transaction are primarily for personal, family, or household purposes, whether or
not such obligation has been reduced to judgment.” 15 U.S.C. § 1692a(5). The concept
undergirding the term “debt” is that the obligation to pay arises out of a qualifying transaction. A
merchant that pursues its civil remedies for a bad check can fairly be described as collecting a
debt—that is, enforcing a payment obligation that arises out of a transaction. See Charles v.
Lundgren & Associates, P.C., 119 F.3d 739, 742 (9th Cir. 1997). In contrast, it’s a crime to
fraudulently pass a bad check regardless of whether the check writer is transacting for goods or
services. See Cal. Penal Code § 476a. The offender’s obligation to pay restitution to the victim
thus arises not from the transaction but from the agreement with the district attorney to resolve a
dispute regarding criminal liability.
Given this mismatch, one might have expected Victim Services to argue that it does not
engage in “debt collection” when it acts as an agent of a district attorney’s office to assist in the
administration of a criminal justice program that includes the recovery of restitution. But that
train has left the station. At the turn of the century, a spate of federal district courts interpreted
the FDCPA to cover the efforts by private entities to obtain criminal restitution in their capacity
as agents of diversion programs. See, e.g., Liles v. American Corrective Counseling Services,
Inc., 131 F. Supp. 2d 1114, 1119–20 (S.D. Iowa 2001). The distinction between civil and
criminal enforcement, those courts reasoned, “makes no difference” if the restitution

5

compensates the merchant harmed by the bad check. Gradisher v. Check Enforcement Unit, Inc.,
133 F. Supp. 2d 988, 990 (W.D. Mich. 2001). These rulings are arguably wrong as a matter of
statutory interpretation, for the reasons discussed above. Moreover, assuming the statutory term
“debt collection” is susceptible to either interpretation, there would have been good reason to
avoid adopting the interpretation that includes district attorneys’ bad-check diversion programs.
Absent a plain statement of intent, Congress is presumed not to regulate in areas traditionally left
to the states. Breazeale, 198 F. Supp. 3d at 1077–79. The enforcement of state criminal law is
obviously one such area. See Bond v. United States, 572 U.S. 844, 858 (2014). And at root, these
diversion programs are criminal justice programs, so state and local government officials, not
Congress, are supposed to be in charge.1
But Congress did not respond to these rulings by clarifying that seeking restitution as part
of a local law enforcement program is different from debt collection. Instead, it responded by
amending the FDCPA to specify that private administrators of diversion programs can
potentially avoid coverage under the statute, but only if they meet a series of detailed, confusing
requirements. Financial Services Regulatory Relief Act of 2006, Pub. L. No. 109-351,
§ 801(a)(2), 120 Stat. 1966, 2004–06 (codified at 15 U.S.C. § 1692p). These requirements are
discussed at length in Section III.A, but for now suffice it to say that although the prior version
of the FDCPA arguably should not have been construed to cover entities involved in the
administration of local law enforcement programs, the amended version reflects a clear
expression of intent by Congress for the FDCPA to cover some of those entities—specifically,
the entities that don’t meet the series of requirements that would allow them to enjoy an
exemption. Husted v. A. Philip Randolph Institute, 138 S. Ct. 1833, 1844 (2018) (“There is no
reason to create an exception to a prohibition unless the prohibition would otherwise forbid what
the exception allows.”); see also Group Life & Health Insurance Co. v. Royal Drug Co., 440
Incidentally, if a district attorney’s office is not sufficiently involved in the administration and
direct supervision of a diversion program (which may well be the case here), the program could
violate the California Constitution. See Cal. Const. art. 5, § 13; People v. Eubanks, 14 Cal. 4th
580, 589 (1996).
1

6

U.S. 205, 219–20 (1979).
Thus, Victim Services has understandably refrained from arguing that the FDCPA does
not cover bad-check diversion programs. But the result is vexing—the Court must attempt to
apply a series of complicated statutory requirements regarding debt collection to bad-check
diversion programs, even though many of those requirements were not designed for, and often
cannot be sensibly applied to, diversion programs. As the discussion below makes clear, this
problem pervades the plaintiffs’ claims.
III
Although Victim Services does not make the argument discussed above, it does argue
that it falls within two exceptions to the FDCPA’s coverage. First, Victim Services contends that
it meets the specific requirements of the exception for diversion programs discussed in the
preceding section. See 15 U.S.C. § 1692p. Second, Victim Services contends that it satisfies the
exception for people or entities who act as fiduciaries to creditors. See § 1692a(6)(F)(i).2
As a preliminary matter, the plaintiffs argue that these statutory exceptions must be
narrowly construed to further the FDCPA’s guiding purpose of protecting debtors from deceptive
and unfair practices. Yet the Supreme Court has recently shied away from invoking this
longstanding narrow-construction canon, instead applying the principle that statutory exceptions
must be given a “fair reading.” Food Marketing Institute v. Argus Leader Media, 139 S. Ct.
2356, 2366 (2019); see Encino Motorcars, LLC v. Navarro, 138 S. Ct. 1134, 1142 (2018). Given
this vague language, it’s unclear whether courts should narrowly construe the FDCPA’s
exceptions in cases of ambiguity or instead strive for the statute’s best reading, no matter where
it leads. But in this case, the narrow-construction canon—to the extent it survives—need not be
deployed. Either way, the plaintiffs and the FDCPA class are entitled to summary judgment as to
The FDCPA contains a separate exception for government actors. That exception doesn’t apply
to Victim Services, notwithstanding its performance of a government function, because the
government actor exception is available only to “any officer or employee of the United States or
any State to the extent that collecting or attempting to collect any debt is in the performance of
his official duties.” 15 U.S.C. § 1692a(6)(C) (emphasis added); see Brannan v. United Student
Aid Funds, Inc., 94 F.3d 1260, 1263 (9th Cir. 1996).
2

