Docena v. Navy Federal Credit Union, No. 3:2015cv00184 - Document 33 (D. Nev. 2016)

Court Description: ORDER granting Navy Federal's 12 Motion to Dismiss; denying as moot Navy Federal's 12 Request for Judicial Notice. Signed by Judge Larry R. Hicks on 1/4/2016. (Copies have been distributed pursuant to the NEF - KR)
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Docena v. Navy Federal Credit Union Doc. 33 1 2 3 4 5 UNITED STATES DISTRICT COURT DISTRICT OF NEVADA 6 7 *** 8 9 10 GERARDO DOCENA, individually and on behalf of all others similarly situated, 3:15-CV-00184-LRH-WGC Plaintiff, 11 v. ORDER 12 13 NAVY FEDERAL CREDIT UNION, a Virginia Corporation, 14 Defendant. 15 16 17 Before the Court is Defendant Navy Federal Credit Union’s (“Navy Federal”) Motion to 18 Dismiss Plaintiff Gerardo Docena’s (“Docena”) First Amended Complaint (“FAC”). Doc. #12.1 19 This motion also contains a request for judicial notice. Doc. #12. Docena filed an Opposition 20 (Doc. #16), to which Navy Federal replied (Doc. #17). 21 I. Factual Background 22 This case involves claims of breach of contract and violations of the Nevada Deceptive 23 Trade Practices Act (“DTPA”) arising from Navy Federal’s sale of a payment protection plan. 24 Navy Federal is a credit union whose members consist of military personnel, Department 25 of Defense personnel, and their families. Navy Federal offers a Payment Protection Plan, which 26 is a voluntary add-on to credit card and consumer loan agreements. Through the Payment 27 Protection Plan, Navy Federal promises to cancel a portion of a subscriber’s loan upon the 28 1 Refers to the Court’s docket number. 1 1 occurrence of certain specific conditions in exchange for a monthly fee based on their loan 2 balance. These specific conditions are death, disability, and involuntary unemployment, and 3 payment is subject to restrictions spelled out in the Payment Protection Plan Agreement and 4 Disclosure (“Agreement”). 5 Docena is a former military contractor with a credit card issued to him by Navy Federal. 6 He has been enrolled in the Payment Protection Plan since August 11, 2008, with individual 7 coverage for loss of life, disability, and involuntary unemployment. Until August 15, 2014, 8 Docena was employed as a military contractor. Beginning on that date, he was unable to work 9 because he was seeking, but had not received, a security clearance. He was then laid off in late 10 October 2014. Docena submitted a claim to Navy Federal for benefits under his Payment 11 Protection Plan, but was denied because he had not been actively working 25 hours or more per 12 week immediately preceding the date he became unemployed, which the contract stated was one 13 of the requirements to obtain benefits. 14 On March 27, 2015, Docena filed a class action Complaint against Navy Federal alleging 15 breach of contract and violations of Nevada’s DTPA. Doc. #1. On June 30, 2015, Navy Federal 16 filed its Motion to Dismiss. Doc. #12. Docena filed a timely Opposition on July 24, 2015. Doc. 17 #16. Navy Federal filed a Reply on August 18, 2015. Doc. #17. On December 22, 2015, oral 18 argument on the motion to dismiss was conducted before the Court. Doc. #31. 19 II. Legal Standard 20 Navy Federal seeks dismissal for failure to state a claim upon which relief can be granted 21 pursuant to Federal Rule of Civil Procedure 12(b)(6). To survive a motion to dismiss for failure 22 to state a claim, a complaint must satisfy the Federal Rule of Civil Procedure 8(a)(2) notice 23 pleading standard. Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1103 (9th Cir. 24 2008). That is, a complaint must contain “a short and plain statement of the claim showing that 25 the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). The 8(a)(2) pleading standard does not 26 require detailed factual allegations, but a pleading that offers “‘labels and conclusions’ or ‘a 27 formulaic recitation of the elements of a cause of action’” will not suffice. Ashcroft v. Iqbal, 556 28 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). 2 1 To satisfy the plausibility standard, 8(a)(2) requires a complaint to “contain sufficient 2 factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Id. 3 (quoting Twombly, 550 U.S. at 570). A claim has facial plausibility when the pleaded factual 4 content allows the Court to draw the reasonable inference, based on the Court’s “judicial 5 experience and common sense,” that the defendant is liable for the misconduct alleged. See id. at 6 678-79. The plausibility standard “is not akin to a probability requirement, but it asks for more 7 than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts 8 that are merely consistent with a defendant’s liability, it stops short of the line between 9 possibility and plausibility of entitlement to relief.” Id. at 678 (internal quotation marks 10 11 omitted). In reviewing a motion to dismiss, the court accepts the facts alleged in the complaint as 12 true. Id. The “factual allegations that are taken as true must plausibly suggest an entitlement to 13 relief, such that it is not unfair to require the opposing party to be subjected to the expense of 14 discovery and continued litigation.” Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). 15 Moreover, “bare assertions . . . amount[ing] to nothing more than a formulaic recitation of the 16 elements of a . . . claim . . . are not entitled to an assumption of truth.” Moss v. U.S. Secret Serv., 17 572 F.3d 962, 969 (9th Cir. 2009) (citing Iqbal, 556 U.S. at 681) (brackets in original) (internal 18 quotation marks omitted). The court discounts these allegations because “they do nothing more 19 than state a legal conclusion—even if that conclusion is cast in the form of a factual allegation.” 20 Id. (citing Iqbal, 556 U.S. at 681). “In sum, for a complaint to survive a motion to dismiss, the 21 non-conclusory ‘factual content,’ and reasonable inferences from that content, must be plausibly 22 suggestive of a claim entitling the plaintiff to relief.” Id. 23 Furthermore, a court may take judicial notice of “records and reports of administrative 24 bodies.” Interstate Natural Gas Co. v. Southern California Gas Co., 209 F.2d 380, 385 (9th 25 Cir.1953. This includes items like notices and opinion letters issued by the administrative 26 agencies. Wible v. Aetna Life Ins. Co., 375 F.Supp.2d 956, 965 (C.D.Cal.2005) (internal 27 quotation marks omitted) (taking judicial notice of the February 26, 2004, opinion letter issued 28 by the California DOI). Under the Federal Rules of Evidence, “[a] judicially noticed fact must 3 1 be one not subject to reasonable dispute in that it is either (1) generally known within the 2 territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by 3 resort to sources whose accuracy cannot reasonably be questioned.” Fed.R.Evid. 201(b). “A 4 court shall take judicial notice if requested by a party and supplied with the necessary 5 information.” Fed.R.Evid. 201(d). 6 III. Discussion 7 A. Docena’s Breach of Contract Claim 8 Navy Federal argues that Docena’s breach of contract claim fails as a matter of law 9 because he cannot show a specific provision of the Payment Protection Plan was breached and 10 there has been no violation of the implied covenant of good faith and fair dealing. Docena 11 responds that Navy Federal breached the implied covenant of good faith and fair dealing through 12 acts of dishonesty. 13 Docena and Navy Federal agree that the breach of contract claim is governed by Virginia 14 law. Under Virginia law, the elements of a breach of contract action “are (1) a legally 15 enforceable obligation of a defendant to a plaintiff; (2) the defendant's violation or breach of that 16 obligation; and (3) injury or damage to the plaintiff caused by the breach of obligation.” Brown 17 v. Harms, 251 Va. 301, 306, 467 S.E.2d 805, 807 (1996); Fried v. Smith, 244 Va. 355, 358, 421 18 S.E.2d 437, 439 (1992); Westminster Investing Corp. v. Lamps Unlimited, Inc., 237 Va. 543, 19 546, 379 S.E.2d 316, 317 (1989). Docena does not show that Navy Federal violated any of its 20 specific obligations as outlined in the Agreement, and Docena cannot show such a violation 21 because he contends that Navy Federal did not violate its specific obligations but obfuscated 22 them. Thus, Docena has no claim for an express breach of contract. 23 B. Breach of the Implied Covenant of Good Faith and Fair Dealing 24 The Fourth Circuit has held that contracts governed by Virginia law contain an implied 25 covenant of good faith and fair dealing. See Va. Vermiculite. Ltd. v. W.R. Grace & Co., 156 F.3d 26 535, 541–42 (4th Cir.1988). In Virginia, the elements of a claim for breach of an implied 27 covenant of good faith and fair dealing are (1) a contractual relationship between the parties, and 28 (2) a breach of the implied covenant. Enomoto v. Space Adventures, Ltd., 624 F. Supp. 2d 443, 4 1 450 (E.D. Va. 2009) (citing Charles E. Brauer Co., 251 Va. at 35, 466 S.E.2d at 386). However, 2 “no implied duty arises with respect to activity governed by express contractual terms.” 