Hunt v. Imperial Merchant ( 2009 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
BRANDY HUNT, on behalf of herself 
and others similarly situated;
BRIAN CASTILLO,
No. 07-16418
Plaintiffs-Appellees,
v.  D.C. No.
CV-05-04993-MJJ
IMPERIAL MERCHANT SERVICES, INC.,
OPINION
dba Check Recovery Systems,
Inc.,
Defendant-Appellant.

Appeal from the United States District Court
for the Northern District of California
Martin J. Jenkins, District Judge, Presiding
Argued and Submitted
February 13, 2009—San Francisco, California
Filed March 31, 2009
Before: William C. Canby, Jr., Ronald M. Gould, and
Jay S. Bybee, Circuit Judges.
Opinion by Judge Gould
3881
3884 HUNT v. IMPERIAL MERCHANT SERVICES
COUNSEL
Paul S. Arons, Law Office of Paul Arons, Friday Harbor,
Washington, and O. Randolph Bragg, Horowitz, Horowitz &
Associates, Chicago, Illinois, for the plaintiffs-appellees.
Clark Garen, Law Offices of Clark Garen, Palm Springs, Cali-
fornia, for the defendant-appellant.
OPINION
GOULD, Circuit Judge:
Class action defendant Imperial Merchant Services, Inc.
(“IMS”) appeals the district court’s interlocutory order requir-
ing it to pay the costs of notifying the plaintiff class. The class
HUNT v. IMPERIAL MERCHANT SERVICES 3885
action alleges that IMS’ debt collection practices violated the
Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq.
The district court certified a plaintiff class, granted partial
summary judgment for the plaintiffs on their Fair Debt Col-
lection Practices Act (“FDCPA”) claim, and then ordered
IMS to pay the costs of notifying class members because the
summary judgment order established that IMS was liable on
the merits. We have jurisdiction to review the notice cost
order under the collateral order doctrine of 28 U.S.C. § 1291.
We affirm the order and hold that a district court has the dis-
cretion to require a class action defendant to pay the costs of
class notification when the court has already determined that
the defendant is liable on the merits.
I
This appeal reaches us in unusual procedural circumstances
that have resulted in two active appeals assigned to different
panels of our circuit. Brandy Hunt and Brian Castillo (collec-
tively “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 dis-
honored 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 Cas-
tillo as named plaintiffs.
On August 1, 2007, the district court ordered IMS to pay
the cost of mailing notice to the Rule 23(b)(3) subclass mem-
bers. The district court’s decision relied on its partial sum-
3886 HUNT v. IMPERIAL MERCHANT SERVICES
mary judgment order that established IMS’ liability on the
merits. IMS timely appealed the order requiring it to pay
notice costs, though it devoted much of its briefing to argu-
ments that the class certification should be overturned.
The plaintiffs then at their own expense notified the class
members. The district court granted IMS’ motion for a stay of
its order requiring IMS to reimburse the named plaintiffs for
those notice costs. As a condition of the stay, IMS was
required to post a $9,000 bond representing the costs of noti-
fying the class. The stay is in effect for the duration of this
appeal.
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 sum-
mary judgment order in this class action case as the basis for
affirming. IMS appealed the district court’s judgment affirm-
ing the bankruptcy court, and the appeal was assigned to a dif-
ferent 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
HUNT v. IMPERIAL MERCHANT SERVICES 3887
since June 2008, pending resolution of both this appeal and
the merits appeal.
II
We review de novo whether a district court has authority to
issue an order and review for an abuse of discretion the dis-
trict court’s exercise of that authority. See, e.g., Idaho Water-
sheds Project v. Hahn, 307 F.3d 815, 823 (9th Cir. 2002) (“A
district court’s authority to grant an injunction is reviewed de
novo, but the court’s exercise of that power is reviewed for an
abuse of discretion.”); United States ex rel. Newsham v. Lock-
heed Missiles & Space Co., Inc., 190 F.3d 963, 968 (9th Cir.
1999) (“The district court’s denial of costs is reviewed for an
abuse of discretion. Whether the district court has the author-
ity to award costs, however, is a question of law reviewed de
novo.”) (citation omitted). We agree with the parties that de
novo review is appropriate to the extent that IMS challenges
the district court’s legal power to impose class notice costs on
a defendant when the district court’s separate judgment on lia-
bility forms the basis for that decision and is still under appel-
late review. If we conclude that the district court has this
authority, then we will review for abuse of discretion its deci-
sion to shift class notice costs. See Oppenheimer Fund, Inc.
v. Sanders, 437 U.S. 340, 359 (1978) (reversing an order
shifting class notice costs because “the District Court abused
its discretion in requiring petitioners to bear the expense of
identifying class members”).
