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Lal v. Capital One Financial Corp.

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

April 12, 2017

NICKLAUS LAL, Plaintiff,


          BETH LAB SON FREEMAN, United States District Judge

         Plaintiff Nicklaus Lal (“Lal”) brings this suit against Defendants, the former employers of his wife, for allegedly recording personal phone calls between him and his wife on the company phone. Before the Court are Defendants' motions to dismiss Lal's First Amended Complaint (“FAC”). HSBC Mot., ECF 28; Cap Mot., ECF 27. After reviewing the parties briefing and holding a hearing on April 6, 2017, the Court hereby rules on the motions as follows.

         I. BACKGROUND

         Lal alleges the following facts in his first amended complaint (“FAC”). Plaintiff is a California resident whose wife was employed by Defendants HSBC Card Services Inc. (“Card Services”) and HSBC Technology & Services (USA) Inc. (collectively, “HSBC”) at a facility in Salinas, California, from March 2009 to May 2012. First Am. Compl. ¶¶ 7, 28, ECF 22. As of May 1, 2012, Defendant Capital One Financial Corporation (“Capital One”) acquired certain assets of HSBC, including the Salinas facility. Lal's wife ceased working for Card Services and thereafter was employed by Capital One from May 1, 2012 through October 2013. Id. ¶ 29.

         During the relevant time period, Lal had “numerous personal telephone communications” with Defendants' employees, including his wife. Id. ¶¶ 31, 33. According to Lal, Defendants intentionally recorded, intercepted, or received the conversations without his consent or knowledge. Id. ¶¶ 28-39. Defendants also required their employees to keep their “policies, procedures, and internal activities confidential and prohibited employees from disclosing such information.” Id. ¶ 28. Lal alleges that at the time he had no reason to believe that his personal telephone calls were being recorded. Id. ¶ 17, 19.

         On August 28, 2015, a plaintiff filed a case in San Diego Superior Court, alleging similar claims and the same causes of actions against Defendants as those here. Id. ¶ 13 (citing Ron Kempton, et al. v. Capital One Financial Corporation, No. 37-2014-00023795-CU-MC-NC (Cal. Super. Ct.) sub nom. Dalia Rojas v. HSBC Card Services Inc., et al., No. D071442 (Cal.App. Ct. filed Nov. 18, 2016) (the “Rojas case”)). On September 28, 2015, HSBC agreed to withdraw the confidential designation for the recordings produced in the Rojas case. FAC ¶ 14. Thereafter, only after the confidential designation was withdrawn and after Lal's wife was contacted as a potential witness in the Rojas case did Lal learn about the recording of his conversations by HSBC. Id. ¶¶ 15-16.

         Lal further alleges that his claims were tolled during the pendency of two class actions because he was a member of the proposed classes. Id. ¶ 21. On June 4, 2012, plaintiff representatives Terry J. Fanning and Tatiana Jabbar filed a class action complaint against HSBC for violation of the California Invasion of Privacy Act (“CIPA”). FAC ¶ 22; Fanning v. HSBC Card Servs. Inc., No. 12-00885-JVS-RNB (C.D. Cal. June 4, 2012) (the “Fanning case”). On July 29, 2014, Gail Medeiros, along with other plaintiffs, filed a class action lawsuit against HSBC and its successor, Capital One, also asserting CIPA violations, in the Southern District of California but that case was later transferred to the Central District as a case related to the Fanning case. FAC ¶¶ 23-25. Medeiros v. HSBC Card Servs. Inc., et al., Case No. 15-9093-JVS-AFM (C.D. Cal. Nov. 21, 2014) (the “Medeiros case”). A motion for preliminary approval of class action settlement was filed in both of these cases on August 26, 2016. FAC ¶ 26.

