Shirley Piatt et al v. The Money Store et al, No. 2:2018cv01291 - Document 41 (C.D. Cal. 2018)

Court Description: ORDER GRANTING, IN PART, DEFENDANTS' MOTION TO DISMISS 23 by Judge Otis D. Wright, II. The Court GRANTS, in part, Defendants' Motion to Dismiss. (ECF No. 23.) Specifically, the Court DISMISSES: The Fee Split Class II in its entirety w ithout leave to amend; The Late Fee Class II, as to class members who reside outside of California, without leave to amend; Shirley Piatt's individual claims, without leave to amend; The Late Fee Class II, as it pertains to California resi dents, with leave to amend within 21 days of this order, and as explained above; Asberry and Cordes' individual claims, with leave to amend, within 21 days of this order, and as explained above; and Plaintiffs' UCL claims, without leave to amend. (lom)

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Shirley Piatt et al v. The Money Store et al Doc. 41 O 1 2 3 4 5 6 7 United States District Court Central District of California 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DARRELL ASBERRY, MICHAEL F. Case 2:18-CV-01291-ODW (PLAx) CORDES, SHIRLEY PIATT, on behalf of themselves and all others similarly situated, ORDER GRANTING, IN PART, DEFENDANTS’ MOTION TO Plaintiffs, DISMISS [23] v. THE MONEY STORE, TMS MORTGAGE, INC., HOMEQ SERVICING CORP., WELLS FARGO BANK, N.A., Defendants. I. INTRODUCTION Darrel Asberry, Michael F. Cordes, and Shirley Piatt (“Plaintiffs”) bring this putative class action on behalf of themselves and two subclasses seeking damages for Defendants’ allegedly fraudulent lending practices. (See generally First Am. Compl. (“FAC”), ECF No. 13.) Plaintiffs bring claims for 1) Breach of Contract; 2) Breach of the Covenant of Good Faith and Fair Dealing; 3) Unfair Business Practices, Cal. Bus. & Prof. Code §§ 17200, et seq.; 4) Restitution to Avoid Unjust Enrichment; and 5) Fraud. (Id.) The Money Store, TMS Mortgage, Inc., HomEq Servicing Corp., and Wells Fargo Bank, N.A. (“Defendants”) move to dismiss Plaintiffs’ FAC pursuant to Federal Rule of Civil Procedure 12(b)(6). After considering the papers filed in Dockets.Justia.com 1 connection with the Motion, the Court deemed the Motion appropriate for decision 2 without oral argument. Fed. R. Civ. P. 78(b); C.D. Cal. L.R. 7-15. For the reasons 3 below, the Court GRANTS, in part, Defendants’ Motion. (ECF No. 23.) 4 II. REQUESTS FOR JUDICIAL NOTICE 5 Defendants request that the Court take judicial notice of several pleadings 6 related to a prior action. (Defs. Req. for Jud. Not. (“DRJN”), ECF No. 24; Defs. 7 Supp. Req. for Jud. Not. (“DSRJN”).) “[O]n a motion to dismiss a court may properly 8 look beyond the complaint to matters of public record and doing so does not convert a 9 Rule 12(b)(6) motion to one for summary judgment.” Mack v. South Bay Beer 10 Distribs., 798 F.2d 1279, 1282 (9th Cir. 1986), abrogated on other grounds by Astoria 11 Fed. Sav. & Loan Ass’n v. Solimino, 501 U.S. 104, 111 (1991). Public court filings 12 are not typically subject to dispute, and thus are generally proper matters to judicially 13 notice. See, e.g., Warren v. Fox Family Worldwide, Inc., 171 F. Supp. 2d 1057, 1062 14 (C.D. Cal. 2001) (taking judicial notice of public documents submitted in support of 15 Rule 12(b)(1) and 12(b)(6) motion); see Reyn’s Pasta Bella, LLC v. Visa USA, Inc., 16 442 F.35 741, 746 n.6 (9th Cir. 2006) (taking judicial notice of pleadings, memoranda, 17 and other court filings); Kootenai Tribe of Idaho v. Veneman, 313 F.3d 1094, 1124 18 n.29 (9th Cir. 2002) (taking judicial notice of a complaint in another case). 19 Plaintiffs object to Defendants’ Supplemental Request for Judicial Notice 20 because certain documents are letters to the court in the prior action. (Plfs. Obj. to 21 DSRJN, ECF No. 37.) Plaintiffs are correct that the Court may not take judicial 22 notice of pleadings filed, or orders of the court in other proceedings “for the truth of 23 the facts recited therein, but [it may] for the existence of the opinion, which is not 24 subject to reasonable dispute over its authenticity.” Lee v. City of Los Angeles, 250 25 F.3d 668, 690 (9th Cir. 2001) (citations omitted). The Court is also permitted to 26 evaluate prior pleadings in applying issue preclusion principles, such as the Court is 27 required to do here. See Reyn’s Pasta, 442 F.3d at 746 n.6 (9th Cir. 2006) (taking 28 judicial notice of pleadings, memoranda, and other court filings when deciding issue 2 1 preclusion); Young Money Entm’t v. Digerati Holdings, LLC, No. 2:12–cv–07663– 2 ODW(JCx), 2012 WL 5571209, *3 (C.D. Cal. Nov. 15, 2012) (considering substance 3 of summary judgment order when deciding claim preclusion); see also Silber v. 4 Mabon, 18 F.3d 1449, 1451–52 (9th Cir. 1994) (reviewing stipulations filed and 5 orders entered regarding notice in prior class-action litigation to evaluate preclusive 6 effect). 