Gutierrez et al v. State Farm Insurance Company et al, No. 5:2011cv03111 - Document 54 (N.D. Cal. 2012)
Court Description: ORDER granting in part 39 Motion to Dismiss; Finding as moot 53 Stipulation to Continue Early Neutral Evaluation, Discovery and Motion Deadlines. The cause of action under the FDCPA is DISMISSED WITH PREJUDICE. Since this court is left without subject matter jurisdiction, this case is REMANDED to Santa Clara County Superior Court. All other pending matters are terminated and the clerk shall close this file. Signed by Judge Edward J. Davila on 10/15/2012. (ejdlc1, COURT STAFF) (Filed on 10/15/2012)
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Gutierrez et al v. State Farm Insurance Company et al Doc. 54 1 2 3 4 5 6 7 IN THE UNITED STATES DISTRICT COURT 8 FOR THE NORTHERN DISTRICT OF CALIFORNIA 9 SAN JOSE DIVISION CASE NO. 5:11-cv-03111 EJD JOEL GUTIERREZ, et. al., 11 ORDER GRANTING IN PART DEFENDANT’S MOTION TO DISMISS; REMANDING CASE Plaintiff(s), For the Northern District of California United States District Court 10 12 13 v. STATE FARM MUTUAL INSURANCE COMPANY, et. al., [Docket Item No(s). 39] 14 15 Defendant(s). / 16 17 In this insurance action, Defendant Ally Financial Company (“Ally Financial”) presently 18 moves the court for an order dismissing the First Amended Complaint (“FAC”) filed by Plaintiffs 19 Joel Gutierrez and Veronica Gutierrez1 after their original complaint was dismissed with leave to 20 amend. See Docket Item No. 39. Plaintiffs have filed written opposition to the motion. See Docket 21 Item No. 43. 22 As it currently stands, jurisdiction in this court arises pursuant to 28 U.S.C. § 1331. See Not. 23 of Removal, Docket Item No. 1, at ¶ 3. Having carefully reviewed this matter, the court finds that 24 Ally Financial’s motion should be granted in part, resulting in the remand of this action to the state 25 court from which it originated. 26 27 28 1 The court refers to Joel Gutierrez and Veronica Gutierrez collectively as “Plaintiffs.” Because the parties share a common surname, Joel Gutierrez is referred to separately as “Joel.” The court means no disrespect. 1 CASE NO. 5:11-cv-03111 EJD ORDER GRANTING IN PART DEFENDANT’S MOTION TO DISMISS; REMANDING CASE Dockets.Justia.com 1 2 I. FACTUAL AND PROCEDURAL BACKGROUND The court recounts the relevant factual information to establish context. Plaintiffs are 3 husband and wife. See FAC, Docket Item No. 38, at ¶ 2. At some point prior to July, 31, 2010, 4 Plaintiffs purchased a limited edition 2007 Pontiac Solstice (the “vehicle”), for which Ally Bank was 5 the lienholder. Id. Ally Financial is the collection subsidiary for Ally Bank. Id. at ¶ 3. 6 As to the vehicle, Plaintiffs contracted with Defendant State Farm Insurance Company 7 (“State Farm”) for a first-party automobile insurance policy, and also purchased a Guaranteed Auto 8 Protection policy (the “GAP contract”). Id. at ¶ 2. According to Plaintiffs, the GAP contract would 9 protect Plaintiffs from any deficiencies or inadequacies in the State Farm coverage and pay Ally Bank any money needed to repay the loan. Id. at ¶ 3. 11 For the Northern District of California United States District Court 10 The vehicle was stolen at some point between July 31, 2010, and August 5, 2010. Id. at ¶ 4. 12 At that time, the fair market value of the vehicle was approximately $30,000.00, and Plaintiffs owed 13 a balance of approximately $18,000.00 to Ally Bank on the original Retail Installment Sales 14 Contract (the “RISC”). Id. Plaintiffs immediately reported the theft to State Farm, but State Farm 15 refused to pay on the theft claim. Id. Plaintiffs also reported the theft to the police and to Ally 16 Financial. Id. at ¶ 6. Plaintiffs allege that two female representatives from Ally Financial informed 17 them they should cease making monthly payments on the RISC because Ally Bank would be paid in 18 full from State Farm or through the GAP contract coverage. Id. Plaintiffs relied on these 19 representations and stopped paying. 20 The vehicle was recovered in or about November, 2010. Id. at ¶ 10. Although it had been 21 destroyed, State Farm refused to pay for damages to the vehicle despite the prompt filing of a 22 notarized claim by Plaintiffs and also refused to advise Ally Bank that it should seek payment from 23 State Farm. Id., at ¶ 9. Instead, State Farm commenced a fraud investigation. Id. The vehicle was 24 ultimately repossessed. Id., at ¶ 11. 