ORDER RE: MOTION TO DISMISS
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”).
BACKGROUND
Plaintiffs Juan Arevalo (“Arevalo”) and Mitchell Sandow (“Sandow”) hold credit cards bearing Bank of America’s logo.
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.
LEGAL STANDARD
Dismissal is appropriate under Federal Rule of Civil Procedure 12(b)(6) when a plaintiffs 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,
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,
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.,
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 plaintiffs favor. Lujan v. Defenders of Wildlife,
The party asserting federal jurisdiction carries the burden of establishing standing under Article III. DaimlerChrysler Corp. v. Cuno,
Second, Plaintiffs argue that CPP is a single “omnibus scheme,” and therefore class representatives should be able to bring all claims relating to it. They link claims arising from voluntary and involuntary CPP enrollment by noting that Bank of America responded to Arevalo and Sundowns complaints about being involuntarily enrolled in CPP by stating that they had voluntarily signed up for the program. This argument is unpersuasive. The Court’s standing analysis depends upon the facts that Plaintiffs allege, and Plaintiffs allege that Bank of America enrolled Arevalo and Sandow in CPP without their knowledge or consent. When Arevalo and Sandow learned of these charges, Bank of America refused to refund more than $700 charged to each of their credit cards. The fact that Bank of America allegedly stated that Arevalo and Sandow voluntarily enrolled in CPP does not change Plaintiffs’ allegations, or relate Arevalo and Sandov/s claims to those arising from class members’ voluntary enrollment in CPP. At oral argument, Plaintiffs argued that putative class members share an injury — they paid for a valueless product that they did not want or could not avail themselves of. But Arevalo and Sandow make no allegation that they suffered an injury stemming from the product’s worth. Their claim is that they got something they did not want and never tried to use. The value of the product, what Bank of America allegedly said to get them to buy it, any disclosures made about the product — facts essential to claims stemming from class members who voluntarily enrolled in CPP — appear to be unrelated to the claims of Arevalo and Sandow.
The Court agrees with Plaintiffs that when class representatives establish standing under Article III, the requirements of Rule 23(a) are ordinarily the best means of “effectively limitfing] the class claims to those fairly encompassed by the named plaintiffs claims.” General Telephone Co.,
Other cases cited by Plaintiffs do not affect the Court’s analysis. Greenwood is inapposite; the issue there was whether absent class members had standing, not whether class representatives had standing to assert claims on behalf of absent class members.
Bank of America argues that Plaintiffs’ FAC should be dismissed in its entirety because FIA Card Services, N.A. (“FIA”), not Bank of America, is the proper defendant in this case. Bank of America produced documents to show that FIA, not Bank of America, issued Plaintiffs credit cards and sold them CPP. FIA is a wholly-owned subsidiary of Bank of America. Thomas v. Bank of America Corp.,
Plaintiffs disagree. They point to several facts alleged in the FAC linking Bank of America to the CPP program: (1) a customer advocate from Bank of America— not FIA — sent Sandow a letter regarding his enrollment in CPP, FAC ¶ 48; (2) Ban-dew’s credit card agreement contains the phrase “©2007 Bank of America Corporation,” Moloney Decl. Ex A at 39; (3) Plaintiffs’ credit card statements containing CPP charges make no mention of FIA, see FAC ¶¶ 38, 45; and (4) Bank of America advertised CPP on its website, id. at ¶¶ 4, 15. Plaintiffs argue that these facts demonstrate Bank of America’s direct involvement in the CPP scheme. They also argue that these facts raise legal questions as to whether FIA’s conduct should be imputed to Bank of America. Bank of America cites no authority in response to these arguments, and the Court is not persuaded, based upon the pleadings, that Plaintiffs claims against Bank of America are not facially plausible.
