Kevin BREAZEALE; Karen Solberg; Kevin Hiep Vu; Nancy Morin; Narisha Bonakdar, on their own behalf and on behalf of others similarly situated, Plaintiffs-Appellees, v. VICTIM SERVICES, INC., DBA CorrectiveSolutions; National Corrective Group, Inc., DBA CorrectiveSolutions; Mats Jonsson, Defendants-Appellants.
Nos. 15-16549, 16-16495
United States Court of Appeals, Ninth Circuit.
Argued and Submitted September 13, 2017 San Francisco, California Filed December 27, 2017
878 F.3d 759
Sean M. Hardy (argued) and Michael A. Taitelman, Freedman & Taitelman LLP, Los Angeles, California, for Defendants-Appellants.
Deepak Gupta (argued) and Matthew W.H. Wessler, Gupta Wessler PLLC, Washington, D.C.; Paul Arons, Law Offices of Paul Arons, Friday Harbor, Washington; Beth E. Terrell and Blythe Chandler, Terrell Marshall Law Group PLLC, Seattle, Washington; for Plaintiffs-Appellees.
R. Orion Danjuma, Rachel Goodman, Nusrat J. Choudhury, and Dennis D. Parker, New York, New York, as and for Amicus Curiae
Before: MARY M. SCHROEDER and RICHARD C. TALLMAN, Circuit Judges, and ROBERT H. WHALEY,* District Judge.
OPINION
SCHROEDER, Circuit Judge:
Plaintiffs are individuals who are subject to potential prosecution for violations of
Before us are two consolidated appeals from separate orders of the district court. VSI first pursues an interlocutory appeal of the district court‘s denial of its motion to strike under California‘s Anti-SLAPP statute. We lack jurisdiction to consider the district court‘s denial, however, because under the terms of the state statute, such a denial in a case deemed to be filed in the public interest is not immediately appealable. VSI also appeals the district court‘s denial of its motion to compel arbitration. We have jurisdiction over that appeal and affirm the arbitration denial because this is not a private contract subject to the provisions of the Federal Arbitration Act. We therefore affirm and remand to the district court for the conduct of further proceedings.
FACTUAL AND PROCEDURAL BACKGROUND
A. California‘s Bad Check Diversion Program
California‘s bad check diversion program permits district attorney offices throughout the state to defer prosecution of those accused of writing bad checks if the accused satisfies certain criteria established by statute. The district attorneys may contract with private parties to administer the program. Plaintiffs here allege that VSI, a private administrator under the program, exceeded its statutory authority and administered the program in violation of federal and state laws applicable to debt collection practices.
The bad check diversion program attempts to address a public policy problem facing the California criminal justice system. California criminalizes the writing of bad checks with intent to defraud. See
The bad check diversion program is designed to operate in accordance with certain statutory requirements that track the life of a bad check case from investigation to resolution—all without formal criminal prosecution if certain criteria are met. A district attorney may refer a case to the bad check diversion program only if there is probable cause that the bad check statute has been violated.
After the district attorney has considered these factors and concluded that there is probable cause that
VSI administers contracts with various county district attorneys in California. VSI is a registered corporation in Delaware, and VSI and its subsidiaries operate in a number of states. Under VSI‘s contracts, local district attorneys retain prosecutorial discretion and approve the fees VSI requests from bad check writers. VSI receives a cut of the fees collected.
The named plaintiffs in this case each received letters from VSI describing probable criminal prosecution, with a potential punishment of up to a year in jail, if they chose not to participate in the BCDP. The letters they received were sent on district attorney letterhead and were signed by the local district attorney. The letters in-
formed
Under the terms of the letter, recipients who make full or partial payment of fees and restitution “agree[] to be enrolled in the Bad Check Restitution Program.” The letter also includes an arbitration clause, which provides:
Agreement to Arbitrate: You and Administrator agree to resolve any and all claims and disputes relating in any way to the Program (“Claims“), except for Claims concerning the validity, scope or enforceability of this Arbitration Agreement, through BINDING INDIVIDUAL ARBITRATION before the American Arbitration Association (“AAA“). This means you will be unable to have Claim(s) resolved by a court or jury, or to participate in a class action or class arbitration. Other rights you would have if you went to court may be unavailable or limited in arbitration, including your right to appeal. The only exception to this agreement to arbitrate is that you and/or Administrator may seek relief in a small claims court for Claims within the jurisdiction of that court in any particular state.