25 Plaintiffs commenced the instant action in Santa Clara County Superior Court on May 2, 26 2011. State Farm removed the action to this court on June 23, 2011. Ally Financial moved to 27 dismiss the original complaint, and the court granted the motion with leave to amend. Plaintiffs then 28 filed the FAC and this motion followed. 2 CASE NO. 5:11-cv-03111 EJD ORDER GRANTING IN PART DEFENDANT’S MOTION TO DISMISS; REMANDING CASE 1 2 II. LEGAL STANDARD Federal Rule of Civil Procedure 8(a) requires a plaintiff to plead each claim with sufficient 3 specificity to “give the defendant fair notice of what the . . . claim is and the grounds upon which it 4 rests.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotations omitted). A 5 complaint which falls short of the Rule 8(a) standard may be dismissed if it fails to state a claim 6 upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). “Dismissal under Rule 12(b)(6) is 7 appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support a 8 cognizable legal theory.” Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 9 2008). Moreover, the factual allegations “must be enough to raise a right to relief above the 11 For the Northern District of California United States District Court 10 speculative level” such that the claim “is plausible on its face.” Twombly, 550 U.S. at 556-57. When deciding whether to grant a motion to dismiss, the court generally “may not consider 12 any material beyond the pleadings.” Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 13 1542, 1555 n. 19 (9th Cir. 1990). The court must generally accept as true all “well-pleaded factual 14 allegations.” Ashcroft v. Iqbal, 556 U.S. 662, 664 (2009). The court must also construe the alleged 15 facts in the light most favorable to the plaintiff. Love v. United States, 915 F.2d 1242, 1245 (9th 16 Cir. 1988). However, the court may consider material submitted as part of the complaint or relied 17 upon in the complaint, and may also consider material subject to judicial notice. See Lee v. City of 18 Los Angeles, 250 F.3d 668, 688-69 (9th Cir. 2001). “[Material which is properly submitted as part 19 of the complaint may be considered.” Twombly, 550 U.S. at 555. But “courts are not bound to 20 accept as true a legal conclusion couched as a factual allegation.” Id. 21 22 III. DISCUSSION The FAC contains four causes of action against Ally Financial, only one of which arises 23 under federal law. Since the Notice of Removal cites the presence of a federal question as the basis 24 for jurisdiction in this court, the court primarily addresses the cause of action under Fair Debt 25 Collection Practices Act (“FDCPA”). 26 The FDCPA cause of action was previously dismissed for two reasons. First, the original 27 complaint did not include sufficient factual information to qualify the financial obligation as a 28 “consumer debt” under 15 U.S.C. § 1692a(5). Second, the original complaint did not establish that 3 CASE NO. 5:11-cv-03111 EJD ORDER GRANTING IN PART DEFENDANT’S MOTION TO DISMISS; REMANDING CASE 1 Ally Financial was a “debt collector” as defined in 15 U.S.C. § 1692a(6) since Ally Financial was 2 alleged to be both the lienholder and the entity seeking to collect on the debt. 3 Upon review of the FAC, Plaintiffs have resolved the deficiency with regard to the character 4 of the debt. A debt subject to the FDCPA is “any obligation or alleged obligation of a consumer to 5 pay money arising out of a transaction . . . [that is] primarily for personal, family, or household 6 purposes.” 15 U.S.C. § 1692a(5). Plaintiffs now allege that the debt created by the RISC contract 7 was used by Joel to purchase vehicle which he used for personal purposes. See FAC, at ¶ 27. 8 9 But Plaintiffs still have not established that Ally Financial qualifies as a “debt collector.” A “debt collector” under the FDCPA is either (1) “a person” the “principal purpose” of whose business is the collection of debts; or (2) “a person” who “regularly” collects debts on behalf of others. 15 11 For the Northern District of California United States District Court 10 U.S.C. § 1692a(6). 12 In order to satisfy this definition, Plaintiffs allege the following: (1) the lienholder is Ally 13 Bank, not Ally Financial, (see FAC, at ¶ 2), (2) Ally Financial is Ally Bank’s “collection subsidiary” 14 (see FAC, at ¶ 3), (3) Ally Financial used a fictitious name to collect from Plaintiffs (see FAC, at ¶¶ 15 5, 26), and (4) one of the principal businesses of Ally Financial is to collect on delinquent loans to 16 Ally Bank (see FAC, at ¶ 26). 