III. Breach of Contract
The elements of a breach of contract claim are (1) the existence of a contract; (2) plaintiffs performance or excuse for non-performance; (3) defendant’s breach; and (4) resulting damages. Carean & Co. v. Sec. Pacific Bus. Credit, Inc.,
At oral argument, Plaintiffs argued that Arevalo and Sandow had also adequately pleaded claims for breach of the CPP contract. Plaintiffs note that “[e]quitable estoppel precludes a party from claiming the benefits of a contract while simultaneously
Plaintiffs also cite Scripps Health v. Blue Cross & Blue Shield of Kan., Inc., No. 10-cv-2028 DMS,
In a footnote to their opposition, Plaintiffs argue that their breach of contract claim should be converted into a suit for rescission. As Bank of America points out, “[i]t is axiomatic that a complaint may not be amended by briefs in opposition to a motion to dismiss.” Tietsworth v. Sears,
IV. Breach of the Covenant of Good Faith and Fair Dealing
The covenant of good faith and fair dealing “is implied as a supplement to the express contractual covenants, to prevent a contracting party from engaging in conduct which (while not technically transgressing the express covenants) frustrates the other party’s rights to the benefits of the contract.” Racine & Laramie, Ltd., Inc. v. Dep’t of Parks and Recreation,
V. Intentional Misrepresentation
“The elements of intentional misrepresentation, or actual fraud, are: (1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (scienter); (3) intent to defraud (i.e., to induce reliance); (4) justifiable reliance; and (5) resulting damage.” Anderson v. Deloitte & Touche,
Plaintiffs’ third cause of action for intentional misrepresentation refers only to facts relating to class members who actively purchased CPP. As it is written, the FAC does not put Bank of America on notice that Plaintiffs’ intentional misrepresentation claim is based upon anything other than the advertising and marketing campaign that caused some putative class members to agree to enroll in CPP. The claim makes no mention of involuntarily enrolled CPP customers, complaining only of Bank of America’s “advertisements and marketing representations,” which “were material to the Class members in deciding to purchase the Credit Protection.” FAC ¶¶ 83, 87. Claims of CPP purchasers are not before this Court, and Plaintiffs failure to allege intentional misrepresentation as it relates to involuntarily enrolled customers requires the Court to GRANT Bank of America’s motion to dismiss Plaintiffs’ third claim for intentional misrepresentation. This claim is DISMISSED WITHOUT PREJUDICE.
VI. Plaintiffs’ Claims Under the Consumer Legal Remedies Act
California’s Consumer Legal Remedies Act (“CLRA”) outlaws various “unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer .... ” Cal. Civ.Code § 1770(a). Plaintiffs asserting a violation of the CLRA must show “not only that a defendant’s conduct was deceptive but that the deception caused them harm.” McAdams v. Monier, Inc.,
Defendants argue that Plaintiffs do not plead sufficient facts to state a CLRA claim, and that Plaintiffs do not show that the facts they do plead constitute unlawful conduct under the CLRA. The Court finds that Plaintiffs have adequately pleaded violations of the CLRA.
Plaintiffs have pleaded with particularity the facts surrounding Arevalo and Sandow’s involuntary enrollment in CPP. They allege that Arevalo, during a call to Bank of America in January 2010 to activate cash advance checks, declined to enroll in CPP when offered by a salesperson. They allege that both Arevalo and Sandow first learned of their enrollment in CPP from their credit card statements—
Defendants correctly point out that Plaintiffs do not explain which provisions of the CLRA were violated by the alleged involuntary enrollments. However, the FAC does cite specific CLRA provisions. While many of these provisions seem to accompany allegations unrelated to customers’ involuntarily enrollment in CPP, at least one of the provisions is clearly cited with Arevalo and Sandow in mind. Plaintiffs allege that their involuntary enrollment in CPP inserted an unconscionable provision in Arevalo and Sandow’s credit card agreements in violation of section 1770(a)(19) of the CLRA.