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both exceptions.
A
First, Victim Services contends that its collection activity falls within the exception for
diversion programs, which includes programs “for alleged bad check offenders who agree to
participate voluntarily in such program to avoid criminal prosecution.” 15 U.S.C. § 1692p(2)(A).
This exception extends to private entities that administer such diversion programs under contract
with a district attorney. § 1692p(2)(B). But to qualify for this exception, the private entity must
comply with six requirements. See § 1692p(2)(C). During the class period, Victim Services
failed to comply with at least one of these requirements, and possibly more.
To be exempt from FDCPA liability, diversion programs must notify suspects of their
right to request that the district attorney’s office determine the existence of probable cause that
the suspect committed a bad-check offense. See § 1692p(2)(C)(v). This disclosure ensures that
suspects have a means to confirm, before deciding whether to participate in the program, that
they were appropriately contacted for diversion. In addition, the diversion program must inform
the suspect that restitution efforts will be paused until the requested determination of probable
cause is made. Specifically, the statute provides that private entities must “include[ ] as part of an
initial written communication with an alleged offender a clear and conspicuous statement that,”
among other things, “if the alleged offender notifies the private entity or the district attorney in
writing, not later than 30 days after being contacted for the first time pursuant to clause (iv), that
there is a dispute . . . , before further restitution efforts are pursued, the district attorney or an
employee of the district attorney authorized to make such a determination makes a determination
that there is probable cause to believe that a crime has been committed.” § 1692p(2)(C)(v)(III).
Victim Services did not comply with this notice requirement. Attached as Appendix A to
this ruling is the letter for the Santa Cruz diversion program, which is representative of the letters
in use across California during the class period. That letter informed the suspect: “You may
dispute the validity of this allegation in writing to this Office within 30 days of receiving this
Official Notice.” Santa Cruz County Form Letter 2 (“Form Letter”), Dkt. No. 315-1. But the

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letter does not state that an employee of the district attorney will determine the existence of
probable cause; it states only that “the authorized administrator of the Check Restitution
Recovery Program will review the written dispute based on criteria established by [that county’s]
District Attorney.” Id. And the letter makes clear that the authorized administrator is a private
entity under contract with the district attorney. Id. at 1. Nor does the letter assure the recipient
that restitution efforts will be put on hold until that determination is made. As a matter of law,
this letter is inconsistent with the notice provision in section 1692p(2)(C)(v). See Cavnar v.
BounceBack, Inc., 2015 WL 4429095, at *3 (E.D. Wash. July 17, 2015).
Victim Services appears to object that this application of the statute is nitpicky. Yet
Congress chose to impose highly specific notice requirements for diversion programs that wish
to avoid coverage under the FDCPA. If the requirements were more general (for example, “to
qualify for the exemption, the program must notify the suspect of the opportunity to dispute the
existence of probable cause”), perhaps Victim Services could be found in substantial compliance.
But in the face of such a specific notice requirement, and in the face of mandate that the
notification be “clear and conspicuous,” the language in the letter used by Victim Services
during the class period is inadequate to support an exemption from the FDCPA.
Although this alone prevents Victim Services from escaping the label of “debt collector”
within the meaning of the statute, it’s worth touching on a few of the parties’ other arguments,
particularly given the dearth of case law regarding the diversion program exception and the
inherent difficulty in applying the FDCPA to diversion programs. To begin with, the plaintiffs
invoke the requirement that the private entity administering the diversion program must comply
“with the penal laws of the State.” 15 U.S.C. § 1692p(2)(C)(i). The plaintiffs note that under
California’s Bad Check Diversion Act, the district attorney must consider five factors before
referring a case to a bad-check diversion program, including the suspect’s “prior criminal record”
and the “strength of the evidence, if any, of intent to defraud the victim.” Cal. Penal Code
§ 1001.62(b), (e). It seems impossible that any of the district attorneys (or their employees) could
have been performing this analysis, because the victims’ submissions don’t contain enough

9

information to consider those factors. See Fineman Dep. 30:12–31:1, Dkt. No. 315-18.
According to the plaintiffs, the district attorneys’ shortcomings in this respect mean that Victim
Services fails to satisfy the FDCPA’s requirement to comply with the penal laws of the state.
But that is a non sequitur. To be sure, it is troubling that district attorneys appear to be
violating state law in the administration of their bad-check diversion programs. But the FDCPA’s
diversion program exception requires the private entity itself to be in compliance with the penal
laws of the state. The conduct the plaintiffs complain of here is the conduct of the district
attorneys, and the obligation to consider the five referral factors is directed solely to the district
attorneys. See Cal. Penal Code § 1001.62. Thus, while the plaintiffs have raised serious concerns
about the district attorneys’ compliance with state law (which presumably could be remedied by
a writ action against district attorneys in state court), those concerns do not disqualify Victim
Services from this exception.3
This case also raises novel issues with respect to the diversion program exception’s twin
prohibitions on private entities exercising prosecutorial discretion or making their own probable
cause determinations. 15 U.S.C. § 1692p(2)(C)(iii)–(iv). It is unclear whether the diversion
programs in California abide by these restrictions. On the one hand, Victim Services forswears
any ability to exercise independent prosecutorial discretion when initiating restitution efforts.
Indeed, the diversion programs might violate the California Constitution if Victim Services could
exercise discretion in this regard. See People v. Eubanks, 14 Cal. 4th 580, 589 (1996). On the
other hand, the structure of the referral system indicates that at least some district attorneys’
offices exercised virtually no supervisory role, at least with respect to individual checks. Several
counties employed an auto-open procedure whereby Victim Services forwarded a list of checks
The plaintiffs’ argument about the failure of district attorneys to conduct the required analysis
before referring suspects to the program underscores why the FDCPA is such a bad fit for
criminal justice diversion programs. Throughout this case, the plaintiffs have made many
arguments that suggest their ultimate concern is less with the specific way Victim Services has
conducted itself and more with the fairness of the diversion programs in general. But an FDCPA
lawsuit is not the appropriate venue for a frontal attack on bad-check diversion programs. And
the federalism implications of this case would be only heightened if the Act is interpreted to
prescribe a federal code of best practices for local prosecutors.
3