7 With this framework, the Court considers the prior pleadings to analyze 8 whether Plaintiffs’ claims are barred by issue preclusion, but does not rely on the truth 9 of the facts recited therein for any other purpose. See Reyn’s Pasta, 442 F.3d at 746 10 n.6. The Court also DENIES Defendants’ Request that the Court take judicial notice 11 of Exhibits T and M. Both exhibits are letters written by Plaintiffs’ counsel relating to 12 the prior action, and do not significantly bear on the Court’s issue preclusion analysis. 13 Accordingly, the Court GRANTS, in part, Defendants’ Requests for Judicial Notice 14 (ECF Nos. 24, 32), and SUSTAINS, in part, and OVERRULES, in part, Plaintiffs’ 15 Objections. (ECF No. 37.) 16 III. FACTUAL BACKGROUND1 17 The filing of this action follows a jury trial, and subsequent appeal in the 18 Second Circuit, which involved the same Defendants, and similarly situated plaintiffs. 19 Because much of the Court’s reasoning turns on the outcome of the first action, the 20 Court explains the history of the first action, Mazzei v. The Money Store (“Mazzei 21 Action”), No. 01 Cv. 5694(JGK), (S.D.N.Y. filed June 22, 2001). Next, the Court 22 addresses the allegations here, as compared to those in the Mazzei Action. 23 A. Mazzei Action 24 Joseph Mazzei filed an action against The Money Store, Inc., TMS Mortgage, 25 Inc., and HomEq (“HomEq Defendants”) in 2001.2 (FAC ¶ 24.) Mazzei took a 26 27 28 1 All factual references are allegations taken from Plaintiffs’ FAC and accepted as true for purposes of this Motion. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). 2 Wells Fargo Bank, N.A. currently owns these defendants via merger. (FAC ¶¶ 15–16.) 3 1 mortgage loan in 1994, and ultimately fell behind on his payments. (Id. ¶¶ 25–26.) 2 After default, the HomeEq Defendants accelerated his loan and initiated non-judicial 3 foreclosure proceedings in California. (Id. ¶ 26.) Mazzei then sold his property so 4 that he could pay off the loan. In 2001, Mazzei filed a lawsuit and claimed that: 1) the 5 HomEq Defendants impermissibly charged him late fees after accelerating the loan; 6 and 2) the HomeEq Defendants paid portions of Mazzei’s loan pay-off, which were 7 earmarked for attorneys’ fees, to non-attorneys. (See id. ¶ 36.) The parties engaged in 8 protracted discovery, and in 2012, Mazzei finally moved for class certification. (Id. 9 ¶¶ 29–36.) 10 The district court certified a “Fee-Split Class” and a “Late Fee Class.” (Id. 11 ¶ 36.) The Fee-Split Class included “all borrowers charged for amounts paid to 12 Fidelity, a non-lawyer entity, from attorneys’ fees charged to borrowers during the 13 Class Period.” Mazzei v. Money Store, 288 F.R.D. 45, 62 (S.D.N.Y. 2012), overruled 14 by, 308 F.R.D. 92 (decertifying class). The Late Fee Class included “every borrower 15 who was charged late fees after the borrower’s loan was accelerated, and where the 16 accelerated loan was paid off (or foreclosed on) during the Class Period.” Id. at 66. 17 After the court certified the sub-classes, the parties continued to identify class 18 members. (FAC ¶¶ 37–38.) Defendants then revealed that Wells Fargo purchased the 19 HomEq Defendants, and that Defendants no longer possessed the databases that 20 included information regarding the loans of the class members. (Id.) Defendants told 21 Plaintiffs that the accounting firm, Ernst & Young, had the databases. (Id. ¶ 37.) 22 Plaintiffs argued that Defendants failed to preserve certain databases that would have 23 provided electronic invoices from law firms to Fidelity, or other documents that would 24 have shown the division of fees, which was relevant to the Fee-Split Class. (Id. 25 ¶¶ 38–39.) Plaintiffs moved for sanctions related to Defendants’ failure to preserve 26 these databases. The Court “held that although the defendants willfully failed to 27 preserve the New Invoice System in the same accessible form that had previously 28 existed…there was no evidence of the defendants’ bad faith in the sense that the 4 1 defendants were intentionally depriving the plaintiff of information for use in [the] 2 litigation.” 3 (quotation omitted). Mazzei v. Money Store, 308 F.R.D. 92, 101–02 (S.D.N.Y. 2015) 4 The case proceeded to trial, and the jury returned a $54 million verdict in favor 5 of the plaintiffs on the Late Fee Class, and in favor of the HomeEq Defendants on the 6 Fee-Split Class. See id. at 94. The plaintiffs moved for a new trial on the Fee-Split 7 Class claim, and Defendants moved to decertify the Late Fee Class. Id. The court 8 denied the plaintiffs’ new trial motion, which was based on, among other things, the 9 HomeEq Defendants’ failure to preserve evidence discussed above. Id. at 106. As to 10 the spoliation argument, the court reasoned that the “plaintiff failed to seek a greater 11 sanction in his initial motion and this Court appropriately refused to grant a more 12 severe sanction at trial in view of the tangential nature of the New Invoice System and 13 the plaintiff’s failure to pursue evidence diligently from alternative and more relevant 14 sources.” Id. at 102. This was effectively the court’s third time addressing, and 15 discounting, plaintiffs’ spoliation claims. See id. 16 The court then decertified the Late Fee Class for two reasons. Id. at 112–13. 