UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA
March 26, 2010
ROBERT BARABINO, PLAINTIFF,
CITIZENS AUTOMOBILE FINANCE, INC.; JPMORGAN CHASE BANK; WESTERN SURETY COMPANY; AND DOES 1 THROUGH TWENTY; DEFENDANTS.
The opinion of the court was delivered by: Morrison C. England, Jr. United States District Judge
MEMORANDUM AND ORDER
Presently before the Court are Motions by Defendants JPMorgan Chase Bank, N.A. and Citizens Automobile Finance, Inc. ("Defendants") to Dismiss the Complaint of Plaintiff Robert Barabino ("Plaintiff") for failure to state a claim upon which relief may be granted pursuant to Federal Rule of Civil Procedure 12(b)(6).*fn1 For the reasons set forth below, Defendants' motion is granted in part and denied in part.
On January 14, 2002, Plaintiff executed a Retail Installment Sales Contract ("Contract") for the purchase of a 2001 Bounder Diesel ("Vehicle") from Dan Gamel's Rocklin RV Center ("Seller"). The Contract states "ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF THE GOODS OR SERVICES OBTAINED PURSUANT HERETO." Subsequent to Plaintiff's purchase, Seller assigned its rights under the Contract to Bank One, N.A. Defendant JPMorgan Chase Bank, N.A. ("JPMorgan") acquired rights under the Contract as successor in interest to Bank One, N.A. by way of merger. Plaintiff made payments to JPMorgan in excess of $25,000. JPMorgan thereafter assigned its rights to Defendant Citizens Automobile Finance, Inc. ("Citizens"). Plaintiff has since made payments to Citizens in excess of $25,000. Citizens currently holds the contract and Plaintiff continues to make payments.
In 2004, Plaintiff filed suit in Eastern District of California, Case No. 2:04-cv-2359-MCE-EFB,(hereinafter "Barabino I") against Seller and the manufacturer of the Vehicle alleging violations of the Song-Beverly Consumer Warranty Act, the Magnuson-Moss Warranty Federal Trade Commission Improvement Act, the Consumers Legal Remedies Act, and fraud. In 2009, Plaintiff obtained judgment on all causes of action against Seller and awarded Plaintiff damages in the amount of $270,590.20.
In light of the entry of judgment in favor of Plaintiff on the fraud claim, Plaintiff asserts that the loan Contract now held by Citizens is unenforceable and void on the basis of fraud. Further, Plaintiff contends that under the terms of the Contract, Defendants are subject to all claims and defenses which Plaintiff could assert against Seller including Plaintiff's claim for award of attorney's fees. Defendants dispute this charge and argue that the Contract is enforceable. As such, Plaintiff seeks judicial declaration of their respective rights.
Defendants argue that Plaintiff's request for declaratory relief is barred by the doctrine of collateral estoppel. Defendants refer to an action brought by Plaintiff on November 26, 2006, Case No. 2:09-CV-00086-GEB KJM, (hereinafter "Barabino II") in which Plaintiff asserted that Defendants, as assignees of the Contract, were liable for claims that Plaintiffs had asserted against Seller. On August 12, 2009, the Court ruled that all of Plaintiff's claims were barred by the applicable statute of limitations and entered judgment in favor of Defendants. Based on this ruling, Defendants move to dismiss Plaintiff's present action on the grounds that it is barred by collateral estoppel, or in the alternative, should collateral estoppel not apply, the claims are still barred by the statute of limitations on the individual claims that were originally brought against Seller.
On a motion to dismiss for failure to state a claim under Rule 12(b)(6), all allegations of material fact must be accepted as true and construed in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Rule 8(a)(2) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief" in order to "give the defendant fair notice of what the...claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1964 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the "grounds" of his "entitlement to relief" requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Id. at 1964-65 (internal citations and quotations omitted). Factual allegations must be enough to raise a right to relief above the speculative level. Id. at 1965 (citing 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp. 235-36 (3d ed. 2004) ("The pleading must contain something more...than...a statement of facts that merely creates a suspicion [of] a legally cognizable right of action")).