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to the district attorney and then institutes collection efforts unless the district attorney objects.
See Noland Dep. 31:14–32:13, Dkt. No. 315-10.
However, this is one of many issues that cannot be resolved on the current record
compiled by the parties for these cross-motions for summary judgment. Previously, the plaintiffs
moved for, and obtained, certification of a California-wide class of people allegedly victimized
by Victim Services’ conduct. But this issue—whether Victim Services acted too much like a
prosecutor in the administration of these programs—does not appear amenable to resolution on a
statewide basis. Because each of the 32 district attorneys established a bad-check diversion
program with the approval of the respective county’s board of supervisors, there are really 32
diversion programs at issue in this case. So it is possible some district attorneys delegated too
much discretion to Victim Services while other district attorneys did not. And if a decision about
whether Victim Services is excluded from the FDCPA’s definition of “debt collector” required a
county-by-county analysis of the discretion granted Victim Services, the Court’s prior class
certification ruling would presumably need to be revisited.4
On a related note, the FDCPA’s diversion program exception doesn’t clarify whether the
district attorney must make an individualized finding of probable cause. What the statute requires
is that the district attorney “determine[ ] . . . that probable cause of a bad check violation under
State penal law exists.” 15 U.S.C. § 1692p(2)(C)(iv). Here, the district attorneys decide in
advance that certain facts will categorically establish probable cause, and then a computer
program mechanically applies the district attorneys’ intake criteria to individual cases. That
approach can claim some support in existing state law: one California court declared that the
passing of a bad check coupled with the failure to pay upon the victim’s subsequent demand—

The plaintiffs’ motion to strike the declaration of former Los Angeles County District Attorney
Steve Cooley, Dkt. No. 320-2, is denied. Victim Services didn’t disclose Cooley as a witness in
its initial disclosures. Fed. R. Civ. P. 26(a)(1)(i). But Victim Services later identified Cooley in
its initial document production. See Dkt. No. 329-3. The plaintiffs had ample opportunity to
depose him if they wished, so Victim Services’ failure to comply with Rule 26 is “harmless.”
Fed. R. Civ. P. 37(c)(1); see Yeti by Molly, Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101, 1106–
07 (9th Cir. 2001).
4

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two existing linchpins of these diversion programs—established “manifest” probable cause of a
violation of California Penal Code § 476a. Morris v. Moore, 61 Cal. App. 314, 318–19 (1923);
see also Schwarm v. Craighead, 552 F. Supp. 2d 1056, 1078 (E.D. Cal. 2008) (“In fact, the
BCDA appears to presume that the probable cause determination will have been made before a
district attorney receives a bad check.”). On the other hand, probable cause determinations are
typically not made on a group basis, and the Supreme Court has “rejected rigid rules, bright-line
tests, and mechanistic inquiries in favor of a more flexible, all-things-considered approach” to
probable cause. Florida v. Harris, 568 U.S. 237, 244 (2013).
At the end of the day, while the parties raise several challenging issues relating to the
diversion program exception, what’s clear is that Victim Services must comply with the
FDCPA’s notice requirement to be exempt from the statute’s reach, and it did not do so during
the class period. Accordingly, Victim Services cannot avoid the FDCPA’s coverage by invoking
the diversion program exception.
B
Victim Services also seeks to take advantage of the FDCPA’s fiduciary exception. A
fiduciary that collects occasional debts in the course of its duties to its principal is not bound by
the Act’s provisions. Specifically, Congress excluded from the definition of “debt collector”
“any person collecting or attempting to collect any debt owed or due or asserted to be owed or
due another to the extent such activity . . . is incidental to a bona fide fiduciary obligation or a
bona fide escrow arrangement.” 15 U.S.C. § 1692a(6)(F)(i). This circuit’s lead case on the
fiduciary exception is Rowe v. Educational Credit Management Corp., 559 F.3d 1028 (9th Cir.
2009). There, the Ninth Circuit announced the two requirements for this exception, both of
which can be readily gleaned from the statute’s text: “First, the entity must have a ‘fiduciary
obligation.’ Second, the entity’s collection activity must be ‘incidental to’ its ‘fiduciary
obligation.’” Id. at 1032.
Victim Services’ invocation of this exception is based on the assertion that it has a
fiduciary duty to the district attorneys. But that’s the wrong inquiry. To qualify for the fiduciary

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exception, Victim Services would need to owe a fiduciary duty to the victims of the alleged
crime, because those are the people to whom the debt is allegedly “owed.” 15 U.S.C.
§ 1692a(6)(F)(i). See also Rowe, 559 F.3d at 1034 (explaining that section 1692a(6)(F)(i) is
concerned with fiduciaries that “collect a debt on behalf of the entity to whom the fiduciary
obligation is owed”). Like the neighboring exceptions in section 1692a(6)(F)(ii)–(iv) for those
who originate or obtain debts, the fiduciary exception serves to reinforce the FDCPA’s critical
distinction between first-party and third-party debt collection. See Henson v. Santander
Consumer USA Inc., 137 S. Ct. 1718, 1723–24 (2017). Only those fiduciaries that can step into
the shoes of the present debt owner can credibly claim not to be third-party debt collectors.
Whether Victim Services owes a fiduciary obligation to some third party (like a district attorney)
is beside the point.
The case law underscores the novelty of Victim Services’ invocation of the fiduciary
exception. No court has applied this provision absent a fiduciary relationship with the present
debt owner. In Rowe, for example, the guaranty agency owed a fiduciary obligation to and
collected debts on behalf of the Department of Education. See 559 F.3d at 1033. Several cases
involved a property management company collecting fees on behalf of its principal, the
homeowner association. See, e.g., Harris v. Liberty Community Management, Inc., 702 F.3d
1298, 1302 (11th Cir. 2012); Berndt v. Fairfield Resorts, Inc., 339 F. Supp. 2d 1064, 1068 (W.D.
Wis. 2004). In addition, courts have recognized the potential application of
section 1692a(6)(F)(i) to the activities of a member on behalf of a member-managed limited
liability company, see Jones v. Baugher, 689 F. Supp. 2d 825, 832 n.17 (W.D. Va. 2010), and a
bail-bond company that originated the debt and retained collateral security, see Buckman v.
American Bankers Insurance Co. of Florida, 924 F. Supp. 1156, 1158 (S.D. Fla. 1996).
The legal fiction ratified by section 1692p—that Victim Services collects debts on behalf
of victims of bad-check offenses—defeats the application of section 1692a(6)(F)(i) to the
arrangement in these diversion programs. From the FDCPA’s perspective, the district attorney
(the beneficiary of the alleged fiduciary obligation) is a third-party debt collector too, albeit one

