Aguayo v. U.S. Bank

• Decision Date: 24 September 2009
• Docket Number: Case No. 08-CV-2139 W(LSP).
• Citation: 658 F.Supp.2d 1226
• Parties: Jose AGUAYO, Aguayo, v. U.S. BANK, U.S. Bank.
• Court: U.S. District Court — Southern District of California

Page 1226

658 F.Supp.2d 1226

Jose AGUAYO, Aguayo, v. U.S. BANK, U.S. Bank.

Case No. 08-CV-2139 W(LSP).

United States District Court, S.D. California.

September 24, 2009.

COPYRIGHT MATERIAL OMITTED

Michael E. Lindsey, Law Offices of Michael E. Lindsey, San Diego, CA, Andrew

J. Ogilvie, Carol McLean Brewer, Kemnitzer Anderson Barron Ogilvie & Brewer LLP, San Francisco, CA, for Aguayo.

James R. McGuire, Morrison and Foerster, San Francisco, CA, Sylvia Rivera, Morrison and Foerster, Los Angeles, CA, for U.S. Bank.

ORDER GRANTING U.S. BANK'S MOTION TO DISMISS

THOMAS J. WHELAN, District Judge.

Pending before the Court is Defendant U.S. Bank's motion to dismiss and motion to strike. Along with the motions, U.S. Bank has also filed a request for judicial notice. Plaintiff Jose Aguayo opposes the motion to dismiss and strike.

The Court decides the matter on the papers submitted and without oral argument. See S.D. Cal. Civ. R. 7.1(d.1). Because the documents attached to the request for judicial notice are not subject to reasonable dispute, the Court GRANTS the request for judicial notice (Doc. No. 17). And for the following reasons, the Court GRANTS the motion to dismiss (Doc. No. 15) and DENIES the motion to strike (Doc. No. 16) as moot.

I. BACKGROUND

The relevant facts for the pending motion are as follows.

Defendant U.S. Bank is a national banking association organized under the National Bank Act, 12 U.S.C. §§ 21 et seq. (Def.'s RJN [Doc. No. 17], Ex. A at 32, Ex. B at 36.) U.S. Bank has branch offices in 26 states, with its main office in Ohio. (Id., Ex. B at 36.)

On or about August 10, 2003, Plaintiff Jose Aguayo purchased a Ford Expedition for personal use from a dealership in California. (Compl. [Doc. No. 1, Ex. A], ¶ 6.¹) Aguayo signed a Retail Installment Sale Contract (RIC), which shortly thereafter was assigned to U.S. Bank. (Id.) When Aguayo later defaulted on the loan, U.S. Bank repossessed the vehicle. (Id., ¶ 7.)

After repossessing the vehicle, on August 14, 2007, U.S. Bank sent Aguayo a Notice of Our Plan to Sell Property. (See Coss Decl., Ex. A.) The Notice advised Aguayo that the vehicle had been repossessed and would be sold after September 3, 2007. (Id., Ex. A at 2.) Additionally, the Notice stated that if the vehicle was sold for less than the amount Aguayo owed, "you will still owe us the difference." (Id.) U.S. Bank subsequently sold the vehicle and sought to recover the deficiency balance against Aguayo. (Compl., ¶¶ 9, 10.)

On August 1, 2008, Aguayo filed this proposed class-action lawsuit against U.S. Bank in the San Diego Superior Court. Aguayo alleges that U.S. Bank violated California Civil Code §§ 2981 et seq. (the Rees-Levering Automobile Sales Finance Act) by failing to satisfy the Act's post-repossession notice requirements. Aguayo is pursuing this claim under California's Unfair Competition Law, Business & Professions Code §§ 17200 et seq. (Compl., ¶¶ 8, 11; Pl's Opp. at 19-20.)

On November 19, 2008, U.S. Bank removed the case to this Court based on the Class Action Fairness Act. U.S. Bank now seeks to dismiss this lawsuit based on federal preemption.

II. APPLICABLE STANDARD

The Court must dismiss a cause of action that fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). A motion to dismiss under Rule 12(b)(6) tests the complaint's sufficiency. North Star Int'l. v. Arizona Corp Comm'n, 720 F.2d 578, 581 (9th Cir.1983). All material allegations in the complaint, "even if doubtful in fact," are assumed to be true. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929(2007). The court must assume the truth of all factual allegations and must "construe them in the light most favorable to [the non-moving party]." Gompper v. VISX, Inc., 298 F.3d 893, 895 (9th Cir.2002); Walleri v. Fed. Home Loan Bank of Seattle, 83 F.3d 1575, 1580 (9th Cir.1996).

As the Supreme Court explained, "[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiffs obligation to provide the `grounds' of his `entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (citations omitted). Instead, the allegations in the complaint "must be enough to raise a right to relief above the speculative level." Id. A complaint may be dismissed as a matter of law either for lack of a cognizable legal theory or for insufficient facts under a cognizable theory. Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir.1984).

