Arevalo v. Bank of Am. Corp.

850 F.Supp.2d 1008

Juan AREVALO, et al., Plaintiffs,

v.BANK OF AMERICA CORP., Defendant.

No. C10–4959 TEH.

United States District Court, N.D. California.

March 29, 2011.

Allison Stacy Elgart, Michael W. Sobol, Lieff Cabraser Heimann & Bernstein, LLP, San Francisco, CA, Rachel Geman, Wendy R. Fleishman, Lieff, Cabraser, Heimann & Bernstein, LLP, New York, NY, for Plaintiffs.

Patrick Shaun Thompson, Michael Joseph Moloney, III, Goodwin Procter LLP, San Francisco, CA, David L. Permut, Eric I. Goldberg, Goodwin Procter LLP, Washington, DC, for Defendant.

ORDER RE: MOTION TO DISMISS

THELTON E. HENDERSON, District Judge.

This matter came before the Court on March 7, 2011, on the motion to dismiss and/or strike filed by Defendant Bank of America Corporation (“Bank of America”). For the reasons set forth below, Defendant's motion is GRANTED IN PART and DENIED IN PART.

BACKGROUND

Plaintiffs Juan Arevalo (“Arevalo”) and Mitchell Sandow (“Sandow”) hold credit cards bearing Bank of America's logo.¹ In April and August 2010, respectively, Arevalo and Sandow discovered charges for “Credit Protection Plus” (“CPP”) on their credit card statements. CPP is a program available to credit card holders that charges them roughly 1 percent of their credit card balance in exchange for allowing them, under certain circumstances, to defer their monthly minimum credit card payment obligations. Arevalo discussed CPP with a Bank of America salesperson in January 2010, and declined to enroll at that time. When he discovered CPP charges on his April 2010 credit card statement, he reviewed previous statements and found CPP charges in February and March 2010. Bank of America allowed Arevalo to cancel CPP, but it refused to credit him the $712.50 he had paid for three months of CPP. Sandow had a similar experience. He discovered CPP charges on his credit card, and after calling Bank of America's customer service line, he filed a complaint with the Office of the Comptroller of Currency (“OCC”). Bank of America responded to Sandow by letter, informing him that Bank of America's records show that Sandow enrolled in CPP on January 6, 2009, “during an inbound telephone call in which a fraud status was removed from [his credit card] account.” First Amended Class Action Complaint (“FAC”) ¶ 48, ECF No. 6. The letter stated that during the call Sandow had provided his city of birth as “Falanagan,” and informed Sandow that Bank of America had mailed him information about CPP within three days of his enrollment. Sandow's city of birth is not “Falanagan,” and he does not recall receiving CPP materials in the mail. Bank of America has stopped charging Sandow for CPP, but refused to refund the more than $700 he paid in CPP charges.

Plaintiffs bring claims on behalf of all California residents who paid for CPP during the relevant time period who either (a) were involuntarily enrolled in CPP, or (b) enrolled in CPP voluntarily but were unable to use CPP due to the program's exclusions. Plaintiffs allege that members of the latter group were persuaded to enroll in CPP because Bank of America advertised the program as a way to make their futures more secure—it called CPP “an important safety net” “when times get tough, or when you go through a major life event.” Id. at ¶ 15. Bank of America also allegedly referred to CPP as coverage that protects consumers “precisely during the times you need it most,” giving them “peace of mind protection for the unexpected. Id. at ¶ 30. Plaintiffs point out exemptions and exclusions contained in CPP's fine print, which they say consumers typically receive, if at all, after enrolling in CPP. They also contend that Bank of America makes no effort to determine if a CPP customer is eligible for CPP when it sells the product. For example, retired persons are excluded from some CPP benefits, but Bank of America allegedly does not ask CPP customers when they sign up for CPP whether they are retired. Plaintiffs make similar allegations as to persons who are self employed or collecting unemployment insurance, part-time seasonal workers, and some disabled persons.

Plaintiffs filed their FAC against Bank of America in this Court on December 6, 2010. Defendant Bank of America filed its motion to dismiss on January 25, 2011, and this motion is now before the Court.

