Adams v. Southern California First National Bank

HUFSTEDLER, Circuit Judge

(dissenting from denial of hearing en banc):

I cannot agree that California’s self-help repossession scheme does not so significantly involve the state as to constitute state action for the purpose of invoking the Fourteenth Amendment. Although each aspect of California’s participation, considered alone, might be inadequate to compel a state action conclusion, the combination of its activities draws the state well within the state action ambit. As Public Utilities Commission v. Pollak (1952), 343 U.S. 451 , 72 S.Ct. 813 , 96 L.Ed. 1068 teaches, ostensibly private action is state action if the state both heavily regulates the private activity and specifically approves the very practice challenged under the Fourteenth Amendment. 1 Underlying *341 the principle in Poliak is a recognition that enterprises operating within heavily regulated areas of activity are performing functions substantially affecting the public weal. The more pervasive is the regulation, the more likely is the.regulated enterprise performing a function of the state. 2 Demonstration of governmental interest, rather than the 'particular nature 3 or history 4 of the specific activity, is the public function indicium. When the activity not only falls within a regulated area, but also is the subject of a statute or administrative rule that expressly authorizes or mandates that activity by a regulated enterprise, private conduct pursuant to the statute or rule is deemed to be state action, as Moose Lodge No. 107 v. Irvis (1972), 407 U.S. 163 , 92 S.Ct. 1965 , 32 L.Ed.2d 627 implicitly acknowledges. There; the state heavily regulated some aspects of the lodge’s activity, but it exercised no regulatory jurisdiction over the lbdge’s discriminatory membership and guest policies. 5 The Court distinguished Moose Lodge from Poliak solely on the ground that “[ujnlike the situation in Public Utilities Comm’n v. Pollak, 343 U.S. 451 , 72 S.Ct. 813 , 96 L.Ed. 1068 (1952), where the regulatory agency had affirmatively approved the practice of the regulated entity after full investigation, the Pennsylvania Liquor Control Board has neither approved nor endorsed the racially discriminatory practices of Moose Lodge.” (Moose Lodge No. 107 v. Irvis, supra, 407 U.S. at 175 -176 n. 3, 92 S.Ct. at 1973 .) If the Pennsylvania regulatory agency had authorized the discriminatory policies of the lodgé, the state would thereby have assumed regulatory jurisdiction. Having assumed regulatory jurisdiction of such behavior, any acts of the lodge authorized by statute or regulation would have been state action.

When the principles of Pollak and Moose Lodge are applied to the California self-help repossession scheme, the conclusion of state action is compelled. The automobile-secured credit industry is heavily regulated by the state. (See, e. g., Cal.Civil Code §§ 2981-2984.4; Cal.Comm.Code §§ 9101-9507.) Self-help repossession, an ingredient of the industry, is the subject of elaborate state regulations. California authorizes self-help repossession (Cal.Comm.Code § 9503), and authorizes the creditor to obtain a deficiency judgment after sale of the repossessed automobile (id. § 9504). It requires that the police be notified of self-help repossessions (Cal.Veh.Code § 28) and facilitates the transfer of title to repossessed automobiles (id. §§ 5601, 9561). The Private Investigators and Adjusters Act (Cal.Bus. & Prof.Code §§ 7500-7590) licenses repossessors and regulates their activities. A state agency conducts examinations, collects fees, disciplines licensees, and otherwise administers the regulations. {Id. §§ 7510-7514; see 16 Cal.Admin.Code §§ 651-690.) The final weld of “private” action to state action is made by the statutes authorizing state licensed and regulated repossessors to carry out self-help repossession (Cal.Bus. & Prof.Code §§ 7500-7590) on behalf of creditors who are given the right to use self-help unless the contract between the creditor and the *342 debtor expressly denies them the remedy. (Cal.Comm.Code § 9503.)

California is not a neutral bystander in a contest between these private debtors and creditors. The economy of the state has become heavily dependent on the automobile industry in all its parts, an essential feature of which is consumer credit secured by interests in automobiles. . California’s statutory authorization to creditors to seize automobiles without prior notice or hearing reduces the creditors’ costs of repossession, for the evident purpose of stimulating the flow of consumer credit for the benefit of the state’s economy, at the expense of those whose automobiles are summarily seized. Thus, the automobile-secured credit industry in California has become a state instrumentality through which California seeks to generate public benefits. Of greater moment in this state action context, however, is that California’s regulatory scheme, by delegating to private persons power to resort to self-help, saves the state the expense that it ¿would otherwise incur in using its own ! governmental personnel to seize the 1 property and in providing notice and hearing before the state’s judicial and quasi-judicial officers. The state cannot avoid the impact of the Fourteenth Amendment by thriftily abdicating these functions to private persons. It cannot do so by expressly delegating a part of them to creditors or their nominees. (See Hall v. Garson (5th Cir. 1970), 430 F.2d 430 ; cf. Evans v. Newton (1966), 382 U.S. 296 , 86 S.Ct. 486 , 15 L.Ed.2d 373 ; United States v. Wiseman (2d Cir. 1971), 445 F.2d 792 . See also Burton v. Wilmington Parking Authority (1961), 365 U.S. 715 , 81 S.Ct. 856 , 6 L.Ed.2d 45 ; Terry v. Adams (1953), 345 U.S. 461 , 73 S.Ct. 809 , 97 L.Ed. 1152 ; Williams v. United States (1951), 341 U.S. 97 , 71 S.Ct. 576 , 95 L.Ed. 774 .)

