Justice Scalia, Liberal Construction & The Finance Lenders Law

by Allen Matkins

A few weeks ago, I purchased a copy of Reading Law: The Interpretation of Legal Texts by Justice Antonin Scalia and Bryan Garner.  According to the cover, the authors “carefully and engagingly explain 57 valid canons of construction and dispel 13 false notions about legal interpretation . . . .”  While it is true that the book is engaging (and I would add thought provoking), California lawyers will need to be careful in applying some of its dictates as they are not always in harmony with California law.

For example, one of the 13 falsities exposed by the authors is the “notion that remedial statutes should be liberally construed”.  The authors begin by citing Jeremy Bentham’s objection to the rule – “As if other statutes were to be expounded illiberally and unbeneficially.”  They then remark on the difficulty of identifying remedial statutes, asking “Is any statute not remedial?” (emphasis in original).  They then argue that identifying a “liberal construction” is impossible and thus this rule is “an open invitation to engage in ‘purposive’ rather than textual interpretation, and generally to engage in judicial improvisation.”

I am very sympathetic to these arguments, but the California legislature was not when it enacted the Finance Lenders Law.  Although the legislature did not label the law as “remedial”, the legislature left no doubt as to how the CFL should be interpreted.  Financial Code Section 22001(a) unequivocally commands that the CFL be “liberally construed and applied” thereby dispelling Scalia and Garner’s first objection.  As for their second objection, the legislature just didn’t issue an open invitation, it sent a car.  Section 22001(a) commands that it is in fact to be interpreted “to promote its underlying purposes and policies”.  Thus, there can be no doubt that legislature  intended a purposive rather than textual interpretation of the CFL.

Does any of this really matter?  In Brack v. Omni Loan Co., Ltd., 164 Cal. App. 4th 1312 (2008), the California Court of Appeal cited Section 22001(a) to refuse enforcement of a Nevada choice of law provision in a loan agreement. In O’Donovan v. Cashcall, Inc., 2009 U.S. Dist. LEXIS 53895 (N.D. Cal., June 24, 2009), Magistrate Judge Maria-Elena James ruled that the limitation on fees imposed by Section 22320 applied to electronic transfers:

In enacting the Financial Lenders Law, the California legislature instructed that “this division shall be liberally construed and applied to promote its underlying purposes and policies… [including] to simplify, clarify, and modernize the law governing loans made by finance lenders.” Cal. Fin. Code § 22001(a). In light of the statute’s legislative intent, Plaintiffs’ argument that § 22320 is limited to traditional paper checks is unpersuasive.

The legislature has liberally salted various California acts with the admonition that they be liberally construed. See, e.g., Capital Access Company Law (Corporations Code Section 28001), the Business & Industrial Development Corporations Law (Corporations Code Section 31001), and the entire Commercial Code (Section 1101).  This returns us, of course, to the question of what’s to be done with all those statutes for which no command has been given.

First Monday in October

The U.S. Supreme Court’s term begins today.  Last week, the Court granted certiorari in Gabelli v. Securities and Exchange Commission. The case involves the application of the statute of limitations (28 U.S.C. § 2642) to a claim for penalties brought by the SEC.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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