VII. Plaintiffs’ Claims Under California’s Unfair Competition Law
Plaintiffs bring their fifth cause of action under California’s Unfair Competition Law (“UCL”). Cal. Bus. & Prof.Code § 17200. The UCL characterizes “any unlawful, unfair or fraudulent business act or practice” as “unfair competition.” Id. The statute’s coverage is “sweeping, embracing ‘anything that can properly be called a business practice and that at the same time is forbidden by law.’ ” Rubin v. Green, 4 Cal.4th 1187, 1200,
Since the UCL is “written in the disjunctive,” it “establishes three varieties of unfair competition — -acts or practice which are unlawful, or unfair, or fraudulent.” Podolsky v. First Healthcare Corp.,
In reply, Bank of America abandons its UCL standing arguments. Its motion papers correctly point out that a plaintiff has standing to bring a UCL claim if he or she “has suffered injury in fact and has lost money or property as a result of the unfair competition.” Cal. Bus. & Prof. Code § 17204. In opposition, Plaintiffs argue that both Arevalo and Sandow allege that they have lost more than $700 each. They argue that their losses constitute injuries in fact and economic injuries caused by involuntary enrollment. In its reply papers, Bank of America does not disagree. Nor does the Court, see Kwikset Corp. v. Superior Court of Orange Cnty.,
Plaintiffs’ UCL claim also withstands Bank of America’s arguments that they have not stated a claim under the statute. Plaintiffs state a claim under the unlawful prong of the UCL. “By proscribing ‘any unlawful’ business practice, section 17200 ‘borrows’ violations of other laws and treats them as unlawful practices that the unfair competition law makes independently actionable.” Cel-Tech Commc’ns, Inc. v. L.A. Cellular Tele. Co.,
In its reply papers, Bank of America does not disagree. Instead, it argues that Plaintiffs have not adequately pleaded claims under the unfair and fraudulent prongs of the UCL. However, the Court need not and does not consider whether Plaintiffs could state a claim under these prongs of the UCL. See, e.g., Morgan,
VIII. False Advertising
Plaintiffs bring their sixth cause of action for false advertising under section 17500 of the California Business and Professions Code, also known as California’s False Advertising Law (“FAL”). This statute “makes it unlawful for a business to disseminate any statement ‘which is untrue or misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading ....’” Ariz. Cartridge Reman
Having already determined that Plaintiffs have suffered injury in fact and have lost some money or property as a result of being involuntarily enrolled in CPP, the Court turns to whether Plaintiffs have alleged a FAL violation, and whether their loss of money happened as a result of that violation. In the FAC, Plaintiffs allege that Bank of America “concealed] the manner in which customers were enrolled in Credit Protection without their permission .... ” Bank of America challenges the substance of Plaintiffs’ FAL claim by arguing that the conduct challenged under the FAL (1) is not pleaded with particularity; and (2) is insufficiently pleaded insofar as Plaintiffs fail to allege that Bank of America intended to induce Plaintiffs’ reliance. Bank of America’s first argument fails because the FAC clearly challenges Bank of America’s failure to tell Plaintiffs that they were being enrolled in CPP. Both Arevalo and Sandow describe contact with Bank of America, and explain that Bank of America omitted from these conversations and communications details about Arevalo and Sandow’s enrollment in CPP. Furthermore, to the extent that Bank of America implies that FAL claims cannot rest upon omissions, it presents no authority suggesting that the failure to disclose information is not actionable under the FAL. As to Bank of America’s second argument regarding Plaintiffs’ failure to plead Bank of America’s intent, the Court finds that this is not fatal to Plaintiffs’ FAL claim. Plaintiffs cite to the FAL in the FAC, and the language of the FAL includes the element of intent. Intent need not be pleaded with particularity under Rule 9(b), and reading the FAC in the light most favorable to Plaintiffs, the Court finds that the FAC adequately pleads the intent element of Plaintiffs’ FAL claim.
The Court also finds that the conduct challenged by Plaintiffs as violating the FAL caused the injury they allege- — -the loss of more than $700. Accordingly, Bank of America’s motion to dismiss Plaintiffs’ FAL claim for failure to state a claim is DENIED.
