People v. Alorica Inc. CA4/2

• Court: California Court of Appeal
• Decided: March 14, 2022
• Docket: E076786
• Status: Unpublished

Opinion

Filed 3/14/22 P. v. Alorica Inc. CA4/2 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION TWO

THE PEOPLE,

Plaintiff and Respondent, E076786

v. (Super.Ct.No. CVMV2000170)

ALORICA INC., OPINION

Defendant and Appellant.

APPEAL from the Superior Court of Riverside County. Eric Isaac, Temporary

Judge. (Pursuant to Cal. Const., art. VI, § 21.) Affirmed.

Goodwin Procter, David R. Callaway, Laura A. Stoll, and Tierney E. Smith for

Michael A. Hestrin, District Attorney, and Emily R. Hanks, Deputy District

Attorney, for Plaintiff and Respondent.

This case arises from an ongoing investigation by the district attorneys’ offices of

several counties into the debt collection practices of Alorica Inc. (Alorica). Alorica

1 appeals from a trial court order compelling it to comply with an administrative subpoena.

We affirm.

BACKGROUND

According to the Riverside County District Attorney’s office, in January 2019, the

district attorneys’ offices of the counties of Riverside, Los Angeles, San Diego, and Santa

Clara began investigating Alorica for compliance with the Rosenthal Fair Debt Collection

Practices Act (the Rosenthal Act; Civ. Code, § 1788, et seq.) and the Telephone

Consumer Protection Act (47 U.S.C. § 227). (We refer to these district attorneys’ offices

collectively as the People.) In November 2019, the People served Alorica with an

investigative subpoena. The subpoena contained 11 separate document requests and

covered the time period from February 2015 through the date the subpoena was served.

The People directed Alorica to respond by December 13, 2019, and to specify whether

any of the requested records were no longer in Alorica’s “possession, custody or control.”

The People sought the collection services agreements and other agreements

between Alorica and its top five clients as defined on an annual basis by the volume of

consumer debt calls made, by the amount of debt sent for collection, and by the number

of individuals engaged in making such calls (Request No. 2). The People sought all of

the call records of all debt collection calls made for these clients to California residents

during the relevant period (Request No. 11). The People also directed Alorica to identify

any company that monitored or audited Alorica for compliance with debt collection

practice laws (Request No. 3), to produce all policies and procedures Alorica followed

2 related to collecting debt in California (Request No. 4), and to provide organizational

charts regarding Alorica’s corporate structure along with specific identifying information

regarding that structure (Request Nos. 5, 6).

In addition, the People sought records related specifically to Alorica’s clients

Credit One Bank, N.A. (Credit One) and another bank, including any specific policies

followed or dialing systems used for these clients and specified information related to

those dialing systems (Request Nos. 7, 8). The People directed Alorica to provide all of

the call records of all debt collection calls Alorica made for Credit One and the other

bank to California residents during the relevant period (Request Nos. 9, 10).

In December 2019, Alorica served its objections and responses to the subpoena.

Alorica objected to most of the requests and argued that the requests violated Alorica’s

right to privacy and right against unreasonable searches and seizures. Alorica claimed

that it did not have any debt collection clients, so it denied having any of the requested

agreements with clients related to debt collection, policies and procedures relating to the

collection of consumer debt, or call records of debt collection calls as to the defined top

five clients.

Concerning the debt collection call records for Credit One and the other specified

bank, Alorica stated that it would provide the documents that were in its custody,

possession, or control. For Credit One, those records consisted of “dialer files for Credit

One for the prior 30 days.” According to Alorica’s counsel, “under the terms of

Alorica’s contract with Credit One, Alorica only keeps call records for 30 days. The call

3 data is transmitted to Credit One and Credit One may retain call records sent by Alorica

each day (or periodically as required by Credit One).”

The parties continued to meet and confer. Alorica subsequently produced an

organizational chart and some client identification information.

