United States District Court, N.D. California
ORDER DENYING DEFENDANT'S MOTION FOR JUDGMENT ON
THE PLEADINGS OR, ALTERNATIVELY, TO STRIKE CLASS ALLEGATIONS;
GRANTING IN PART AND DENYING IN PART PLAINTIFFS' MOTION
TO STRIKE AFFIRMATIVE DEFENSES RE: DKT. NOS. 24, 26
M. CHESNEY, UNITED STATES DISTRICT JUDGE
the Court are two motions: (1) defendant Massage Envy
Franchising, LLC's ("MEF") "Motion for
Judgment on the Pleadings or, in the Alternative, to Strike
Class Allegations, " filed January 27, 2017; and (2)
plaintiffs Baerbel McKinney-Dropnis
("McKinney-Dropnis"), Joseph B. Piccola
("Piccola") and Camille Berlese's
("Berlese") "Motion to Strike Affirmative
Defenses in Defendants' [sic] Answer to Plaintiffs'
Class Action Complaint, " filed January 27, 2017. The
motions have been fully briefed. Having read and considered
the papers filed in support of and in opposition to the
motion, the Court rules as follows.
their complaint, plaintiffs allege MEF is a "membership
based franchise that, by its standard business practices,
attracts customers to join its program that, basically,
entitles members to receive one fifty minute massage per
month in exchange for a monthly fee that ranges between
approximately $30.00 to $59.00 (depending on geographic
location)." (See Compl. ¶ 1.) According to
plaintiffs, when a person enrolls as a member, the person
executes MEF's "form Membership Agreement."
allege the Membership Agreement provides for an "initial
term" of months (see Compl. ¶ 2), the
length of which can vary (see Compl. ¶¶ 9,
11), during which period the customer may cancel for limited,
specified reasons (see Compl. ¶¶ 2,
If the customer chooses to pay on a monthly basis during the
initial term, the following provision applies: "Your
membership dues of $[X dollar amount] (not including any
additional applicable taxes) are due on or after the ___ day
of each month hereafter until your membership expires or is
terminated in accordance with this agreement."
(See Compl. ¶ 1 (alteration in original).)
Alternatively, if the customer chooses to pay for the initial
term "in full, " the following provision applies:
"Your payment of $[X dollar amount] is due today."
(See id. (alteration in original).) Plaintiffs also
allege that, upon expiration of the initial term, the
"membership is automatically renewed, " and the
following provision governs the monthly amount due:
"Following the initial term, your membership will
automatically continue on a month-to-month basis at $[X
dollar amount] per month until your membership is
cancelled." (See Compl. ¶ 2 (alteration in
original).) According to plaintiffs, the above-quoted
clauses, read together, provide that "a customer
contracts to pay an explicit, locked in fee for the entire
membership term" (see Compl. ¶ 1),
"both for the original term and renewal term(s)"
(see Compl. ¶ 3).
allege that each of the three plaintiffs is currently a
member of MEF. See Compl. ¶¶
9-14). Plaintiffs allege that although
McKinney-Dropnis' Membership Agreement provided for a
monthly fee of $59, MEF, during the sixth year of her
membership, "unilaterally increased" the fee to
$59.99, which increase she has paid. (See Compl.
¶ 10.) Plaintiffs allege that although Piccola's
Membership Agreement provided for a monthly fee of $49, MEF,
during the fourth year of his membership, "unilaterally
increased" the fee to $49.99, and, during the fifth
year, "unilaterally increased" the fee to $59.99,
which increases he has paid. (See Compl. ¶ 12.)
Plaintiffs allege that although Berlese's Membership
Agreement provided for a monthly fee of $39, MEF, during the
second year of her membership, "unilaterally
increased" the fee to $39.99, which increase she paid,
and, during the sixth year, "unilaterally
increased" the fee to $55. (See Compl. ¶
14.) According to plaintiffs, such increases are "part
of a concerted plan to extract as much money from its captive
membership base as possible" and "millions of
individuals have suffered from [MEF's] failure to abide
by the proper contractual obligations." (See
Compl. ¶ 23.)
on the above-referenced allegations, plaintiffs assert six
causes of action, two of which are alleged on behalf of the
three plaintiffs and a putative nationwide class,
specifically, "Breach of Contract and the Implied
Covenant of Good Faith and Fair Dealing" ("Count
One") and "Declaratory Relief Pursuant to 28 U.S.C.
