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Stone v. Advance America

March 20, 2009

KERRIE STONE, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
ADVANCE AMERICA, CASH ADVANCE CENTERS, INC.; ADVANCE AMERICA, CASH ADVANCE CENTERS OF CALIFORNIA, LLC; AND DOES 1 THROUGH 50, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Hayes, Judge

ORDER

The matter before the Court is the Motion to Dismiss First Amended Complaint (Doc. # 19).

Background

On July 16, 2008, Plaintiff Kerrie Stone initiated this action by filing a class action complaint in the Superior Court of California, County of San Diego. Not. of Removal, p. 1-2. On August 21, 2008, Defendants removed the complaint to this Court (Doc. # 1) on grounds that this Court has subject matter jurisdiction pursuant to the Class Action Fairness Act, 28 U.S.C. 1332(d). On October 10, 2008, Plaintiff filed the first amended complaint ("FAC") (Doc. # 16), which is the operative pleading in this case.

The FAC alleges that Plaintiff is an individual residing in San Diego County, CA. The FAC alleges that Defendant Advance America, Cash Advance Centers of California, LLC ("Advance America/California") is a Delaware limited liability company with its principal place of business in South Carolina, and that Defendant Advance America, Cash Advance Centers, Inc. ("Centers") is a Delaware corporation with its principal place of business in South Carolina. The FAC alleges that Advance America/California is the alter ego of Centers for the following reasons:

(1) Centers appears to be the sole owner of Advance America/California; (2) all of the officers of Advance America/ California appear to be officers of Centers; (3) Advance America/ California and Centers share the same corporate headquarters and administrative operations; (4) Centers appears to use Advance America/ California as a mere shell, instrumentality or conduit to conduct Centers' business in California; (5) Centers and Advance America/ California appear to share the same website, which California consumers can use to apply for cash advances; (6) Centers and Advance America/ California appear to share the same trade name in California; (7) Advance America/ California appears to prosecute lawsuits in California on behalf of Centers, and vice versa; and (8) Advance America/ California appears to be insufficiently capitalized to satisfy the liabilities alleged herein.

FAC, ¶ 5. The FAC alleges that Defendants are in the business of providing short-term cash advances to individual customers, which are regulated by the California Deferred Deposit Transaction Law ("CDDTL"), Cal. Fin. Code section 23000, et seq.

The FAC alleges that on or about December 30, 2005, Plaintiff "obtained a cash advance from an 'Advance America' branch in San Diego County." Id., ¶ 10. The FAC alleges that "[o]n information and belief, . . . the branch is jointly operated by both Advance America/ California and Centers." Id. The FAC alleges that Plaintiff gave Defendants a check for $300.00, and in exchange Defendants gave Plaintiff approximately $255.00 in cash, keeping the difference as a service fee. The FAC alleges that the transaction "was memorialized in a standardized written contract" (the "Customer Agreement"). Id. The FAC alleges that "Defendants failed to give plaintiff any written disclosures of her rights or obligations before she entered into the [Customer Agreement]." Id. The FAC alleges that "Plaintiff was unable to repay the cash advance by the original due date," and that as a result, Defendants "charged plaintiff a fee to extend that date." Id. The FAC alleges that the "total fees that plaintiff paid in connection with the cash advance transaction exceeded 15% of the face amount of her check." Id. The FAC alleges that the Customer Agreement "plaintiff entered into contained an unconscionable class action waiver clause," which is unenforceable. Id., ¶ 11.

The FAC alleges causes of action for (1) violation of the CDDTL, (2) violation of the California Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code section 17200, et seq., and (3) violation of the California Consumer Legal Remedies Act ("CLRA"), Cal. Civ. Code section 1760, et seq. In support of the first cause of action for violation of the CDDTL, the FAC alleges that "Defendants included an unconscionable arbitration clause and class action waiver in the [Customer Agreement] entered into by plaintiff and the other Class members, which violated Cal. Fin. Code section 23035(h)(5)." Id., ¶ 21. The FAC alleges that "Defendants failed to give plaintiff or the other members of [the Class] written notice of their rights and duties prior to entering into their cash advance transactions, in violation of Cal. Fin. Code sections 23035(c) and (f)." Id., ¶ 22. In support of the second cause of action for violation of the UCL, the FAC alleges that Defendants' violations of the CDDTL alleged above constitute unlawful, unfair or fraudulent business acts or practices" under the UCL. Id., ¶ 30. In support of the third cause of action for violation of the CLRA, the FAC alleges that "[i]n [the Customer Agreement], defendants misrepresented that they would not charge a fee to extend an existing deferred deposit transaction, when in fact they did," which constitutes "an unfair method of competition and/or an unfair or deceptive act or practice." Id., ¶ 38. The FAC alleges that "by inserting an unconscionable arbitration clause and class action waiver into [the Customer Agreement], defendants committed an unfair method of competition and/or an unfair or deceptive act or practice." Id.

On October 30, 2008, Defendants filed the Motion to Dismiss the First Amended Complaint ("Motion to Dismiss"). Defendants move to dismiss the entire FAC as to Centers for lack of personal jurisdiction pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure. Defendants move to dismiss paragraph 21 of the first cause of action, the incorporation of paragraph 21 into the second cause of action and the entire third cause of action as to all Defendants on grounds that Plaintiff lacks standing pursuant to Rule 12(b)(1), and Rule 12(b)(6). Defendants move to dismiss paragraph 22 of the first cause of action and the incorporation of paragraph 22 into the second cause of action for failure to state a claim pursuant to Rule 12(b)(6). On December 1, 2008, Plaintiff filed a Response in Opposition to the Motion to Dismiss (Doc. # 20). On December 8, 2008, Defendants filed a Reply (Doc. # 21). On February 10, 2009, Defendants filed a Notice of Recent Authority, referring the Court to Meyer v. Spring Spectrum L.S., No. S153846 (Jan. 29, 2009 Cal.) (Doc. # 22).