17 First, Mazzei failed to present class-wide evidence that the plaintiffs were in privity 18 with the defendants, such that they could pursue their breach of contract claims. Id. at 19 113. This was because many of the class members’ loans were serviced by the 20 HomeEq Defendants, but did not originate with them. See id. Second, Mazzei was 21 not typical of the class because his loan originated with, and was serviced by, the 22 HomeEq Defendants. Id. at 112–13. Thus, the court reasoned, individual questions 23 regarding each class member’s contract with the defendants (or lack thereof in the 24 event the loan did not originate with them) predominated over the common questions, 25 rendering the class untenable. Id. The court further reasoned that “decertifying the 26 class furthers the interests of absent class members because it protects them from 27 being saddled with the fact that the plaintiff failed to produce enough evidence to 28 protect their interests at trial.” Id. at 113 (citing Rector v. City & Cnty. of Denver, 348 5 1 F.3d 935, 949 (10th Cir. 2003)). 2 decertification order, and denial of Plaintiffs’ motion for new trial. Mazzei v. Money 3 Store, 829 F.3d 260, 273 (2d Cir. 2016) (affirming decertification order); see also 4 Mazzei v. Money Store, 656 F. App’x 558, 560 (2d Cir. 2016) (considering the 5 plaintiffs’ spoliation argument and affirming, in summary order, denial of the 6 plaintiffs’ motion for new trial). 7 B. 8 9 The Second Circuit affirmed the trial court’s Current Action Three plaintiffs bring this action: Michael F. Cordes, Shirley Piatt, and Darrel Asberry. (See generally FAC.) 10 Cordes took out a loan, which was ultimately transferred to a securitized trust 11 with Wells Fargo as trustee and HomEq as the servicer. (Id. ¶¶ 100–01.) Defendants 12 accelerated the loan in 2004, and he claims that he was charged $220.42 in late fees in 13 2005. (Id. ¶¶ 105–07.) Cordes claims these fees were improper based on his contract 14 with the lender, and California Civil Code sections 2924(c), 2924d, and 2924.4. (Id.) 15 He also claims Defendants improperly charged him for Broker Price Opinions, 16 property inspections, a payoff quote demand fee, a lien release fee, a recording fee, 17 attorney’s fees for foreclosure, and foreclosure costs, in 2005. (Id. ¶¶ 109–11, 121.) 18 He paid the loan in full in 2005. Cordes fell within the definition of the Fee-Split 19 Class and the Late Fee Class in the Mazzei Action. 20 Piatt took a loan in 1999, and sometime thereafter HomEq became the owner of 21 the mortgage note. (Id. ¶¶ 127–28.) She also claims that after her loan was 22 accelerated, in 2003, Defendants impermissibly charged her post-acceleration late 23 fees. (Id. ¶¶ 109–11, 121.) She paid off the loan later in 2003. Piatt fell within the 24 definition of the Late Fee Class in the Mazzei Action. 25 Asberry also took out a loan, in the early 2000s, which was eventually 26 “assigned to and/or serviced by the Defendants.” (Id. ¶ 133.) After defaulting, 27 Asberry obtained funds to pay the amount Defendants claimed he owed, including 28 fees and expenses associated with the foreclosure, which he claims Defendants 6 1 improperly initiated in any event. (Id. ¶ 139.) On June 9, 2006, Asberry paid off the 2 loan in full, and paid Defendants $335,028.00. (Id. ¶ 140.) He claims that Defendants 3 charged him $3,142.06 for “legal fees and/or expenses based on an invoice which 4 were [sic] never disclosed to Asberry, nor provided to the Defendants, until after 5 Asberry was told he had paid his loan in full.” (Id.) In any event, Asberry claims, on 6 information and belief, that Defendants improperly shared these fees with non- 7 attorneys, and that the fees were in excess of the amount allowed by the contracts 8 governing the relationships between the lender, servicer, and borrower. (Id. ¶ 141.) 9 Asberry further alleges that, while he should have been identified as a member 10 of both classes in the Mazzei Action, he did not receive notice and had no basis to 11 believe that Defendants improperly charged him late fees, or otherwise improperly 12 split his loan payment until class counsel explained the violations in 2017. (Id. 13 ¶¶ 142–43.) Until then, Defendants had concealed their improper charges. (Id.) 