United States District Court, S.D. California
Decided July 1, 2014
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For Dean Beaver, Husband and Wife, Laurie Beaver, Husband and Wife, Steven Adelman, an individual, Abram Aghachi, an individual, Dinesh Gauba, an individual, Kevin Kenna, husband and wife, on behalf of themselves and all others similarly situated, Veronica Kenna, husband and wife, on behalf of themselves and all others similarly situated, Plaintiffs: Donald Eugene Chomiak, LEAD ATTORNEY, Talisman Law, P.C., Glendale, CA; Michael Lawrence Schrag, Tyler R. Meade, LEAD ATTORNEYS, Meade & Schrag, LLP, Berkeley, CA; Michael Rubin, Altshuler Berzon LLP, San Francisco, CA; Wendy C. Fostvedt, PRO HAC VICE, Fostvedt Legal Group, LLC, Basalt, CO.
For Tarsadia Hotels, a California corporation, Tushar Patel, an individual, B.U. Patel, an individual, Gregory Casserly, an individual, 5th Rock LLC, a Delaware limited liability company, MKP One, LLC, a California limited liability company, Gaslamp Holdings, LLC, a California limited liability company, Defendants: Alicia Natalie Vaz, Perry Hughes, LEAD ATTORNEYS, Cox Castle and Nicholson, Los Angeles, CA; Frederick H Kranz, Jr, Lynn T Galuppo, Cox Castle & Nicholson LLP, Irvine, CA.
For Playground Destination Properties, Inc., a Washington corporation, Defendant: Daniel M. Benjamin, LEAD ATTORNEY, Ballard Spahr, LLP, San Diego, CA; John J. Rice, Thomas W McNamara, Ballard Spahr LLP, San Diego, CA.
For Gregory Casserly, an individual, MKP One, LLC, a California limited liability company, Tushar Patel, an individual, 5th Rock LLC, a Delaware limited liability company, Gaslamp Holdings, LLC, a California limited liability company, Tarsadia Hotels, a California corporation, B.U. Patel, an individual, ThirdParty Plaintiffs: Alicia Natalie Vaz, Perry Hughes, LEAD ATTORNEYS, Cox Castle and Nicholson, Los Angeles, CA; Frederick H Kranz, Jr, Cox Castle & Nicholson LLP, Irvine, CA.
For Greenberg Traurig, LLP, a limited liability partnership, ThirdParty Defendant: Michael P McNamara, LEAD ATTORNEY, Steptoe & Johnson LLP, Los Angeles, CA; Dylan Ruga, Steptoe & Johnson LLP, Los Angeles, CA.
ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS' MOTION FOR RECONSIDERATION; AND GRANTING TARSADIA DEFENDANTS' AND PLAYGROUND'S MOTIONS FOR SUMMARY JUDGMENT ON THE NEGLIGENCE CAUSE OF ACTION [Dkt. Nos. 81, 94, 98, 138.]
HON. GONZALO P. CURIEL, United States District Judge.
Before the Court is Plaintiffs' motion for reconsideration of two rulings in the Court's order filed on October 16, 2013. (Dkt. No. 133.) In that order, the Court denied Plaintiffs' motion for summary judgment based on the " unlawful" prong of California's Unfair Competition Law (" UCL" ) and granted Tarsadia Defendants and Defendant Playground Destination Properties, Inc.'s (" Playground" ) motions for summary judgment as to all
causes of action except the negligence cause of action. (Dkt. No. 128.) On November 12, 2013, Plaintiffs filed an amended motion for reconsideration. (Dkt. No. 138.) Tarsadia Defendants and Playground filed their oppositions on March 7, 2014. (Dkt. Nos. 146, 147.) A reply was filed on March 14, 2014. (Dkt. No. 148.)
In the Court's order on the parties' motions for summary judgment, the Court requested supplemental briefing on the negligence cause of action. (Dkt. No. 128.) Pursuant to the Court's direction, the parties filed supplemental briefs on the negligence cause of action. (Dkt. Nos. 134, 135, 136.)