Analysis

I. Motion to Dismiss the Amended Complaint in its Entirety as to Defendant Advance America, Cash Advance Centers, Inc. for Lack of Personal Jurisdiction

Defendants request that the Court dismiss Centers from this action with prejudice, pursuant to Rule 12(b)(2) for lack of personal jurisdiction. Defendants contend that Plaintiff has failed to satisfy her burden of establishing either general or specific personal jurisdiction over Centers. Plaintiff responds the exercise of personal jurisdiction over Centers is proper because Plaintiff has presented prima facie evidence that Centers either purposefully directed its activities at California, or purposefully availed itself of the privilege of conducting business in California; because Plaintiff's claims arise out of or relate to Centers' forum-related activities; and because Defendants have failed to demonstrate that the exercise of jurisdiction would be unreasonable.

On a motion to dismiss a complaint for lack of personal jurisdiction, the plaintiff bears the burden of establishing personal jurisdiction. Farmers Ins. Exchange v. Portage La Prarie Mut. Ins. Co., 907 F.2d 911, 912 (9th Cir. 1990). A district court has the discretion to take evidence at a preliminary hearing in order to resolve issues of credibility or disputed questions of fact with regard to jurisdiction. Data Disc, Inc. v. Systems Technology Associates, Inc., 557 F.2d 1280, 1285 (9th Cir. 1977). Where the motion to dismiss is based on written materials rather than an evidentiary hearing, the plaintiff need only make a prima facie showing of jurisdictional facts to satisfy this burden. Dole Food Co. v. Watts, 303 F.3d 1104, 1108 (9th Cir. 2002). While the plaintiff cannot "simply rest on the bare allegations of its complaint," Amba Marketing Systems, Inc. v. Jobar Int'l, Inc., 551 F.2d 784, 787 (9th Cir. 1977), uncontroverted allegations in the complaint must be taken as true. AT&T v. Campagnie Bruxelles Lambert, 94 F.3d 586, 588 (9th Cir. 1996). Conflicts between parties over statements contained in affidavits must be resolved in the plaintiff's favor. Id.; see also Bancroft & Masters, Inc. v. Augusta Nat'l, Inc., 223 F.3d 1082, 1087 (9th Cir. 2000). "[I]f a plaintiff's proof is limited to written materials, it is necessary only for these materials to demonstrate facts which support a finding of jurisdiction in order to avoid a motion to dismiss." Data Disc, Inc. v. Systems Technology Associates, Inc., 557 F.2d 1280, 1285 (9th Cir. 1977).

The exercise of personal jurisdiction over a nonresident defendant must be authorized under the state's long-arm statute and must satisfy the due process clause of the United States Constitution. Pac. Atl. Trading Co. v. M/V Main Express, 758 F.2d 1325, 1327 (9th Cir. 1985). California's long-arm statute permits the exercise of personal jurisdiction "on any basis not inconsistent with the Constitution of the United States." Cal. Civ. Pro. Code § 410.10. Due process requires that the defendant have such "minimum contacts" with the forum state that the exercise of jurisdiction over the defendant does not offend "traditional notions of fair play and substantial justice." International Shoe Co. v. Washington, 326 U.S. 310, 316 (1954). Under due process analysis, a defendant may be subject to either general or specific personal jurisdiction. Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408, 414 (1984).

A. General Personal Jurisdiction

Defendants contend that "Plaintiff's Opposition does not rely on a theory of general jurisdiction, except to allege that general jurisdiction might exist if Advance America/ California is the alter ego or agent of Centers." Reply, p. 5. Defendants contend that the relationship between Centers and Advance America/ California is insufficient to establish personal jurisdiction over Centers because Centers and Advance America/ California "have complied with all corporate formalities necessary to maintain corporate independence;" Advance America/ California is adequately capitalized; and Centers and Advance America/ California are "separate and distinct corporate entities." Mot. to Dismiss, p. 6-7. In support of the assertion that Advance America/ California is not the alter ego of Centers, Defendants submitted the Declaration of Thomas Newell, Vice President of Centers. Newell attests that Centers and Advance America/ California "are separate and distinct corporate entities;" that they maintain their "own separate corporate form and [were] incorporated for legitimate business purposes;" that they maintain "separate corporate books and records," hold separate corporate meetings and file separate tax returns; that corporate decisions "are made by each entity's separate board of directors/ managers;" and that they "have not and do not transfer money between the corporate entities for business or any other purpose, unless proper documentation has been made." Newell Decl., ¶¶ 3-12. Defendants contend that there is no basis for a finding of general jurisdiction over Centers.

Plaintiff makes one reference general jurisdiction in the Opposition, stating that "[g]eneral jurisdiction would exist if Advance America/ California was either the alter ego or some agent of Centers." Id. at 2, n 1. Although the FAC alleges that Advance America/ California is the alter ego of Centers, Plaintiff submits no evidence in support of her allegation that Centers and Advance America/ California are not distinct corporate entities. FAC, ¶ 5.

"For general jurisdiction to exist over a nonresident defendant . . . the defendant must engage in continuous and systematic general business contracts, that approximate physical presence in the forum state." Schwartzenegger v. Fred Martin Motor Co., 374 F.3d 797, 801 (9th Cir. 2004) (internal quotations omitted). "This is an exacting standard, as it should be, because a finding of general jurisdiction permits a defendant to be haled into court in the forum state to answer for any of its activities anywhere in the world." Id. To demonstrate that the alter ego doctrine applies, a plaintiff "must make out a prima facie case (1) that there is such unity of interest and ownership that the separate personalities [of the two entities] no longer ...


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