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Bailey v. Household Finance Corporation of California

November 4, 2010

DEBRA ANN BAILEY ET AL., PLAINTIFF,
v.
HOUSEHOLD FINANCE CORPORATION OF CALIFORNIA, HSBC FINANCE CORPORATION, HSBC CARD SERVICES INC., HSBC BANK NEVADA, N.A., DEFENDANTS.



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

ORDER

The matters before the Court are the Motion to Dismiss Portions of Plaintiff's First Amended Complaint (ECF No. 20) filed by Defendants Household Finance Corp. of California, HSBC Card Services Inc., and HSBC Bank Nevada, N.A. for failure to state a claim; and the Motion to Dismiss First Amended Complaint (ECF No. 23) filed by HSBC Finance Corporation for lack of personal jurisdiction.

BACKGROUND

Plaintiff Debra Ann Bailey ("Plaintiff") filed a putative class action complaint alleging that Defendants Household Finance Corp. of California, HSBC Card Services Inc., and HSBC Bank Nevada, N.A. violated California's Rosenthal Fair Debt Collection Practices Act, Cal. Civil Code §§ 1788-1788.32; California's Invasion of Privacy Act, California Penal Code § 630, et seq.; the federal Telephone Consumer Protection Act; and California's Unfair Competition Law, Cal. Bus. & Prof. Code § 17200, et seq. (ECF No. 14 at 2).

Plaintiff alleges that in 2007, she received a personal loan from Household Finance Corp. of California for $6,000 with an annual interest rate of 29% and monthly payments of $229. Id. at 6 ¶ 24. Plaintiff alleges that in 2006 or 2007, she received an unsolicited credit card from "HSBC."*fn1 Id. at 7 ¶ 25. Plaintiff alleges that in July 2009, she was no longer able to make payments on her Household Finance Corp. of California loan and "HSBC" credit card. Id. at 7 ¶ 26. Plaintiff alleges that "Defendants persisted in a course of action in making hundreds of telephone calls to Plaintiff, mainly on her cellular telephone but also to her land line home phone, in an attempt to coerce her to make payments on her loans." Id. at 7 ¶ 27.

Plaintiff alleges that Defendants violated California's Invasion of Privacy Act, California Penal Code § 630, et seq. by using "a software system that enables [Defendants] to secretly record confidential telephone conversations...." Id. at 20 ¶ 105. Plaintiff alleges that Defendants violated California's Invasion of Privacy Act, and the federal Telephone Consumer Protection Act by secretly recording confidential telephonic communications "without an advisory at the initiation of the telephone call that these confidential telephonic communications could be or were being monitored and/or recorded, and without obtaining express advance consent to record such conversations or providing an advisory at the initiation of the call [that] such calls would be recorded." Id. at 20-21 ¶ 108; 22 ¶ 117.

Plaintiff alleges that Defendants also violate California's Unfair Competition Law, Cal. Bus. & Prof. Code § 17200, et seq. Id. at 22 ¶ 117. Plaintiff alleges that during a phone call on October 8, 2009, a "[Household Finance Corp. of California] representative demanded that Plaintiff make a full monthly payment of $229, in order for her to qualify for a hardship program." Id. at 14 ¶ 89. Plaintiff alleges that she told the Household Finance Corp. of California representative that she would need to borrow the money but, "[t]he representative indicated that the company did not care, and made it clear that doing so would be the only way she could stop the multiple daily telephone calls, including the calls to her cellular telephone." Id. Plaintiff alleges that she borrowed the money and paid it to "[Household Finance Corp. of California] to stop such harassing calls." Id. Plaintiff further alleges that she "has needed to pay additional amounts for cellular telephone charges attributable to such calls, $100 to a bankruptcy attorney based on her trying to determine if there was a way to stop such calls, and approximately $25 in mailing costs to Defendants sending certified letters related to such calls." Id.

On June 24, 2010, Defendants Household Finance Corp. of California, HSBC Card Services Inc., and HSBC Bank Nevada, N.A. filed this Motion to Dismiss Portions of Plaintiff's First Amended Complaint. (ECF No. 20). The Motion to Dismiss asserts that the First Amended Complaint fails to state a claim against Defendants for violations of California's Invasion of Privacy Act, California Penal Code § 630, et seq. and California's Unfair Competition Law, Cal. Bus. & Prof. Code § 17200, et seq. pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Id. at 6. Defendants also filed a Request for Judicial Notice in Support of the Motion to Dismiss. (ECF No. 20-2).

On July 22, 2010, Plaintiff filed an Opposition. (ECF No. 28). Plaintiff also filed an Objection and Request to Strike "Exhibit A" to the Request for Judicial Notice. (ECF No. 28-2). On August 2, 2010, Defendants filed a Reply. (ECF No. 31).

I. Motion to Dismiss For Failure to State a Claim by Household Finance Corp. of California, HSBC Card Services, HSBC Bank Nevada

Federal Rule of Civil Procedure 12(b)(6) permits dismissal for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). Dismissal under Rule 12(b)(6) is appropriate where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory. See Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). Courts may "consider... matters of judicial notice without converting the motion to dismiss into a motion for summary judgment." United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003) (citations omitted).

