Opinion
EDCV 24-956-KK-SHKx
07-29-2024
Allen Saltzman LLP v. Bank of America N.A., et al
PRESENT: THE HONORABLE KENLY KIYA KATO, UNITED STATES DISTRICT JUDGE
CIVIL MINUTES-GENERAL
Proceedings: (In Chambers) Order GRANTING Plaintiff's Motion to Remand [Dkt. 17]
I.
INTRODUCTION
On March 25, 2024, plaintiff Allen Saltzman LLP (“Plaintiff”) filed a putative class action Complaint against defendant Bank of America, N.A. (“Defendant”) in Riverside County Superior Court, asserting breach of contract and unfair competition claims arising from Defendant's alleged practice of placing extended holds on deposited checks. ECF Docket No. (“Dkt.”) 1-1 at 2-14. On May 6, 2024, the action was removed to this Court. Dkt. 1.
On June 5, 2024, Plaintiff filed the instant Motion to Remand (“Motion”). Dkt. 17. The Court finds this matter appropriate for resolution without oral argument. See FED. R. CIV. P. 78(b); L.R. 7-15. For the reasons set forth below, Plaintiff's Motion is GRANTED.
II.
BACKGROUND
On March 25, 2024, Plaintiff filed the operative Complaint against Defendant. Dkt. 1-1 at 214 (“Compl.”). Plaintiff alleges Defendant has a practice of placing holds on deposited checks for up to eight business days in violation of Defendant's own policies and 12 C.F.R. Part 229 (“Regulation CC”), “which states that banks are allowed to place a hold on checks for . . . up to five business days[.]” Id. ¶¶ 13-17, 21. Plaintiff further alleges Defendant failed to provide notice to customers of its policies regarding holds on deposited funds. Id. ¶¶ 18-20. Based upon these allegations, Plaintiff asserts claims for (1) breach of contract; and (2) violation of California's Unfair Competition Law (“UCL”), Section 17200 of the California Business and Professions Code. Id. ¶¶ 32-45.
On May 6, 2024, Defendant filed a Notice of Removal. Dkt. 1. Defendant asserts the Court has federal question jurisdiction over this matter because Plaintiff's claims are predicated upon an alleged violation of federal law - specifically, Regulation CC - and, therefore, necessarily raise a substantial federal issue. Id.
On June 5, 2024, Plaintiff filed the instant Motion, arguing (1) Plaintiff's claims do not implicate a “substantial” federal issue because “mere incorporation of an allegation of [a] Regulation CC violation cannot constitute a substantial question of federal law[,]” and (2) to the extent a substantial federal issue is implicated, such issue is not “necessarily raised,” because Plaintiff's UCL claim is supported by independent state-law theories. Dkt. 17 at 5-9.
On June 26, 2024, Defendant filed an Opposition to the Motion. Dkt. 21.
On July 3, 2024, Plaintiff filed a Reply in support of the Motion. Dkt. 23.
The matter thus stands submitted.
III.
LEGAL STANDARD
Federal courts are courts of “limited jurisdiction” which “possess only that power authorized by Constitution and statute[.]” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). Pursuant to 28 U.S.C. § 1441(a), a civil action may be removed from state to federal court if the action is one over which federal courts could exercise original jurisdiction.
District courts have original jurisdiction over “all civil actions arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. Generally, a case “arises under federal law” for purposes of establishing federal question jurisdiction under 28 U.S.C. § 1331 “when federal law creates the cause of action asserted.” Negrete v. City of Oakland, 46 F.4th 811, 816-17 (9th Cir. 2022). Even in a case in which state law creates the cause of action asserted, federal question jurisdiction exists “if a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress.” Id. at 817. “This type of federal question jurisdiction applies to a ‘special and small category' of cases[.]” Nevada v. Bank of Am. Corp., 672 F.3d 661, 674 (9th Cir. 2012) (quoting Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 699 (2006)). “When a claim can be supported by alternative and independent theories - one of which is a state law theory and one of which is a federal law theory - federal question jurisdiction does not attach because federal law is not a necessary element of the claim.” Id.
