Chapter 6

Contempt Action Against Check Collector for Violating Injunction (CA)

Paul Arons operates a law office with Sharon Grace in Friday Harbor, Washington. He began his legal career representing plaintiffs in labor and employment law disputes. In the early 1990s he began focusing his efforts on class actions under the FDCPA, suing debt collectors who collect on dishonored checks. He has participated as class counsel in a number of large class actions in California including Newman v. Checkrite, 912 F.Supp. 1354, Irwin v. Mascott, 112 F. Supp. 2d 937, 959 (N.D. Cal. 2000) and Ballard v. Equifax Check Services, Inc. 158 F. Supp. 2d 1163 (E.D. Cal. 2001). Rand Bragg is a private attorney whose offices are in Chicago, Illinois. He specializes in consumers rights litigation, particularly debt collection abuse, automobile leases, misuses of credit reports, and truth in lending. Previously, Mr. Bragg was a litigation coordinator with the UAW Legal Services Plans, and practiced with Legal Services Corporation-funded programs in Pennsylvania. He graduated from West Virginia University College of Law in 1973 and has practiced law in West Virginia, Pennsylvania, Delaware, and Illinois as well as many federal courts. Since 1989 Mr. Bragg has co-authored National Consumer Law Centers Fair Debt Collection and annual supplements. For several years he has written a chapter entitled Fair Debt Collection Practices Act, for Ohio Consumer Law. Mr. Bragg has lectured and conducted trainings on the Fair Debt Collection Practices Act for various groups including: Kansas City Metropolitan Bar Association (1996); National Association of Consumer Advocates (19911995); Commercial Law League (1992); and UAW Legal Services Plans (1985-1992). Section 6.1 is an application in federal court for an order of contempt against a check collection agency that failed to abide by an injunction issued under a state law claim made supplementally with a Fair Debt Collection Practices Act claim.1 The defendant failed to include the face amount of its check in its collection letters, demanded treble damages under state law when it was not entitled to them, and made false threats.2 Section 6.2 is a memorandum of law in support of the contempt application. Section 6.3 is a reply memorandum of law to the check collectors arguments that its violations were not significant and that the collectors chief operating officer should be held in contempt. Section 6.4 is a draft order holding the debt collector in contempt.3

1 2 3

See generally, National Consumer Law Center, Fair Debt Collection Practices 6.9 (5th Ed. 2004). See Irwin v. Mascott, 112 F. Supp.2d 937 (N.D. Ca. 2000). See Irwin v. Mascott, 2004 WL 1233984 (9th Cir. 2004).

6.1 Application for Contempt Order

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA [CONSUMER 1], et al., Plaintiffs, OWEN T. MASCOTT, Defendants. Case No. Date Time Courtroom CLASS ACTION APPLICATION FOR ORDER TO SHOW CAUSE RE: CONTEMPT Plaintiffs [Consumer 1], [Consumer 2] and [Consumer 3] hereby apply for an Order to Show Cause re: Contempt to be issued against defendants Commonwealth Equity Adjustments, Inc. Eric W. Browning and non-party Robert Hyde, why they should not be 1. adjudged in contempt of court; 2. sanctioned as appropriate to compel their future compliance with the permanent injunction, including, but not limited to, assessing the $10,000.00 per letter sanction orderd by this Court in ____________; 3. ordered to compensate those who have suffered monetary loss as a result of the violations of the injunction; and, 4. ordered to pay the reasonable attorneys fees and costs incurred in connection with enforcing the injunction, all in connection with their alleged violations of the following provisions of the permanent injunction, issued on August 31, 2000: Sending collection letters which do not include the face amount of the check in any identification of the debt or itemization of damages; Making demands for treble damages pursuant to California Civil Code 1719 unless defendant has (1) sent a letter which meets all the requirements of 1719; and (2) maintained a record that shows the actual letter mailed, the actual date of mailing, and that the letter was sent certified mail; Making any collection demands which CEA knows or should know are unlawful, false, deceptive or misleading or which otherwise violate the Fair Debt Collection Practices Act, including, but not limited to, falsely representing: (1) that a

communication is from an attorney; (2) that failure to pay the money being demanded will result in a lawsuit being filed, a judgment being obtained, or a judgment being executed; or (3) that the check writer has committed a crime; This application is supported by the memorandum of points and authorities and on the supporting declarations and exhibits, filed herewith. DATED: April 21, 2000 By ________________________ [Attorneys for Plaintiffs]