A hearing was held on April 18, 2014. (Dkt. No. 149.) Michael Rubin, Esq., Michael Reiser, Esq. and Tyler Meade, Esq. appeared on behalf of Plaintiffs. Alicia Vaz, Esq. and Frederick Kranz, Esq. appeared on behalf of Tarsadia Defendants; and Daniel Benjamin, Esq. appeared on behalf of Defendant Playground. Based on the reasoning below, the Court GRANTS in part and DENIES in part Plaintiffs' motion for reconsideration; and GRANTS Tarsadia Defendants and Playground's motions for summary judgment on the negligence cause of action.
MOTION FOR RECONSIDERATION
A. Legal Standard on Motion for Reconsideration
A district court may reconsider a grant of summary judgment under either Federal Rule of Civil Procedure (" Rule" ) 59(e) or Rule 60(b). Sch. Dist. No. 1J, Multnomah County, Or. v. AcandS, Inc., 5 F.3d 1255, 1262 (9th Cir. 1993). Plaintiffs do not assert which rule they move under but it appears that Plaintiffs are moving under Rule 59(e) based on the standard they assert.
Federal Rule of Civil Procedure 59(e) provides for the filing of a motion to alter or amend a judgment. Fed.R.Civ.P. 59(e). A motion for reconsideration, under Federal Rule of Civil Procedure 59(e), is " appropriate if the district court (1) is presented with newly discovered evidence; (2) clear error or the initial decision was manifestly unjust, or (3) if there is an intervening change in controlling law." Sch. Dist. No. 1J, Multnomah County, Or., 5 F.3d at 1263; see also Ybarra v. McDaniel, 656 F.3d 984, 998 (9th Cir. 2011).
In addition, Local Civil Rule 7.1(i)(1) provides that a motion for reconsideration must include an affidavit or certified statement of a party or attorney " setting forth the material facts and circumstances surrounding each prior application, including inter alia: (1) when and to what judge the application was made, (2) what ruling or decision or order was made thereon, and (3) what new and different facts and circumstances are claimed to exist which did not exist, or were not shown upon such prior application." Local Civ. R. 7.1(i)(1).
The Court has discretion in granting or denying a motion for reconsideration. Fuller v. M.G. Jewelry, 950 F.2d 1437, 1441 (9th Cir. 1991). A motion for reconsideration should not be granted absent highly unusual circumstances. 389 Orange St. Partners v. Arnold, 179 F.3d 656, 665 (9th Cir. 1999). " A motion for reconsideration cannot be used to ask the
Court to rethink what the Court has already thought through merely because a party disagrees with the Court's decision. Collins v. D.R. Horton, Inc., 252 F.Supp.2d 936, 938 (D. Az. 2003) (citing United States v. Rezzonico, 32 F.Supp.2d 1112, 1116 (D. Az.1998)).
Plaintiffs move for reconsideration arguing that the Court's ruling that 1) Plaintiffs' claims under California's Unfair Competition Law, California Business & Professions Code section 17200 et seq. are governed by a three year statute of limitations set forth under the Interstate Land Sales Full Disclosure Act (" ILSA" ) rather than the four year statute of limitations in section 17208 of the UCL is based on " clear error" ; and 2) that scienter is required to establish a violation of the ILSA's anti-fraud provision should be reconsidered based on " an intervening change in the controlling law." (Dkt. No. 138 at 16.)
Tarsadia Defendants oppose both issues while Playground only opposes the reconsideration of the UCL claim since the fraud claim against it was previously dismissed with prejudice.
B. California's Unfair Competition Law, UCL
Plaintiffs' argument is two pronged. First, Plaintiffs contend that the California legislature intended the UCL's four year statute of limitations to apply to all UCL claims, including those based on federal law with shorter limitations period. This argument is based on the California legislature's freedom to enact any laws as long as those protections do not violate the Supremacy Clause. Second, nothing in the ILSA preempts the UCL or its four year statute of limitations. Specifically, they argue that the ILSA invites states to enact parallel laws that are stricter than the ILSA under 15 U.S.C. § 1708 and § 1713. Since the ILSA has no preemptive effect, which is the only way federal law can displace state law, courts have the authority to apply Plaintiffs' UCL four year statute of limitations even though it borrows from a federal statute, ILSA, with a shorter three year statute of limitations.
