In Hunt v. Imperial Merchant Services, the Ninth Circuit goes the extra mile to address class notice cost-shifting

Ninth Circuit Seal“We have never addressed when it is appropriate to place notice costs on a class action defendant,” said the Ninth Circuit on March 31, 2009, in Hunt v. Imperial Merchant Services. When an appellate court says that, you are almost guaranteed to get an answer to that question (unless the appellate court takes that opportunity to mention that it isn’t going to answer that question because it doesn’t have to reach the question to resolve the appeal). In this instance, you are in luck. Hunt provides something of an answer to that question.

The “holding” is summarized in the final paragraph of the opinion:

District courts may order a class action defendant to pay the cost of class notification after they determine that the defendant is liable on the merits. They may in an appropriate case shift these notice costs even when the liability decision is under appeal. Here, considering the totality of circumstances, we conclude that the district court did not abuse its discretion by placing the cost of class notification on IMS.

(Opinion, at p. 3895.) From this paragraph, we already know that trouble is afoot. We know that merits were decided, in some fashion, against the defendant, and that decision is on appeal. One could also infer, rightly in this case, that the opinion doesn’t resolve the liability appeal. So we have a notice cost shifting order resolved on an appeal before the underlying liability decision is resolved. The truth, as is often the case in litigation, is even worse than that:

This appeal reaches us in unusual procedural circumstances [author’s note: “uh oh”] that have resulted in two active appeals assigned to different panels of our circuit. Brandy Hunt and Brian Castillo (collectively “Hunt”) filed a class action complaint against IMS, alleging that it violated the FDCPA by attempting to collect both an interest charge and a statutory service charge on dishonored checks. The district court concluded that whether IMS violated the FDCPA turned on whether California law permits a debt collector to demand both a statutory service charge and interest in addition to the debt amount. Hunt v. Check Recovery Sys., Inc., 478 F. Supp. 2d 1157, 1161 (N.D. Cal. 2007). The district court granted Hunt partial summary judgment on liability in March 2007, concluding that IMS’ collection efforts violated California law and thus the FDCPA. In a separate order filed the same day, the district court certified two subclasses under Federal Rules of Civil Procedure (“Rule”) 23(b)(2) and 23(b)(3), with Hunt and Castillo as named plaintiffs.

(Opinion, at p. 3885.) But wait, there’s more:

The class action was not the first time Brandy Hunt had pursued her FDCPA claim against IMS. Hunt had declared bankruptcy before filing her class action complaint, and the bankruptcy court determined that IMS could not collect both an interest charge and a statutory service charge from Hunt under California law. IMS appealed the bankruptcy court’s decision to the district court, and the appeal was assigned to the same district judge responsible for the consolidated class action cases. The district court affirmed the bankruptcy court’s decision, incorporating its March 2007 partial summary judgment order in this class action case as the basis for affirming. IMS appealed the district court’s judgment affirming the bankruptcy court, and the appeal was assigned to a different panel of our circuit as case number 07-15976 (the “merits appeal”). On May 12, 2008, the other panel certified to the California Supreme Court the question whether a debt collector recovering on a dishonored check may impose both a service charge and prejudgment interest under California law. Imperial Merchant Servs., Inc. v. Hunt, 528 F.3d 1129, 1130 (9th Cir. 2008).

The California Supreme Court granted certification in July 2008, but has not yet issued its decision, and so the merits appeal is still active. The class action case has been stayed since June 2008, pending resolution of both this appeal and the merits appeal.

(Opinion, at p. 3886-7.) Amazing. You can decide for yourself whether you think that this is amazing “good” or amazing “bad”. If you are curious about the cost-shifting analysis, it is but a smidgeon of the opinion. Before the Court ever reaches that issue, it has to decide whether it can hear the appeal, what standard of review applies, whether the appeal is moot, whether it is “anticipatorily moot,” and whether the Court will hear the matter regardless. The Court decides to hear the issue because it is an “issue that often arises in district courts but typically evades appellate review.”