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 With these representatives, Plaintiffs seek to certify two classes: the “Late Fee Class II,” and the “Fee-Split Class II.” (Id. ¶ 19.) The Late Fee Class II includes: All borrowers of loans originated by or assigned to HomEq who, after March 1, 2000, paid late fees after acceleration of the loan where the loan was not subsequently reinstated by the borrower’s payment of the entire delinquent amount outstanding; and/or (b) [sic] all borrowers of loans owned and/or serviced by HomEq for property located in California, Ohio, Delaware, Montana, New Jersey and/or Michigan who, after March 1, 2000, paid post-acceleration late fees. (Id. ¶ 19.a.) The Fee-Split Class II includes: All borrowers of loans owned and/or serviced by HomEq for property located in California who, after March 1, 2000, paid fees in foreclosure, bankruptcy or eviction actions which (i) were shared with Fidelity National Foreclosure Solutions (Fidelity) or another non-attorney outsourcer; or (ii) were in excess of the fees which were allowed to be charged under HomEq’s governing Master Service 7 Agreement with Fidelity and/or the Network Agreements with law firms and/or other service providers. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 (Id. ¶ 19.b.) IV. LEGAL STANDARD A motion to dismiss under 12(b)(6) is proper where the plaintiff fails to allege a cognizable legal theory or where there is an absence of sufficient facts alleged under a cognizable legal theory. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); see also Shroyer v. New Cingular Wireless Serv., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010). That is, the complaint must “contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted). Accusations of fraud require a heightened particularity in pleading. See Fed. R. Civ. P. 9(b). The “circumstances” required by Rule 9(b) are the “who, what, when, where, and how” of the fraudulent activity. Cafasso, ex rel. U.S. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055 (9th Cir. 2011). In addition, the allegation “must set forth what is false or misleading about a statement, and why it is false.” Id. This heightened pleading standard ensures that “allegations of fraud are specific enough to give defendants notice of the particular misconduct which is alleged to constitute the fraud charged so that they can defend against the charge and not just deny that they have done anything wrong.” Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 1985). Generally, a court should freely give leave to amend a complaint that has been dismissed, even if not requested by the party. See Fed. R. Civ. P. 15(a); Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) (en banc). However, a court may deny leave to amend when it “determines that the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986). 27 28 8 V. 1 DISCUSSION 2 Defendants first argue that the judgment in the Mazzei Action bars Plaintiffs’ 3 claims pursuant to res judicata principles. Next, Defendants claim that Plaintiffs’ 4 claims are barred by the relevant statutes of limitations, and should not be tolled. 5 A. Res Judicata 6 Res judicata bars a subsequent action where there is: “(1) an identity of claims, 7 (2) a final judgment on the merits, and (3) privity of the parties.” Tahoe-Sierra Pres. 8 Council, Inc. v. Tahoe Reg’l Planning Agency, 322 F.3d 1064, 1077 (9th Cir. 2003) 9 (quoting Stratosphere Litig. L.L.C. v. Grand Casinos, Inc., 298 F.3d 1137, 1143 n. 3 10 (9th Cir. 2002)). This doctrine applies equally in the class action context. Cooper v. 11 Fed. Reserve Bank, 467 U.S. 867, 874 (1984) (citations omitted) (“There is of course 12 no dispute that under elementary principles of prior adjudication a judgment in a 13 properly entertained class action is binding on class members in any subsequent 14 litigation.”). Because the result of the Mazzei Action differed for each of Plaintiffs’ 15 subclasses, so does the Court’s analysis. 16 1. Late Fee Class II 17 While Plaintiffs spend some time discussing whether the Mazzei Action has a 18 preclusive effect on their Late Fee Class II claims, Defendants concede that these 19 claims are not barred by res judicata. (Reply 11.) Moreover, the district court in the 20 Mazzei Action specifically explained that decertifying the class “further[ed] the 21 interests of absent class members because it protects them from being saddled with the 22 fact that the plaintiff failed to produce enough evidence to protect their interests at 23 trial.” Mazzei, 308 F.R.D. at 113 (citation omitted). Accordingly, the Late Fee 24 Class II claims are not barred on res judicata grounds. 25 2. Fee-Split Class II 26 The jury in the Mazzei Action returned a verdict for the defense on the Fee-Split 27 Class’s claims, which the Second Circuit upheld on appeal. See Mazzei, 656 F. App’x 28 at 560. Defendants argue that the jury’s finding precludes the Fee-Split Class II’s 9 1 claims here because the jury’s verdict was a “final judgment on the merits,” barring 2 subsequent litigation of claims based on the same nucleus of operative fact. See Adam 3 Bros. Farming v. Cnty. of Aanta Barabara, 604 F.3d 1142, 1148–49 (9th Cir. 2010) 4 (holding that jury verdict constitutes final judgment on the merits for purposes of res 5 judicata). Asberry counters that he may proceed with his claim because: 1) he did not 6 receive notice of the prior action until contacted by class counsel in 2017; and 2) he 7 asserts new claims that the jury did not adjudicate in the Mazzei Action. (Opp’n 22.) 