Tarsadia Defendants and Playground oppose arguing that Plaintiffs have failed to meet the standard for reconsideration of " clear error" and are merely improperly repeating their arguments in prior briefing. Second, they assert that when Congress has established a time limit for enforcing a federal right, that limitations period must apply.
California's Unfair Competition Law prohibits any " unlawful, unfair or fraudulent business act or practice." Cal. Bus. & Prof. Code § 17200. " Each of these three adjectives [unlawful, unfair or fraudulent] captures a separate and distinct theory of liability." Rubio v. Capital One Bank, 613 F.3d 1195, 1203 (9th Cir. 2010) (quotation marks omitted). The UCL's coverage is broad, sweeping and embracing of anything that can be properly called a business practice and at the same time forbidden by law.
Cel-Tech Comms., Inc. v. Los Angeles Cellular Tel. Co., 20 Cal.4th 163, 180, 83 Cal.Rptr.2d 548, 973 P.2d 527 (1999). " It governs 'anti-competitive business practices' as well as injuries to consumers, and has a major purpose 'the preservation of fair business competition.'" Id. (citations omitted)
The California Supreme Court explained that while the unfair competition law is broad and sweeping, " it is not unlimited" and plaintiffs may not " plead around" an " absolute bar to relief" by " recasting the cause of action as one for unfair competition." Id. at 182. For example, courts may not impose their own notions of what is fair or unfair, specific legislation may limit the court's power to declare conduct unfair, and when specific legislation provides a safe harbor, plaintiffs may not use the general unfair competition law to " assault that harbor." Id. However, the limitation is narrow. Chabner v. United Omaha Life Ins. Co., 225 F.3d 1042, 1048 (9th Cir. 2000). " To forestall an action under the unfair competition law, another provision must actually 'bar' the action or clearly permit the conduct." Cel-Tech Comms., Inc., 20 Cal.4th at 183.
C. Statute of Limitations
1. Unlawful Prong of the UCL
Under the " unlawful" prong, the UCL incorporates other laws and treats violations of those laws as unlawful business practices independently actionable under state law.
Chabner, 225 F.3d at 1048 (citing Cel-Tech Comms. Inc., 20 Cal.4th at 180). Violation of almost any federal, state or local law may serve as the basis for an " unlawful" UCL claim.
Saunders v. Superior Court, 27 Cal.App.4th 832, 838-39, 33 Cal.Rptr.2d 438 (1994). " To state a cause of action based on an unlawful business act or practice under the UCL, a plaintiff must allege facts sufficient to show a violation of some underlying law."
Prakashpalan v. Engstrom, Lipscomb and Lack, 223 Cal.App.4th 1105, 1133, 167 Cal.Rptr.3d 832 (2014) (" unlawful practices are practices 'forbidden by law, be it civil or criminal, federal, state, or municipal, statutory, regulatory or court-made.'" ).
In this case, the underlying law are the disclosure provisions of the ILSA, 15 U.S.C. § § 1703(a)(1)(A) & (B) and § 1703(d). (See Dkt. No. 81.) These provisions have a three year statute of limitations from the date of signing of the contract, which was either on May 18, 2006 or December 12, 2006. See 15 U.S.C. § 1711(a), (b). The Complaint in this case was filed on May 18, 2011 in San Diego Superior Court. Under the three year ILSA statute of limitations, Plaintiffs' cause of action would be timebarred. However, it is undisputed that the cause of action would not be time-barred under the four year statute of limitations under the UCL because the limitations period commences after the cause of action accrued, not from the date of the signing of the contract.
The statute of limitations under the UCL provides that " [a]ny action to enforce any cause of action pursuant to this chapter shall be commenced within four years after the cause of action accrued." Cal. Bus. & Prof. Code § 17208 (emphasis added). Restated, the statute of limitations provision is a broad provision applying to " any action to enforce any cause of action." See id. The California Supreme Court has held that the four year statute of limitations applies even if the borrowed statute has a shorter limitations period. Cortez v. Purolator Air Filtration Prods. Co., 23 Cal.4th 163, 178-79, 96 Cal.Rptr.2d 518, 999 P.2d 706 (2000) (borrowed statute was California Labor Code). The court stated that " the language of section 17208 admits of no exceptions. Any action on any UCL cause of action is subject to the four-year period of limitations created by that section." Id. at 179. In analyzing the holding in Cortez, the court in Blanks noted
that the " general rule is that a UCL cause of action borrows the substantive portion of the borrowed statute to prove the 'unlawful' prong of that statute, but not the limitations procedural part of the borrowed statute." Blanks v. Shaw, 171 Cal.App.4th 336, 363, 89 Cal.Rptr.3d 710 (2009).
