Yotta Technologies Inc. v. Evolve Bancorp, Inc.
3:24-cv-06456
N.D. Cal.May 19, 2025Background
- Yotta Technologies Inc. is a fintech company that provided finance management and prize drawing software but relied on partner banks, such as Evolve Bank, to hold customer funds and issue payment cards.
- In 2019, Yotta partnered with Evolve Bank, which then worked with Synapse Financial Technologies as an intermediary; Plaintiff and Evolve Bank never entered into a direct contract.
- Disputes arose after Evolve Bank suspended interest payments in 2023 and later froze customer access to funds in May 2024, with subsequent revelations of missing customer funds and data breaches.
- An investigation led to a Consent Decree against Evolve Bank for deficiencies in risk management and compliance.
- Yotta filed suit against Evolve Bank for fraud, conspiracy to commit fraud, negligent misrepresentation, negligent interference, negligence, violation of California’s UCL, and unjust enrichment.
- Evolve Bank moved to dismiss all claims; the Court considered motions, briefs, and oral arguments, ultimately granting the motion to dismiss and addressing possible leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Application of NY or CA Law | CA law should apply since conduct/parties are connected to CA | NY law applies, referencing law differences and representations | CA law applies; Evolve failed to show material conflict |
| Fraud Pleadings (Rule 9(b) specificity) | Alleged ongoing misrepresentations and fraudulent scheme by Evolve Bank | Allegations lack required specificity (who, what, where, etc.) | Dismissed; pleadings lack particularity |
| Conspiracy to Commit Fraud | Evolve and Synapse acted jointly to defraud Yotta and customers | No viable fraud claim pled; conspiracy claim must fail | Dismissed; no underlying fraud sufficiently alleged |
| Negligence & Negligent Misrepresentation | Economic loss doctrine doesn’t apply due to special relationship | Claims barred by economic loss doctrine | Dismissed; no special relationship under CA law |
| Negligent Interference with Contract | Claim should proceed as interference with prospective relations | CA does not recognize negligent interference with contract | Dismissed; leave to amend for prospective relations |
| UCL Standing | Misconduct occurred in CA; Yotta can assert UCL claims | Injury and conduct not sufficiently alleged to be in CA | Dismissed; standing not sufficiently alleged |
| Unjust Enrichment | Evolve bank benefited from Yotta’s customer deposits | No benefit directly conferred by Plaintiff to Defendant | Dismissed; Plaintiff failed to allege conferral by self |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard for plausibility)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (plausible claim requirement in complaints)
- Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097 (Rule 9(b) fraud pleading standards)
- Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025 (motion to dismiss standard)
- Hertz Corp. v. Friend, 559 U.S. 77 (definition of principal place of business for jurisdiction)
- Engalla v. Permanente Med. Grp., Inc., 15 Cal. 4th 951 (elements of fraud under CA law)
- Temple v. Synthes Corp., Ltd., 498 U.S. 5 (required versus permissive parties under Rule 19)
- Sheen v. Wells Fargo Bank, N.A., 12 Cal. 5th 905 (scope of the economic loss doctrine)