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shielded by the separate government-actor exception in section 1692a(6)(C).5 It would be truly
strange if Victim Services could escape the Act by dint of owing a fiduciary obligation to another
third-party debt collector.
What’s more, even if the correct inquiry were whether Victim Services is a fiduciary of
the district attorneys, the answer would likely be “no.” To be sure, Victim Services acts “as an
agent of the government, assisting the government in the exercise of its police power.”
Breazeale, 198 F. Supp. 3d at 1077 n.2. Yet not all agents are fiduciaries. What distinguishes a
fiduciary from a run-of-the-mill agent is the fiduciary’s duty of “utmost good faith, trust,
confidence, and candor” to the principal. Rowe, 559 F.3d at 1033. On that point, another court in
this district has already determined that the private entity’s obligations under the Bad Check
Diversion Act are solely contractual—in other words, not grounded in a fiduciary’s duty to
safeguard its principal’s best interests. See Del Campo v. Mealing, 2013 WL 4764975, at *6
(N.D. Cal. Sept. 5, 2013).6
Topping it off, Victim Services does not appear to satisfy the second requirement for the
fiduciary exception. The Ninth Circuit has held that collection activity is “incidental” only if it is
not “central” to the fiduciary obligation. Rowe, 559 F.3d at 1034. Here, Victim Services’
collection of restitution seems central—and therefore not incidental—to the administration of the
bad-check diversion program. The alleged fiduciary obligation to the district attorney kicks in
only after a merchant has forwarded a bad check to Victim Services “to act as a collection
agent.” Id. at 1035. That fact distinguishes this case from, say, the property manager whose
ongoing maintenance responsibilities involve the periodic collection of assessments. See Harris,
5

As explained in footnote 2, this exception does not apply to a private contractor like Victim
Services.
6
Another difficult question—which need not be answered in this case—is whether
section 1692a(6)(F)(i) prescribes a uniform federal definition for fiduciaries or instead
incorporates the law under which the fiduciary relationship arises. See Skilling v. United States,
561 U.S. 358, 417–18 (2010) (Scalia, J., concurring in part and concurring in the judgment)
(discussing the potential sources of a fiduciary duty for honest-services fraud). Recently, the
Ninth Circuit suggested in passing that courts should look to state law when the alleged fiduciary
relationship is a creature of state law. Vien-Phuong Thi Ho v. ReconTrust Co., NA, 858 F.3d 568,
575 n.9 (9th Cir. 2017).

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702 F.3d at 1302. Moreover, Victim Services targeted merchants with promotional materials that
tout the availability of restitution and contrast the diversion program’s costs with third-party debt
collection. See Payliance Program Overview 3–9, Dkt. No. 315-13. Victim Services also
emphasized restitution to counties. See Glenn County Startup Packet 979, Dkt. No. 315-9.
Victim Services’ only response is that the diversion program’s financial responsibility
classes are the central component of the services provided to the district attorney. But it’s far
from clear that a fiduciary obligation can have only one central feature. Cf. 8 U.S.C.
§ 1158(b)(1)(B)(i) (requiring asylum applicants to prove that a protected characteristic was “at
least one central reason for persecuting the applicant”). And even if Rowe called for an inquiry
into the most important aspect of the fiduciary relationship, the district attorneys appear to
prioritize the recovery of restitution over completion of the class. Some counties specified that
“no bad check writer will be allowed to attend a bad check diversion class until all restitution,
class, and administrative fees have been paid in full.” E.g., Los Angeles County Contract Ex. A,
§ 7.8.2, Dkt. No. 320-6. Other counties gave the distribution of restitution priority over other
program fees and the class on financial responsibility. See, e.g., San Bernardino County Contract
§ V.H.1, Dkt. No. 323-6.
IV
Because Victim Services must be considered a “debt collector” within the meaning of the
FDCPA, the next question is whether it has violated the statute in its administration of the badcheck diversion programs. The plaintiffs assert two violations. First, they contend that the form
letter sent by Victim Services to suspected bad checkwriters is false and misleading. Second,
they contend that Victim Services collects fees not authorized by law. On the first issue, Victim
Services is entitled to summary judgment. But the current record does not permit summary
judgment for either side on the second issue.7
7

As mentioned earlier, Victim Services is the primary defendant in this case, but it is just one of
several related defendants. The parties dispute whether those other defendants should be
considered debt collectors. However, that question matters only if there was a violation of the
FDCPA. Because the plaintiffs have not yet been able to create a genuine issue of material fact

15

A
The FDCPA forbids debt collectors to “use any false, deceptive, or misleading
representation or means in connection with the collection of any debt.” 15 U.S.C. § 1692e. To
give content to that general prohibition, the Act provides 16 illustrative examples of false or
misleading conduct, several of which are relevant to this case.
Whether conduct is false or misleading within the meaning of the FDCPA is an objective
inquiry that the Ninth Circuit treats as an issue of law. See Gonzales v. Arrow Financial Services,
LLC, 660 F.3d 1055, 1061 (9th Cir. 2011). Misrepresentations are actionable only if they are
“material.” Donohue v. Quick Collect, Inc., 592 F.3d 1027, 1033 (9th Cir. 2010). A material
misrepresentation is one that could “cause the least sophisticated debtor to suffer a disadvantage
in charting a course of action in response to the collection effort.” Tourgeman v. Collins
Financial Services, Inc., 755 F.3d 1109, 1121 (9th Cir. 2014).
1
The plaintiffs first attack the demand letter that Victim Services sent to suspects. An
exemplar of the letters sent during the class period is attached to this ruling as Appendix A. The
plaintiffs’ biggest complaint about the letter is that it creates the misimpression—through the use
of district attorney letterhead and the district attorney’s signature—that it was sent directly by a
district attorney rather than by a private company. But that impression is not misleading in the
context of a program under the Bad Check Diversion Act. The district attorney establishes the
diversion program “within his or her office.” Cal. Penal Code § 1001.60. And when the district
attorney has hired a private entity to administer the program, the private entity acts “as an agent
of the government in the exercise of the government’s criminal law enforcement power.”
Breazeale, 198 F. Supp. 3d at 1076–77. There’s nothing misleading or otherwise legally
inappropriate about an agent, with the principal’s authorization, sending out a letter under the
principal’s name, inviting the suspect to participate in the principal’s program.
on that question, there is no need at this point to consider whether the other defendants are debt
collectors.