6.2 Memorandum of Law in Support of Contempt Order

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA [CONSUMER 1], et al. Plaintiffs, OWEN T. MASCOTT, Defendants. Case No. Date MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF FINDING OF CONTEMPT I. INTRODUCTION Plaintiffs are seeking a finding of contempt against defendants Commonwealth Equity Adjustments, Inc. [CEA] and Eric Browning, and non-party Robert H. Hyde.4 Based on the recent depositions of Browning and Hyde it is clear that that they have continued to pressure check writers to pay unlawful treble damages through the use of both demand letters and false credit reporting information. Additionally, defendants have not consistently included the check amount when identifying the check, despite this Courts unequivocal order that they do so. II. CEA, BROWNING AND HYDE CONTINUE TO VIOLATE THE AUGUST 31, 2000 INJUNCTION A. TREBLE DAMAGE CALCULATIONS The primary monetary injunction violation involves CEAs continuing attempts to collect treble damages, pursuant to Cal. Civil Code 1719. [Section 1719]. Statutory damages equal to three times the amount of the check are available if the payee of the check, or an assignee of the payee, first sends a demand letter which meets two requirements: 1. The letter must be sent to the check writer by certified mail. 2. The written demand informs the check writer of (A) the provisions of Section 1719, (B) the amount of the check, and (C) the amount of the service charge payable to the payee.

According to Browning CEA ceased active operations as of October 31, 2001. 2/5/02 Deposition of Eric Browning, hereinafter E. Browning depo., p. 5: 21-23. However, CEA still exists and Browning has not ruled out reviving his collection business. E. Browning depo., pp. 25:7-26:10.

If the check writer does not pay the demand within thirty days of mailing, the check writer becomes liable for the check amount and a penalty of three times the amount of the check, with a minimum penalty of $100.00 and a maximum penalty of $1,500.00. Once the check writer becomes liable for treble damages, the check writer is no longer liable for a service charge or the cost of mailing the demand.5 Treble damages are only available to those who send a written demand that strictly conforms to the letter of the statute. Newman v. CheckRite of California, Inc., 912 F.Supp. 1354, 1376-1377 (E.D. Cal. 1995). This Court expressly enjoined defendants from: Making demands for treble damages pursuant to California Civil Code 1719 unless defendant has (1) sent a letter which meets all the requirements of 1719; and (2) maintained a record that shows the actual letter mailed, the actual date of mailing, and that the letter was sent certified mail. Emphasis added, Irwin v. Mascott, 112 F. Supp. 2d 937, 964 (N.D. Cal. 2000). Defendants violated the injunction because they have continued to seek treble damages although they have never sent any check writer a written demand which meets all the requirements of Section 1719. Treble damages which were calculated before the injunction remained in the check writers account after the injunction.6 Further, CEA has not maintained any record showing the actual letter mailed.7 Throughout at least most of 2000, and perhaps into 2001, CEA used the AFW letter to purportedly meet the requirements of 1719.8 Approximately thirty days after the AFW letter was sent, if the account remained unpaid CEAs computerized collection system would automatically add treble damages to the amount owed. These treble damages remained in the computer system and were never removed. Thus, even though the Court ruled that the AFW letters did not conform to the provisions of Section 1719 Id., p. 947, and prohibited defendants from attempting to collect treble damages unless they first sent a letter meeting the statutory requirements, treble damages already calculated remained in the system as part of the alleged debt. The AFW letter which CEA used in 2000 falls short of the statute because in the letter defendants misstate the statute and demand more than is owed. The AFW version used by defendants as of April 2000 and as of June 2000 contains the following paragraph: Section 1719 states that you can avoid [treble damage] liability by paying in full, within 30 days of the date of this letter, the amount of the check plus the

Civil Code 1719 is attached to the Declaration of Paul Arons in Support of Finding of Contempt, dated 3/15/02, hereinafter P. Arons Declaration as Exhibit 1. 6 2/12/02 Deposition of Robert K. Hyde, hereinafter R.Hyde depo., p. 68:7-10/ 7 Defendants claim the they sent each of the three initial declarants, Tiffany Caine, Ray Robinson and Crystal Gilbert, a certified AFW letter. Each declarant denies ever having received any certified letter from CEA. It is not necessary to resolve this dispute since the certified letter which CEA claims to have sent does not meet the requirements of Section 1719. 8 Sample AFW letters are attached to the Declaration of P. Arons, filed herewith, as Exhibits 2-5. It was necessary to use sample letters because, in violation of the injunction, CEA did not maintain a record of the actual letters mailed.