The terms then stipulate the agreement is to be governed by and enforceable under the
One of the named plaintiffs, Narisha Bonakdar, elected to participate in the BCDP, while the others declined.
B. Plaintiffs’ Complaint
Plaintiffs instituted this action in the United States District Court for the Northern District of California on December 1, 2014. They filed their First Amended Complaint—the operative complaint in this case—on February 6, 2015.
The complaint alleges VSI‘s programs violate state and federal consumer-protection laws governing collection abuses, and also shirk the requirements imposed under the very state statutes governing bad check diversion programs. Included were alleged violations of the Fair Debt Collection Practices Act, (“FDCPA“),
Plaintiffs also allege violations of the California Unfair Competition Law (“UCL“),
ed
Plaintiffs further allege that under VSI‘s administration of this program, no prosecutor has reviewed the evidence against the accused, or made a probable cause determination as required by the statute. Instead, Plaintiffs allege VSI typically receives referrals directly from retailers and private agencies—not from district attorneys. Indeed, Plaintiffs allege that “very few” bad check writers sent collection letters from VSI will ever be prosecuted, even if they make only partial payment or no payment at all.
The remedies pursued are broad. Specifically, Plaintiffs seek declaratory relief that VSI‘s debt collection practices violate the FDCPA and the California UCL. They seek a preliminary and permanent injunction enjoining VSI from, among other things, continuing to participate in the bad check diversion program and further communicating with accused bad check writers unless disclosing in each communication that it is a debt collector, and not a district attorney‘s office. Plaintiffs also seek actual damages, restitution, statutory damages under
C. VSI‘s Motion to Strike State Law Claims Under California‘s Anti-SLAPP Statute
On April 17, 2015, VSI moved under California‘s Anti-SLAPP law to strike the UCL and fraudulent misrepresentation claims. California passed its Anti-SLAPP statute in 1992 to address a spike in lawsuits aimed at chilling the exercise of the rights to free speech and to petition for redress of grievances. See
It‘s helpful to think of a “SLAPP” as a lawsuit defined by a particular strategy: obtaining an economic advantage over a defendant, and not necessarily the vindication of a cognizable legal right. See Wilcox v. Superior Court, 27 Cal.App.4th 809, 816 (1994), as modified on denial of reh‘g (Sept. 15, 1994). The paradigm SLAPP, as a California Court of Appeal has described, “is a suit filed by a large land developer against environmental activists or a neighborhood association intended to chill the defendants’ continued political or legal opposition to the developers’ plans.” Id. at 815. The causes of action favored by those who bring these suits—most often businesses—“are defamation, various business torts such as interference with prospective economic advantage, nuisance and intentional infliction of emotional distress.” Id. at 816.
Attempting to root out these harassing cases, the California statute provides for pre-trial dismissal of a SLAPP through a “special motion to strike” the cause of action.
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A litigant defending against a motion to strike by invoking the public interest exception must make the following showing:
- The plaintiff does not seek any relief greater than or different from the relief sought for the general public or a class of which the plaintiff is a member....
- The action, if successful, would enforce an important right affecting the public interest, and would confer a significant benefit, whether pecuniary or nonpecuniary, on the general public or a large class of persons.
- Private enforcement is necessary and places a disproportionate financial burden on the plaintiff in relation to the plaintiff‘s stake in the matter.
While orders disposing of SLAPP motions remain generally immediately appealable, there is no right to immediate appeal when the trial court has determined the public interest exception applies. See
In VSI‘s motion to strike, it argued plaintiffs were seeking to discourage VSI‘s communications made in connection with proceedings authorized by law, and that plaintiffs did not have a reasonable possibility of prevailing because, inter alia, VSI was entitled to prosecutorial immunity. VSI also argued the public interest exception to the Anti-SLAPP statute did not apply. The district court rejected these contentions and denied VSI‘s Anti-SLAPP motion on the ground that the case was within the public-interest exception.
On August 3, 2015, VSI filed its notice of appeal from the district court‘s order. The district court subsequently denied VSI‘s motion to stay proceedings pending appeal, and it also denied plaintiffs’ motion to certify VSI‘s appeal as frivolous.