III
A
IMS asks us to overturn the district court’s class certifica-
tion and notice cost orders, while Hunt contends that we lack
jurisdiction to review either order. We review questions of our
own jurisdiction de novo. Sandoval-Lua v. Gonzales, 499 F.3d
1121, 1126 (9th Cir. 2007). We conclude that we lack juris-
3888 HUNT v. IMPERIAL MERCHANT SERVICES
diction to review the class certification order but that we may
review the notice cost order.
[1] “Class certification orders generally are not immedi-
ately appealable.” Plata v. Davis, 329 F.3d 1101, 1106 (9th
Cir. 2003). We have discretion to permit interlocutory appeals
of class certification orders under Rule 23(f), but IMS con-
cedes it has not met the Rule’s procedural requirements.
Instead, IMS contends, without citing precedent, that by issu-
ing the notice cost order the district court gave IMS a right to
appeal the class certification order because IMS must be able
to argue any issue that would establish that the notice cost
order was incorrect. We have occasionally permitted appeals
on class certification orders when they are “inextricably
bound up” with a class-wide injunction appealable under 28
U.S.C. § 1292(a)(1), even if the appellant did not comply with
Rule 23(f). See Bates v. United Parcel Serv., Inc., 465 F.3d
1069, 1075-76 & n.5 (9th Cir. 2006); Paige v. California, 102
F.3d 1035, 1039-40 (9th Cir. 1996). Here, however, IMS
attempts to piggyback its class certification appeal onto a
notice cost order affecting only the parties, not an injunction
affecting every class member. Cf. Cunningham v. Gates, 229
F.3d 1271, 1284 (9th Cir. 2000) (“We have consistently inter-
preted ‘inextricably intertwined’ very narrowly.”). We reject
IMS’ argument that a district court’s order shifting notice
costs creates appellate jurisdiction over its earlier class certifi-
cation order, and we conclude that we lack jurisdiction to
review IMS’ objections to class certification.
[2] In Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 171-72
(1974), the Supreme Court held that a district court’s order
imposing most of the class notice costs on the defendants was
immediately appealable under the collateral order doctrine.1
1
The collateral order doctrine states that an interlocutory order may be
appealed under 28 U.S.C. § 1291 if it “finally determine[s] claims of right
separable from, and collateral to, rights asserted in the action, too impor-
tant to be denied review and too independent of the cause itself to require
that appellate consideration be deferred until the whole case is adjudicat-
ed.” Englert v. MacDonell, 551 F.3d 1099, 1103 (9th Cir. 2009) (quoting
Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546 (1949)).
HUNT v. IMPERIAL MERCHANT SERVICES 3889
We see no meaningful distinction between this case and Eisen
for jurisdictional purposes and hold that the collateral order
doctrine gives us jurisdiction under 28 U.S.C. § 1291 to con-
sider an order placing class notice costs on a defendant. See
S. Ute Indian Tribe v. Amoco Prod. Co., 2 F.3d 1023, 1027-28
(10th Cir. 1993) (relying on Eisen to hold that jurisdiction
existed to review order requiring parties to split class notice
costs); In re Victor Techs. Sec. Litig., 792 F.2d 862, 863-64
(9th Cir. 1986) (relying in part on Eisen in holding that the
collateral order doctrine establishes appellate jurisdiction over
an interlocutory order requiring a class action plaintiff to
reimburse a third party for costs incurred during class notifi-
cation).
[3] Eisen does not end our jurisdictional inquiry. It is pos-
sible that the notice cost issue will become moot once the
merits appeal is decided. “The mootness doctrine asks the
basic question whether decision of a once living dispute con-
tinues to be justified by a sufficient prospect that the decision
will have an impact on the parties.” Flagstaff Med. Ctr., Inc.
v. Sullivan, 962 F.2d 879, 884 (9th Cir. 1992) (internal quota-
tion omitted). At oral argument both parties argued that this
case is not moot, “a factor that weighs in favor of our jurisdic-
tion because a party moving for dismissal on mootness
grounds bears a heavy burden.” Demery v. Arpaio, 378 F.3d
1020, 1025 (9th Cir. 2004) (internal quotation omitted)).
“Nonetheless, we have an independent duty to consider sua
sponte whether a case is moot, and we consider this issue de
novo.” Id. (internal citation omitted).
[4] IMS concedes that it must pay the class notice costs if
it loses the merits appeal. Conversely, Hunt likely would be
responsible for notice costs if the merits appeal is decided in
IMS’ favor, because the basis for the district court’s ruling
was that IMS was liable on the merits. Consequently, any
decision by the merits appeal might make this appeal moot
because presumably the parties would no longer dispute
3890 HUNT v. IMPERIAL MERCHANT SERVICES
which side should pay the notice costs.2 See Abdala v. INS,
488 F.3d 1061, 1063 (9th Cir. 2007) (stating that case can
become moot “[a]t any stage of the proceeding”); 13C
Charles Alan Wright et al., Federal Practice and Procedure
§ 3533.10 (3d ed. 1998) (citing “basic rule that a case must
remain alive throughout the course of appellate review”); but
see Gator.com Corp. v. L.L. Bean, Inc., 398 F.3d 1125, 1132
(9th Cir. 2005) (en banc) (“ ‘To abandon the case at an
advanced stage may prove more wasteful than frugal,’ and a
flexible application of the mootness doctrine may therefore be
appropriate.” (quoting Friends of the Earth, Inc. v. Laidlaw
Envtl. Servs., Inc., 528 U.S. 167, 191-92 (2000))).