3 Skillstorm, Inc. v. Elec. Data Sys., LLC, 666 F.Supp.2d 610, 620 (E.D.Va.2009) (citing Ward's 4 Equip., Inc. v. New Holland N. Am., 493 S.E.2d 516, 520 (Va.1997)). Thus, the covenant of 5 good faith and fair dealing does not preclude a party from exercising valid contractual rights, “as 6 long as that party does not exercise those rights in bad faith.” Wolf v. Fed. Nat. Mortg. Ass'n, 7 512 Fed.App’x. 336, 345 (4th Cir. 2013). The duty can also be breached if the purported 8 exercise of a contractual right is dishonest, as opposed to merely arbitrary. See Enomoto, 624 9 F.Supp.2d at 450 (holding that the “claim [was] properly pled because ... Plaintiff alleges that 10 Defendant's actions were not merely unfavorable, but dishonest”); Charles E. Brauer Co., 251 11 Va. at 35, 466 S.E.2d at 386 (holding that the implied duty of good faith was not breached when, 12 “arguably, the bank's conduct was arbitrary, but it was not dishonest.”). 13 It is clear that the implied covenant of good faith and fair dealing is found in this contract 14 under Virginia law. Docena acknowledges that a party cannot breach the obligation of good 15 faith and fair dealing by exercising their valid and binding contractual rights, and he instead 16 focuses on the dishonesty method of breaching the implied covenant of good faith and fair 17 dealing. Docena relies heavily on the Enomoto case, in which a prospective space tourist 18 brought action against the company he had contracted with to facilitate his space flight. In 19 Enomoto, the space tourist made several large payments toward his space flight, but despite 20 passing two medical clearance boards the company told him his space flight had been cancelled 21 because he was medically unfit. Enomoto, 624 F.Supp.2d at 448-49. The space tourist’s health 22 was no different at disqualification than it had been either time he was medically cleared, and the 23 company refused to provide him with medical records regarding his disqualification despite his 24 repeated requests. Id. 25 The court found that the space tourist’s claim was properly pled because he alleged not 26 unfavorable actions, but dishonest ones. Id. at 450. However, the facts supporting the space 27 tourist’s claims are substantially different than the ones at issue here. In Enomoto, the tourist 28 alleged that the company had specifically lied to him. Here, Docena does not allege that Navy 5 1 Federal lied to him about anything. He only alleges that they should not have accepted his 2 money because they knew or should have known that he was likely ineligible for Payment 3 Protection benefits, even though his potential ineligibility was explained in the Agreement they 4 gave him. Therefore, Navy Federal’s actions are not “dishonest” as in Enomoto because the 5 express grounds of qualification were clear and unambiguous at all times. Therefore, the implied 6 covenant of good faith and fair dealing is not violated. 7 Next, a “party cannot breach the covenant of good faith and fair dealing before a contract 8 is formed. Wensley v. First Nat. Bank of Nevada, 874 F. Supp. 2d 957, 964 (D. Nev. 2012). 9 (citing Indep. Order of Foresters v. Donald, Lufkin & Jenrette, Inc., 157 F.3d 933, 941 (2d 10 Cir.1998) (“[A]n implied covenant relates only to the performance of obligations under an extant 11 contract, and not to any pre-contract conduct.”)). 12 Docena contends that his claims stem from post-contractual dishonesty in the 13 administration of the plan. However, the implied covenant of good faith and fair dealing does 14 not compel a party to take affirmative actions that the party is not obligated to take under the 15 terms of the contract. E. Shore Markets, Inc. v. J.D. Assocs. Ltd. P'ship, 213 F.3d 175, 182 (4th 16 Cir.2000). Instead, the duty simply bars a party from “acting in such a manner as to prevent the 17 other party from performing his obligations under the contract.” Id. at 183.The covenant of good 18 faith and fair dealing “cannot be construed to establish new and independent rights or duties not 19 agreed upon by the parties.” De Vera v. Bank of Am., N.A., No. 2:12CV17, 2012 WL 2400627, 20 at *3 (E.D. Va. June 25, 2012) (quoting Knudsen v. Countrywide Home Loans, Inc., No. 2:11– 21 CV–429, 2011 WL 3236000, at *3 (D. Utah July 26, 2011)). An implied duty under a contract is 22 simply a manifestation of conditions inherent in expressed promises. E. Shore Markets, 213 F.3d 23 at 182. The implied covenant cannot “rewrite[e] an unambiguous contract in order to create 24 terms that do not otherwise exist.” McInnis v. BAC Home Loan Servicing, LP, 2:11CV468, 2012 25 WL 383590 (E.D. Va. Jan.13, 2012) report and recommendation adopted, McInnis v. BAC Home 26 Loan Servicing, LP, 2:11CV468, 2012 WL 368282 (E.D. Va. Feb.3, 2012). 