17 Although these allegations are an improvement from those asserted previously, the FAC still 18 invokes one of the statutory exceptions to the definition of “debt collector.” Indeed, excluded are 19 “entities collecting or attempting to collect any debt owed or due or asserted to be owed or due 20 another . . . to the extent such activity concerns a debt which was not in default at the time it was 21 obtained by such person.” 15 U.S.C. § 1692a(6)(F). Here, Plaintiffs allege that the vehicle was 22 stolen at some time in late July or early August, 2010, and that Joel contacted Ally Financial on or 23 about August 5, 2010, at which time he was advised to cease making monthly payments on the loan. 24 See FAC, at ¶¶ 4,6. One fact that must be reasonably inferred from these allegations is that Joel was 25 current on his payments until at least August, 2010. Another reasonably inferred fact is that Ally 26 Financial was either servicing Joel’s loan or had acquired the loan before the default since Joel knew 27 to call Ally Financial when the vehicle was stolen. These inferred facts as well as those actually 28 alleged establish that Ally Financial falls within the exception described in § 1692a(6)(F) because it 4 CASE NO. 5:11-cv-03111 EJD ORDER GRANTING IN PART DEFENDANT’S MOTION TO DISMISS; REMANDING CASE 1 was already a party involved in the loan prior to default. See Suellen v. Mercantile Adjustment 2 Bureau, LLC, Case No. 12-cv-00916 NC, 2012 U.S. Dist. LEXIS 98640, at *7, 2012 WL 2849651, 3 (N.D. Cal. June 12, 2012) (“The primary inquiry in determining whether the FDCPA applies is 4 whether an entity is servicing the debt or collecting the debt.”). It therefore cannot be a “debt 5 collector” under the FDCPA as a matter of law.2 6 Because this is Plaintiffs’ second failed attempt to plead a FDCPA cause of action against 7 Ally Financial, and considering Ally Financial can never qualify as a “debt collector” under 8 Plaintiffs’ alleged facts, the FDCPA cause of action will be dismissed with prejudice. 9 This result raises the issue of whether this case should remain in federal court. The jurisdiction of federal courts is limited, and is only properly exercised over those cases raising 11 For the Northern District of California United States District Court 10 federal questions or involving parties with diverse citizenship. Exxon Mobil Corp. v. Allapattah 12 Servs., Inc., 545 U.S. 546, 552 (2005). 13 “[O]nce a court has original jurisdiction over some claims in the action, it may exercise 14 supplemental jurisdiction over additional claims that are part of the same case or controversy.” Id. 15 However, a district court may properly decline to exercise supplemental jurisdiction over state-law 16 claims if such claims “substantially predominate[] over the claim or claims over which the district 17 court has original jurisdiction” or the court “has dismissed all claims over which it has original 18 jurisdiction.” 28 U.S.C. § 1367(c). 19 Having now determined that Plaintiffs’ sole federal claim should be dismissed with 20 prejudice, all that remains are causes of action based in state law. As such, the court finds that state- 21 law issues substantially predominate and declines to exercise supplemental jurisdiction over those 22 remaining claims. This case will therefore be remanded to state court.3 23 24 25 26 27 28 2 The analysis of course assumes that Ally Financial could not also be excluded as a “debt collector” because it is an entity associated with the alleged lienholder, Ally Bank. See 15 U.S.C. § 1692a(6)(B). 3 The court notes that the FAC still names Dunn’s Tow as a defendant despite it having been previously dismissed as a party to this case. See Docket Item No. 13. The court must assume its inclusion in the FAC was an error since Dunn’s Tow has not been re-served with process and has not participated in this action since the dismissal. 5 CASE NO. 5:11-cv-03111 EJD ORDER GRANTING IN PART DEFENDANT’S MOTION TO DISMISS; REMANDING CASE 1 IV. ORDER 2 Based on the foregoing, Ally Financial’s Motion to Dismiss (Docket Item No. 39) is 3 GRANTED IN PART. The cause of action under the FDCPA is DISMISSED WITH PREJUDICE. 4 Since this court is left without subject matter jurisdiction, this case is REMANDED to Santa 5 Clara County Superior Court. All other pending matters are terminated and the clerk shall close this 6 file. 7 IT IS SO ORDERED. 8 9 Dated: October 15, 2012 EDWARD J. DAVILA United States District Judge 11 For the Northern District of California United States District Court 10 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6 CASE NO. 5:11-cv-03111 EJD ORDER GRANTING IN PART DEFENDANT’S MOTION TO DISMISS; REMANDING CASE
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