16

In Sheriff v. Gillie, 136 S. Ct. 1594 (2016), the Supreme Court reached the same
conclusion on fairly similar facts. That case involved the Ohio Attorney General’s use of
independent contractors—referred to as “special counsel”—to collect debts owed to the State of
Ohio. Id. at 1597. Special counsel communicated with debtors on the Attorney General’s
letterhead, a practice that was challenged as false and misleading under section 1692e. See id. at
1599–1600. The Court rejected that claim because “use of the letterhead accurately conveys that
special counsel, in seeking to collect debts owed to the State, do so on behalf of, and as
instructed by, the Attorney General.” Id. at 1598. Stated differently, the use of the letterhead
reveals “on whose authority special counsel writes to the debtor” and truthfully represents the
special counsel’s “institutional affiliation.” Id. at 1601–02. The FDCPA, “sensibly read,” did not
“require special counsel to obscure that reality.” Id. at 1603.
So too here. The “use of the letterhead accurately conveys” that Victim Services collects
restitution on behalf of, and “as instructed by,” the district attorneys. Id. at 1598. It’s true, as the
plaintiffs point out, that the letter at issue in Sheriff included the independent contractor’s contact
information and a “conspicuous notation that the letter is sent by a debt collector.” Id. at 1601.
Victim Services, by contrast, disclosed only that “[t]he Check Restitution Recovery Program is
administered by a private entity under contract with the [county’s] District Attorney.” Form
Letter at 1. But the Supreme Court did not hinge its analysis on the inclusion of the private
entity’s contact information, and the difference between the two disclosures wouldn’t
disadvantage the least sophisticated debtor in charting a response to the letter. In fact, the use of
the letterhead encourages recipients, if they are unsure whether the district attorney approved the
communication, “to use official channels to ensure the legitimacy of the letters.” Sheriff, 136
S. Ct. at 1602.
Just as the use of the district attorneys’ letterhead did not violate the FDCPA’s general
prohibition against making false or misleading statements, neither did it violate any of the
statute’s specific prohibitions. Because the letters are effectively sent by the district attorneys
through their agents, they are not a “false representation or implication that any individual is an

17

attorney or that any communication is from an attorney.” 15 U.S.C. § 1692e(3). Similarly,
because it was authorized to use the district attorneys’ letterhead and send out the letters under
the name of the district attorneys, Victim Services did not “simulate[ ] . . . a document
authorized, issued, or approved by . . . any State,” or “create[ ] a false impression as to its source,
authorization, or approval.” § 1692e(9). Finally, Victim Services’ accurate statement of its
affiliation with the diversion program did not involve the “use of any business, company, or
organization name other than the true name of the debt collector’s business, company, or
organization.” § 1692e(14); see Sheriff, 136 S. Ct. at 1602.
2
The plaintiffs also paint the form letter’s references to the possibility of criminal
prosecution as false and misleading. The FDCPA forbids a debt collector to coerce a debtor into
repaying a debt with threats that the debt collector legally can’t or factually won’t carry out.
Victim Services, of course, does not itself possess the legal authority to initiate a prosecution, nor
is the district attorney likely to prosecute any given bad-check offense. But again, the plaintiffs’
argument appears to be grounded in the faulty assumption that Victim Services is acting as
something other than the lawful agent of the district attorneys. Once the letter is scrutinized with
a proper background understanding of the company’s role, it becomes clear that the letter’s
reference to the possibility of prosecution is not misleading.
Victim Services’ letter begins:
You have been accused of violating California Penal Code 476a,
entitled “Making or Delivering Check With Insufficient Funds”. A
conviction under this statement is punishable by up to one (1) year
in the county jail for checks up to $450, and county jail or state
prison for checks in excess of $450.
Form Letter at 1. The letter further explains that the bad-check diversion program is “a precharge program designed to allow people accused of having violated the above-referenced statute
to avoid the possibility of further action against the accused by the District Attorney’s Office.”
Id. If the recipient makes restitution and participates in the diversion program, “[the district
attorney’s] office will consider this matter resolved.” Id. The recipient is also told: “You have the

18

right to choose not to participate, and to contest this matter.” Id. at 2.
Victim Services did not mislead the letter’s recipient by informing her that she has been
accused of passing a bad check. Under the Bad Check Diversion Act, a check is referred to a
diversion program only when the victim makes this accusation. And the “statement of the
penalty for issuance of a bad check” is required by state law. Cal. Penal Code § 1001.63(d). The
plaintiffs highlight the potentially coercive effect of informing a debtor that a bad check can lead
to jail time. No doubt, the letter’s recipient might fear prosecution upon learning that passing a
bad check can carry criminal consequences. But to the extent the recipient is concerned about the
possibility of criminal charges down the line, the FDCPA “does not protect consumers from
fearing the actual consequences of their debts.” Sheriff, 136 S. Ct. at 1603.
The letter from Victim Services also notes the possibility of further action by the district
attorney and represents that the suspect can receive a non-prosecution agreement by participating
in the diversion program. The plaintiffs argue that these statements are misleading because
Victim Services referred to the district attorneys only 1.4 percent of those who failed to complete
every aspect of the diversion program—that is, make restitution, pay the specified fees, and
attend the class on financial responsibility. See Terrell Decl. ¶¶ 39–46, Dkt. No. 315. In the
plaintiffs’ view, any reference to the possibility of further action by the district attorney is
misleading due to the low rate of prosecution for this offense.
But the reference to the possibility of further action by the district attorney cannot
“reasonably be interpreted to imply that the debt collector will take action it has no intention or
ability to undertake.” Gonzales, 660 F.3d at 1063. Nor is the letter “calculated to intimidate the
least sophisticated debtor into believing that legal action against her is imminent.” Irwin v.
Mascott, 112 F. Supp. 2d 937, 951 (N.D. Cal. 2000). This is in contrast to a previous case in this
district, where a private entity operating a diversion program under the Bad Check Diversion Act
sent a letter that stated: “Due to your failure to complete the requirements of the District
Attorney’s Bad Check Restitution Program as specified in previous notices, we are now initiating
formal prosecution proceedings against you.” Del Campo v. American Corrective Counseling