amount of the service charge, interest and legal notice cost. 4/27/2000 AFW letter, Emphasis added, Exhibit 3; 6/6/2000 AFW letter, Exhibit 4. Following this Courts August 30, 2000 summary judgment ruling, defendants changed legal notice cost to mailing cost. 9/26/2000 AFW letter, Exhibit 5; 10/31/2000 AFW letter, Exhibit 2. Thus, despite the fact that Section 1719 does not provide for interest, CEAs AFW letter stated that is did. Since CEA misstated the statute in the AFW letter, CEA did not send any check writer a letter that met the statutory requirements. Without a statutorily sufficient warning letter, no check writer ever became liable to CEA for treble damages. B. THE THREE DECLARANTS In addition to the fact that the AFW form letter did not meet the requirements of Section 1719, in each of the AFW letters allegedly sent Ray Robinson, Tiffany Caine and Crystal Gilbert, defendants overstated the check writers liability under Section 1719. Thus, in addition to misstating the statute, defendants demanded more than was due under the statute. CEA was entitled to demand the actual postage cost of sending the AFW letter. This was $1.675 in the year 2000.9 CEA was not entitled to demand interest. CEA made the following demands in the letters that were sent in purported compliance with Section 1719: Crystal Gilbert: Acct. No. 1S152156: AFW Letter sent 1/24/0010
Item Service charge Cost of Mailing Interest Lawful amount $25.00 $ 1.67 $ 0.00 Amount Demanded $25.00 $35.00 $ 0.37 Total Overcharge $ 0.00 $33.33 $ 0.37

Crystal Gilbert: Acct. No. 1S158914: AFW Letter sent 3/04/00

Item Service charge Cost of Mailing Interest Lawful amount $25.00 $ 1.67 $ 0.00 Amount Demanded $25.00 $35.00 $ 0.83 Total Overcharge $ 0.00 $33.33 $ 0.83

Crystal Gilbert: Acct. No. 1S184470: AFW Letter sent 7/11/00

Item Service charge Cost of Mailing Interest Lawful amount $25.00 $ 1.67 $ 0.00 Amount Demanded $25.00 $35.00 $ 0.58 Total Overcharge $ 0.00 $33.33 $ 0.58

Tiffany Caine: Acct. No. 1S155086: AFW Letter sent 2/15/0011

Item Service charge Cost of Mailing Interest Lawful amount $25.00 $ 1.67 $ 0.00 Amount Demanded $25.00 $35.00 $ 2.05 Total Overcharge $0.00 $33.33 $ 2.05

9. Order re: Contempt, filed 2/27/01, p. 5:18-20. 10. R. Hyde depo. pp. 41:14-42:11; 43:8-45:6. 11. R. Hyde depo., pp. 42:13-43:11

Ray Robinson: Acct. No. 1I030569: AFW Letter sent 9/19/0012

Item Service charge Cost of Mailing Interest Lawful amount $25.00 $ 1.67 $ 0.00 Amount Demanded $25.00 $1.90 $ 0.00 Total Overcharge $0.00 $ 0.23 $ 0.00