LEGAL STANDARD

Dismissal is appropriate under Federal Rule of Civil Procedure 12(b)(6) when a plaintiff's allegations fail “to state a claim upon which relief can be granted.” In ruling on a motion to dismiss, the Court must “accept all material allegations of fact as true and construe the complaint in a light most favorable to the non-moving party.” Vasquez v. L.A. County, 487 F.3d 1246, 1249 (9th Cir.2007). Courts are not, however, “bound to accept as true a legal conclusion couched as a factual allegation.” Iqbal, 129 S.Ct. at 1949–50.

A Rule 12(b)(6) dismissal “can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.1990). To survive a motion to dismiss, a plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Plausibility does not equate to probability, but it requires “more than a sheer possibility that a defendant has acted unlawfully.” Iqbal, 129 S.Ct. at 1949. “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. Dismissal of claims that fail to meet this standard should be with leave to amend unless it is clear that amendment could not possibly cure the complaint's deficiencies. Steckman v. Hart Brewing, Inc., 143 F.3d 1293, 1296 (9th Cir.1998).

DISCUSSION

Bank of America asks the Court to dismiss the following claims: (1) breach of contract (first claim); (2) breach of the covenant of good faith and fair dealing (second claim); (3) intentional misrepresentation (third claim); (4) violation of the Consumer Legal Remedies Act, California Civil Code section 1750, et seq. (fourth claim); (5) violation of the California Business and Professions Code section 17200, et seq. (fifth claim); (6) false advertising under the California Business and Professions Code section 17500, et seq. (sixth claim); and (7) unjust enrichment (seventh claim). Bank of America argues that Plaintiffs lack standing, that Plaintiffs have sued the wrong entity, that certain claims are preempted, and that Plaintiffs have not adequately pleaded their substantive claims.

I. Standing

The two named Plaintiffs bring claims on behalf of a putative class of all California residents who paid for CPP during the relevant time period who either (1) were enrolled involuntarily in CPP, or (2) signed up for CPP but were unable to use CPP due to exclusions. In its motion to dismiss, Bank of America argues that because the named Plaintiffs admit that they do not fall into the latter category of class members—they did not sign up for CPP and never attempted to use it—Plaintiffs fail to state various claims resting upon allegations relating to that group. In its reply papers, Bank of America identified this as a constitutional standing challenge and cited authority in support of its arguments. Because constitutional standing is a jurisdictional question that can be raised at any time in the litigation and cannot be waived, Chapman v. Pier 1 Imports (U.S.) Inc., 631 F.3d 939, 954 (9th Cir.2011), the Court will consider Bank of America's standing arguments. At oral argument, Plaintiffs declined the opportunity to address these arguments in writing.

Constitutional standing requires a plaintiff to demonstrate an actual, personal injury in fact that is fairly traceable to the challenged actions of the defendant and likely be redressed by a decision in the plaintiff's favor. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). Standing “is the threshold question in every federal case, determining the power of the court to entertain the suit.” Warth v. Seldin, 422 U.S. 490, 498, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975). In class actions, questions of standing do not generally defer until the class certification stage. LaDuke v. Nelson, 762 F.2d 1318, 1325 (9th Cir.1985) (“Standing ... is a jurisdictional element that must be satisfied prior to class certification.”). Named plaintiffs in a class action “must allege and show that they personally have been injured, not that injury has been suffered by other, unidentified members of the class to which they belong and which they purport to represent.” Warth, 422 U.S. at 502, 95 S.Ct. 2197. Bank of America's standing challenge raises the question of “whether intra-class differences implicate standing or the class certification requirements of Rule 23(a).” Brazil v. Dell Inc., No. C07–01700 RMW, 2008 WL 4912050, at *5 (N.D.Cal. Nov. 14, 2008). The Supreme Court has acknowledged “tension in our prior cases in this regard.” Gratz v. Bollinger, 539 U.S. 244, 264 n. 15, 123 S.Ct. 2411, 156 L.Ed.2d 257 (2003). Courts have resolved this tension differently. Compare Blum v. Yaretsky, 457 U.S. 991, 102 S.Ct. 2777, 73 L.Ed.2d 534 (1982) (finding that class representatives, who had standing to challenge their transfer to lower levels of medical care under Medicaid, lacked standing to challenge class members' transfers to higher levels of care), and In re Wells Fargo Mortg.-Backed Certificates Litig., 712 F.Supp.2d 958, 965 (N.D.Cal.2010) (holding that named plaintiffs, who had standing to sue based on misstatements or omissions in securities offerings through which they actually purchased securities, did not have standing to sue based on similar allegations relating to offerings through which they did not purchase securities), and Shurkin...