Hernandez v. TLC of the Bay Area, Inc.

263 F.Supp.3d 849

Daniel HERNANDEZ, Plaintiff,

v.TLC OF THE BAY AREA, INC., Defendant.

Case No. 5:16–cv–05524–HRL

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

Signed July 12, 2017

David Michael Medby, William Michael Artigliere, Garcia, Artigliere and Medby, Stephen Michael Garcia, Garcia Law Firm, Long Beach, CA, for Plaintiff.

Jon Peter Kardassakis, Zourik Zarifian, Lewis Brisbois Bisgaard & Smith LLP, Los Angeles, CA, Joseph Ronald Lamagna, Hooper, Lundy & Bookman, P.C., San Diego, CA, for Defendant.

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS THE FIRST AMENDED COMPLAINT WITHOUT LEAVE TO AMEND

HOWARD R. LLOYD, United States Magistrate Judge

Plaintiff Daniel Hernandez sues for himself and on behalf of two putative subclasses for rescission of an arbitration agreement due to alleged fraud, as well as for alleged violation of California Health and Safety Code § 1430(b). Hernandez invokes this court's diversity jurisdiction, 28 U.S.C. § 1332. Pursuant to Fed. R. Civ. P. 12(b)(6), defendant TLC of the Bay Area, Inc. (TLC) moves to dismiss the First Amended Complaint (FAC) for failure to state a claim. TLC also moves to strike the class allegations pursuant to Fed. R. Civ. P. 12(f). Plaintiff opposes the motion. Upon consideration of the moving and responding papers, as well as the oral arguments presented, the court grants TLC's motion to dismiss and deems moot the motion to strike.¹

BACKGROUND

The following facts are drawn from the FAC. Additionally, as will be discussed, the parties have separately stipulated to the dates of plaintiff's admission to and discharge from the facility in question.

Hernandez is a former resident of one of the skilled nursing facilities (Facility) owned and operated by TLC. The parties stipulate that he was admitted to the Facility on June 23, 2015. On or about that date, plaintiff entered into an Arbitration Agreement with the Facility. (FAC, Ex. 1). That agreement provides that any disputes between plaintiff and the Facility "shall be resolved exclusively by binding arbitration" to be conducted "in accordance with the National Arbitration Forum Code of Procedure, which is hereby incorporated into this Agreement, and not by a lawsuit or resort to court process." (Id. at 1). In a footnote, the agreement provides a phone number, fax number, and a website address where information about the National Arbitration Forum (NAF) and a copy of the Code of Procedure can be obtained. (Id. at 1 n.1).

The Arbitration Agreement expressly states that it is not part of the Admissions Agreement and that residents are not required to sign the Arbitration Agreement as a condition of admission. (FAC, Ex. 1).

The parties stipulate that plaintiff was discharged from the Facility a few months later on September 15, 2015.

On June 22, 2016, Hernandez sued TLC in state court for alleged elder abuse. On August 9, 2016, TLC requested a 45–day extension to respond to Hernandez's state court complaint. Then, on August 24, 2016, TLC sent a letter stating that TLC "has found that Daniel Hernandez agreed to arbitrate any claims involving his care" and requesting that plaintiff "voluntarily dismiss the above action and proceed to arbitrate his claims." (FAC ¶ 26, Ex. 7). On September 13, 2016, TLC wrote a letter advising that TLC would be filing a motion to compel arbitration. That motion was filed that same day. (Id. ¶ 27, Exs. 8, 9).

Hernandez then filed this federal putative class action here on September 28, 2016, asserting a sole claim for relief under California Health & Safety Code § 1430(b). He alleged that TLC fraudulently duped residents into signing the Arbitration Agreement, thereby depriving them of their right to a jury trial. The claim was based on allegations that, since 2009, NAF had ceased administering arbitrations involving consumers and that the NAF's Code of Procedure was not accessible online. TLC moved to dismiss the original complaint, arguing (among other things) that the allegations did not give rise to a plausible or actionable claim for relief. That motion was mooted when Hernandez timely filed his FAC as a matter of right under Fed. R. Civ. P. 15(a).