Thus, both in the text of the letters and in the amounts being demanded, the AFW letters do not pass muster under Section 1719. B. REPORTING FALSE INFORMATION TO CREDIT REPORTING AGENCIES CEAs practice was to report uncollected accounts to credit reporting agencies. CEA made these reports in order to facilitate collections by using the negative credit report entries to pressure check writers.13 Although the practice may have changed from time to time, the amount reported as owing was the balance due, as shown on the computer system. Thus, if the balance due included treble damages, that would be included in the amount owing. If a checkwriter disputed the debt with the credit bureau, the credit bureau would contact CEA for confirmation. This would trigger the sending of a demand letter for the balance due, including any unpaid treble damages.14 Tiffany Caines experience is illustrative. CEA sought to collect a $53.75 check written by Ms. Caine that had not cleared. On February 15, 2000 she was sent an AFW letter telling her that under Section 1719 she would be liable for treble damages if she did not pay the check amount, plus $2.05 in interest and $35.00 in legal notice costs. Ms. Caine paid the check amount, but not the additional charges. CEA reported these unpaid charges to Trans Union, a credit reporting agency. When Ms. Caine questioned this debt, CEA sent her a new demand to pay treble damages.15 In short, CEA operated as if this Courts August 30, 2000 rulings had never been made, and the injunction never existed.16 Robert Hyde testified that CEA never attempted to correct these credit report entries prior to October 2001, although he claims that corrections have now been made.17 C. FAILURE TO INCLUDE CHECK AMOUNT IN TIFFANY CAINE LETTER Robert Hyde testified that he physically reviews data to make sure that the check amount is included in the letter, and that he failed to catch that omission in the October 5, 2001 letter to Tiffany Caine.18 In light of the litany of factual misstatements emanating from defendants
12. R. Hyde depo., pp. 50:2-5. 13. R. Hyde depo., pp. 25:22-26:6. 14. R. Hyde depo., pp. 52:21-54:6. 15. R. Hyde depo., pp. 57:12-58:12. 16. Defendants disregard of the injunction typifies their response this litigation. When he was recently deposed Eric Browning had never seen the 2/17/00 contempt order and did not know that either CEA or he had been found in contempt. E. Browning depo., p. 10:1-17. Robert Hyde, forewarned by this line of questioning in the Browning deposition, testified that he vaguely recalled the outcome of the prior contempt proceeding. R. Hyde depo., pp. 27:25-28:22. 17. R. Hyde depo., pp. 24:18-25:21. 18. R. Hyde depo., pp. 55:18-57:11.

throughout this litigation, Hydes explanation is not particularly credible. The check amount on each account is in the computer data, and there is no reason why form letters cannot be programmed to accurately set forth that amount. Given defendants history of avoiding compliance with the law and with express court orders, defendants have not provided a justifiable excuse for omitting the check amount in the letter to Ms. Caine. III. SEVERE SANCTIONS ARE THE ONLY MEANS FOR ASSURING FUTURE COMPLIANCE WITH THE INJUNCTION CEA, Browning and Hyde have made clear that they do not intend to allow the injunction to unduly restrict their highly profitable and clearly unlawful collection practices. At this point, the only effective remedies include imposition of monetary sanctions designed to make class members whole for actual damages resulting from violations of the injunction. CEA, Browning and Hyde may then either pay the sanctions, or seek protection in bankruptcy. Either alternative will provide a strong disincentive to future violations of the injunction. Plaintiffs propose the following relief: Payment of $10,000.00 for sending Tiffany Caine a demand letter which did not include the face amount of the check and which sought treble damages pursuant to Section 1719 without CEA first having sent the required warning letter. This is pursuant to this Courts February 27, 2000 Order re: Contempt order, p. 10:4-16. Immediate correction of all class member credit reports, to eliminate reporting of any amounts due other than the unpaid amount of a check. Defendants shall provide a declaration describing in detail all steps that have been taken to comply with this requirement, and shall include copies of all correspondence with Trans Union or other credit reporting agencies concerning the correction of the credit reporting information. The Courts March 6, 2002 order concerning the preservation of documents shall continue in effect. At their expense defendants shall make a copy of the January 2002 back up tapes which they claim to have located. Eric Browning and Robert Hyde shall immediately conduct a detailed search for the October 31, 2001 back up tapes that claims he has lost. If they cannot locate these tapes, they shall file and serve detailed declarations describing their efforts to locate these tapes. Based on data obtained from the back up tapes, from the computer system formerly used by CEA, or from any other reliable source, plaintiffs shall determine the amount of money which defendants have collected in violation of the injunction. Plaintiffs shall submit a report setting forth this information. The Court will set a hearing and enter a judgment ordering repayment of all amounts unlawfully collected. CEA, Browning and Hyde shall pay interim attorneys fees and costs to plaintiffs counsel for obtaining this contempt order. Plaintiffs counsel shall be entitled to seek further fees and cost for additional work necessitated by the contempt order. Browning and Hyde shall be ordered to file and serve a report on the disposition and current location of all funds received in connection with the sale of 4807 Clayton Road, Concord, California. Neither CEA, Browning nor Hyde may use account data in CEAs former computer system until they have provided plaintiffs and the Court with a detailed written plan of their proposal to correct all check fee entries. Upon approval of the plan, defendants shall immediately implement correction of all fee entries.