8 While Federal Rule of Civil Procedure 23 does not require actual notice to bind 9 absent class members, it requires that the notice procedures provide the absent class 10 members due process. See Silber, 18 F.3d at 1554–55 (discussing due process 11 standard for class notice). 12 decisions on due process and notice to class members should not be read to require 13 that a class member receive actual notice….” Gorton v. Wells Fargo Bank NA, No. 14 SACV121245JVSMLGX, 2012 WL 12887063, at *3 (C.D. Cal. Nov. 27, 2012) 15 (citing Silber, 18 F.3d at 1454). “The notice must instead be ‘reasonably calculated, 16 under all the circumstances, to apprise interested parties of the pendency of the action 17 and afford them an opportunity to present their objections.’” Id. (quoting Silber, 18 18 F.3d at 1454). “[I]n the Ninth Circuit’s view, the Supreme Court’s 19 Asberry claims that because of Defendants’ “grossly negligent” and “willful” 20 failure to preserve their databases, he was never notified that he was a member of 21 either class in the Mazzei Action. (Opp’n 22.) However, the court was not required to 22 assure that Asberry received actual notice. Silber, 18 F.3d at 1454. The court also 23 addressed Defendants’ alleged failure to preserve its databases in the Mazzei Action, 24 certified the Fee-Split Class, and approved the notice procedures submitted by the 25 parties. (Defs.’ RJN, Ex. L ¶¶ 7, 10, ECF No. 24-13.) The court found that the notice 26 was the best practicable method under the circumstances, and that was all that was 27 required to bind absent class members. Silber, 18 F.3d at 1454. Asberry makes no 28 allegations attacking the validity of the procedural process employed to identify 10 1 absent class members, other than to raise the Defendants’ alleged destruction of its 2 databases. However, the Court is not inclined to revisit the discovery rulings made in 3 the Mazzei Action. Accordingly, the fact that Asberry did not receive actual notice of 4 the Mazzei Action does not bar application of res judicata principles. Id.; see also 5 Gorton, 2012 WL 12887063, at *3. 6 The question then becomes whether Plaintiffs’ claims here are sufficiently 7 similar to the claims in the Mazzei Action such that they are barred by the jury’s 8 verdict. “The fact that res judicata depends on an ‘identity of claims’ does not mean 9 that an imaginative attorney may avoid preclusion by attaching a different legal label 10 to an issue that has, or could have, been litigated.” Tahoe-Sierra Pres. Agency, 322 11 F.3d at 1077–78. The Court must analyze whether the “two suits arise from ‘the same 12 transactional nucleus of facts.’” Id. (quoting Owens v. Kaiser Found. Health Plan, 13 Inc., 244 F.3d 708, 714 (9th Cir. 2001)). 14 The Fee-Split Class from the Mazzei Action included “all similarly situated 15 borrowers, who…from March 1, 2000 to the present were charged amounts paid to 16 Fidelity, a non-lawyer entity, from attorneys’ fees charged to borrowers.” (Defs. RJN 17 Ex. E.) In this case, Asberry limits the proposed class to borrowers in California, and 18 those who paid fees that “(i) were shared with Fidelity…or another non-attorney 19 outsourcer; or (ii) were in excess of the fees which were allowed to be charged” 20 pursuant to the relevant contracts between Defendants and third-party mortgage 21 servicers. (FAC ¶ 19.) The only claims that could arguably be construed as different 22 from the Mazzei Action are Plaintiffs’ references to breaches of contracts governing 23 the relationship between Defendants and the mortgage servicers. (See FAC ¶¶ 19, 24 126, 141, 158.) However, these claims arise from the same nucleus of facts that the 25 Mazzei Action adjudicated because the Fee-Split Class’s claims relied on substantially 26 the same Defendants improperly splitting fees with non-attorneys.3 See also Mazzei, 27 28 3 The only new defendant in this action is Wells Fargo. (See generally FAC.) However, the addition of Wells Fargo is a function of Wells Fargo acquiring the HomeEq Defendants, which were the 11 1 656 F. App’x at 560 (denying motion for new trial on Fee-Split Class claims). That 2 the Fee-Split Class II Plaintiffs now also claim that the same Defendants breached 3 contracts by splitting fees with non-attorneys during the same period, and revolving 4 around the same lending practices, does not let them escape res judicata. IUOE- 5 Emp’rs Constr. Indus. Pension v. Karr, 994 F.2d 1426, 1429–30 (9th Cir. 1993) 6 (holding that successive claims for breach of contract barred by res judicata even 7 where evidence necessary for the second action may have slightly differed from first 8 action). 9 The policies underlying res judicata favor this result too. “The doctrine of res 10 judicata ‘is motivated primarily by the interest in avoiding repetitive litigation, 11 conserving judicial resources, and preventing the moral force of court judgments from 12 being undermined.’” Id. at 1430 (quoting Haphey v. Linn Cnty., 942 F.2d 1512, 1518 13 (9th Cir. 1991), rev’d in part on other grounds, 953 F.2d 549 (9th Cir. 1992) (en 14 banc)). The Mazzei Action continued for close to ten years. The Fee-Split Class 15 litigated its claims, tried them to a jury, and had the opportunity to raise these breach 16 of contract allegations there. 