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Yu v. Design Learned, Inc.

United States District Court, N.D. California, San Francisco Division

June 29, 2016

RAYMOND YU, Plaintiff,
v.
DESIGN LEARNED, INC., et al., Defendants.

          ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS Re: ECF, 41

          LAUREL BEELER JUDGE

         INTRODUCTION

         This dispute arises from an engineering and consulting services agreement governing the design and construction of a dog day-care facility.[1] Raymond Yu sued Design Learned, its employees, and E.C.C. & Associates in connection with the alleged breach of the agreement and money owed thereunder.[2] He asserts claims for breach of contract, promissory estoppel, violation of the Fair Debt Collection Practices Act (“FDCPA”), and violation of California’s False Advertising Law (“FAL”) and Unfair Competition Law (“UCL”).[3] Design Learned and the individually named employee-defendants now move to dismiss Mr. Yu’s First Amended Complaint (“FAC”) for lack of subject-matter jurisdiction and for failure to state a claim.[4] They also move to strike Mr. Yu’s prayer for attorney’s fees.[5]

         The court can decide this matter without oral argument. See N.D. Cal. Civ. L.R. 7-1(b). The court grants in part and denies in part the motion: the court has subject-matter jurisdiction; Mr. Yu fails to state a plausible FDCPA claim against Design Learned and its employees; and Mr. Yu’s other claims survive. The court also denies the motion to strike.

         STATEMENT

         In February 2014, Mr. Yu contracted with Design Learned for engineering and consulting services related to the construction of a dog day-care facility.[6] Under the agreement, Design Learned was to (among other things) visit and review the potential construction site.[7] More specifically, Design Learned agreed to provide mechanical and plumbing engineering and drafting, “[p]rovide interior design assistance . . .[, ] [p]articipat[e] in conference calls and verbal recommendations for the floor plans[, ] [and] [p]rovide [the] architect with lighting level requirements and circuiting recommendations[.]”[8] The contract also authorized additional services, specified payment procedures (including increased fees for certain project delays), and limited the parties’ liability for claims under the agreement.[9]

         Design Learned’s employees - the individual defendants here - communicated with Mr. Yu multiple times regarding the services they were to provide.[10] In particular, he alleges the defendants made the following representations:

Date

Defendant(s)

Alleged Representation

February 2014

Scott Learned

“[Mr.] Learned communicated to [Mr. Yu] that he would perform a site visit and a review of the construction site prior to drafting engineering documents.”[11]

February 2014

Scott Learned & Mr. Learned and Ms. August

“communicated that they Kelly August would not charge additional fees for modest and reasonable delays in the project schedule.”[12]

Spring 2014

Scott Learned & Mr. Learned and Ms. August

“communicated that they Kelly August would deliver competent engineering and construction plans, suitable for use at the project site, and appropriate for [Mr. Yu’s] budget.”[13]

Summer 2015

Kelly August & Ms. August and Mr. Pfarr

“communicated that they would Michael Pfarr provide answers to RFIs, and other modifications to the construction documents.”[14]

         It is unclear if, in saying these things to Mr. Yu, the employee defendants were “act[ing] in their individual capacit[ies], or in their representative capacit[ies, ]” on behalf of Design Learned.[15]

         In either case, Design Learned and its employees did not perform these services and broke the representation “that they would not charge additional fees for modest and reasonable delays in the project schedule.”[16] Design Learned’s services and construction plans have consequently been rendered unusable.[17] Mr. Yu additionally alleges that, in reliance on the defendants’ representations, he spent “in excess of $100, 000” to move the project along.[18] This included fees for permits, architects, third-party consultants, third-party engineers, real-estate transaction costs, and more.[19] Mr. Yu also had to obtain additional funding to satisfy Design Learned’s request for additional fees and “has taken on substantial debt . . . to pay for the aforementioned expenditures.”[20] In sum, the defendants’ failures have “resulted in a dramatic increase in the cost to complete the construction project, if it is possible at all.”[21]

         To recover the alleged damages, Mr. Yu asserts six claims against Design Learned and its employees: 1) breach of contract, 2) promissory estoppel, 3) declaratory judgment, 4) violation of California’s False Advertising Law (“FAL”), Cal. Bus. & Prof. Code §§ 17500 et seq., 5) violation of California’s Unfair Competition Law (“UCL”), id. §§ 17200 et seq., and 6) violation of the federal Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. §§ 1692 et seq.[22]

         The Design Learned defendants (including each named employee) move to dismiss the First Amended Complaint for lack of subject-matter jurisdiction under Rule 12(b)(1) and for failure to state a claim under 12(b)(6).[23] They also move to strike his request for attorney’s fees under Rule 12(f)(2).[24]