19

Services, Inc., 718 F. Supp. 2d 1116, 1135 (N.D. Cal. 2010). The least sophisticated debtor (or
really any debtor) could be misled by that blustering threat, but a reference to the possibility of
future prosecution is not misleading in the same way.8
At bottom, the plaintiffs seem to assume that the administration of a restitution-based
diversion program is misleading unless the district attorneys prosecute a critical mass of those
who do not complete the diversion program. This position raises (to put it mildly) a serious
“federalism concern.” Sheriff, 136 S. Ct. at 1602. A use-it-or-lose-it interpretation of the FDCPA
would trammel the counties’ ability to experiment with diversion programs and might even
encourage the district attorneys to more aggressively prosecute bad-check offenses. The
plaintiffs’ interpretation isn’t necessarily better for debtors either. The diversion program is
voluntary, and suspects are always free to play the odds. Two of the plaintiffs in this case—
Solberg and Morin—took that route. But even if prosecutions are rare, some suspects will
rationally prefer the certainty of a non-prosecution agreement to the possibility (however remote)
of entanglement with the criminal justice system. See John Rappaport, Criminal Justice, Inc.,
118 Colum. L. Rev. 2251, 2281 (2018).9
In sum, the reference to the possibility of criminal prosecution does not violate the
FDCPA in the context of this case. Victim Services’ letter is neither false nor misleading in this
respect under the general prohibition of section 1692e. Likewise, its letter does not violate
8

It’s a bit strange in this context to focus on the least sophisticated debtor, as opposed to the
least sophisticated offender. A person’s aptitude in financial matters is only weakly related (if at
all) to the ability to navigate the criminal justice system—which is really the animating concern
behind the plaintiffs’ claims. Chalk this up as another example of the difficulty in applying a
federal debt collection statute to a law enforcement program.
9
A different analysis might have been required if the plaintiffs proposed a class of individuals
contacted by Victim Services even though the relevant district attorney’s prosecution criteria
excluded their bad checks. See Schwarm, 552 F. Supp. 2d at 1079. For example, some district
attorneys do not consider prosecuting checks under a certain face amount. See, e.g., Orange
County Prosecution Review Criteria, Dkt. No. 315-40. But the plaintiffs have not presented
evidence on this issue that would apply classwide. In any event, internal prosecution criteria are
a shaky foundation for regulating pre-charge diversion programs. The minimum-value threshold
might reflect the district attorney’s categorical exercise of discretion under California Penal Code
section 1001.62 to refer those checks to the diversion program. If the diversion program can’t be
used for checks outside the prosecution criteria, it is easy to imagine that district attorneys will
expand their prosecution criteria.

20

section 1692e’s specific prohibitions against “representation[s] or implication[s] that
nonpayment of any debt will result in the arrest or imprisonment of any person . . . unless such
action is lawful and the debt collector or creditor intends to take such action”; and against
“threat[s] to take any action that cannot legally be taken or that is not intended to be taken.” 15
U.S.C. § 1692e(4), (5).
3
The plaintiffs also argue that Victim Services did not include two necessary disclosures
in its form letter. Congress was concerned that debt collectors would adopt the pretense of some
other line of work to trick debtors into divulging information. The FDCPA therefore requires
debt collectors “to disclose in the initial written communication . . . that the debt collector is
attempting to collect a debt and that any information obtained will be used for that purpose.” 15
U.S.C. § 1692e(11). Congress also created a process by which a putative debtor could confirm
the existence of the debt before paying up. Under that provision, debt collectors must disclose
that “if the consumer notifies the debt collector in writing within the thirty-day period that the
debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt . . .
against the consumer.” § 1692g(a)(4).
While these two provisions do not map onto a diversion program in any obvious way
(which again highlights the problems with applying the FDCPA to criminal justice diversion
programs), the FDCPA eschews “a hypertechnical approach.” Davis v. Hollins Law, 832 F.3d
962, 967 (9th Cir. 2016). And here it is “possible to resolve these conflicts without great harm to
either the Act or state [diversion] schemes.” Obduskey v. McCarthy & Holthus LLP, 139 S. Ct.
1029, 1037 (2019).
Under the first provision, the debt collector must reveal that its goal is to collect a debt, as
opposed to some other purpose more likely to elicit information from the debtor. The recovery of
restitution for a bad-check offense is considered debt collection under the FDCPA, and Victim
Services encouraged the recipient to promptly communicate for the purpose of paying that debt.
See Form Letter at 1. Therefore, Victim Services’ letter does not materially vary from the

21

disclosure required by section 1692e(11). See Davis, 832 F.3d at 967.
The second provision establishes a process for the debtor to verify a debt, which in this
context means that the diversion program must confirm the basis for restitution. Cal. Penal Code
§§ 1001.60, 1001.64. Victim Services’ letter states that the dispute-resolution procedure entails
review “based on criteria established by the” district attorney—in other words, verification that
probable cause authorizes the diversion program to collect restitution. Form Letter at 2. This
disclosure satisfies section 1692g(a)(4).
B
Other than complaining that the letter is misleading, the plaintiffs focus on Victim
Services’ collection of administrative fees. The Act contains a general prohibition on “unfair or
unconscionable means to collect or attempt to collect any debt.” 15 U.S.C. § 1692f. More
specifically, the Act is violated by the “collection of any amount (including any interest, fee,
charge, or expense incidental to the principal obligation) unless such amount is expressly
authorized by the agreement creating the debt or permitted by law.” § 1692f(1) (emphasis
added). The plaintiffs contend that Victim Services collected fees not permitted by California
law—namely, up to $185 for the financial responsibility class, a $10 credit/debit card fee, a $25
class rescheduling fee, and a $10 late fee. For ease of reference, this ruling refers to these charges
as the “class fees.”
California’s Bad Check Diversion Act explicitly permits the diversion programs to
charge certain fees, but it does not mention the class fees. In addition to the recovery of
restitution, the Act authorizes the district attorney to collect a “processing fee” not to exceed $50
and a “bank charge” not to exceed $15. Cal. Penal Code § 1001.65(a), (c). The Act also
authorizes the court to “require a defendant to participate in and successfully complete a check
writing education class” as a condition of probation following a conviction. § 1001.65(b). To
impose this condition, the court must “make inquiry into the financial condition of the defendant
and, upon a finding that the defendant is able in whole or part to pay the expense of the education
class, the court may order him or her to pay for all or part of that expense.” § 1001.65(b).