17 Class’s claims from the ashes of the jury’s defense verdict does not further any of the 18 policies underlying the application of res judicata. Id. (quoting McClain v. Apodaca, 19 793 F.2d 1031, 1033 (9th Cir. 1986)) (“For this reason, res judicata bars not only all 20 claims that were actually litigated, but also claims that ‘could have been asserted’ in 21 the prior action.”). Furthermore, the Fee-Split Class II’s theory of liability relies on 22 Defendants’ purported discovery violations in the Mazzei Action, which the trial court 23 found not to be determinative, and the Second Circuit affirmed on appeal. Mazzei, 24 656 F. App’x at 560. Accordingly, the Fee-Split Class II’s claims are barred by res 25 judicata, and the Court GRANTS Defendants’ Motion to Dismiss the Fee-Split Class 26 II’s claims, without leave to amend. Now allowing Plaintiffs to resurrect the Fee-Split 27 28 subject of the Mazzei Action. Plaintiffs argue that Wells Fargo is the successor-in-interest, and thus is liable for the same acts of its predecessors. (Opp’n 17.) 12 1 B. Statute of Limitations 2 Defendants argue that Plaintiffs’ Late Fee Class II claims are barred by the 3 statute of limitations. (Mot. 10.) The Court first identifies the relevant statutes of 4 limitations, and then whether they were tolled during the pendency of the Mazzei 5 Action. 6 1. 7 Plaintiffs’ breach of contract, breach of the covenant of good faith and fair 8 dealing, and Plaintiffs’ unfair competition claims are governed by a four-year statute 9 of limitations. Cal. Civ. Proc. Code § 337(1); Krieger v. Nick Alexander Imp., Inc., 10 234 Cal. App. 3d 205, 220 (1991); Aryeh v. Canon Bus. Sols., Inc., 55 Cal. 4th 1185, 11 1192 (2013) (citing Cal. Bus. & Prof. Code § 17208). Plaintiffs’ fraud claim is 12 governed by a three-year statute of limitations. Platt Elec. Supply, Inc. v. EOFF Elec., 13 Inc., 522 F.3d 1049, 1054 (9th Cir. 2008) (citing Cal. Civ. Proc. Code § 338(d)). Applicable Statutes of Limitations 14 Plaintiffs also assert a claim for “Restitution to Avoid Unjust Enrichment.” 15 (FAC ¶¶ 160–63.) Defendants argue that unjust enrichment is not a standalone cause 16 of action in California, and therefore the Court should dismiss it. (Mot. 23.) Courts 17 apply California’s law on unjust enrichment with different results. Compare GeoData 18 Sys. Mgmt., Inc. v. Am. Pac. Plastic Fabricators, Inc., No. CV1504125MMMJEMX, 19 2015 WL 12731920, at *7 (C.D. Cal. Sept. 21, 2015) (applying California law and 20 dismissing unjust enrichment claim) with Astiana v. Hain Celestial Grp., Inc., 783 21 F.3d 753, 762 (9th Cir. 2015) (declining to dismiss unjust enrichment claim). The 22 Court construes Plaintiffs’ claim for unjust enrichment as a claim in quasi-contract, 23 seeking restitution. See Astiana, 783 F.3d at 762 (quoting Rutherford Holdings, LLC 24 v. Plaza Del Rey, 223 Cal.App.4th 221, 166 (2014)) (“When a plaintiff alleges unjust 25 enrichment, a court may ‘construe the cause of action as a quasi-contract claim 26 seeking restitution.’”). In California, a quasi-contract claim has a two-year statute of 27 limitations. Filet Menu, Inc. v. Cheng, 71 Cal. App. 4th 1276, 1280 (1999). 28 13 1 Accordingly, Plaintiffs’ claims are governed by, at most, a four-year statute of 2 limitations, and, at least, a two-year statute of limitations. 3 Plaintiffs allege they were charged improper late fees between 2003 and 2006. 4 (FAC ¶¶ 117–22, 131–32, 140.) Thus, the statute of limitations on their claims 5 expired as early as 2008, or as late as 2010. Because Plaintiffs filed their complaint in 6 this action on February 16, 2018, their claims are barred by the statute of limitations, 7 absent some form of tolling.4 (Compl., ECF No. 1.) 8 2. 9 Plaintiffs argue that their claims are tolled under two theories. First, they argue 10 that the statutes of limitation should be tolled pursuant to the United States Supreme 11 Court’s decision in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974). 12 Second, they claim they should be tolled under California’s equitable tolling doctrine. Whether Plaintiffs’ Claims Are Tolled a. American Pipe Tolling 13 14 Plaintiffs rely on the Ninth Circuit’s interpretation of American Pipe in Resh v. 15 China Agritech, Inc., 857 F.3d 994, 1002 (9th Cir. 2017) (“Resh I”). After Plaintiffs 16 filed their Opposition, however, the Supreme Court reversed the Ninth Circuit’s ruling 17 in Resh I. China Agritech, Inc. v. Resh, 138 S. Ct. 1800 (2018) (“Resh II”). American 18 Pipe held that filing a class action based on federal claims tolls the statute of 19 limitations for absent class members during the pendency of the action. Id. at 1804. 