D. VSI‘s Motion to Compel Arbitration
After filing its Anti-SLAPP appeal to this Court, VSI filed in the district court a motion to compel arbitration against Narisha Bonakdar, the only plaintiff who had elected to participate in the BCDP and hence the only plaintiff party to the arbitration agreement. VSI contended that the Federal Arbitration Act (“FAA“),
The district court twice requested further briefing as to whether the FAA applies. Then in an order filed July 27, 2016, the district court denied VSI‘s motion to compel arbitration, concluding the FAA does not apply to the type of agreement at issue here, which it described as “an agreement between a criminal suspect and the local authorities about how to resolve a potential state-law criminal violation.” The agreement was outside the purview of the FAA and not “a contract evidencing a transaction involving commerce” as Congress intended in
In its consolidated appeals, VSI argues the district court erred in applying the Anti-SLAPP statute‘s public interest exception. VSI also argues the district court erred in denying its motion to compel arbitration. We address each issue in turn, agreeing with plaintiffs that we lack jurisdiction to review the denial of the Anti-SLAPP motion and that the district court correctly denied the motion to compel arbitration. The facts for purpose of this appeal are not disputed and both appeals present issues of law we review de novo.
ANALYSIS
A. This Court Lacks Appellate Jurisdiction to Review the District Court‘s Denial of VSI‘s Motion to Strike
VSI attempts to appeal on an interlocutory basis the district court‘s denial of its motion to strike under California‘s Anti-SLAPP statute. See Appeal No. 15-16549. Our appellate jurisdiction is generally limited to “final decisions” of district courts.
VSI argues this Court‘s decision in Batzel v. Smith, 333 F.3d 1018 (9th Cir. 2003), expressly permits interlocutory appeals from district court rulings on motions to strike under California‘s Anti-SLAPP statute. Yet later statutory history shows our decision in Batzel is no longer controlling. In Batzel, relying on analysis similar to that we use in considering issues of qualified immunity, we concluded we had collateral order jurisdiction to review an appeal from a trial court‘s denial of a motion to strike under California‘s Anti-SLAPP law, as it then provided. Id. at 1024-26. We looked to California‘s legislative intent and reasoned the statute‘s provision granting the right of immediate appeal from a denial of a motion to strike,
After our decision in Batzel, however, the California legislature amended the Anti-SLAPP law to add the public-interest exception to the right of immediate appeal
Accordingly, we lack jurisdiction to review the district court‘s order denying the motion to strike. The appeal from that order must be dismissed for lack of jurisdiction.
B. Denial of the Motion to Compel Arbitration
VSI separately appeals on an interlocutory basis the district court‘s denial of its motion to compel arbitration. See Appeal No. 16-16495. The parties in this appeal do not dispute our appellate jurisdiction. It rests on
VSI relied on the arbitration provision in the diversion agreement, invoking the
The Act provides:
A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.
We agree with the district court that Congress never intended the FAA to apply to agreements between citizens and prosecutors resolving an individual‘s potential criminal liability. As the Supreme
The history of the FAA, the various cases construing its reach, and the body of law governing the formation and interpretation of plea-agreements bear this out. The Supreme Court has recognized the import of the history leading up to the FAA. Because courts were refusing to order arbitration, “[t]he preeminent concern of Congress in passing the Act was to enforce private agreements into which parties had entered....” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 221 (1985). As the Court pointed out in Concepcion, “[t]he FAA was enacted in 1925 in response to widespread judicial hostility to arbitration agreements.” Concepcion, 563 U.S. at 339. That judicial hostility dated back centuries to a time when English courts “refused to enforce specific agreements to arbitrate upon the ground that the courts were thereby ousted from their jurisdiction.” Byrd, 470 U.S. at 220 n.6 (quoting H. R. Rep. No. 96, 68th Cong., 1st Sess., 1-2 (1924)). This hostile principle became embedded in the English common law and was thereby adopted by the American courts.
The point of the FAA was to enforce private agreements between contracting parties. A unanimous Supreme Court surveyed the history of the FAA and expressly stated that intent: “[t]he legislative history of the Act establishes that the purpose behind its passage was to ensure judicial enforcement of privately made agreements to arbitrate.”
The Supreme Court again considered the history of the FAA in Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468 (1989). The Court once more emphasized the FAA‘s primary purpose is to ensure enforcement of private agreements to arbitrate. Volt, 489 U.S. at 479. The Court said the FAA “simply requires courts to enforce privately negotiated agreements to arbitrate, like other contracts, in accordance with their terms.” Id. at 478. Over twenty years later, in an opinion emphasizing the robust reach of the FAA, the Supreme Court in Concepcion repeated that the Act‘s “‘principal purpose’ ... is to ‘ensur[e] that private arbitration agreements are enforced according to their terms.‘” Concepcion, 563 U.S. at 344 (quoting Volt, 489 U.S. at 478) (emphasis added).