Courts “strictly construe the removal statute against removal jurisdiction.” Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). Thus, “[f]ederal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance.” Id.; see also Luther v. Countrywide Home Loans Servicing LP, 533 F.3d 1031, 1034 (9th Cir. 2008) (holding “any doubt” as to the propriety of removal “is resolved against removability”). The party seeking removal bears the burden of establishing removal is proper by a preponderance of the evidence. Naffe v. Frey, 789 F.3d 1030, 1040 (9th Cir. 2015).
IV.
DISCUSSION
A. APPLICABLE LAW
The UCL prohibits “any unlawful, unfair or fraudulent business act or practice[.]” Cal. Bus. & Prof. Code § 17200. “Each prong of the UCL is a separate and distinct theory of liability[.]” Kearns v. Ford Motor Co., 567 F.3d 1120, 1127 (9th Cir. 2009) (citing South Bay Chevrolet v. General Motors Acceptance Corp., 72 Cal.App.4th 861, 886 (1999)). The “unlawful” prong of the UCL “borrows violations of other laws and treats them as unlawful practices that the [UCL] makes independently actionable.” Cel-Tech Commc'ns, Inc. v. L.A. Cellular Tel. Co., 973 P.2d 527, 539-40 (Cal. 1999). The “unfair” prong of the UCL prohibits conduct directed at consumers even if it is “not specifically proscribed by some other law” when the gravity of the harm caused by such conduct outweighs its utility. Epic Games, Inc. v. Apple, Inc., 67 F.4th 946, 1000 (9th Cir. 2023). The “fraudulent” prong of the UCL requires a showing that “members of the public are likely to be deceived.” Davis v. HSBC Bank Nev., N.A., 691 F.3d 1152, 1169 (9th Cir. 2012) (citing Puentes v. Wells Fargo Home Mortgage, Inc., 160 Cal.App.4th 638, 645 (Cal.Ct.App. 2008)).
Allegations of unfair or fraudulent conduct “are sufficient . . . to sustain the elements of [a UCL] claim[.]” Lippitt v. Raymond James Fin. Servs., Inc., 340 F.3d 1033, 1043 (9th Cir. 2003). Hence, district courts have concluded a claim under the unlawful prong of the UCL that is predicated upon an alleged violation of federal law does not give rise to federal question jurisdiction when the plaintiff also brings a claim under the unfair or fraudulent prong of the UCL. See Moralez v. Kern Schs. Fed. Credit Union, No. 1:15-CV-1444-DAD, 2016 WL 2756427, at *3-5 (E.D. Cal. May 12, 2016) (concluding federal question jurisdiction did not exist based on claim under UCL's unlawful prong, even though such claim “rest[ed] solely on a violation of federal law[,]” because plaintiff also brought claim under UCL's unfair prong); People ex. rel. Herrera v. Accrediting Comm'n for Cmty. & Junior Colls., No. C 13-4379-SI, 2013 WL 5945789, at *6 (N.D. Cal. Nov. 4, 2013) (“While the complaint alleges that defendant has violated federal regulations and statutes to establish the ‘unlawful' prong of the UCL claim, the complaint also alleges that defendant engaged in acts that are unfair and/or fraudulent[.] . . . [T]hus plaintiff's UCL claim does not require the resolution of a federal issue.”).
B. ANALYSIS
Here, the Court lacks federal question jurisdiction over Plaintiff's UCL claim. As an initial matter, although Defendant argues Plaintiff raises a claim under the unlawful prong of the UCL that “is entirely predicated on a purported violation of Regulation CC[,]” dkt. 21 at 12, Plaintiff does not appear to assert a claim under the UCL's unlawful prong at all, see Compl. ¶¶ 41-45; see also dkt. 17 at 7. Moreover, even assuming Plaintiff seeks to bring a claim under the UCL's unlawful prong, Plaintiff also brings claims under the UCL's unfair and fraudulent prongs. In particular, Plaintiff alleges Defendant's practice of placing extended holds on deposited checks and failure to disclose its policies regarding holds constitute unfair and/or fraudulent conduct in violation of the UCL. See Compl. ¶¶ 43-45. These allegations “are sufficient . . . to sustain the elements of [Plaintiff's UCL] claim without resort to federal law.” See Lippitt, 340 F.3d at 1043.