IX. Preemption of Plaintiffs’ CLRA, UCL, and FAL Claims
Bank of America argues that even if they are adequately pleaded, Plaintiffs’ fourth, fifth, and sixth claims for relief under the CLRA, UCL, and FAL are preempted by the National Bank Act (“NBA”), 12 U.S.C. § 1 et seq. The parties do not address whether Bank of America is a national bank created and operated under the NBA, but Bank of America argues that the NBA applies to the transactions here because FIA is a national bank under the statute. Plaintiffs do not disagree.
“[The NBA] vests national banks ... with authority to exercise ‘all such
As the agency charged with administering the Act, the Office of the Comptroller of the Currency (“OCC”) has the primary responsibility for the surveillance of the “business of banking” authorized by the Act. NationsBank of N.C., N.A. v. Variable Annuity Life Ins. Co.,513 U.S. 251 , 256,115 S.Ct. 810 ,130 L.Ed.2d 740 (1995). To carry out this responsibility, the OCC has the power to promulgate regulations and to use its rulemaking authority to define the “incidental powers” of national banks beyond those specifically enumerated in the statute. See 12 U.S.C. § 93a (authorizing the OCC “to prescribe rules and regulations to carry out the responsibilities of the office”); Wachovia Bank, N.A v. Burke,414 F.3d 305 , 312 (2d Cir.2005). OCC regulations possess the same preemptive effect as the Act itself.
Martinez,
The three circumstances in which state law can be preempted under the Supremacy Clause, U.S. Const, art. VI, cl. 2, by federal law, are:
(1) express preemption, where Congress explicitly defines the extent to which its enactments preempt state law; (2) field preemption, where state law attempts to regulate conduct in a field that Congress intended the federal law exclusively to occupy; and (3) conflict preemption, where it is impossible to comply with both state and federal requirements, or where state law stands as an obstacle to the accomplishment and execution of the full purpose and objectives of Congress.
Indus. Truck Ass’n, Inc. v. Henry,
The Supreme Court has stated that “[f]ederally chartered banks are subject to state laws of general application in their daily business to the extent such laws do not conflict with the letter or the general purposes of the NBA.” Watters v. Wachovia Bank, N.A.,
The Court is less sure as to whether OCC regulations may expressly preempt state consumer protection laws. However, assuming that express preemption still applies, the state laws at issue here are not expressly preempted.
A. Express Preemption
The parties agree that CPP is a debt cancellation contract (“DCC”) under the OCC regulations. See 12 C.F.R. § 37.2(f). The OCC regulations expressly state that DCCs “are governed by this part and applicable Federal law and regulations, and not ... by State law.” 12 C.F.R. § 37.1(c). Bank of America argues that this regulation expressly preempts Plaintiffs’ claims under California’s consumer protection statutes such as the CLRA, UCL, and FAL. Bank of America also argues that various provisions that do not reference state law nonetheless expressly preempt the state laws at issue here. Because express preemption requires a federal law or regulation to “define[ ] the extent to which its enactments preempt state law,” the latter provisions are not properly analyzed under express preemption. They will be analyzed under conflict preemption.
While other courts have held otherwise, this Court is not persuaded that the OCC regulation quoted above expressly preempts the state laws at issue here. “The NBA itself sets out procedures the OCC must follow to issue a rule concluding that ‘federal law preempts the application to a national bank of any State law regarding ... consumer protection ....’” Jefferson v. Chase Home Fin., No. C. 06-6510 TEH,
B. Conflict Preemption
Bank of America argues that Plaintiffs’ CLRA, UCL, and FAL claims are preempted by OCC regulations. State laws conflict with federal law where
“compliance with both federal and state regulations is a physical impossibility,” Florida Lime and Avocado Growers, Inc. v. Paul,373 U.S. 132 , 142-43,83 S.Ct. 1210 ,10 L.Ed.2d 248 (1963), or when state law “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Hines v. Davidowitz,312 U.S. 52 , 67,61 S.Ct. 399 ,85 L.Ed. 581 (1941).