         On September 26, 2016, Lal filed a complaint in Monterey County Superior Court asserting that Defendants violated the CIPA. Compl., Ex. A to Notice of Removal, ECF 1; Cal. Penal Code §§ 632, 632.7. Pursuant to the CIPA, Lal asserts a first cause of action based on California Penal Code § 632, and a second cause of action based on Penal Code § 632.7. Compl.; FAC ¶¶ 41-51. Lal further requests damages in the amount $5, 000.00 per violation or three times the amount of actual damages sustained, and preliminary and permanent injunction to restrain Defendants from violating CIPA. Id. ¶¶ 45, 46, 50, 51. HSBC removed the case to this Court, to which Capital One consented. Notice of Removal. Defendants then filed motions to dismiss the case. ECF 13, 15, 17, 18. Instead of opposing the motions to dismiss, Plaintiff filed a first amended complaint, which Defendants now move to dismiss.


         “A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted ‘tests the legal sufficiency of a claim.'” Conservation Force v. Salazar, 646 F.3d 1240, 1241-42 (9th Cir. 2011) (quoting Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001)). When determining whether a claim has been stated, the Court accepts as true all well-pled factual allegations and construes them in the light most favorable to the plaintiff. Reese v. BP Exploration (Alaska) Inc., 643 F.3d 681, 690 (9th Cir. 2011). However, the Court need not “accept as true allegations that contradict matters properly subject to judicial notice” or “allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008) (internal quotation marks and citations omitted). While a complaint need not contain detailed factual allegations, it “must contain sufficient factual matter, 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 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when it “allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

         Where the damages sought are not recoverable as a matter of law, the damages claim may be removed from the complaint pursuant to Rule 12(b)(6). Johnson v. Napa Valley Wine Train, Inc., No. 15-04515-TEH, 2016 WL 493229, at *13 (N.D. Cal. Feb. 9, 2016) (citing Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970, 974-95 (9th Cir. 2010)).


         Before turning to the merits of the parties' arguments, the Court addresses their requests for judicial notice.

         A. Judicial Notice

         In support of its motion to dismiss, HSBC has requested judicial notice of eight documents, attached to the request as Exhibits A through H: (A) Fanning v. HSBC Card Servs. Inc., et al., No. 12-00885-JVS-RNB (C.D. Cal. June 4, 2012), ECF No. 1 (the “Fanning Complaint”); (B) the First Amended Complaint filed in the Medeiros case (the “Medeiros FAC”); (C) Order Granting Joint Motion To Consolidate the Fanning case and Lindgren with the Medeiros case, filed in Medeiros, ECF No. 83 (the “Consolidation Order”), pursuant to which the Fanning and Medeiros actions were consolidated for settlement purposes; (D) Order Conditionally Certifying A Settlement Class for Settlement in the Medeiros case, the Fanning case, and Lindgren v. HSBC Card Servs. Inc., et al., filed in Fanning case, ECF No. 364 (the “Preliminary Approval Order”); (E) Order granting HSBC's motion for summary judgment in the Rojas case (the “Rojas MSJ Order”); (F) excerpts of the certified reporter's transcript for the November 4, 2016 hearing in the Rojas case; (G) Order in Yevgeniya Grania v. Eddie Bauer, LLC, No. BC569111, slip. op. (Cal. Super. Ct. L.A. Cty. Dec. 2, 2015); (H) Order in Furman v. Station Casinos LLC, No. 56-2013-00446134-CU-BT-VTA (Cal. Super. Ct. Ventura Cty. Mar. 11, 2014). HSBC RJN, ECF 29.

         Judicial notice is appropriate with respect to Exhibits A to H because they are documents publicly filed with either state or federal courts. See Mir v. Little Co. of Mary Hosp., 844 F.2d 646, 649 (9th Cir. 1988) (court may take judicial notice of matters of public record). Plaintiff objects to the exhibits attached to this request only to the extent that the facts and statements recited in the exhibits are taken as true or accurate. ECF 40. However, the Court does not take judicial notice of the legal reasoning or disputed facts contained therein, but rather the existence of such allegations and arguments. Lee v. City of Los Angeles, 250 F.3d 668, 690 (9th Cir. 2001) (permitting a court to take judicial notice of another court's opinion, but not the truth of the facts recited therein). As such, it would not be improper to judicially notice the exhibits that are public filings in other courts.