One year later, in November 2020, the People petitioned for an order compelling

full compliance with the subpoena. Alorica opposed and argued that it is not a debt

collector subject to the Rosenthal Act, so the subpoena was invalid as it was not

reasonably relevant to an investigation concerning debt collection. An Alorica company

executive attested that “Alorica is a customer experience company” and “is not a ‘debt

collector’ or debt buyer” because “Alorica does not collect funds from debtors and is not

paid based on amounts collected from consumers.” For four clients, including Credit

One, Alorica makes “outbound calls on behalf of and in the name of its clients to

consumers who are late paying active accounts.” Those calls comprise less than one

percent of Alorica’s business.

Alorica argued in the alternative that it had substantially complied with the

subpoena by producing “all of the responsive information and documents with respect to

Credit One” for the last 30 days in December 2019 because Alorica retains only 30 days

worth of call records for its clients, including Credit One. Alorica argued that by seeking

additional call data the People were treating the subpoena as “an ongoing obligation with

no end in sight.” In addition, Alorica argued that it should not be required to produce

4 further information relating to Credit One because the People were not authorized to seek

such records under the National Bank Act.

At a hearing on the matter, the trial court granted the People’s petition. The court

ordered Alorica to provide further responses to Request Nos. 2 through 4 and 7 through

11, and to confirm that Alorica produced all organizational charts responsive to Request

Nos. 5 and 6. The minute order directs that “[f]urther issues discussed clarifying [the]

court order” were provided in the hearing.

At the hearing, the court concluded that Alorica is a debt collector under the

Rosenthal Act, that each of the contested requests was reasonably relevant to the People’s

investigation into Alorica’s debt collection practices, and that Alorica’s original

responses were incomplete. The court rejected Alorica’s argument that because the

People could not obtain Credit One’s call data directly from the bank absent “some sort

of legal action,” the same data was not subject to disclosure by Alorica in response to the

subpoena. The court thus concluded that Alorica’s “claim that it should not have to

provide more than 30 days of call data is unsupported.” After further discussion, the

court added that the People were requesting that Alorica “turn over the call data

information that’s in your possession,” “what’s in your possession” has “a clear

meaning,” and the order did not require Alorica to produce documents on an ongoing

basis.

5 DISCUSSION

Alorica argues that it is not a debt collector under the Rosenthal Act and that the

trial court therefore erred by ordering it to comply with the administrative subpoena.

Alorica also argues that the subpoena improperly seeks Credit One’s call records in

violation of the National Bank Act. Both arguments lack merit.

A. Administrative Subpoena Power

Government Code section 11180 authorizes the Attorney General (and other

administrative department heads) to investigate and to prosecute actions concerning

matters related to the business activities and subjects under its jurisdiction. The Attorney

General’s power is granted to a district attorney in certain circumstances. (Bus. & Prof.

Code, § 16759.) As part of such an investigation, the district attorney may issue

subpoenas for “the production of papers, books, accounts, documents, . . . and testimony

pertinent or material to any inquiry, investigation, hearing, proceeding, or action

conducted in any part of the state.” (Gov. Code, § 11181, subd. (e).)

The power to make an administrative inquiry is akin “to the power of a grand jury,

which does not depend on a case or controversy in order to get evidence but can

investigate ‘merely on suspicion that the law is being violated, or even just because it

wants assurance that it is not.’” (Brovelli v. Superior Court of Los Angeles County

(1961) 56 Cal.2d 524, 529 (Brovelli).) Such subpoenas do not violate the constitutional

prohibition against unreasonable searches and seizures if (1) the inquiry is “one which the

agency demanding production is authorized to make,” (2) the demand is “not too

6 indefinite,” and (3) the information sought is “reasonably relevant” to the intended

investigation. (Ibid.; Fielder v. Berkeley Properties Co. (1972) 23 Cal.App.3d 30, 40.)

We broadly construe the relevance standard. (State Water Resources Control Bd. v.

Baldwin & Sons, Inc. (2020) 45 Cal.App.5th 40, 57.) We independently review whether

the subpoena meets these enforcement standards. (Millan v. Restaurant Enterprises

Group, Inc. (1993) 14 Cal.App.4th 477, 485 (Millan).)