Bank of America v. City and County of San Francisco,
Plaintiffs’ CLRA, UCL, and FAL claims challenge two actions on the part of Bank of America: (1) involuntarily enrolling Arevalo and Sandow in CPP; and (2) misleading Arevalo and Sandow regarding their involuntary enrollment. Bank of America fails to persuade the Court that the OCC regulations governing DCCs create duties that conflict with the duties at issue in Plaintiffs’ CLRA, UCL, and FAL claims.
Bank of America also argues that 12 C.F.R. section 37.4, which governs the provision of refunds to DCC customers, conflicts with Plaintiffs’ claims that Bank of America failed to provide them refunds in violation of the CLRA, UCL, and FAL. Insofar as Plaintiffs’ claims are premised upon the failure of Bank of America to refund Arevalo and Sandow’s money, section 37.4 does not conflict with them. Section 37.4 governs the refund of fees “paid for the contract.” 12 C.F.R. § 37.4(a).
Bank of America argues that two other OCC regulations — 12 C.F.R. section 37.6(c) (“section 37.6(c)”) and 12 C.F.R. Part 37, App. B (“Appendix B”) — conflict with Plaintiffs’ consumer protection claims. Section 37.6(c) governs the disclosures that sellers of DCCs must make to customers, and Appendix B governs eligibility requirements. The claims of class members challenging CPP disclosures and eligibility requirements are not before this Court.
In light of the Court’s conclusion that Plaintiffs’ consumer protection claims are not preempted, Bank of America’s motion to dismiss these claims on preemption grounds is DENIED.
X. Unjust Enrichment
Bank of America challenges Plaintiffs’ claim for unjust enrichment by arguing that unjust enrichment is not a proper cause of action under California law. California courts appear to agree. “[T]here is no cause of action in California for unjust enrichment.” Melchior v. New Line Prods., Inc.,
XL Motion to Strike
In support of its motion to strike, Bank of America merely argues that “to the extent that the Court determines that some portion of a claim does not state a claim,” the Court should strike it pursuant to Rule 12(f) of the Federal Rules of Civil Procedure. Mot. 21: 3-6. Rule 12(f) provides that “[t]he court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” Fed.R.Civ.P. 12(f). As Plaintiffs point out, Bank of America offers no authority in favor of automatically striking portions of pleadings dismissed on a motion to dismiss, and no argument as to why any of Plaintiffs’ pleadings should be stricken. Accordingly, Bank of America’s motion to strike is DENIED.
CONCLUSION
For the reasons set forth above, Bank of America’s motion to dismiss is GRANTED IN PART and DENIED IN PART. It is
Notes
. On a motion to dismiss, the Court must accept as true all material factual allegations in the complaint, as well as any reasonable inferences to be drawn from them. Ashcroft v. Iqbal,
. At oral argument, Plaintiffs cited case law in support of their argument that a breach of contract claim is stated where it is obvious from the terms of the contract that a party to the contract cannot charge fees for services not contemplated in the contract. The Court need not evaluate these arguments because Plaintiffs did not plead a breach of the credit card contract.
. This is one of several cases mentioned by Plaintiffs at oral argument for which no citation was given. The Court believes it has located the correct cases, but if it has not, the Court considers the cases abandoned because they were not cited in Plaintiffs' brief. See Collins v. City of San Diego,
. Even though Morgan v. AT & T Wireless Servs., Inc.,
. Similar language appears in the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank”), codified in relevant part at 12 U.S.C. section 25b. Dodd-Frank provides that "State consumer financial laws are preempted, only if ... the State consumer financial law prevents or significantly interferes with the exercise by the national bank of its powers.” 12 U.S.C. § 25b(b)(l). Defendants argue that this language is irrelevant to the Court's preemption analysis. In light of the fact that nearly identical language appears in Watters, and Watters controls this case, the Court need not determine the significance of this provision DoddFrank.
. In its reply papers, Bank of America states that it does not argue that the OCC regulations conflict with Plaintiffs’ claims regarding their involuntary enrollment. However, in its motion, Bank of America appears to argue that these claims are expressly preempted because they conflict with OCC regulations. Therefore the Court analyzes here whether the OCC regulations conflict with Plaintiffs’ involuntary enrollment claims.