         Lal has also submitted two exhibits in support of his sur-replies. ECF 53, 54. Although Lal does not formally request judicial notice of these two exhibits, the Court construes the submission as such a request. ECF 53, 54. The two exhibits are (A) Confidential Communications: Disclosure, Hearing Before the Senate Committee on Public Safety, A.B. 1671, 2015-2016 Reg. Sess. (Cal. June 28, 2016) (Hearing Notes, Sen. Loni Hancock, Chair) (the “June 28 Hearing Notes”); and (B) Confidential Communications: Disclosure, Hearing Before the Senate Committee On Appropriations, A.B. 1671, 2015-2016 Reg. Sess. (Cal. August 8, 2016) (Hearing Notes, Sen. Ricardo Lara, Chair) (the “August 8 Hearing Notes”). Exs. A and B to Raymond Decl., ECF 53-1, 54-1.

         HSBC objects to these two exhibits submitted by Lal on the grounds that they are irrelevant, and lack foundation and personal knowledge. HSBC Obj., ECF 56. Specifically, HSBC points out that the relevant issue here is how the 2017 amendment affects the interpretation of the CIPA statute. Id. at 1. HSBC argues that the Senate Committee's hearing notes are not relevant because they pre-date the proposed amendment which was introduced on August 30, 2016. Id. at 2. HSBC further argues that the hearing notes discuss criminal penalties related to violation of Penal Code § 632, and do not discuss the civil statutory damages relevant to this case. Id. at 3. Finally, HSBC argues that there is an inadequate showing that Ms. Raymond has personal knowledge regarding the legislative history attached as exhibits to her declaration and how the exhibits were located. Id. Without foundation and personal knowledge, HSBC requests that the exhibits be stricken. Id.

         First, even though these Senate hearing notes pre-date the introduction of the amendment, they can still provide the Senate's perspective on the statute's meaning prior to the amendment and the potential purpose of the amendment. Second, such records of “[l]egislative history is properly a subject of judicial notice.” Anderson v. Holder, 673 F.3d 1089, 1094 n.1 (9th Cir. 2012); see also Perkins v. Linkedin Corp., 53 F.Supp.3d 1222, 1241 (N.D. Cal. 2014). As such, the Court grants the request for judicial notice of these exhibits. The Court agrees with HSBC that these documents have limited relevance to the later amendment here at issue, and thus the Court will give these documents the weight they deserve.

         In support of HSBC's objections to Lal's sur-reply, HSBC also requests judicial notice of nine documents, attached as exhibits A to I: (A) A.B. 1671, 2015-2016 Reg. Sess. (Cal. Jan. 15, 2016) (as introduced by Assembly Member Gomez); (B) A.B. 1671, 2015-2016 Reg. Sess. (Cal. Mar. 17, 2016) (as amended in Assembly); (C) A.B. 1671, 2015-2016 Reg. Sess. (Cal. Apr. 12, 2016) (as amended in Assembly); (D) A.B. 1671, 2015-2016 Reg. Sess. (Cal. Apr. 25, 2016) (as amended in Assembly); (E) A.B. 1671, 2015-2016 Reg. Sess. (Cal. May 18, 2016) (as amended in Assembly); (F) A.B. 1671, 2015-2016 Reg. Sess. (Cal. Aug. 2, 2016) (as amended in Senate); (G) A.B. 1671, 2015-2016 Reg. Sess. (Cal. Aug. 16, 2016) (as amended in Senate); (H) A.B. 1671, 2015-2016 Reg. Sess. (Cal. Aug. 30, 2016) (as amended in Senate); (I) A.B. 1671, 2015-2016 Reg. Sess. (Cal. 2016) (as enacted).

         Just like the California Senate Committee hearing notes provided by Lal in support of his sur-reply, these exhibits contain legislative history, which is judicially noticeable. Anderson, 673 F.3d at 1094 n.1. The parties do not dispute the authenticity of these exhibits. As such, the request for judicial notice is GRANTED with respect to the exhibits attached to HSBC's objections to Lal's sur-reply.

         B. ...

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