Newton v. American Debt Services, Inc.
75 F. Supp. 3d 1048
N.D. Cal.2014Background
- Newton, on behalf of a putative class, alleges California and federal UCL violations related to a debt-settlement scheme involving ADS, QSS, Global, and RMBT.
- Global and RMBT remain after ADS and QSS defaulted; Newton's second amended complaint targets RMBT's FDIC Order-based UCL claims and aiding-and-abetting over Proraters Law violations.
- RMBT and Global seek summary judgment on Newton’s UCL claims predicated on the FDIC Order and on aiding-and-abetting Proraters violations; the court previously ruled on CROA/CLRA and conspiracy claims.
- The FDIC Order of April 2, 2009 required RMBT to overhaul third-party risk and monitor debt-settlement partners; FDIC later noted deficiencies but did not bring enforcement action in court.
- The court discusses Section 1818(i)(1), which bars courts from enforcing or reviewing FDIC orders except by the agency, raising jurisdictional issues for borrowing the Order to support UCL claims.
- RMBT moves for summary judgment arguing the FDIC Order cannot serve as a predicate for unlawful/unfair/fraudulent UCL claims and that Newton abandoned the fraudulent prong; the court partially grants and partially denies RMBT/Global relief.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can the FDIC Order be borrowed to support UCL unlawful prong liability? | Newton argues the FDIC Order provides predicate law for unlawful violations under §17200. | RMBT contends the FDIC Order is not an independent law that can be borrowed due to 1818(i)(1) jurisdictional bar. | Unlawful prong borrowing barred; order cannot be enforced or borrowed under §17200. |
| Can the FDIC Order's terms be used to support UCL unfairness liability? | Newton asserts ongoing RMBT relationships violate the Order and thus are unfair. | RMBT argues the same jurisdictional bar applies to the unfair prong. | Unfairness claim barred for the same jurisdictional reasons as unlawful prong. |
| Can the FDIC Order support a UCL fraudulent-prong claim? | Newton alleges RMBT’s breach of the Order constitutes fraud under the UCL. | RMBT contends the Order cannot form the basis for fraudulent liability for lack of knowledge/reliance and enforcement issues. | Fraudulent prong dismissed due to lack of response by Newton and lack of independent basis. |
| Do RMBT and Global have viable aiding-and-abetting UCL claims regarding Proraters Law violations? | Newton presents evidence that Global and RMBT aided ADS/QSS’s Proraters violations. | Defendants previously argued no aiding-and-abetting liability under the UCL; the court has rejected this argument in prior orders but the issue is revisited here. | Denied; aiding-and-abetting claims may proceed to trial. |
Key Cases Cited
- Zhang v. Superior Court, 57 Cal.4th 364 (Cal. 2013) (UCL unlawful prong borrowing; common-law predicate allowed but limited)
- Cel‑Tech Communications, Inc. v. L.A. Cellular Telephone Co., 20 Cal.4th 163 (Cal. 1999) (limits on borrowing laws when safe harbors exist)
- State Farm Fire and Casualty Co. v. Superior Court, 45 Cal.4th 1093 (Cal. 2008) (unfair prong requires balancing harm and utility)
- Garrett v. Coast & Southern Fed. Sav. & Loan Assn., 9 Cal.3d 731 (Cal. 1973) (illustrates borrowing under the unlawful prong)
- Bondanza v. Peninsula Hospital & Medical Center, 23 Cal.3d 260 (Cal. 1979) (unlawful penalties borrowed under UCL)
- Hewlett v. Squaw Valley Ski Corp., 54 Cal.App.4th 499 (Cal. Ct. App. 1997) (UCL violations may be prosecuted even when based on TROs)
- CRST Van Expedited, Inc. v. Werner Enterprises, Inc., 479 F.3d 1099 (9th Cir. 2007) (unlawful prong broad interpretation to cover legally forbidden practices)
- People v. Casa Blanca Convalescent Homes, Inc., 159 Cal.App.3d 509 (Cal. Ct. App. 1984) (definition of unfair under UCL)