Plaintiffs do not enjoy having to continuing to force defendants to obey the permanent injunction. There are, however, no readily available alternatives. Plaintiffs cannot initiate a criminal contempt action. Although the Federal Trade Commission has authority to broadly bar defendants from engaging debt collection, it is not clear that plaintiffs have the same standing. Moreover, as this Court has already noted, a costly monetary judgment that eliminates the profits derived from illegal conduct may be effective. 2/27/01 Order re: Contempt, p. 9:15-17. IV. CONCLUSION WHEREFORE, for the reasons stated herein, plaintiffs respectfully request that Commonwealth Equity Adjustments, Inc., Eric Browning and Robert Hyde be held in contempt. By ____________________________ Attorneys for Plaintiffs

6.3 Reply Memorandum in Support of Contempt Order

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA [CONSUMER 1], et al. Plaintiffs, v. OWEN T. MASCOTT, Defendants. Case No. Class Action Date Time Courtroom REPLY MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF FINDING OF CONTEMPT I. INTRODUCTION Plaintiffs are seeking a finding of contempt against defendants Commonwealth Equity Adjustments, Inc. [CEA] and Eric Browning, and non-party Robert H. Hyde. In their opposition memorandum the alleged contemnors argue: (1) this Court has no jurisdiction over Hyde; (2) CEA and Browning have substantially complied with Civil Code 1719; (3) CEA substantially complied with the Court order that its collection letters contain the original amount of the check; (4) the maximum liability for violating the injunction is $10,000.00. As shown below, these are frivolous arguments. II. THIS COURT ACQUIRED JURISDICTION OVER ROBERT HYDE IN THE PRIOR CONTEMPT PROCEEDING On December 7, 2000 plaintiffs applied for an Order to Show Cause re: Contempt directed against CEA, Eric Browning and Robert Hyde. The Court issued an OSC on December 8, 2000. Plaintiffs had this OSC personally served on Hyde. Personal service of the OSC conferred jurisdiction. On January 4, 2001 Robert Hyde appeared and was represented in this action. Thus, even if Hyde had never been served, his voluntary appearance conferred jurisdiction. Moreover, even though in the present contempt opposition Mr. Hydes name has been eliminated from the caption as a represented party, the opposition memorandum is replete

with jurisdictional arguments made solely on Mr. Hydes behalf. This Court acquired jurisdiction over Robert Hyde in December 2000 and that jurisdiction has never been lost.19 III. CEA HAS NOT COMPLIED WITH SECTION 1719 IN MAKING ITS TREBLE DAMAGE DEMANDS Defendants argue that they have complied with Cal. Civil Code 1719 in making treble damage demands. The AFW letters which they claim to have sent, however, include a statement that pursuant to Section 1719 the check writer must pay interest in order to avoid treble damages. In their opposition defendants simply pretend that the letters dont contain this statement. Defendants also fail to respond to the fact that although the injunction requires them to keep a record of the actual letter mailed to a check writer, the best that they can do is to produce a sample of the letter mailed. The sample letter does not include the name or address of the check writer, any check information, or the amounts charged. Irwin v. Mascott, 112 F. Supp. 2d 937, 964 (N.D. Cal. 2000). Defendants Opposition to Motion for Contempt, Exhibits AA, BB, CC and DD. Indeed, plaintiffs had to go to the trouble and expense of reviewing the CEA data base and deposing Robert Hyde in order to determine what demands had been made in the AFW letter. See, e.g., Deposition of Robert K. Hyde, taken 2/12/02, pp. 41-43, Exhibit 7 to Declaration of Paul Arons in Support of Finding of Contempt, filed 3/18/02. IV. IT IS NOT CLEAR WHETHER DEFENDANTS DENY REPORTING FALSE INFORMATION TO CREDIT BUREAUS CEAs practice was to report uncollected accounts to credit reporting agencies. This reporting appears to have continued through the cessation of CEA active collections in October 2001, more than one year after the injunction was issued in August 2000. The fact that the AFW demand letters that purportedly set up the treble damage demand were sent out prior to issuance of the injunction misses the point. The credit reporting which CEA made in an attempt to facilitate the collection of treble damages took place following the injunction. Raymond Robinsons negative credit entry from CEA was verified in December 2000. Declaration of Raymond Robinson, filed 12/13/01, Exhibit 1. Crystal Gilberts negative credit entries were reported in April 2001. Declaration of Crystal Gilbert, filed 12/13/01, Exhibit 1. Defendants do not explain why, following issuance of the injunction, they were using credit reporting to attempt to collect unlawfully imposed treble damages. V. THE OCTOBER 5, 2001 LETTER TO TIFFANY CAINE In the October 5, 2001 letter to Tiffany Caine defendants violated the permanent injunction by making unlawful treble damage demands and by failing to include the check
19