To sufficiently state a claim to relief and survive a Rule 12(b)(6) motion, a complaint "does not need detailed factual allegations" but the "[f]actual allegations must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). "[A] plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. (quoting Fed. R. Civ. P. 8(a)(2)). When considering a motion to dismiss, a court must accept as true all "well-pleaded factual allegations." Ashcroft v. Iqbal, --- U.S. ----, 129 S.Ct. 1937, 1950 (2009). "[F]or a complaint to survive a motion to dismiss, the non-conclusory factual content, and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (quotations omitted).

A. Penal Code Section 632 Claim

Defendants contend that the Penal Code claim against HSBC Card Services and HSBC Bank Nevada should be dismissed because Plaintiff expressly consented to call recording and monitoring. (ECF No. 20-1 at 21). Defendants have submitted a cardmember agreement which states, "You agree that our supervisory personnel may listen and record telephone calls between you and our representatives[.]" (ECF No. 20-2 at 15). Defendants request the Court take judicial notice of the cardmember agreement. (ECF No. 20-2 at 2). Defendants explain that "Plaintiff references her credit card account with HSBC Bank Nevada in the First Amended Complaint, but does not attach the operative agreement as an exhibit." Id. Defendant seeks judicial notice "[t]o remedy that omission[.]" Id.

Plaintiff opposes Defendants' request for judicial notice and disputes the document's authenticity asserting that it is "a generic, undated and unsigned purported 'operative agreement' that does not even contain plaintiff's name or any indicia relating the document to plaintiff." (ECF No. 28-2 at 2). Plaintiff also contends that the document is hearsay because "Defendants improperly rely on [the operative agreement] to prove the truth of what it states." Id. at 5.

Fed R. Evid. 201 provides that "a judicially noticed fact must be one not subject to reasonable dispute in that it is... capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Fed R. Evid. 210(b). "[D]ocuments whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading, may be considered in ruling on a Rule 12(b)(6) motion to dismiss." Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994) (overruled on other grounds by Galbraith v. County of Santa Clara, 307 F.3d 1119, 1125 (9th Cir. 2002)). "Such consideration does not convert the motion to dismiss into a motion for summary judgment." Id. (quotation omitted). "[A] court may not take judicial notice of a fact that is subject to reasonable dispute." Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cal. 2001) (quotation omitted).

In this case, Plaintiff questions the authenticity of the cardmember agreement and the document is not "capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201. The cardmember agreement is not referred to in the allegations of the Complaint. Defendants' request for judicial notice (ECF No. 20-2) is denied.*fn2 Defendant's Motion to Dismiss the Penal Code claim relies upon documents outside the allegations in the Complaint which is not appropriate under Rule 12(b)(6). Defendants' Motion to Dismiss Plaintiff's claim for violation of California Penal Code Section 632 is denied.

B. California's Unfair Competition Law Claim

1. The Loan

Defendants contend that Plaintiff lacks standing to assert a claim under California's Unfair Competition Law ("UCL") with regard to her personal loan because the Complaint fails to allege facts to support a claim that she lost any money or property within the meaning of the UCL. (ECF No. 20-1 at 14). Defendants contend that "only a loss eligible for 'restitution' confers UCL standing." Id. Defendants contend that the single $229 payment that Plaintiff paid to Household Finance Corp. of California was not restitutionary in nature and cannot show Plaintiff suffered an injury in fact. Id. at 17. Defendants assert that "Plaintiff was contractually obligated to make that payment, and, more importantly, [Household Finance Corp. of California] was legally entitled to receive it." Id. at 14. Defendants further contend that any payments that Plaintiff made to third parties would be a basis for damages, not restitution. Id. at 16-17.

Plaintiff contends that standing exists where the wrong caused the harm. (ECF No. 28 at 8). Plaintiff contends that "she only needs to assert that she expended money that she would not have paid at the time if she had not been exposed to the illegal conduct." Id. at 8-9.

California's UCL permits civil recovery for "any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising...." Cal. Bus. & Prof. Code § 17200. "Historically, the UCL authorized any person acting for the interests of the general public to sue for relief notwithstanding any lack of injury or damages." Durell v. Sharp Healthcare, 183 Cal. App. 4th 1350, 1359 (2010); see also Californians for Disability Rights v. Mervyn's, LLC, 39 Cal. 4th 223, 227 (2006). Proposition 64 amended the UCL to limit standing to sue. Durell, 183 Cal. App. 4th at 1359. "After Proposition 64,... a private person has standing to sue only if he or she 'has suffered [an] injury in fact and has lost money or property as a result of such unfair competition.'" Californians for Disability Rights, 39 Cal. 4th at 227 (quoting Cal. Bus. & Prof. Code § 17204); see also Hall v. Time, Inc., 158 Cal. App. 4th 847, 855 (2008).

"The remedies available under the UCL are limited to injunctive, restitutionary and related relief." Nelson v. Pearson Ford Co., 186 Cal. App. 4th 983, 1015 (2010) (citations omitted). "[T]he notion of restoring something to a victim of unfair competition includes two separate components. The offending party must have obtained something to which it was not entitled and the victim must have given up something which he or she was entitled to keep." Day v. AT&T Corp., 63 Cal. App. 4th 325, 340 (1998); see also Feitelberg v. Credit Suisse First Boston, LLC, 134 Cal. App. 4th 997, 1012 (2005) (quoting id.). "Restitution thus is available where 'a defendant has wrongfully acquired funds or property in which a plaintiff has an ownership or vested interest.'" ...


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