Against this historical backdrop, it is apparent that Congress never contemplated that the FAA would apply to agreements between prosecutors and citizens
VSI similarly fails to direct us to any cases from the federal courts of appeals suggesting the FAA applies to plea agreements, quasi-plea agreements, or deferred-prosecution agreements. Indeed, the only authority we have located that discusses the issue dismissed any contention that the FAA could apply. In Neal v. LaRiva, the Seventh Circuit ruled the Bureau of Prisons was not required to arbitrate a dispute with a prisoner because “the Federal Arbitration Act governs only maritime contracts and contracts involving interstate commerce,” and the prisoner‘s documents, which he claimed compelled arbitration of his habeas corpus claim, “involve[d] neither kind of contract.” 765 F.3d 788, 790 (7th Cir. 2014).
The foundational principle, underlined repeatedly in all these decisions, as our Court aptly put it not too long ago, is that “[a] plea bargain is not a commercial exchange. It is an instrument for the enforcement of the criminal law.” United States v. Barron, 172 F.3d 1153, 1158 (9th Cir. 1999) (en banc). Contract law doctrines operate in the realm of criminal plea bargains by analogy only—and even then, “[t]he contract analogy is imperfect.” United States v. Partida-Parra, 859 F.2d 629, 634 (9th Cir. 1988); see also Barron, 172 F.3d at 1158 (“reliance on contract law is by analogy“). In the context of plea bargains, traditional black letter rules applicable to commercial contracts between private parties often yield, as they must, to substantive and procedural requirements, including federal or state rules of criminal procedure, that protect the various rights of the accused. See, e.g.,
We expanded on the nature of plea agreements in Barron, where we explained why interests greater than contractual rights are involved:
A plea bargain is not a commercial exchange. It is an instrument for the enforcement of the criminal law. What is at stake for the defendant is his liberty. On rescission of the agreement, the prisoner can never be returned to his “original position“: he has served time by reason
of his guilty plea and his surrender of basic constitutional rights; the time he has spent in prison can never be restored, nor can his cooperation in his punishment. What is at stake for the government is its interest in securing just punishment for violation of the law and its interest that an innocent act not be punished at all. The interests at stake and the judicial context in which they are weighed require that something more than contract law be applied.
California courts agree that plea bargains are not the same as private or commercial contracts. In Brown v. County of Los Angeles, for example, a California Court of Appeal concluded an appellant‘s reliance on the California Civil Code to argue plea bargains with minors are void was “misplaced.” 229 Cal.App.4th 320, 323 (2014). The court reasoned the appellant “incorrectly assume[d] that since civil statutes govern contracts in general, they must govern plea bargains as well.” Id. at 323. Plea bargains in California are governed by the California Penal Code, not civil law, and so “principles of contract law should not be imported wholesale into the plea bargaining process.” Id. at 323.
Principles of federalism also militate against the FAA‘s application in this context. In our system of dual sovereignty, “[s]tates possess primary authority for defining and enforcing the criminal law,” and “the administration of criminal justice rests with the States except as Congress ... has created offenses against the United States.” United States v. Lopez, 514 U.S. 549, 561 n.3 (1995) (internal quotation marks and citations omitted).
Once it held the FAA did not apply, the district court looked to California law to see whether it would compel arbitration. The district court ruled that an agreement to arbitrate disputes invoking the criminal law would be contrary to public policy. California law supports this conclusion. See, e.g., Bayscene Resident Negotiators v. Bayscene Mobilehome Park, 15 Cal.App.4th 119, 129 (1993) (threats of criminal prosecution “to force individuals to give up their legal rights and to agree to binding arbitration implicates strong public policy considerations“). VSI does not argue that California law would compel arbitration. It simply disagrees with the district court‘s ruling that state law would prohibit arbitration in this case. The controlling issue with respect to arbitration is therefore whether the FAA applies. The district court correctly decided it does not.
CONCLUSION
VSI‘s appeal from the district court‘s denial of its motion to strike is DISMISSED for lack of appellate jurisdiction. The district court‘s order denying VSI‘s motion to compel arbitration against Narisha Bonakdar is AFFIRMED. We remand to the district court for the conduct of further proceedings.