by David M. Reutter
On December 29, 2021, the Court of Appeal for the First District of California decided that a “bail bond premium financing agreement” is a consumer credit contract and, under California Civil Code § 1799.91, is unenforceable against any cosigner to whom the statutory notice is not provided.
Before the Court was the appeal of Bad Boys Bail Bonds (BBBB), which sued Klara Caldwell to recover a $5,000 loan she cosigned to help a friend post bail to get out of the City of San Leandro jail on June 21, 2018.
The Premium Agreement that Caldwell signed made her responsible for the entire $5,000 balance if her friend did not pay. The contract provided for a $500 down payment followed by $450 monthly payments until the remaining $4,500 balance was satisfied.
When Caldwell was not able to make any payments, “BBBB attempted to collect from her, repeatedly calling her phone, her mother, and her place of unemployment in an effort to persuade her to resume payments,” the Court recalled. “BBBB representatives repeatedly threatened litigation and claimed she could lose her job if she did not make payments.”
In October 2019, with its collection attempts failing, BBBB initiated a collection action by filing a complaint for breach of contract and common accounts against Caldwell in the Alameda County Superior Court. Caldwell responded by asserting that she was not informed of the financial risks associated for cosigning her friend’s bond and maintained she would not have done so if she had been provided with a § 1799.91 notice.
She also counter-sued, filing a class action complaint that alleged BBBB violated the state’s unfair competition law (UCL) by failing to comply with §1799.91. Her complaint noted BBBB had filed at least 150 lawsuits against similarly situated persons from July 1, 2019, through December 31, 2020. She requested an injunction, as well as attorney’s fees.
The Superior Court granted Caldwell’s motion for a preliminary injunction, preventing BBBB from filing any actions to enforce or collect on bail bond premium agreements against cosigners who were not provided with the §1799.91 notice. BBBB was also enjoined from prosecuting any actions already filed or seeking to enforce, execute, or collect on any judgments already entered against such cosigners. BBBB appealed.
The Court of Appeal began its analysis by detailing the provisions of § 1799.91, which states that if a creditor obtains the signature of more than one person on a consumer credit contract, and the signatories are not married, then the cosigner must be provided with a specified “cosigner notice” stating that he or she is guaranteeing the debt and could become responsible to repay it in full. But as the Court noted, “if the required cosigner notice is not given, the creditor may not enforce any resulting security interest against the cosigner.”
BBBB argued that the bail bond industry is not subject to consumer protection laws because it is governed by its own statutory scheme, the Bail Bond Regulatory Act, Ins. Code, § 1800 et seq. But the Court disagreed.
First, it found that the premium agreement is a “consumer credit contract” within the meaning of §1799.90(a), and there was no indication in that subsection that the Legislature intended to exclude bail bond transactions from that definition.
Secondly, § 1800 requires licensing to conduct business within the bail bond industry. It does not exempt licensees from complying with other statutes such as the UCL and the Rosenthal Fair Debt Collection Practices Act.
Finally, the Court found “BBBB failed to identify any conflict between the notice requirement in § 1799.91 and any provisions of the Insurance Code.”
Since Caldwell was a cosigner, the Court concluded, she was entitled to the § 1799.91 notice. And since BBBB failed to provide that notice, it could not enforce its claim for payment against her. Thus the Superior Court’s order was affirmed. See: BBBB Bonding Corp. v. Caldwell, 73 Cal. App. 5th 349 (2021).
BBBB filed a petition for review with the state Supreme Court, but that petition was denied on April 13, 2022. See: BBBB Bonding Corp. v. Caldwell, 2022 Cal. LEXIS 2018.
Caldwell was represented by attorney Jeffrey M. Cohon, with assistance from Brendan J. Begley, Charles L. Post, James Kachmar and Audrey A. Millemann of Weintraub Tobin Law Corporation. Also providing counsel were Laurie Carr Mims, Jay Rapaport, Niall Mackay Roberts, and Donna Zamora-Stevens of Keker, Van Nest & Peters LLP, as well as Elisa Della-Piana, Zal K. Shroff and Rio Scharf of the Lawyers’ Committee for Civil Rights of the San Francisco Bay Area.
An Amicus Curiae brief was filed in support of Caldwell’s case by a long list that included Community Legal Services in East Palo Alto, the National Consumer Law Center, The Debt Collective, The Public Law Center, Watsonville Law Center, East Bay Community Law Center, as well as state Attorney General Rob Bonta (D) and since-recalled San Francisco District Attorney Chesa Boudin, plus the state Department of Insurance.
Meanwhile, two more class-action suits were filed in March 2022 by attorneys with Edelson PC, seeking to recover payments that were improperly collected without providing notice under bond financing agreements like the one Caldwell signed. Both cases have been removed by Defendants to the federal court for the Northern District of California, and PLN is following their developments. See: Medina v. Two Jinn Inc., USDC (N.D. Ca.), Case No. 4:22-cv-02540; and Bradley v. All-Pro Bail Bonds Inc., USDC (N.D. Ca.), Case No. 3:22-cv-01819.
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Related legal cases
Medina v. Two Jinn Inc.
|Cite||USDC (N.D. Ca.), Case No. 4:22-cv-02540|
Bradley v. All-Pro Bail Bonds Inc.
|Cite||USDC (N.D. Ca.), Case No. 3:22-cv-01819|