The FAC adds a claim seeking rescission of the Arbitration Agreement due to fraud. It continues to assert a claim for violation of California Health & Safety Code § 1430(b) for alleged deprivation of the right to a jury trial. And, Hernandez continues to bring his claims for himself and on behalf of two putative subclasses. Both subclasses are comprised of current and former residents of skilled nursing facilities owned, operated, or managed by TLC. The only difference is that Subclass 2 consists of individuals against whom TLC tried to enforce the Arbitration Agreement. (FAC ¶ 1). The gravamen of the FAC continues to be that TLC fraudulently duped plaintiff and putative class members into signing the Arbitration Agreement, even though the NAF no longer administers consumer disputes and the NAF's Code of Procedure was not accessible online.

Meanwhile, back in state court—on November 11, 2016, TLC answered Hernandez's complaint and ceased efforts to enforce the Arbitration Agreement.

In this federal suit, TLC once again moves to dismiss pursuant to Fed. R. Civ. P. 12(b)(6). TLC contends that plaintiff's right to a jury trial is not one that is protected by Cal. Health & Safety Code § 1430(b). And, TLC says that the § 1430(b) claim is time-barred anyway. Additionally, TLC argues that the FAC does not sufficiently allege facts supporting a claim for rescission based on fraud. As to both claims, defendant maintains that the FAC does not allege facts establishing any plausible claim for relief. Pursuant to Fed. R. Civ. P. 12(f), TLC also moves to strike the class allegations, arguing that individual issues of causation and reliance will necessarily predominate over any common issues of law or fact.

For the reasons to be discussed, this court grants the motion to dismiss both claims for relief and deems moot the motion to strike the class allegations.

DISCUSSION

A. Fed. R. Civ. P. 12(b)(6) Motion to Dismiss

1. Legal Standard

A motion to dismiss for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6) tests the legal sufficiency of the claims in the complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Dismissal is appropriate where there is no cognizable legal theory or an absence of sufficient facts alleged to support a cognizable legal theory. Id. (citing Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990) ). In such a motion, all material allegations in the complaint must be taken as true and construed in the light most favorable to the claimant. Id. However, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). Moreover, "the court is not required to accept legal conclusions cast in the form of factual allegations if those conclusions cannot reasonably be drawn from the facts alleged." Clegg v. Cult Awareness Network, 18 F.3d 752, 754–55 (9th Cir. 1994).

Federal Rule of Civil Procedure 8(a)(2) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief." This means that the "[f]actual allegations must be enough to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (citations omitted) However, only plausible claims for relief will survive a motion to dismiss. Iqbal, 129 S.Ct. at 1950. A claim is plausible if its factual content permits the court to draw a reasonable inference that the defendant is liable for the alleged misconduct. Id. A plaintiff does not have to provide detailed facts, but the pleading must include "more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Id. at 1949.

Documents appended to the complaint or which properly are the subject of judicial notice may be considered along with the complaint when deciding a Fed. R. Civ. P. 12(b)(6) motion. See Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990) ; MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 1986).²

While leave to amend generally is granted liberally, the court has discretion to dismiss a claim without leave to amend if amendment would be futile. Rivera v. BAC Home Loans Servicing, L.P., 756 F.Supp.2d 1193, 1997 (N.D. Cal. 2010) (citing Dumas v. Kipp, 90 F.3d 386, 393 (9th Cir. 1996) ).

2. Fraud

Plaintiff seeks to rescind the Arbitration Agreement, alleging that TLC concealed information and fraudulently induced him to sign that contract. TLC moves to dismiss this claim as implausible and lacking particularity. For the reasons to be discussed, the court agrees.

To satisfy pleading requirements under Fed. R. Civ. P. 8, "the Supreme Court has held that an ‘entitlement to relief’ requires ‘more than labels and conclusions.... Factual allegations must be enough to raise a right to relief above a speculative level.’ " Eclectic Properties East, LLC v. Marcus & Millichap Co., 751 F.3d 990, 995 (9th Cir. 2014) (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955 ). "Although ‘a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof is improbable,’ plaintiffs must include sufficient ‘factual enhancement’ to cross ‘the line between possibility and plausibility.’ " Id. (quoting Twombly, 550 U.S. at 556, 557, 127 S.Ct. 1955 ). In evaluating plausibility, "courts must also consider an ‘obvious alternative explanation’ for defendant's behavior." Id. at 996. "When faced with two possible explanations [for a defendant's behavior], only one of which can be true and only one of which results in liability, plaintiffs cannot offer allegations that are ‘merely consistent with’ their favored explanation but are also consistent with the alternative explanation." In re Century...