Sawyer v. Bill Me Later, Inc.

23 F.Supp.3d 1359

Kyle SAWYER, Individually and on behalf of all others similarly situated, Plaintiff

v.BILL ME LATER, INC., eBay Inc., PayPal, Inc., and Does 1–100, Defendants.

Case No. 2:11–cv–00988.

United States District Court, D. Utah, Central Division.

Signed May 23, 2014.

Heather M. Sneddon, Anderson & Karrenberg, Salt Lake City, UT, Jeff D. Friedman, Shana E. Scarlett, Hagens Berman Sobol Shapiro LLP, Berkeley, CA, Steve W. Berman, Hagens Berman Sobol Shapiro LLP, Seattle, WA, for Plaintiff.

Brent E. Johnson, Rebecca A. Ryon, Holland & Hart, Salt Lake City, UT, Samuel C. Zun, Thomas P. Brown, Paul Hastings LLP, San Francisco, CA, for Defendants.

MEMORANDUM DECISION AND ORDER GRANTING DEFENDANTS' MOTION TO DISMISS

CLARK WADDOUPS, District Judge.

Before the court is Defendants' Motion to Dismiss for Failure to State a Claim Under Rule 12(b)(6). (Dkt. No. 62.) The court heard oral argument on the Motion on September 20, 2012, taking the matter under advisement at that time. For the reasons discussed below, the court GRANTS Defendants' Motion (Dkt. No. 62) and dismisses Plaintiff's First Amended Complaint (Dkt. No. 49) in its entirety. The court also therefore DENIES AS MOOT Plaintiff's Motion for a Determination of Defendants' Claim of Privilege Pursuant to Fed.R.Civ.P. 26(b)(5)(B). (Dkt. No. 54.)

BACKGROUND

Plaintiff purchased a computer online in October 2008 for $1,068.08 using eBay/PayPal's affiliated “Bill Me Later” program to finance the purchase. To effect this online loan transaction through Bill Me Later (“BML”), Plaintiff signed a contract identifying CIT Bank as the lender in the financing and as the owner of the account created by Plaintiff in using BML to purchase the computer. CIT Bank was an FDIC-insured bank chartered in Utah. The contract specified that Plaintiff was accepting the loan in Utah, credit was being extended from Utah, an annual interest rate of 19.99% would apply to outstanding loan amounts, and disclosed a schedule for late fees. CIT Bank funded Plaintiff's transaction by paying the merchant on his behalf, then held the receivables for Plaintiff's account for at least two days before selling them to BML. On September 1, 2010, WebBank acquired all of CIT Bank's rights to this lending program and became the owner of all existing accounts (including Plaintiff's account) and the sole entity to issue new accounts and fund extensions of credit. WebBank is also an FDIC-insured bank chartered in Utah that retains the receivables on the accounts consumers choose to open with it through the BML program for two days before selling those receivables to PayPal (Europe) S.A.R.L., ET CIE S.C.A., a Luxembourg Bank. (Defs.' Mem. Supp. Mot. Dismiss 6 [Dkt. No. 63].) “WebBank retains a portion of the interest that accrues during the time it holds the receivable, shares in the upside ‘when the portfolio performs well’ and, as the account owner, benefits when account holders request additional extensions of credit.” (Id. (internal citations omitted).)

BML facilitates this consumer financing for the lending bank. Consumers, including Plaintiff, provide BML with financial and other information at the point of online sale that allows BML, on the bank's behalf as its service provider, to perform a real-time credit check for purposes of determining whether the consumer qualifies for the loan to finance the transaction. If the consumer qualifies for and reviews and accepts the terms and conditions of the loan, initially CIT Bank and now WebBank opens an account for the consumer and extends the consumer credit for the purchase, paying the merchant on the consumer's behalf. The consumer-turned-borrower is then responsible for a loan account similar to a credit card account with a current balance.

If the borrower pays for the purchase in full within 30 days, there is no charge for using the service at all. If the borrower makes a payment by the due date but does not pay off the account in full, the disclosed 19.99% interest rate applies to the remaining balance. If the borrower does not make at least the minimum payment by the payment date, then just like with a typical credit card balance, a separate late fee is applied according to the disclosed late fee schedule in addition to the disclosed 19.99% interest rate that applies to the outstanding balance. Plaintiff acknowledges in the First Amended Complaint that, according to the Wall Street Journal Blog, most borrowers “pay on time and in full,” meaning that there is no cost at all to them for using the BML service. (First Amended Complaint ¶ 103 [Dkt. No. 49].)¹