Defendants explanation of Mr. Hydes status since CEA went into hibernation after October 2001 is irrelevant. The Order to Show Cause concerns Hydes conduct on behalf of CEA, from the time the injunction was issued through the end of October 2001. At least in his deposition Mr. Hyde was represented by defendants counsel for his activity while employed by CEA. Deposition of Robert K. Hyde, taken 2/12/02, pp. 6:21-7:4., Exhibit I to Declaration of June Coleman in Opposition to Motion for Contempt, dated 4/2/02.

amount in the letter. Plaintiffs have already discussed the unlawfulness of the treble damage demands above. Defendants do not explain why form letters cannot be programmed to accurately set forth the check amount. Given defendants history of avoiding compliance with the law and with express court orders, defendants have not provided a justifiable excuse for omitting the check amount in the letter to Ms. Caine. VI. DEFENDANTS DO NOT PRESENT ANY LEGITIMATE REASON FOR AVOIDING THE IMPOSITION OF SEVERE SANCTIONS Plaintiffs are seeking severe sanctions because defendants have evidenced an intent to ignore the injunction when obedience is inconvenient or unprofitable. Payment of $10,000.00: Plaintiffs seek enforcement of the prospective $10,000.00 contempt sanction imposed by this Court in its February 27, 2000 Order re: Contempt, p. 10:4-16 for the Tiffany Caine letter. Other than claiming that they have done nothing wrong, defendants do not contest the propriety of this sanction. Actual Damages: Defendants assert that they are not liable for any actual damages caused by their violation of the injunction because the Court has already established $10,000.00 as the appropriate sanction and because class members have already been made whole. This argument is based on a misrepresentation of the settlement and a misunderstanding of the purpose of the $10,000.00 per letter sanction. Payments under the settlement agreement were limited to those class members who had received a collection demand and who had paid money, prior to August 31, 2000. Stipulation of Settlement, pp. 2:25-3:3; 5:14-16, Exhibit G to Declaration of June Coleman in Opposition to Motion for Contempt, dated 4/2/02. Thus, no one who has paid unlawful treble damages since August 31, 2000 has been compensated for that loss. Moreover, the prospective $10,000.00 sanction was designed to deter future misconduct, not to compensate victims. Both actual damages and prospective sanctions are available in a contempt action. American Airlines, Inc. v. Allies Pilots Assn., 228 F.3d 574, 584 (5th Cir. 2000); Glover v. Johnson, 199 F.3d 310, 313 (6th Cir. 1999). Immediate Correction of All Class Member Credit Reports: Plaintiffs request merely that defendants provide a declaration describing in detail all steps that have been taken to comply with this requirement, and include copies of all correspondence with TransUnion or other credit reporting agencies concerning the correction of the credit reporting information. Although defendants claim that this order would be superfluous, in light of both Mr. Brownings and Mr. Hydes past misstatements, there small burden involved in providing the requested detail and correspondence is easily outweighed by the interest in preventing the evasion of this injunction. Plaintiffs are concerned, for instance, that Mr. Hydes new collection agency, JBA Services, Inc., which seems to have acquired CEAs physical assets for free, has simply instructed TransUnion to change all the CEA debts to JBA debts. Production of relevant back up tapes: If defendants are potentially liable for actual damages, the most effective way to calculate these damages is through CEA computer data. Defendants do not appear to dispute the plaintiffs right to copies of the tapes. However, they claim that it would superfluous for Browning and Hyde to explain in detail under oath their efforts to locate the October 2001 back up tapes. The back up tapes are physical objects. The CEA headquarters are not that large. Plaintiffs cannot imagine how these back up tapes could be lost, only a few months after they were made. If actual damages are to be calculated, then the