22

The plaintiffs contend that the Bad Check Diversion Act, by expressly authorizing certain
fees, should be interpreted to prohibit all other fees not mentioned. This interpretation rests on a
negative inference that lawyers dress up with the Latin maxim expressio unius est exclusio
alterius, which—as a note of caution—“applies only when circumstances support a sensible
inference that the term left out is meant to be excluded.” NLRB v. SW General, Inc., 137 S. Ct.
929, 940 (2017) (internal quotation marks and alteration omitted). The plaintiffs also note that
the Act interposes a judicial determination of the defendant’s financial need to protect those who
cannot afford post-conviction classes, and they contend that collecting class fees from those
same individuals in the pre-charge context would circumvent this safeguard.
Whatever sway these arguments might typically hold, state law forecloses the plaintiffs’
interpretation of the Bad Check Diversion Act. The California Legislature has announced its
“intent” that these “provision[s] of law not be construed to preempt other current or future
pretrial or precomplaint diversion programs.” Cal. Penal Code § 1001. In California, as
elsewhere, “the words of a statute” are “the most reliable indicator of legislative intent.”
Tuolumne Jobs & Small Business Alliance v. Superior Court, 59 Cal. 4th 1029, 1037 (2014).
Canons like expressio unius that resolve ambiguity by reference to presumed legislative intent
cannot override an “anti-preemption provision” like section 1001 that embodies express
legislative intent on the issue. Bank of America v. City & County of San Francisco, 309 F.3d 551,
565 (9th Cir. 2002); cf. Puerto Rico v. Franklin California Tax-Free Trust, 136 S. Ct. 1938, 1946
(2016) (explaining that the presumption against preemption does not apply to the interpretation
of an express preemption clause). So while the Bad Check Diversion Act contemplates the
collection of specified fees, it leaves the door open for unspecified fees adopted in a manner
consistent with state law.
The fees’ legality therefore turns on background principles of California law. On this
front, the plaintiffs contend that fees are actually “taxes” prohibited by state law absent approval
by two-thirds of the respective local government’s electorate. Cal. Const. art. XIII.C, § 2(d).
Victim Services, by contrast, argues that they are not taxes but “user fees.” Under the California

23

Constitution, a user fee is defined as a “charge imposed for a specific government service or
product provided directly to the payor that is not provided to those not charged, and which does
not exceed the reasonable costs to the local government of providing the service or product.”
Cal. Const. art. XIII.C, § 1(e)(2). Whether the class fees are impermissible taxes or permissible
user fees depends on two issues not yet adequately briefed or reflected in the summary judgment
record.
The first issue is whether the class fees are reasonably proportionate to the services
provided by Victim Services. See Isaac v. City of Los Angeles, 66 Cal. App. 4th 586, 597 (1998).
The plaintiffs have thus far focused on whether Victim Services profited by charging more than
its average cost of processing payments or providing financial responsibility classes. But state
law asks a different question: Did the counties profit from the user fees? The California
Constitution prohibits local governments from raising revenue through the provision of optional
services; money that compensates a private party for providing that optional service does not fill
the local government’s coffers. So the compensation offered to Victim Services to administer the
diversion program could theoretically be a “reasonable cost of providing the service or activity
for which the fee is charged.” City of Dublin v. County of Alameda, 14 Cal. App. 4th 264, 281
(1993). Put another way, the money retained by Victim Services is a cost borne by the counties,
not excess revenue extracted by the counties. See California Building Industry Association v.
State Water Resources Control Board, 4 Cal. 5th 1032, 1051 (2018). If the amounts paid by the
counties to Victim Services for the class fees are “excessive and disproportionate” (and therefore
if the amounts collected from participants are excessive and disproportionate), they are in fact
unlawful taxes. Monterey Peninsula Water Management District v. Public Utilities Commission,
62 Cal. 4th 693, 702 (2016). The plaintiffs will have the opportunity, if they wish, to conduct the
proper inquiry about the legality of the fees and supplement the record.
Another issue is whether the counties complied with the state-law procedural hurdles for
imposing user fees. The briefing and record are incomplete on this issue as well. For starters, the
California Government Code seems to set out multiple procedures for authorizing user fees. If

24

the class fees are under one chapter of the Government Code, they “shall be adopted by
ordinance,” and the county board of supervisors “shall make a finding” that the “fee charged is
based on the cost or value of the services rendered.” Cal. Gov’t Code § 25336(d). Yet the Code
also states that “[t]he procedures, pursuant to this chapter, are alternative to any other procedure
provided by law with respect to the establishment of fees or charges” and “may be used by a
county notwithstanding any other provision of law and without complying with any other
provisions in conflict therewith.” § 25337. And another chapter provides that the county board of
supervisors may “by resolution or ordinance” establish user fees, “provided that they are not
property-related fees and charges.” § 25215.4(a). The interaction of these provisions is far from
clear, and the parties have not discussed it. Nor have the parties submitted evidence about
whether the counties have complied with whatever procedures are required.
To sum up, the open questions that prevent summary judgment of the claim that Victim
Services violated the FDCPA by charging fees not authorized by law are: (1) whether, as a
substantive matter, the user fees represent a reasonable cost to the counties (not to Victim
Services) of operating the bad-check diversion programs; (2) what procedures potentially apply
to the counties’ authorization of user fees; (3) whether those procedures are inclusive or
exclusive of others; and (4) whether each county authorized the user fees through at least one
appropriate procedural mechanism. Therefore, the cross-motions for summary judgment on the
lawfulness of the fees are denied. Denial is without prejudice to filing renewed summary
judgment motions if the parties determine that no genuine factual disputes exist on this
question.10
V
Although the plaintiffs focus primarily on their claims under the federal Fair Debt
Collection Practices Act, they also bring state-law claims for violation of California’s Unfair
Competition Law and for fraudulent and negligent misrepresentation.
Again, to the extent this issue is not amenable to resolution on a statewide basis, the Court’s
prior class certification ruling might need to be revisited.
10