B. The Rosenthal Act

The Rosenthal Act was enacted “to prohibit debt collectors from engaging in

unfair or deceptive acts or practices in the collection of consumer debts and to require

debtors to act fairly in entering into and honoring such debts.” (Civ. Code, § 1788.1,

subd. (b).) The statute defines “‘debt collector’” as “any person who, in the ordinary

course of business, regularly, on behalf of that person or others, engages in debt

collection.” (Civ. Code, § 1788.2, subd. (c).) “The term ‘debt collection’ means any act

or practice in connection with the collection of consumer debts.” (Civ. Code, § 1788.2,

subd. (b).) The Rosenthal Act is a remedial statute that we interpret broadly to effectuate

its purpose. (Komarova v. National Credit Acceptance, Inc. (2009) 175 Cal.App.4th 324,

340; People ex rel. Lungren v. Superior Court (1996) 14 Cal.4th 294, 313 [“civil statutes

for the protection of the public are, generally, broadly construed in favor of that

protective purpose”].)

Alorica does not dispute that the People have the authority to investigate whether

debt collectors comply with the Rosenthal Act. Alorica instead claims that it is not a debt

7 collector under the statute, so the subpoena seeks information that is not reasonably

relevant to the People’s authority to investigate compliance with the Rosenthal Act. In

support of that argument, Alorica claims that it does not regularly engage in debt

collection services because only one percent of its business consists of making outbound

account-related calls, and those calls are made on behalf of only four clients.1

Alorica’s argument lacks merit. An agency has the power to investigate a matter

within its jurisdiction “‘merely on suspicion that the law is being violated, or even just

because it wants assurance that it is not.’” (Brovelli, supra, 56 Cal.2d at p. 529.)

Encompassed within that investigative power is “the authority to conduct an investigation

and to subpoena records to determine whether the entity under investigation is subject to

the agency’s jurisdiction and whether there have been violations of provisions over which

the agency has jurisdiction.” (Millan, supra, 14 Cal.App.4th at p. 487.) Accordingly, the

People have the authority to subpoena records from Alorica in order to determine

whether Alorica—which concedes that it makes “outbound calls on behalf of and in the

name of its clients to consumers who are late paying active accounts”—is a debt collector

under the Rosenthal Act. It follows that Alorica cannot resist the subpoena by claiming

that it is not a debt collector. 2

1 Alorica does not concede that the “outbound account-related services it performs” constitute debt collection, because Alorica does not “actually receive any payments from consumers made to its clients’ accounts.” Rather, Alorica argues that even if those services constitute debt collection, Alorica still is not a debt collector.

2 Alorica cites an unpublished federal district court summary judgment ruling for the proposition that Alorica is not a debt collector under the Rosenthal Act because debt

8 C. The National Bank Act

Alorica argues that Request Nos. 9 and 11 of the subpoena are invalid and

unenforceable because the requests amount to an impermissible “visitation” upon Credit

One under the National Bank Act. We are not persuaded.

The National Bank Act provides: “No national bank shall be subject to any

visitorial powers except as authorized by Federal law, vested in the courts of justice or

such as shall be, or have been exercised or directed by Congress or by either House

thereof or by any committee of Congress or of either House duly authorized.” (12

U.S.C. § 484, subd. (a).) Under that provision, only the federal Office of the Comptroller

of the Currency (the OCC) “or an authorized representative of the OCC may exercise

visitorial powers with respect to national banks.” (12 C.F.R. § 7.4000(a)(1); Cuomo v.

Clearing House Ass’n, L.L.C. (2009) 557 U.S. 519, 524.) Visitorial powers include

examining a national bank, inspecting a national bank’s records, regulating activities

permitted under federal banking law, and “[e]nforcing compliance with any applicable

collection calls make up only one percent of its business. (See Pflueger v. Auto Finance Group, Inc. (C.D.Cal. Apr. 26, 1999, No. CV-97-9499 CAS (CTX)) 1999 WL 33740813.) We are not persuaded. First, a federal court’s interpretation of California state law is not binding. (Qualified Patients Assn. v. City of Anaheim (2010) 187 Cal.App.4th 734, 764.) Second, the district court’s summary judgment ruling was necessarily limited to the evidence that was before the court. Assuming for the sake of argument that the ruling was legally sound, the People would still have the authority to collect evidence in order to determine whether Alorica is relevantly similar to the defendant in the federal case—the People are not required to take Alorica’s word for it. Third, it is difficult to understand how Alorica’s argument could be sound. If Alorica makes debt collection calls every day, for example, then it is at least arguable that Alorica regularly engages in debt collection, even if Alorica is such a large business that the debt collection calls comprise only one percent of its business according to some metric.