back up tapes should be produced, or a detailed explanation for the inability to do so should be provided. Attorneys fees and costs: CEA, Browning and Hyde do not specifically respond to plaintiffs request for interim and final attorneys fees and costs to plaintiffs counsel for obtaining this contempt order. Therefore, if this Court determines that the defendants or Hyde are in contempt, this request should be granted. The Sale of the CEA Office Building: The alleged contemnors can be expected to claim that even if all of plaintiffs claims have merit, this proceeding is pointless because they do not have any way to satisfy a judgment. Although defendants imply that there was no equity in the office building, the sale price exceeded the encumbrances which existed at the time of settlement by approximately $200,000.00. Again, if contempt is found, the slight burden involved in providing the requested accounting is far outweighed by the potential benefit to victims of Brownings and Hydes injunction violations. Plaintiffs have also requested an order that neither CEA, Browning nor Hyde may use account data in CEAs former computer system until they have provided plaintiffs and the Court with a detailed written plan of their proposal to correct all check fee entries. Defendants have not responded to this request. VII. CONCLUSION WHEREFORE, for the reasons stated herein, plaintiffs respectfully request that Commonwealth Equity Adjustments, Inc., Eric Browning and Robert Hyde be held in contempt. DATED: April 10, 2002

By ____________________________ [Attorneys for Plaintiffs]

6.4 Proposed Contempt Order

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA [CONSUMER 1], et al. Plaintiffs, v. OWEN T. MASCOTT, Defendants. Case No. Class Action ORDER TO SHOW CAUSE RE: CONTEMPT The Court has considered plaintiffs application for an order to show cause re: contempt and is satisfied that the application presents sufficient grounds for contempt by Commonweatlh Equity Adjustments, Inc., Eric W. Browning and Robert K. Hyde for violation of the of this Courts August 31, 2000 order granting a permanent injunction prohibiting them, inter alia, from: Sending collection letters which do not include the face amount of the check in any identification of the debt or itemization of damages; Making demands for treble damages pursuant to California Civil Code 1719 unless defendant has (1) sent a letter which meets all the requirements of 1719; and (2) maintained a record that shows the actual letter mailed, the actual date of mailing, and that the letter was sent certified mail; Making any collection demands which CEA knows or should know are unlawful, false, deceptive or misleading or which otherwise violate the Fair Debt Collection Practices Act, including, but not limited to, falsely representing: (1) that a communication is from an attorney; (2) that failure to pay the money being demanded will result in a lawsuit being filed, a judgment being obtained, or a judgment being executed; or (3) that the check writer has committed a crime; This order to show cause is based on the fact that there is good cause to believe that the alleged contemnors have made or caused to be made demands for treble damages pursuant to Cal. Civil Code 1719, without first having complied with that statute, have communicated false information to credit reporting agencies in order to coerce payment of treble damages and check fees which are not owed, and have sent collection letters that do not include the face amount of the check in any identification of the debt or itemization of damages;

Therefore, plaintiffs application for an order to show cause is granted. Commonwealth Equity Adjustments, Inc., Eric W. Browning and Robert K. Hyde shall appear on __________________ at ______.m., in Courtroom C of the above-entitled Court, located in Courtroom C at 450 Golden Gate Ave., San Francisco, California to show cause, if any there be, why they should not be adjudged in contempt of court for violation of the August 31, 2000 permanent injunction and sanctioned as appropriate to compel their future compliance with the permanent injunction, including, but not limited to: 1. Paying $10,000.00, pursuant to this Courts February 27, 2001 contempt order for, sending a collection letter which violates this injunction, 2. Compensating those who have suffered monetary loss as a result of the violation of the injunction, 3. Immediately ceasing all efforts to collect check fees from California check writers, until a plan of operation encompassing all form collection letters and all check fee assessments for California check writers is approved by this Court 4. Paying the reasonable attorneys fees and costs incurred in connection with enforcing the injunction, No later than two weeks prior to the hearing date Commonwealth Equity Adjustments, Inc., Eric W. Browning shall file and serve any responsive pleadings, affidavits and exhibits. No later than one week after receipt thereof plaintiffs shall file and serve reply pleadings, affidavits and exhibits. Dated: ____________________________ Magistrate Judge James Larson United States District Court