§ 2201 - The Declaratory Judgement Act"
("Count Six"). The remaining four causes of action
are alleged on behalf of McKinney-Dropnis and a putative
sub-class consisting of California residents (see
Compl. ¶ 26), specifically, "Violation of Cal. Civ.
Code §§ 1750, et seq. -Consumer Legal Remedies
Act" ("Count Two") and three claims each
titled "Violation of Cal. Bus. & Prof. Code
§§ 17200, et seq. - Unlawful Business Acts and
Practices" ("Counts Three, Four, and
seeks judgment on the pleadings or, in the alternative, an
order striking the class action allegations.
Judgment on the Pleadings
contrast to Rule 12(b) of the Federal Rules of Civil
Procedure, which provides for the filing of a motion to
dismiss prior to the filing of an answer, Rule 12(c) provides
that "[a]fter the pleadings are closed . . . a party may
move for judgment on the pleadings." See
Fed.R.Civ.P. 12(c). "The principal difference between
motions filed pursuant to Rule 12(b) and Rule 12(c) is the
time of filing." See Dworkin v. Hustler Magazine,
Inc., 867 F.2d 1188, 1192 (9th Cir. 1989). As the
motions are "functionally identical, " federal
courts, in considering motions under Rule 12(c) that are
based on an asserted failure to state a claim, apply the same
analysis as that applicable to motions under Rule 12(b)(6),
see id., which rule provides that a dismissal may be
based on, inter alia, an affirmative defense, where
"the defendant shows some obvious bar to securing relief
on the face of the complaint, " see ASARCO, LLC v.
Union Pacific Railroad Co., 765 F.3d 999, 1004 (9th Cir.
2014), or where the affirmative defense can be established by
documents of which a district court can take judicial notice,
such as court filings in other actions, see Coto
Settlement v. Eisenberg, 593 F.3d 1031, 1038, 1040-41
(9th Cir. 2010).
MEF argues, the claims of the named plaintiffs are barred in
light of the resolution of a class action filed in the
Southern District of California, titled Zizian v. Massage
Envy Franchising, LLC, Civ. No. 16-CV-00783 DMS-BGS,
either under the doctrine of claim preclusion or in light of
the court-approved settlement agreement.
Zizian, the plaintiff, a "current" member
of MEF who proceeded on behalf of a class of members whose
accounts were "active as of June 30, 2016"
(see Def.'s Req. for Judicial Notice, filed
January 27, 2017, Ex. J ¶¶ 5, 16),  alleged that MEF
"uniformly interprets its Membership Agreement to
provide that if a member has not paid all charges when due,
misses a monthly payment, and/or cancels their account, all
prepaid massages in the member's account will have to be
redeemed within a very short 60-day window or be
forfeited" (see Def.'s Req. for Judicial
Notice, filed January 27, 2017, Ex. J ¶ 14). The
plaintiff therein further alleged that said interpretation,
when applied to a member whose membership had been
terminated, constituted a breach of a clause in the
Membership Agreement providing as follows: "If you have
Paid in Full for your membership services, you will be
refunded the unused portion of your membership dues for any
actual services you have not yet received." (See
id. Ex. J ¶ 2.) The district court, after
certifying a class for purposes of settlement, approved a
settlement entered on behalf of the class (see id.
Ex. P), and thereafter, on January 13, 2017, entered its
"Final Judgment" dismissing the class claims
"with prejudice on the merits" (see id.
"claim-preclusive effect" of a judgment entered by
a federal district court sitting in diversity is determined
by the law of the forum state. See Semtek Int'l, Inc.
v. Lockheed Martin Corp., 531 U.S. 497, 508-09 (2001).