27 28 Here, Docena contends that he is simply asking for compensation, but it is clear from his complaint that he is asking Navy Federal to take on different and additional obligations. He 6 1 takes issue with the restrictiveness and opacity of the terms of the contract, and he claims Navy 2 Federal had a duty to prescreen customers, explain the contract to them, and stop accepting 3 payments from those currently ineligible for certain benefits. Docena’s claim is not about the 4 conditions inherent in Navy Federal’s expressed promise; it’s about Docena’s subjective 5 expectations. Docena is alleging a host of duties that Navy Federal simply did not owe him. 6 Therefore, there is no valid claim for breach of the implied covenant of good faith and fair 7 dealing. 8 C. Docena’s Claim for Violations of the Nevada DTPA 9 Docena also alleges that Navy Federal’s actions constitute an unfair trade practice under 10 Nevada's DPTA. Nevada Revised Statutes section 41.600 provides, “An action may be brought 11 by any person who is a victim of consumer fraud. As used in this section, ‘consumer fraud’ 12 means: ... A deceptive trade practice as defined in NRS 598.0915 to NRS 598.0925....” Docena 13 claims a violation because Navy Federal failed to “disclose a material fact in connection with the 14 sale or lease of goods or services.” Nev. Rev. Stat. Ann. § 598.0923(2). To establish a violation 15 of the DPTA, the plaintiff must demonstrate that (1) an act of consumer fraud by the defendant 16 (2) caused (3) damages to the plaintiff. Picus v. Wal–Mart Stores, Inc., 256 F.R.D. 651, 657–58 17 (D.Nev.2009) (noting Nevada Supreme Court has not specified the elements of a DPTA claim 18 and predicting how the court would rule). 19 20 Navy Federal argues that Docena’s claim fails on several grounds: that he cannot plead consumer fraud, that the claim is time barred, and that it is preempted. 21 Even without reaching the question of whether the heightened pleading standard of Rule 22 9(b) applies, Docena cannot adequately plead consumer fraud. Docena states that his claim is 23 based on Navy Federal’s failure to disclose material facts, namely that exceptions like the 24 actively working requirement apply to the involuntary unemployment activation event. 25 However, these facts are clearly stated in the Agreement, and they are quoted and cited to many 26 times by the plaintiff. The Agreement clearly states that involuntary unemployment means “You 27 involuntarily lost Your Full-Time Employment,” that Full-Time Employment means “you are 28 Actively at Work for Income twenty-five (25) hours or more per week,” and that Actively at 7 1 Work means “actively working and actually performing Your job duties and not off work due to 2 a leave of absence; layoff; furlough; routine or seasonal work interruption; or any other reason.” 3 Doc. 1 Ex. 1. These terms are on the first page of a two page document, in the same font size as 4 everything else in the document. Id. Terms are labeled in bold and defined in a section clearly 5 labeled “Definitions.” 6 document to denote that they are described in the definitions section. Id. All of the things 7 Docena alleges Navy Federal failed to disclose are, in fact, disclosed. The fact that Docena did 8 not read them or did not understand them is immaterial. Freeman v. Time, Inc., 68 F.3d 285, 289 9 (9th Cir. 1995) (upholding a motion to dismiss because a reasonable consumer would have been 10 put on notice “simply by doing sufficient reading”); Gage v. Phillips, 26 P. 60, 61–62, 21 Nev. 11 150 (Nev.1891) (“The mere statement of the defendant ‘that she did not know what she was 12 signing, when she signed the bill of sale’ is no excuse in law”); In re Schwalb, 347 B.R. 726, 743 13 (Bankr. D. Nev. 2006) (“It has long been the common law rule that signing a document 14 authenticates and adopts the words it contains, even if there was a lack of subjective 15 understanding of the words or their legal effect. In essence, people are presumed to be bound by 16 what they sign.”). Because the facts Docena alleges Navy Federal failed to disclose were, in 17 fact, disclosed in the Agreement, he cannot make a claim for violations of Nevada’s DTPA. Id. Words with specific definitions are capitalized throughout the 18 Further, because Docena cannot state a legally valid claim for violations of Nevada’s 19 DTPA, it is unnecessary to address Navy Federal’s arguments regarding federal preemption and 20 the time bar.2 21 /// 22 /// 23 /// 24 /// 25 /// 26 /// 27 28 It is also unnecessary to address Navy Federal’s request for judicial notice because the documents in question are not necessary to this decision. 2 8 1 2 3 4 5 IV. Conclusion IT IS THEREFORE ORDERED that Navy Federal’s Motion to Dismiss (Doc. #12) is GRANTED. IT IS FURTHER ORDERED that Navy Federal’s Request for Judicial Notice (Doc. #12) is DENIED as moot. 6 IT IS SO ORDERED. 7 DATED this 4th day of January, 2016. 8 ________________________________ LARRY R. HICKS UNITED STATES DISTRICT JUDGE 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 9