[5] But even accepting that this appeal might become moot
once the merits appeal is decided, that has not yet happened.
We conclude that this appeal is not moot now and that we
may review the notice cost order. As a condition of the stay
on the notice cost order pending this appeal, IMS has posted
a supersedeas bond to the district court covering the notice
costs. Had we decided in IMS’ favor, then the district court
would have released the bond to IMS, which would reduce its
costs and exposure. On the other hand, our holding affirming
the district court ensures that Hunt will be reimbursed for the
notice costs that Hunt has already paid, an amount now
secured by the supersedeas bond. We conclude that there is a
“sufficient prospect that [our] decision will have an impact on
the parties” and decline to dismiss this appeal on mootness
grounds. Flagstaff Med. Ctr., 962 F.2d at 884.
[6] This appeal, while not moot in a classical sense, may be
characterized as being “anticipatorily moot” because an
impending decision in the merits appeal might eliminate the
2
Our reasoning does not imply that this case necessarily would become
moot if the merits appeal were already decided. There might still be juris-
diction under one of the “numerous exceptions to mootness” articulated by
the Supreme Court. Gator.com Corp. v. L.L. Bean, Inc., 398 F.3d 1125,
1141 (9th Cir. 2005) (en banc) (W. Fletcher, J., dissenting).
HUNT v. IMPERIAL MERCHANT SERVICES 3891
controversy between the parties. Perhaps some cases that are
“anticipatorily moot” might permissibly be dismissed under a
doctrine of “prudential mootness,” adopted by some of our
sister circuits, under which a court can dismiss an appeal not
technically moot if “circumstances [have] changed since the
beginning of litigation that forestall any occasion for mean-
ingful relief.” S. Utah Wilderness Alliance v. Smith, 110 F.3d
724, 727 (10th Cir. 1997); see also Chamber of Commerce v.
Dep’t of Energy, 627 F.2d 289, 291 (D.C. Cir. 1980) (“In
some circumstances, a controversy, not actually moot, is so
attenuated that considerations of prudence and comity for
coordinate branches of government counsel the court to stay
its hand, and to withhold relief it has the power to grant.”).
However, we are not required to dismiss a live controversy as
moot merely because it may become moot in the near future.
[7] Even if it is assumed that we have discretion to dismiss
this case as “anticipatorily moot,” we decline to do so because
this case gives us an opportunity to decide an issue that often
arises in district courts but typically evades appellate review.
So far as we are aware, no appellate court has addressed in a
published opinion whether a district court’s determination that
a class action defendant is liable on the merits entitles the dis-
trict court to shift notice costs to that defendant. This absence
of authority is not surprising. Because the losing party in a
class action typically is responsible for class notice costs,
there is no need for an appellate court reviewing a final merits
judgment also to review a notice cost order that is based on
a party’s liability. Even when a party is able to appeal an
interlocutory notice cost order that is based on a liability
determination, by the time the case is adjudicated the district
court may have calculated damages and issued a final judg-
ment, rendering the notice cost issue moot. Nonetheless, in
cases where liability is disputed on appeal or where there is
a considerable lag between the notice cost order and a final
judgment, the imposition of notice costs could be a significant
burden on a party, one it could not always recoup if it later
prevails on liability in its appeal. Here, IMS has argued that
3892 HUNT v. IMPERIAL MERCHANT SERVICES
it cannot afford to continue operations and pay the class
notice costs. There may also be cases where absent the shift-
ing of notice costs upon determination of summary judgment
liability, plaintiffs would have difficulty funding notice costs
if the class is extremely numerous. It is perhaps not an easy
question, but having considered all these circumstances we
hold that we may consider an interlocutory appeal of an order
shifting class notice costs, even if the issue may likely
become moot at some time in the near future. We therefore
proceed to assess the merits of the order shifting class notice
costs.
B
[8] “The usual rule is that a plaintiff must initially bear the
cost of notice to the class.” Eisen, 417 U.S. at 178. “[C]ourts
must not stray too far from the principle underlying [Eisen]
that the representative plaintiff should bear all costs relating
to the sending of notice because it is he who seeks to maintain
the suit as a class action.” Oppenheimer Fund, Inc. v. Sand-
ers, 437 U.S. 340, 359 (1978). However, occasionally “the
district court has some discretion” in allocating the cost of
complying with an order concerning class notification. Id. at
350.