Here, as the Southern District of California had diversity
jurisdiction over the claims alleged in Zizian
(see Def.'s Req. for Judicial Notice, filed
January 27, 2017, Ex. J ¶ 3), the preclusive effect of
the final judgment entered therein is determined by
California law, the doctrine of claim preclusion bars an
action where "(1) [a] claim . . . raised in the present
action is identical to a claim . . . litigated in a prior
proceeding; (2) the prior proceeding resulted in a final
judgment on the merits; and (3) the party against whom the
doctrine is being asserted was a party or in privity with a
party to the prior proceeding." See Boeken v. Philip
Morris USA, Inc., 48 Cal.4th 788, 797 (2010). Here, the
parties agree the Zizian dismissal constitutes a
final judgment on the merits and that plaintiffs, as class
members, were parties thereto. (See Def.'s Mot.
at 11:25 - 12:6; Pls.' Opp. at 8:10-14.) The parties
disagree, however, as to whether the claims alleged in the
instant complaint are identical to a claim litigated in
determine whether two proceedings involve identical causes of
action for purposes of claim preclusion, California courts
have consistently applied the primary rights theory."
Boeken, 48 Cal.4th at 797 (internal quotation and
citation omitted). Under the primary rights theory, "a
cause of action arises out of an antecedent primary right and
corresponding duty and the delict or breach of such primary
right and duty by the person on whom the duty rests."
See id. at 797-98 (internal quotation, alterations
and quotation omitted). In the context of successive lawsuits
alleging breach of the same contract, the California Supreme
Court, applying the primary rights theory, has held that,
although a plaintiff may not file a second lawsuit seeking
different remedies for the same breach of a contractual
provision, see Mycogen Corp. v. Monsanto Co., 28
Cal.4th 888, 908 (2002), a plaintiff may bring a second
lawsuit alleging breach of the same contract on which it
relied in the first lawsuit, so long as "[e]ach action
is based on a breach of a separate covenant at different
times, " see id.
argues the claims alleged in the instant action are barred
because "the primary right at issue here is the same
primary right at issue in the Zizian [a]ction."
(See Def.'s Mot. at 14:25.) The Court disagrees.
forth above, the Zizian action asserted claims
arising from an alleged breach of a provision in the
Membership Agreements concerning the rights a member has upon
termination of a membership, whereas the claims in the
instant action arise from the alleged breach of provisions
concerning the amount of the monthly fee MEF may charge its
current members. Consequently, the two actions are based on
breaches of separate covenants. Further, MEF has not shown
the asserted breaches of the separate covenants occurred at
the same time, as the contractual provision at issue in
Zizian can only be breached after a membership is
terminated, whereas the contractual provisions at issue in
the instant case can only be breached while a customer is
still a member.
MEF has failed to show plaintiffs' claims are barred by
the doctrine of claim preclusion.
argues the Zizian settlement agreement unambiguously
provides that plaintiffs, as Zizian class members,
nonetheless waived the claims alleged in the instant
complaint. As discussed below, the Court disagrees.
Zizian settlement agreement provides that the class
members "fully release and forever discharge" MEF
from "causes of action, claims, damages, equitable,
legal and administrative relief . . ., whether based on
federal, state, or local law, statute, ordinance, regulation,
the Constitution, contract, common law, or any other source,
that relate to the Released Claims." (See
Def.'s Req. for Judicial Notice, filed January 27, 2017,
Ex. M ¶ 59.) Additionally, the settlement agreement
provides that "[i]t is the intention of plaintiffs in
executing this release on behalf of themselves and the
Settlement Class to fully, finally, and forever settle and
release all matters and all claims relating to the Released
Claims in every way." (See id. Ex. M ¶
term "Released Claims" is defined in the settlement
agreement as follows:
'Released Claims' means all claims, demands, rights,
and liabilities asserted in the [Zizian action]
including, but not limited to, claims under the common laws
and statutes of all fifty (50) states concerning (a) the
terms and conditions of the Membership Agreements between the
Settlement Class and MEF Franchisees concerning the
cancellation, renewal, termination, and/or expiration of or
ability to use any Unutilized Massage(s); (b) alleged
misrepresentations concerning the terms and conditions of the
Membership Agreements between the Settlement Class and MEF
Franchisees concerning the cancellation, renewal,
termination, and/or expiration of or ability to use any
Unutilized Massage(s); and/or (c) any fact or circumstance
that relates to the cancellation, renewal, termination,
and/or expiration of or ability to use any Unutilized
Massage(s) or any claim asserted or that could have been
asserted in the [Zizian action]. The Released Claims
include, but are not limited to, claims that any Membership
Agreement contained an illegal ...