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