20 “Where class-action status has been denied…members of the failed class [can] timely 21 intervene as individual plaintiffs in the still-pending action, shorn of its class 22 character.” Id. at 1804 (citing Am. Pipe, 414 U.S. at 544). In Resh I, the Ninth Circuit 23 extended American Pipe to also allow tolling of subsequent class actions, where the 24 individual class member’s claims would survive. 857 F.3d at 1002. 25 26 27 28 4 Plaintiffs argue that the Fee-Split Class II should also be permitted because Plaintiffs did not discover the violation of their rights, such that the statute of limitations never began to run. (Opp’n 22–23.) Because the Court finds that res judicata principles bar the Fee-Split Class II claim, it does not address this argument. 14 1 In Resh II, the Supreme Court answered the question: “Upon denial of class 2 certification, may a putative class member, in lieu of promptly joining an existing suit 3 or promptly filing an individual action, commence a class action anew beyond the 4 time allowed by the applicable statute of limitations?” Id. The Supreme Court’s 5 answer was “no.” Id. Accordingly, while the members of the Late Fee Class II may 6 pursue their claims individually, to the extent they are not barred by the statute of 7 limitations, Resh II forecloses the possibility that statutes of limitations were tolled on 8 a class-wide basis. Id. Accordingly, Plaintiffs may not proceed on a class basis, 9 unless their claims survive under another theory. 10 b. Equitable Tolling 11 12 Plaintiffs also argue that California’s equitable tolling doctrine applies to the Late Fee Class II. (Opp’n 12–15.) 13 Equitable tolling is a judicially created doctrine in California that seeks to 14 preserve a plaintiff’s claim and extend the statute of limitations where the plaintiff 15 pursues one out of several possible legal theories. See J.M. Hunting Beach Union 16 High School Dist., 2 Cal. 5th 648, 657 (2017) (quotations omitted) (recognizing “a 17 general policy which favors relieving plaintiff from the bar of a limitations statute 18 when, possessing several legal remedies he, reasonably and in good faith, pursues one 19 designed to lessen the extent of his injuries or damage.”). Plaintiffs seeking the 20 benefit of the equitable tolling doctrine must show: 1) timely notice to the defendant 21 during the statutory period; 2) lack of prejudice to defendant in gathering and 22 preserving evidence; and 3) the plaintiff’s reasonableness and good faith in pursuing 23 the claim in a different forum. See Hopkins v. Kedzierski, 225 Cal. App. 4th 736, 748 24 (2014) (quoting McDonald v. Antelope Valley Cmty. Coll. Dist., 45 Cal.4th 88, 102 25 (2008)). 26 Relying largely on Hatfield v. Halifax PLC, 564 F.3d 1177, 1188 (9th Cir. 27 2009), Plaintiffs contend that California’s equitable tolling is distinct from American 28 Pipe tolling. (Id. at 14.) In Hatfield, the Ninth Circuit, applying California law, 15 1 explained that equitable tolling’s purpose “is to toll the statute of limitations in favor 2 of a plaintiff who acted in good faith where the defendant is not prejudiced by having 3 to defend against a second action.” Hatfield, 564 F.3d at 1188. Hatfield noted that 4 American Pipe tolling and California’s equitable tolling are not congruent doctrines, 5 and therefore, even if American Pipe did not apply, equitable tolling might. Id. 6 (noting American Pipe as “legal” tolling, and California’s doctrine as “equitable” 7 tolling). 8 different states is less clear. Compare Hatfield, 564 F.3d at 1188 (applying “equitable 9 tolling” to California residents, but not non-resident class members), with Clemens v. 10 DaimlerChrysler Corp., 534 F.3d 1017, 1025 (9th Cir. 2008) (declining to toll claims 11 of residents and non-residents where prior action was filed in different jurisdiction). Whether California’s equitable tolling doctrine applies to residents of 12 Defendants distinguish Hatfield because in that case the court in the prior action 13 dismissed the case for lack of personal jurisdiction, as opposed the sufficiency of the 14 class, as compared to Rule 23. See Hatfield, 564 F.3d at 1186. Indeed, the Ninth 15 Circuit cautioned in Hatfield that it was “clearly not an instance in which [the 16 plaintiff] is trying to reargue a denial of class certification because of a failure to meet 17 Rule 23 of the Federal Rules of Civil Procedure or its state counterpart.” Hatfield, 18 564 F.3d at 1189 n.8; see also Moore v. Wachovia Sec., LLC, No. CV 09–9071, 2010 19 WL 1437923, at *4 (C.D. Cal. March 15, 2010) (granting motion to dismiss and 20 declining to toll plaintiff’s claims where plaintiff sought to certify the same class of 21 plaintiffs that were the subject of the first action). As Defendants argue, this is exactly 22 what Plaintiffs seek in bringing the Late Fee Class II. 23 (discussing prior action, and defining classes as almost identical to the Mazzei 24 Action).) Furthermore, unlike in Hatfield, the court in the Mazzei Action decertified 25 the Late Fee Class because it did not comport with Rule 23. Mazzei, 308 F.R.D. at 26 113. (See FAC ¶¶ 3–8, 19 27 Additionally, Plaintiffs have not set forth specific factual allegations sufficient 28 to meet their burden to plead equitable tolling. See Moore, 2010 WL 1437923, at *4. 