[9] We have never addressed when it is appropriate to place
notice costs on a class action defendant. However, many dis-
trict courts have placed notice costs on the class action defen-
dant once the defendant’s liability has been established. See,
e.g., Macarz v. Transworld Sys., Inc., 201 F.R.D. 54, 58 (D.
Conn. 2001) (agreeing with the plaintiff that “because liability
has already been determined, defendant bears the cost of
notice to the class”); Six (6) Mexican Workers v. Ariz. Citrus
Growers, 641 F. Supp. 259, 264 (D. Ariz. 1986) (directing
defendants to pay notice costs in part because “liability of the
defendants will have already been established”); Catlett v.
Missouri Highway and Transp. Comm’n, 589 F. Supp. 949,
952 (D. Mo. 1984) (shifting notice costs “because the liability
HUNT v. IMPERIAL MERCHANT SERVICES 3893
of the [defendant] has been established”). These district court
decisions point us towards recognizing, as commentators have
suggested, a general principle that “interim litigation costs,
including class notice costs, may be shifted to defendant after
plaintiff’s showing of some success on the merits, whether by
preliminary injunction, partial summary judgment, or other
procedure.” 3 William B. Rubenstein, Alba Conte, and Her-
bert B. Newberg, Newberg on Class Actions § 8:6 (4th ed.
2007).
[10] IMS contends that the district court had no power to
shift notice costs because “final liability” on the underlying
merits action was still on appeal to this court. It argues that
the prior district court cases shifting notice costs are inappo-
site because in none of them did a district court shift notice
costs while liability was still contested on appeal. Even if
IMS’ interpretation of these cases is correct, we see no reason
to suspend a district court’s authority to shift notice costs
based on a liability determination until after the time period
for an appeal on liability has expired. Also, we have recog-
nized a district court’s power to shift interim costs to a defen-
dant in the attorney fee context, even when the defendant
might later prevail on the underlying merits question and be
entitled to reimbursement. See Rosenfeld v. United States, 859
F.2d 717, 720 (9th Cir. 1988) (holding that interim attorney
fee award was unreviewable even though “upon completion
of the district court proceedings, the government could
recover the interim fees it paid out if it successfully appealed
the [merits issue], which formed the limited basis of the
interim fee award”).
[11] IMS concedes that district courts may award interim
attorney fees but argues that these cases are distinguishable
because it is easier to recollect fees from an attorney than
from a plaintiff. But this argument implicates a district court’s
discretion in awarding interim fees, not its inherent power to
do so. Although in Rosenfeld we implied we might be more
willing to review an interlocutory fee award if those fees were
3894 HUNT v. IMPERIAL MERCHANT SERVICES
paid to a hard-to-reach plaintiff rather than to counsel, we
never indicated that the recipient of the attorney fees would
impact the district court’s inherent authority to grant the
award. See id. at 721. We hold that a district court in an
appropriate case may award interim costs to a plaintiff by
shifting class notice costs to a defendant even if the defendant
might later be entitled to recover those costs.
[12] We next address whether the district court’s decision
shifting costs to IMS here was an abuse of discretion. IMS
asserts that it will be unable to recollect notice costs from
Hunt if IMS prevails on its merits appeal because Hunt has
filed for bankruptcy. It argues that the district court’s decision
risks permanently depriving IMS of the notice cost amount,
even if the outcome of the merits appeal entitles IMS to
recover the notice costs it pays. This argument, however,
overlooks the likelihood that had notice costs been placed on
Hunt, Hunt might have had equal difficulty collecting from
IMS if she prevailed in the merits appeal. While IMS’ claim
that it would be unable to recover from Hunt is somewhat
speculative, IMS told the district court that it would be unable
to pay the notice costs. IMS has not shown that its potential
collection problems so outweigh those it conceded Hunt
would face that the district court abused its discretion by forc-
ing IMS to pay the notice costs. We hold that once the district
court determined that IMS was liable on the merits, it had the
discretion to shift the notice costs to IMS. Stated another way,
the district court had discretion to choose not to impose on
Hunt the burden of first advancing notice costs and then try-
ing to recover those costs from IMS after a final judgment.
We perceive no solution here that can avoid risk to both par-
ties, and accordingly we think the proper placement of notice
costs is best left to the sound discretion of district courts, once
liability on the merits has been determined in the first
instance. In such circumstances, the district courts are not
required in all cases to shift notice costs but instead may con-
sider the totality of circumstances to decide whether shifting
notice costs is just in that particular case.
HUNT v. IMPERIAL MERCHANT SERVICES 3895
IV
District courts may order a class action defendant to pay the
cost of class notification after they determine that the defen-
dant 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.
AFFIRMED.