California’s involvement in self-help repossession can be put into striking perspective by comparing these cases to Moose Lodge. Moose Lodge would have been analogous to Adams and Hampton if in Moose Lodge the state had not merely generally regulated the lodge, but had also, for public purposes, specifically authorized the lodge to discriminate on the basis of race and licensed agents of the lodge to effect that discrimination. As Moose Lodge itself indicates, a scheme of that kind would have brought the state squarely within the range of Pollak. (Compare Moose Lodge No. 107 v. Irvis, supra, 407 U.S. at 178-179 , 92 S.Ct. 1965 , with id. at 175-176 n. 3, 92 S.Ct. 1965 .)

Underlying the reluctance of this court to reach the state action destination to which the Supreme Court has directed us is fear that the same path will carry the Fourteenth Amendment into boundless territory. I do not share that fear. Very substantial limitations of the state action doctrine articulated by the Supreme Court in Public Utilities Commission v. Poliak, supra, inhere in that decision. (See Moose Lodge No. 107 v. Irvis, supra.) Even in those restricted instances in which private activity is drawn into the public orbit, few private acts are of the kind that could be found substantively violative of the Fourteenth Amendment. When the alleged violation of the Fourteenth Amendment lies in the procedural due process realm, flexible accommodations of the competing interests involved can be fashioned. (See, e. g., Fuentes v. Shevin (1972), 407 U.S. 67, 90-92 , 92 S.Ct. 1983 , 32 L.Ed.2d 556 ; cf. Lindsey v. Normet (1972), 405 U.S. 56 , 92 S.Ct. 862 , 31 L.Ed.2d 36 ; D. H. Overmyer Co. v. Frick Co. (1972) 405 U.S. 174 , 92 S.Ct. 775 , 31 L.Ed.2d 124 .)

We cannot permit the Fourteenth Amendment to be blunted because we fear that it may sometime have too sharp a point. The judiciary has ample tools to halt excesses if they arise.

I would take the cases en banc, affirm Adams, and reverse Hampton.

. “We find in the reasoning of the court below a sufficiently close relation between the Federal Government and the radio service [on Capital Transit vehicles] to make it necessary for us to consider [whether the radio service violates the First and Fifth] Amendments. In finding this relation we do not rely on the mere fact that Capital Transit operates a public utility on the streets of the District of Columbia under authority of Congress. Xor do we rely upon the fact that, by reason of such federal authorization, Capital Transit now enjoys a substantial mononoply of street railway and bus transportation in the District of Columbia. We do, however, recognize that Capital Transit operates its service under the regulatory supervision of the Public Utilities Commission of the District of Columbia which is an agency authorized by Congress. We rely particularly upon the fact that that agency, pursuant to protests against the radio program, ordered an investigation of it and, after formal public hearings, ordered its investigation dismissed on the ground that the public safety, comfort and convenience were not impaired thereby.” Public Utilities Commission v. Pollak (1952) 343 U.S. 451, 462 , 72 S.Ct. 813, 820 , 96 L.Ed. 1068 (emphasis added; footnote omitted). Compare Reitman v. Mulkey, (1967) 387 U.S. 369, 379 , 87 S.Ct. 1627 , 18 L.Ed.2d 830 , with McCabe v. Atchison, T. & S. F. Ry. (1914) 235 U.S. 151 , 35 S.Ct. 69 , 59 L.Ed. 169 ; Linscott v. Millers Falls Co. (1st Cir. 1971) 440 F.2d 14, 16 , with Railway Employees’ Dept. v. Hanson (1956) 351 U.S. 225, 231-232 , 76 S.Ct. 714 , 100 L.Ed. 1112 .

The Supreme Court has consistently regarded the statement in Poliak as having the force of a holding. (See, e. g., Evans v. Newton (1966) 382 U.S. 296, 301 , 86 S.Ct. 486 , 15 L.Ed.2d 373 ; cf. Moose Lodge No. 107 v. Irvis (1972) 407 U.S. 163 , 175-176 n. 3, 92 S.Ct. 1965 , 32 L.Ed.2d 627 .) Similarly, although Poliak addressed the issue of “federal government action,” the Court has indicated that Poliak’s principle is no less applicable in the state action context. (See Evans v. Newton, supra.) Finally, it is of *341 note that Pollak was not a racial discrimina^ tion case. (See Evans v. Newton, supra, 382 U.S. at 319-320 , 80 S.Ct. 486 (Harlan, J., dissenting).) Hence Judge Trask’s suggestion, even if otherwise sound, that certain state action principles should be confined to racial discrimination controversies cannot be applied to the rule articulated in Poliak.-

. Cf. Evans v. Newton (1966), 382 U.S. 296, 301-302 , 86 S.Ct. 480 , 15 L.Ed.2d 373 .

. Cf. Terry v. Adams (1953), 345 U.S. 461 , 73 S.Ct. 809 , 97 L.Ed. 1152 ; Marsh v. Alabama (1946) 326 U.S. 501 , 66 S.Ct. 276 , 90 L.Ed. 265 .

. Cf. Evans v. Newton (1966), 382 U.S. 296 , 80 S.Ct. 486 , 15 L.Ed.2d 373 .

. One of the state’s regulations indirectly exerted influence on the lodge’s policies. The Court obliterated this indirect effect of the regulation when it held that the regulation, facially neutral, was unconstitutional insofar as it could be applied to enforce the lodge’s racially discriminatory policies.