The WSJ Blog post cited by Plaintiff in the First Amended Complaint notes that 35% of borrowers do not pay in full within the first 30 days, meaning they then carry a balance similar to a credit card balance with associated interest rate and late fees triggered by missing a payment due date. The First Amended Complaint cites a number of complaints from such users, including Plaintiff, who became subject to late fees based on the disclosed schedule upon missing the due date for payment on their balance, in addition to the disclosed 19.99% interest rate on that balance. Borrowers expressed outrage at the annualized “interest rates” that resulted when combining the late fees on an annual percentage basis based on the balance with the disclosed annual interest rate of 19.99%; the resulting combined annualized figure, expressed as an “interest rate,” ranged from “more than a 70 percent interest rate” for Plaintiff to as high as 180% in one anonymous consumer complaint cited in an online article. (See id. at ¶¶ 104–115 [Dkt. No. 49].)

Plaintiff, a consumer-borrower living in California, brought this suit on his own behalf and on behalf of a class of similarly situated California consumers for alleged breach of contract (id. at ¶¶ 116–19), violation of California's Consumers Legal Remedies Act (California Civil Code sections 1750 et seq. ) (id. at ¶¶ 120–23), violation of California's Business and Professions Code sections 17200 et seq. by allegedly violating California's Unfair Competition Law under (Cal. Civ.Code 1671(c) –(d) ), California's Consumer Legal Remedies Act under Cal. Civ.Code sections 1750 et seq., California's Financial Code sections 22100(a), 22324, 12304, 22001, 22109, 22320.5, the California Constitution's anti-usury provision in Section 1, Art. VX and public policy of California (id. at ¶¶ 124–41), violation of the California Constitution's cited usury provision (id. at ¶¶ 142–47), and for aiding and abetting the above against eBay Inc. (id. at ¶¶ 148–52). Plaintiff is seeking injunctive relief enjoining the BML service in California and an order restoring all funds “improperly received by Defendants” to California borrowers and rescinding all contracts made between borrowers and Defendants that would violate California law. (Id. at 38.)

Judge Otero of the U.S. District Court for the Central District of California applied a choice of law analysis to Plaintiff's usury claims, which Plaintiff had brought under California law, and dismissed those claims with prejudice on the grounds that Utah law applied to and allowed the disclosed 19.99% interest rate applicable to balances under the program. (Order dated Dec. 14, 2010, at 10 [Dkt. No. 5–6].) WebBank moved to intervene, both permissively and as of right, as a Defendant in the matter. Judge Otero granted WebBank's motion to intervene on August 8, 2011. (Civil Minutes dated Aug. 8, 2011, at 12 [Dkt. No. 11–21].) Judge Otero then granted Defendants' Motion to Transfer Venue to the U.S. District Court for the District of Utah on October 21, 2011. (See Civil Minutes dated Oct. 21, 2011, at 3 & 10 [Dkt. No. 16–12].)

ANALYSIS

I. LEGAL STANDARD

“The court's function on a Rule 12(b)(6) motion is not to weigh potential evidence that the parties might present at trial, but to assess whether the plaintiff's complaint alone is legally sufficient to state a claim for which relief may be granted.” Dubbs v. Head Start, Inc., 336 F.3d 1194, 1201 (10th Cir.2003) (citations and quotation marks omitted). To survive a motion to dismiss, Plaintiff must plead “enough factual matter” to state “a claim to relief that is plausible on its face” when the court takes such factual matter as true, as it must at this stage of the litigation. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The plausibility standard “asks for more than a sheer possibility that a defendant has acted unlawfully” but is not “akin to a probability requirement.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). “Determining whether a complaint states a plausible claim for relief will ... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. at 679, 129 S.Ct. 1937. In making this determination, the court must make all reasonable inferences in the favor of the non-moving party, distinguishing well-pleaded facts from conclusory allegations. Ruiz v. McDonnell, 299 F.3d 1173, 1181 (10th Cir.2002). “This is not to say that the factual allegations must themselves be plausible; after all, they are assumed to be true. It is just to say that relief must follow from the facts alleged.” United States v. Ledford, No. 07–cv–01568–WYD–KMT, 2009 WL 724061 at *5, 2009 U.S. Dist. LEXIS 48441 at *9 (D.Colo. Feb. 9, 2009). Of course, the court is “not bound to accept as true a legal conclusion couched as a factual allegation.” Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937.

The court agrees with Defendants that “after setting aside the rhetoric and irrelevant allegations, the [First Amendment Complaint] cannot support a verdict for Plaintiff in light of the admitted facts and the documents Plaintiff has relied upon in this litigation.” (Defs.' Mem. Supp. Mot. Dismiss 6 [Dkt. No. 63].) Accordingly, the court dismisses the Complaint with prejudice for the reasons discussed below.

II. EXPRESS...