9 Federal or state laws concerning those activities, including through investigations that

seek to ascertain compliance through production of non-public information by the

bank . . . .” (12 C.F.R. § 7.4000(a)(2).) State officials “may not exercise visitorial

powers with respect to national banks, such as conducting examinations, inspecting or

requiring the production of books or records of national banks, or prosecuting

enforcement actions, except in limited circumstances authorized by federal law.”

(12 C.F.R. § 7.4000(a)(1).)

The People do not claim to have been authorized by federal law to exercise

visitorial powers as to a national bank. Moreover, the parties do not dispute that Alorica

is not a national bank and thus is not itself subject to the provisions of the National Bank

Act. Alorica instead argues that the subpoena is an impermissible visitation upon Credit

One because (1) the National Bank Act prohibits state officials from examining the

“records of national banks” (12 C.F.R. § 7.4000(a)(1)), and (2) “[a]ny records Alorica

possesses regarding Credit One” constitute records “of” a national bank within the

meaning of the regulations. The only authority that Alorica cites for its expansive

interpretation of the regulations is a dictionary definition of the word “of,” which of

course has many meanings.

Alorica’s interpretation is implausible on its face. For example, if a licensed

general contractor performs construction work for a national bank, then the contractor

will have records regarding that work. A state agency investigating the contractor for

compliance with state licensing requirements should be able to access such records in the

10 contractor’s possession. But if Alorica were right that any record regarding a national

bank is beyond the reach of state officials, then the state agency would be barred from

examining those records or requiring the contractor to produce them. Such an

interpretation would make no sense as a matter of policy. The point of the prohibition on

“visitation” by state agents is to protect the exclusive regulatory authority of the OCC

concerning national banks. But the OCC has no ability to enforce state licensing

requirements for general contractors, or otherwise to investigate or prosecute wrongdoing

by other third parties providing services to national banks. Thus, if Alorica’s

interpretation were correct, the National Bank Act and associated regulations would

arbitrarily curtail state law enforcement authority without creating an equivalent federal

law enforcement authority to fill the gap. It is not reasonable to infer that such a result

was intended.

Fortunately, there are alternatives to Alorica’s interpretation. One ordinary

meaning of the word “of” is “to indicate belonging or a possessive relationship.”

(Merriam-Webster Dict. Online (2022)

webster.com/dictionary/of> [as of Mar. 10, 2022].) We are not aware of any basis to

interpret “of” in the federal regulations in any other way—the regulations prohibit state

officials from examining or requiring production of records possessed by national banks.

But the regulations do not prohibit state officials from examining or requiring production

of other individuals’ or entities’ records of their dealings with national banks. The trial

11 court’s order is therefore consistent with the regulations, because it requires Alorica to

produce only records in Alorica’s possession.

Because Alorica is not a national bank, the National Bank Act does not apply to

Alorica. We accordingly conclude that the National Bank Act does not preclude the

People from subpoenaing the debt collection call records in Alorica’s custody, control, or

possession that Alorica made for Credit One. 3 The People’s requests for those

documents (Request Nos. 9 & 11) are consequently valid and enforceable.

DISPOSITION

The January 14, 2021, order compelling Alorica’s compliance with the

investigative subpoena is affirmed.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS MENETREZ J.

We concur:

RAMIREZ P. J. FIELDS J.

3 Alorica argues that because it does not maintain more than 30 days’ worth of call records for Credit One at any given time, the trial court order requires it to request and to obtain its historical call records directly from Credit One. The argument is not supported by the record. The trial court stated that Alorica was required to produce only those records in its possession.