         GOVERNING LAW

         1. Motion to dismiss for lack of subject-matter jurisdiction

         A complaint must contain a short and plain statement of the ground for the court’s jurisdiction (unless the court already has jurisdiction and the claim needs no new jurisdictional support). Fed.R.Civ.P. 8(a)(1). The plaintiff has the burden of establishing jurisdiction. See Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994); Farmers Ins. Exchange v. Portage La Prairie Mut. Ins. Co., 907 F.2d 911, 912 (9th Cir. 1990). A defendant’s Rule 12(b)(1) jurisdictional attack can be either facial or factual. White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000). “A ‘facial’ attack asserts that a complaint’s allegations are themselves insufficient to invoke jurisdiction, while a ‘factual’ attack asserts that the complaint’s allegations, though adequate on their face to invoke jurisdiction, are untrue.” Courthouse News Serv. v. Planet, 750 F.3d 776, 780 n.3 (9th Cir. 2014). Under a facial attack, the court “accept[s] all allegations of fact in the complaint as true and construe[s] them in the light most favorable to the plaintiffs.” Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003). In a factual attack, the court “need not presume the truthfulness of the plaintiff’s allegations” and “may review evidence beyond the complaint without converting the motion to dismiss into a motion for summary judgment.” Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004).

         The defendants’ challenge here is a factual attack because they rely on extrinsic evidence to show the court lacks subject-matter jurisdiction. See Safe Air for Everyone, 373 F.3d at 1039 (citing Morrison v. Amway Corp., 323 F.3d 920, 924 n.5 (11th Cir. 2003)).

         2. Motion to dismiss for failure to state a claim

         A complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief” to give the defendant “fair notice” of what the claims are and the grounds upon which they rest. See Fed. R. Civ. P. 8(a)(2); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). A complaint does not need detailed factual allegations, but “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. Factual allegations must be enough to raise a claim for relief above the speculative level . . . .” Twombly, 550 U.S. at 555 (internal citations omitted).

         To survive a motion to dismiss, a complaint must contain sufficient factual allegations, accepted as true, “‘to state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. “The plausibility standard is not akin to a ‘probability requirement, ’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (quoting Twombly, 550 U.S. at 556). “Where a complaint pleads facts that are ‘merely consistent with’ a defendant’s liability, it ‘stops short of the line between possibility and plausibility of ‘entitlement to relief.’’” Id. (quoting Twombly, 550 U.S. at 557).

         3. Leave to amend

         If a court dismisses a complaint, it should give leave to amend unless the “the pleading could not possibly be cured by the allegation of other facts.” Cook, Perkiss and Liehe, Inc. v. Northern California Collection Serv. Inc., 911 F.2d 242, 247 (9th Cir. 1990).

         ANALYSIS

         1. Motion to dismiss for lack of subject-matter jurisdiction

         The court incorporates by reference its order at ECF No. 38 and concludes that it has subject-matter jurisdiction over Mr. Yu’s claims. The court has federal-question jurisdiction over Mr. Yu’s FDCPA claim, but because the court dismisses this claim (see below), it does not support supplemental jurisdiction over his state-law claims. See 28 U.S.C. §§ 1331, 1367(c); Brady v. Brown, 51 f.3d 810, 816 (9th Cir. 1995). The court also has diversity-jurisdiction over Mr. Yu’s state-law claims - including his contract, promissory estoppel, FAL, and UCL claims - because the parties are diverse and the court cannot determine “to a legal certainty that the claim is really for less than the jurisdictional amount.” Crum v. Circus Enterprises, 231 F.3d 1129, 1131 (9th Cir. 2000).

         The Design Learned defendants again make two arguments that the amount in controversy is to a legal certainty less than the jurisdictional threshold.[25] They first argue that “the terms of the contract limit [Mr. Yu’s] possible recovery[.]”[26] See Pachinger v. MGM Grand Hotel-Las Vegas, Inc., 802 F.2d 362, 364 (9th Cir. 1986) (quoting 14 A Wright, Miller, & Cooper, Federal Practice & Procedure, Jurisdiction § 3702, at 48-50 (2d ed. 1985)). Their theory is that, because Mr. Yu’s other claims fail, he may only (possibly) recover under the contract, which limits Design Learned’s liability to the greater of $20, 000 or the amount paid to it (apparently, $20, 801.68).[27]The court disagrees: Mr. Yu’s promissory estoppel, FAL, and UCL claims survive (see below). These claims may support relief outside of - and in excess of - the contract’s limitation of liability.[28]

