Eduardo De La Torre v. Cashcall, Inc.
2017 U.S. App. LEXIS 6997
| 9th Cir. | 2017Background
- Plaintiffs are California borrowers who took unsecured CashCall loans of $2,500–$2,600 carrying disclosed interest rates of 96% and later 135%; suit alleges those rates are unconscionable and violate the UCL.
- Loans are governed by the California Finance Lenders Law (FLL); FLL caps interest for loans under $2,500 but § 22303 removed rate caps for loans $2,500 or more in 1985.
- FLL § 22302 incorporates California Civil Code § 1670.5(a) (unconscionability), and plaintiffs contend that unconscionable interest rates remain reviewable despite § 22303.
- District court initially found factual issues but on reconsideration granted summary judgment for CashCall, reasoning judicial review of rates would substitute economic policy choices for the Legislature.
- Ninth Circuit panel certified to the California Supreme Court the question whether interest rates on consumer loans of $2,500 or more under § 22303 can be unconscionable under § 22302 (and thus actionable under the UCL), and stayed the case pending that decision.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether interest rates on consumer loans ≥ $2,500 governed by Cal. Fin. Code § 22303 can be deemed unconscionable under § 22302 (and thus support a UCL claim) | §22302 incorporates Cal. Civ. Code §1670.5, so courts may declare extreme interest rates unconscionable even if §22303 removed statutory caps | §22303 creates a legislative "safe harbor" removing rate caps for ≥ $2,500 loans; judicial policing of rates would usurp legislative/regulatory authority and Cel‑Tech bars UCL challenges to such a safe harbor | Ninth Circuit certified the legal question to the California Supreme Court for authoritative resolution and stayed the appeal |
Key Cases Cited
- Cel‑Tech Commc’ns, Inc. v. L.A. Cellular Tel. Co., 973 P.2d 527 (Cal. 1999) (UCL cannot be used to attack a specific statutory or regulatory "safe harbor")
- Carboni v. Arrospide, 2 Cal. Rptr. 2d 845 (Cal. Ct. App. 1991) (court reduced an extremely high interest rate as unconscionable; interest can be the "price" that is shockingly extreme)
- California Grocers Ass’n v. Bank of Am., 27 Cal. Rptr. 2d 396 (Cal. Ct. App. 1994) (courts should avoid imposing economic policy where legislature or regulator has authority)
- Davis v. O’Melveny & Myers, 485 F.3d 1066 (9th Cir. 2007) (standard for when a contract or clause "shocks the conscience" in unconscionability analysis)
- Pacheco v. United States, 220 F.3d 1126 (9th Cir. 2000) (federal courts may predict state law if state supreme court guidance is absent)
- Klein v. United States, 537 F.3d 1027 (9th Cir. 2008) (federal court agrees to accept and follow state supreme court decision when question certified)