25

1
The UCL prohibits unfair competition, which is defined as “any unlawful, unfair or
fraudulent business act or practice.” Cal. Bus. & Prof. Code § 17200. This provision has been
interpreted to create separate causes of action for unlawful, unfair, and fraudulent practices; the
plaintiffs raise claims under each prong. Although Victim Services performs a law enforcement
function for the counties, the diversion program is still subject to the UCL. The California
Supreme Court has excluded governmental entities from these provisions, but private entities
that contract with the government are bound to refrain from unfair competition. See Wells v.
One2One Learning Foundation, 39 Cal. 4th 1164, 1203–04 (2006).
Largely for the same reasons that the letter is not misleading under the FDCPA, Victim
Services’ business practices are not fraudulent. See Section IV.A. The plaintiffs cannot
demonstrate that “members of the public are likely to be deceived” if the least sophisticated
debtor would not be materially misled by the form letter. In re Tobacco II Cases, 46 Cal. 4th
298, 312 (2009) (internal quotation marks omitted). And even under the more expansive
definition of unfairness, the administration of these bad-check diversion programs is not unfair.
Victim Services’ activities implement the policy goals pursued by the California Legislature
through the Bad Check Diversion Act, so its non-misleading business practices do not “offend[ ]
an established public policy.” South Bay Chevrolet v. General Motors Acceptance Corp., 72
Cal. App. 4th 861, 886–87 (1999); see Hodsdon v. Mars, Inc., 891 F.3d 857, 865–66 (9th Cir.
2018). If district attorneys are giving too much discretion to or failing to adequately supervise
Victim Services, that is a failing of the district attorneys, who have not been named as defendants
in this case.
The unlawful prong of the UCL provides a cause of action to enforce violations of other
laws, including the FDCPA. Randall v. Ditech Financial, LLC, 23 Cal. App. 5th 804, 811–12
(2018). Insofar as it relies on the FDCPA, the UCL claim could succeed only on the collection of
the class fees, an issue that cannot be decided on this record. See Section IV.B. Thus, neither
party is entitled to summary judgment on this claim. But for reasons already stated, the plaintiffs

26

cannot premise this claim on the requirement of probable-cause determination or the five-factor
referral criteria, both of which are directed only to the district attorneys. See Cal. Penal Code
§§ 1001.60, 1001.62. Not only does the language of statute undercut the plaintiffs’ claim, but if
the obligations of the district attorneys were considered part of Victim Services’ business
practices, the UCL could interfere with the district attorneys’ “sovereign functions.” Wells, 39
Cal. 4th at 1204.
2
With respect to the plaintiffs’ claim that Victim Services fraudulently and negligently
misrepresented that they had been accused of a crime and had to participate in the diversion
program to avoid prosecution, no reasonable jury could find (at least) one element shared by both
claims: a material misrepresentation by Victim Services. A claim for fraudulent
misrepresentation requires that “the defendant represented to the plaintiff that an important fact
was true” and that the “representation was false.” Graham v. Bank of America, N.A., 226
Cal. App. 4th 594, 605 (2014). Likewise, a claim for negligent misrepresentation requires “the
misrepresentation of a past or existing material fact.” Tindell v. Murphy, 22 Cal. App. 5th 1239,
1252 (2018). As already explained, the letters did not falsely represent Victim Services’
authority or the material aspects of the diversion program. Summary judgment is therefore
granted to Victim Services on these two claims. The plaintiffs’ motion to amend the class
definition to include these claims is denied.
VI
A further case management conference is scheduled for Wednesday, December 11, 2019,
at 10:00 a.m. in San Francisco, Courtroom 4, 17th Floor, to map out a plan for adjudicating the
plaintiffs’ remaining claims. A joint case management statement is due by December 4, 2019.
IT IS SO ORDERED.
Dated: November 20, 2019
______________________________________
VINCE CHHABRIA
United States District Judge

27

Appendix A

Bob Lee
District Attorney

Santa Cruz County District Attorney
Check Restitution Recovery Program

PO Box 8523
Santa Cruz CA 95061 8523

1 1111 111111111111 I II I I IIIIIII I IIII III
08MF730

OFFICIAL NOTICE - IMMEDIATE ATTENTION REQUIRED
"' DIV 0409DUP BLU 001
3000000015 01 0000 0000 8/1

Office Hours: 9:00 a.m. - 5:00 p.m.
Phone: [phone]
Date of Notice: 04/09/2014
Case #: 42684586
Balance Due: $255.01
Page: 1

111ll1111111 •111111l11 •111111l11111111lll111111111lll11l111111111
JUDITH MARISCAL
LAKE BLVD
FELTON CA 95018

You have been accused of violating California Penal Code 476a, entitled "Making or Delivering Check With Insufficient Funds". A conviction
under this statute is punishable by up to one (1) year in the county jail for checks up to $450, and county jail or state prison for checks in
excess of $450. See page 5 for details on the party(s) initiating this allegation.
My office has established a Check Restitution Recovery Program. The Check Restitution Recovery Program is authorized by the California
legislature, and is a pre-charge program designed to allow people accused of having violated the above-referenced statute to avoid the
possibility of further action against the accused by the District Attorney's Office. Participation in the Check Restitution Recovery Program is
voluntary. The Check Restitution Recovery Program has two steps:
1. Pay all restitution on all reported checks, plus any administrative, returned item, and program fees.
2. Attend a Financial Accountability class.
Santa Cruz County District Attorney Check Restitution Recovery Program

TOTAL BALANCE DUE: $255.01

You have the right to dispute this matter, as set forth on page 2 of this notice. In order to participate in the Check Restitution Recovery Program
you must pay in full and schedule class within THIRTY (30) DAYS from the date of this Notice.

PLEASE CALL {855)211-0581 or visit www.checkprogram.com TO
MAKE PAYMENT/SCHEDULE CLASS

Please have your case number ready: 42684586 and Password: 39885223
PAYMENTS ACCEPTED: CREDIT & DEBIT CARDS, WESTERN UNION, MONEY ORDERS, OR CASHIER'S CHECK
If you choose to participate in the Check Restitution Recovery Program, and if you successfully complete the program's two steps outlined
above, my office will consider this matter resolved. The Check Restitution Recovery Program is administered by a private entity under contract
with the Santa Cruz County District Attorney.
For additional information or if you believe you received this Notice in error, please see the reverse side.

Sincerely,

Bob Lee
District Attorney

See reverse side-+

This notice has been printed and mailed on behalf of my office by a third party
administrator of the Check Restitution Recovery Program at no cost to the tax12_a1.er.

Dl:F 114532

[8/1]

04/09/2014

Doc FirstNotcCA

K1 0XVI I