A court granting a motion to dismiss a complaint must then decide whether to grant leave to amend. A court should "freely give" leave to amend when there is no "undue delay, bad faith[,] dilatory motive on the part of the movant,...undue prejudice to the opposing party by virtue of...the amendment, [or] futility of the amendment...." Fed. R. Civ. P. 15(a); Foman v. Davis, 371 U.S. 178, 182 (1962). Generally, leave to amend is denied only when it is clear the deficiencies of the complaint cannot be cured by amendment. DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992).
Under California Law, collateral estoppel may only apply if five threshold requirements are met. In Re Baldwin, 249 F.3d 912 (9th Cir. 2001) (citing Lucido v. Superior Court, 51 Cal. 3d 335, 340 (1990)). First, the issue sought to be precluded from relitigation must be identical to that decided in a former proceeding. Id. Second, this issue must have been actually litigated in the former proceeding. Id. Third, it must have been necessarily decided in the former proceeding. Id. Fourth, the decision in the former proceeding must be final and on the merits. Id. Finally, the party against whom preclusion is sought must be the same as, or in privity with, the party to the former proceeding. Id.
Plaintiff argues that collateral estoppel does not apply to his claim for declaratory relief because, unlike his suit in Barabino II, Plaintiff states he is not seeking to again hold Defendants liable for Seller's actions. Rather, Plaintiff argues that as a result of the Court's ruling in Barabino I, in which Plaintiff obtained judgment against the Seller for fraud, Plaintiff is unclear on whether that fraud now voids his Contract thereby relieving him of any obligation to make payments to Citizens. Although the Contract currently held by Citizens is scheduled to run though 2017, due to his success on the fraud claim, Plaintiff believes that the Contract is void, that he is no longer required to make further payments and that Defendants should return all monies paid. Accordingly, Plaintiff states he seeks judicial determination of the enforceability of the Contract.
However, Plaintiff's characterization of the remedy he seeks is incomplete. Plaintiff's Complaint states:
"Plaintiff desires a judicial determination of the rights and duties of all parties to this action under the Contract, including a declaration as to whether the Contract is enforceable, and, a declaration of the liability, if any, of defendants for claims and defenses which plaintiff could assert, and has asserted against [Seller], including plaintiff's claim for an award of attorney's fees."
(Pl.'s Compl. ¶ 17). Therefore, although couched as a single cause of action, Plaintiff is in fact seeking resolution on two issues; 1) whether the Contract held by Citizens is enforceable and, 2) whether there is any liability of Defendants for claims which Plaintiff has and could have asserted against Seller.
As regards to the second issue, that matter has already been adjudicated. In Barabino II, Plaintiff attempted to hold Defendants liable for all claims previously brought against Seller in Barabino I under the theory that Defendants as "holders of the consumer credit contract [, were] subject to all claims and defenses which the debtor could assert against the seller of goods or services obtained..." (Def.'s Ex. C pg. 2) The Court dismissed Plaintiff's based on this theory holding that the claims, as alleged against Defendants, were barred by the statute of limitations. (Def.'s Ex. C pgs. 5-6)
Resultantly, the issue of Defendants' liability for claims brought against the Seller is collaterally estopped from relitigation. Defendants' Motion to Dismiss Plaintiff's request for declaratory relief on the matter is granted.
Conversely, neither Barabino I nor Barabino II directly address the issue of enforceability of the Contract. Unlike the claims addressed in the antecedent cases, the issue of enforceability does not necessarily pertain to the liability of the parties, but rather rests on the validity of the instrument. As such, Plaintiff's request for judicial determination on this issue is not collaterally estopped. Defendants' Motion to Dismiss Plaintiff's request for declaratory relief on this matter is denied.
Accordingly, Defendants' Motion to Dismiss (Docket Nos. 5 and 7) is hereby GRANTED on the issue of Defendants' liability, and DENIED on the issue of enforceability of the contract.
IT IS SO ORDERED.