Despite the broad and sweeping nature of the UCL statute of limitations, it is not unlimited and exceptions can apply. For example, in Blanks, the court of appeal held that the one year statute of limitation under the Talent Agencies Act (" TAA" ), Cal. Labor Code 1700 et seq., applied and not the UCL. Id. at 346. The court held that " plaintiffs seeking affirmative relief under the TAA must bring their cases to the Labor Commissioner within the Act's one-year statute of limitations and cannot rely on the longer statute contained in the Unfair Competition Law." Id. In the case, the plaintiff alleged a cause of action under section 17200, and alleged a defendant had engaged in an unlawful business practice because he did not have the required licensure under the TAA. Id. at 363. The court explained the general rule that the UCL claims has a four year statute of limitations does not apply because the TAA vests exclusive original jurisdiction in the Labor Commissioner, see Cal. Labor Code § 1700.44(c), and imposes a one-year limitations period as a predicate to assert any claim. Id. at 364. Plaintiffs seeking affirmative relief under the TAA may not invoke the jurisdiction of the Superior Court until after the Commissioner has issued a ruling. Id. at 365.
California courts and the Ninth Circuit have not addressed whether the holding in Cortez, that the four year statute of limitations under the UCL applies even if the borrowed statute has a shorter limitations period, is applicable to an underlying federal cause of action. As a result, district courts are divided on whether the UCL four year statute of limitations applies when the UCL cause of action is based on a federal statute with a shorter three year statute of limitations. The interpretation of footnote 3 in Silvas v. E*Trade Mortg. Corp., 514 F.3d 1001, 1007 n. 3 (9th Cir. 2008) has created much of the division.
In Silvas, the plaintiffs brought a single cause of action under the UCL alleging " misrepresenting rescission rights under the Truth in Lending Act (" TILA" ) and by failing to provide a refund of the deposit as required by TILA." Id. at 1003. The plaintiffs did not assert a claim under TILA itself. Id. The district court dismissed the complaint under Federal Rule of Civil Procedure 12(b)(6) holding that federal law preempted the UCL claims, which the Ninth Circuit affirmed. Id. The Ninth Circuit held that the Home Owners' Loan Act (" HOLA" ) and the accompanying regulations by the Office of Thrift Supervision (" OTS" ) preempted the entire field of lending which also encompassed the TILA claims. Id. at 1008.
While HOLA, in its regulations, explicitly states that OTS occupies the entire field of lending regulation for federal savings associations, HOLA provides an exception under 12 C.F.R. § 560.2(c) where state laws of general applicability only incidentally affecting federal savings associations are not preempted. Id. at 1006-07. However, the court declined to address that issue because the claims were based on types of laws listed in another provision, 12 C.F.R. § 560.2(b). In the alternative, the Ninth Circuit explained that despite this exception, it noted that " when federal law preempts a field, it leaves 'no room for the States to supplement it.'" Id. at 1007 n.3. The court further explained,
In this case, it is clear that the UCL has a much longer statute of limitations than does TILA. Compare Cal. Bus. & Prof. Code § 17208 (West 2007) (providing a four-year statute of limitations period) with 15 U.S.C. § 1640(e) (providing a one-year limitations period for TILA claims). It is also clear that Appellants seek to take advantage of the longer statute of limitations under UCL to remedy TILA violations, because without the extended limitations period their claims would be barred.
An attempt by Appellants to go outside the congressionally enacted limitation period of TILA is an attempt to enforce a state regulation in an area expressly preempted by federal law.
Id. at 1007 n.3.
The court in Silvas also addressed TILA's savings clause where state law is not preempted unless the state law is inconsistent with TILA. 15 U.S.C. § 1610(b). The court held that a " savings clause" or " no preemption clause" only applies to TILA and does not ...