         The Design Learned defendants next argue that “independent facts show that [Mr. Yu claimed] the amount of damages . . . merely to obtain federal court jurisdiction.”[29] See Pachinger, 802 F.2d at 364. They assert that 1) Mr. Yu filed suit only after E.C.C. & Associates began debt-collection activities, 2) Mr. Yu was satisfied with Design Learned’s services, 3) the accused breaches could not have caused the alleged damages, and 4) Mr. Yu fabricated his claims.[30] In support, Mr. Learned declares that Mr. Yu did not complain about Design Learned’s services, did not submit requests for information, and did not request site visits (certain bases for Mr. Yu’s claims).[31] This is the same argument that the defendants previously made, and as before, the court cannot on this record determine that Mr. Yu alleges his damages only to obtain federal court jurisdiction.[32]

         The court thus cannot conclude to a legal certainty that the amount in controversy is less than the jurisdictional requirement. The court denies the Design Learned defendants’ motion to dismiss for lack of subject-matter jurisdiction.

         2. Motion to dismiss for failure to state a claim

         The Design Learned defendants also move to dismiss each of Mr. Yu’s claims under Rule 12(b)(6). The court dismisses Mr. Yu’s FDCPA claim, but the defendants’ arguments to dismiss his other claims fail, and thus those claims survive the current motion.

         2.1 The court dismisses Mr. Yu’s FDCPA claim

         Mr. Yu alleges that Design Learned and E.C.C. & Associates violated the FDCPA when they contacted him to collect money owed under the engineering and consulting agreement.[33] The FDCPA “prohibits ‘debt collector[s]’ from making false or misleading representations and from engaging in various abusive and unfair practices.” Heintz v. Jenkins, 514 U.S. 291, 292 (1995) (citation omitted). “To establish a claim under the FDCPA, a plaintiff must show: (1) she is a consumer within the meaning of 15 U.S.C. §§ 1692a(3); (2) the debt arises out of a transaction entered into for personal purposes; (3) the defendant is a debt collector within the meaning of 15 U.S.C. § 1692a(6); and (4) the defendant violated one of the provisions of the FDCPA, 15 U.S.C. §§ 1692a-1692o.” Makreas v. JP Morgan Chase Bank, N.A., No. 12-cv-02836-JST, 2013 WL 3014134, at *2 (N.D. Cal. June 17, 2013). Mr. Yu fails to plausibly plead an FDCPA claim against Design Learned and its employees.

         First, he does not plausibly allege that the debt at issue was for personal, family, or household purposes. See 15 U.S.C. § 1692a(5). See also Bloom v. I.C. Systems, Inc., 972 F.2d 1067, 1068 (9th Cir. 1992) (the FDCPA “applies to consumer debts and not business loans”). Mr. Yu alleges that “a significant portion of [Design Learned’s] engineering and consulting services were of a personal nature, and involved the design and use of [his] home.”[34] Yet the contract attached to the complaint is for a “Proposed Dog Day Care Facility”[35] and itemizes services and costs for “Animal Care Related Interior Design Assistance” and “Additional Animal Care Facility Services.”[36] It says nothing that plausibly suggests the services were for personal or household use. Although the court accepts as true Mr. Yu’s factual allegations, it does not accept conclusory allegations, see Twombly, 550 U.S. at 555, or allegations contradicted by the attached contract, see Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). Mr. Yu’s debt-characterization is both conclusory and contradicted by the agreement, the court does not assume its truth, and hence he fails to plausibly plead this element.

         Second, Mr. Yu does not plausibly allege that Design Learned is a debt collector under the FDCPA. A “debt collector” includes a person who: 1) uses interstate commerce or the mail in a business the principal purpose of which is debt collection; 2) “regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another[;]” or 3) is “any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts.” 15 U.S.C. § 1692a(6). For the second time, Mr. Yu argues in his Opposition that Design Learned’s relationship with E.C.C. & Associates is unclear, hinting that it may collect its debts under the name “E.C.C. & Associates” - thus qualifying as a “debt collector” under (3), above.[37] And for the second time, he does not allege this relationship in his complaint.[38] He thus fails to plausibly plead this element of an FDCPA claim.

         Mr. Yu does not plausibly allege that the dog day-care facility debt was for personal, family, or household use, and does not plausibly allege that Design Learned is an FDCPA-debt collector. The court accordingly dismisses the claim. The court previously gave Mr. Yu an opportunity to amend this claim, but he added little (or nothing) to ...


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