16 1 Plaintiffs do not allege facts supporting lack of prejudice to Defendants, nor do they 2 allege sufficient facts supporting their reasonableness. The only allegation supporting 3 Plaintiffs’ new action is their disdain for the Southern District of New York 4 decertifying the Late Fee Class, which is insufficient to support a claim for equitable 5 tolling. Catholic Social Services, Inc. v. I.N.S., 232 F.3d 1139 (9th Cir.2000) (“[T]he 6 filing of an earlier class action does not toll the statute of limitations when the second 7 action is no more than an attempt to relitigate the correctness of the earlier class 8 certification decision.”). 9 With respect to the claims of the class members from outside of California, the 10 Court finds they are barred by the applicable statute of limitations because equitable 11 tolling does not apply cross-jurisdictionally. 12 Accordingly, the Court GRANTS, without leave to amend, Defendants’ Motion to 13 Dismiss the Late Fee Class II claims, as they pertain to residents of Ohio, Delaware, 14 Montana, New Jersey and Michigan. 15 Defendants’ Motion as it pertains to Shirley Piatt’s individual claims because she is 16 not a California resident, and thus her Late Fee Class II claims are also barred by the 17 statute of limitations. (See FAC ¶ 127–32.) See Hatfield, 564 F.3d at 1188. (FAC ¶ 19.) The Court also GRANTS 18 With respect to the California Late Fee Class II members, and accompanying 19 individual claims of Asberry and Cordes, the Court GRANTS Defendants’ Motion, 20 with leave to amend, as discussed below. 21 C. Unfair Competition Law (“UCL”) Claims 22 Defendants argue that Plaintiffs’ UCL claims are barred by the statute of 23 limitations because the court in the Mazzei Action declined to certify California UCL 24 subclasses in 2012. (Mot. 16–17; DRJN, Ex. D pp. 59–60.) Defendants argue that, 25 from that point on, the plaintiffs in the UCL subclasses were on notice that they could 26 have filed suit. (Reply 12.) In Moore, the court held that plaintiffs were not entitled 27 to equitable tolling after they should have been put on notice that certain claims were 28 no longer being pursued. Moore, 2010 WL 1437923, at *3–5. The same applies here. 17 1 To the extent the Mazzei Action tolled any class member’s UCL claim, the tolling 2 stopped accruing when the court declined to certify the UCL subclasses in 2012. Id. 3 Accordingly, Plaintiffs’ UCL claims are barred by the statute of limitations, see 4 Aryeh, 55 Cal. 4th at 1192 (four-year statute of limitations for UCL claims), and the 5 Court GRANTS Defendants’ Motion to Dismiss the UCL claims, without leave to 6 amend. 7 D. Amendment & Defendants’ Additional Arguments 8 A court should freely give leave to amend a complaint that has been dismissed, 9 even if not requested by the party. See Fed. R. Civ. P. 15(a); Lopez, 203 F.3d at 1130. 10 To the extent Asberry, Cordes, and the California members of the Late Fee Class II 11 can allege additional facts that would bring their claims within the reach of 12 California’s equitable tolling laws, they must do so within 21 days of entry of this 13 Order. Specifically, Plaintiffs must allege facts addressing the lack of prejudice to 14 Defendants, and Plaintiffs’ goodwill and reasonableness in pursuing this action. See 15 Hopkins, 225 Cal. App. 4th at 748. 16 Defendants set forth several other arguments regarding the legal sufficiency of 17 Plaintiffs’ claims, as pleaded. 18 sufficiently plead a claim for breach of contract, fraud, and unfair competition).) 19 Because Plaintiffs’ remaining claims are barred by the statute of limitations absent 20 some form of tolling, the Court declines to address Defendants’ remaining arguments. 21 22 23 24 25 26 27 VI. (See Reply 15–17 (arguing Plaintiffs failed to CONCLUSION For the reasons discussed above, the Court GRANTS, in part, Defendants’ Motion to Dismiss. (ECF No. 23.) Specifically, the Court DISMISSES: The Fee Split Class II in its entirety without leave to amend; The Late Fee Class II, as to class members who reside outside of California, without leave to amend; Shirley Piatt’s individual claims, without leave to amend; 28 18 1 2 3 4 5 The Late Fee Class II, as it pertains to California residents, with leave to amend within 21 days of this order, and as explained above; Asberry and Cordes’ individual claims, with leave to amend, within 21 days of this order, and as explained above; and Plaintiffs’ UCL claims, without leave to amend. 6 7 IT IS SO ORDERED. 8 9 August 8, 2018 10 11 12 13 ____________________________________ OTIS D. WRIGHT, II UNITED STATES DISTRICT JUDGE 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 19

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