Defendant argues Plaintiff's breach of contract claim independently confers federal question jurisdiction over this matter because “the only alleged breach of contract is actually a breach of Regulation CC.” Dkt. 21 at 15-16. However, Plaintiff's breach of contract claim is predicated upon Plaintiff's allegation that Defendant's conduct constitutes a violation of its own policies. Compl. ¶ 37(c). Hence, Plaintiff's breach of contract claim does not “necessarily raise[]” a federal issue. See Negrete, 46 F.4th at 817.
In addition, Defendant's argument that Plaintiff's claims under the unfair and fraudulent prongs of the UCL are predicated upon an alleged Regulation CC violation is without merit.
First, with respect to Plaintiff's claim under the unfair prong, Defendant contends such claim “must be tethered to a specific legislative policy[,]” and “the only legislation discussed in the Complaint is Regulation CC.” Dkt. 21 at 14 (citing Vidana v. Gen. Motors LLC, No. CV 23-6986-MCS-AGRx, 2024 WL 1680064, at *7 (C.D. Cal. Feb. 27, 2024)). However, the authority cited by Defendant in support of the proposition that a claim under the unfair prong of the UCL “must be tethered to a specific legislative policy” fails to support such proposition. See Vidana, 2024 WL 1680064, at *7 (concluding plaintiff asserting claim under UCL's unfair prong was required to allege “whether the conduct violates some established public policy, or is immoral, unethical, oppressive, or unscrupulous”). To the extent Defendant is referring to the UCL's “tethering” test, under which a court considers whether the defendant's conduct “threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws[,]” such test applies when the allegations concern “unfairness to competitors.” Epic Games, 67 F.4th at 1000 (emphasis in original). The “tethering” test is, therefore, not applicable when the allegations concern unfairness to consumers, as here. Defendant alternatively argues Plaintiff's claim under the unfair prong necessarily raises a federal issue because “the only reason the conduct at issue is ‘unfair' is that it allegedly violates federal law.” See dkt. 21 at 15. This contention misconstrues not only Plaintiff s allegations in the Complaint but also the applicable legal standard. Conduct is “unfair” under the UCL when, as Plaintiff appears to allege, the gravity of the harm caused by the defendant's conduct outweighs its utility. See Epic Games, 67 F.4th at 1000; Compl. ¶ 43.
Second, with respect to Plaintiff's claim under the fraudulent prong, Defendant's assertion that “the only reason the conduct at issue is allegedly fraudulent is that it purportedly violates Regulation CC” mischaracterizes Plaintiff s allegations. See dkt. 21 at 13. Specifically, Plaintiff alleges Defendant's conduct was fraudulent because Defendant “knew or should have known that the account holders reasonably believed that they would be able to use the deposited funds immediately or after one business day” and “misrepresent[ed]” customers' “rights under the contract.” See Compl. ¶¶ 43, 45. Plaintiff does not allege Defendant's conduct is fraudulent solely because such conduct violates Regulation CC. See id.
Hence, Plaintiff's claims under the unfair and fraudulent prongs of the UCL do not “necessarily raise[]” a federal issue. See Negrete, 46 F.4th at 817. Plaintiff s UCL claim can, thus, be supported by “alternative and independent” state law theories. See Nevada, 672 F.3d at 674. Therefore, “federal law is not a necessary element” of Plaintiff's UCL claim, and “federal question jurisdiction does not attach[.]” See id.; see also Moralez, 2016 WL 2756427, at *3-5; Herrera, 2013 WL 5945789, at *6. Accordingly, Plaintiff's Motion is GRANTED.
In light of the Court's Order remanding the instant action to state court, the Court does not decide whether Plaintiff's claims under the unfair and fraudulent prongs of the UCL are adequately alleged. See Lippitt, 340 F.3d at 1043 (finding plaintiff s allegations of fraudulent conduct were “sufficient . . . to sustain the elements of his [UCL] claim without resort to federal law” without deciding whether plaintiff “made sufficiently detailed allegations of deception and fraud to survive in state court a demurrer or motion on the pleadings”).
V.
CONCLUSION
For the reasons set forth above, Plaintiff's Motion is GRANTED. This action shall be REMANDED to state court. (JS-6)
IT IS SO ORDERED.