Generally, the court may not consider material outside the complaint when ruling on a motion to dismiss. Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n. 19 (9th Cir.1990). However, the court may consider any documents specifically identified in the complaint whose authenticity is not questioned by the parties. Fecht v. Price Co., 70 F.3d 1078, 1080 n. 1 (9th Cir.1995). The court may also consider material properly subject to judicial notice without converting the motion into a motion for summary judgment. Barron v. Reich, 13 F.3d 1370, 1377 (9th Cir.1994) (citing Mack v. South Bay Beer Distribs., Inc., 798 F.2d 1279, 1282 (9th Cir.1986), abrogated on other grounds by Astoria Federal Savings and Loan Ass'n v. Solimino, 501 U.S. 104, 111 S.Ct. 2166, 115 L.Ed.2d 96 (1991)).

III. DISCUSSION

U.S. Bank moves to dismiss Aguayo's claim on grounds of federal preemption. U.S. Bank contends that, as a national bank, federal law preempts state laws that interfere with its authorized activities. U.S. Bank argues that the Rees-Levering Act is preempted because its post-repossession notice requirements interfere impermissibly with national banks' authorized lending powers. And, because Aguayo's cause of action under California's Unfair Competition Law is derivative of the alleged Rees-Levering violation, the entire claim must be dismissed.

Aguayo counters that the Rees-Levering Act neither conflicts nor interferes with U.S. Bank's authorized federal lending powers, and additionally that U.S. Bank's status as an assignee of the RIC preserves the requirements of Rees-Levering as they applied when Aguayo entered into the contract. Aguayo argues that by purchasing the RIC from the dealer, U.S. Bank is a voluntary assignee to the contract, subject to the same rights and limitations as the assignor. According to Aguayo, U.S. Bank's motion to dismiss must fail because contractual obligations are not preempted.

In analyzing U.S. Bank's motion to dismiss, the Court answers two questions. First, is the Rees-Levering Act preempted by federal law? And second, does U.S. Bank's status as an assignee of the RIC change the Court's preemption analysis?

A. The Rees-Levering Act is Expressly Preempted by Federal Regulation.

Federal preemption may be established in three ways: (1) express preemption (2) field preemption; and (3) conflict preemption. Bank of America v. City and County of San Francisco, 309 F.3d 551, 558 (9th Cir.2002). The dispositive issue in any question of federal preemption is congressional intent. Cal. Fed. Sav. & Loan Ass'n v. Guerra, 479 U.S. 272, 280, 107 S.Ct. 683, 93 L.Ed.2d 613 (1987). "Did Congress, in enacting the Federal Statute, intend to exercise its constitutionally delegated authority to set aside the laws of the State? If so, the Supremacy Clause requires courts to follow federal, not state, law." Barnett Bank v. Nelson, 517 U.S. 25, 30, 116 S.Ct. 1103, 134 L.Ed.2d 237 (1996).

The supremacy question is generally met with a presumption against preemption. However, this presumption is not implicated when the area of law analyzed is subject to significant federal presence. United States v. Locke, 529 U.S. 89, 108, 120 S.Ct. 1135, 146 L.Ed.2d 69 (2000). National banking is an example. "Congress has legislated the field of banking from the days of M'Culloch v. Maryland [17 U.S. 316, 4 Wheat. 316, 4 L.Ed. 579 (1819)] [citation], creating an extensive federal statutory and regulatory scheme." Bank of America, 309 F.3d at 558. Thus, there is no presumption against preemption when analyzing state regulation of the banking industry. Id. at 559 ("[B]ecause there has been a history of significant federal presence in national banking, the presumption against preemption of state law is inapplicable.").

Congress enacted the National Bank Act (NBA) in 1864. Watters v. Wachovia Bank, N.A, 550 U.S. 1, 10, 127 S.Ct. 1559, 167 L.Ed.2d 389 (2007). Through the NBA, Congress granted national banks broad authority to exercise "all such incidental powers as necessary to carry on the business of banking." 12 U.S.C. § 24 (Seventh). These powers include "discounting and negotiating promissory notes" and "loaning money on personal security." Id.

Congress further assigned supervision of national banks and implementation of the NBA to the Office of the Comptroller of Currency (OCC). 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). The OCC is authorized to issue rules and regulations as necessary to preserve the purpose and sound operation of the national banking system. See 12 U.S.C. § 93a; 69 Fed. Reg. 1904, 1907 (January 13, 2004). This authority includes interpretation of state law preemption under the NBA. Rose v. Chase Manhattan Bank USA, 396 F.Supp.2d 1116, 1122 (C.D.Cal.2005) (citing 12 U.S.C. § 43). OCC regulations carry the same weight as federal statutes when considering questions of state law preemption. Hillsborough County v. Automated Med. Labs., Inc., 471 U.S. 707, 713, 105 S.Ct. 2371, 85 L.Ed.2d 714 (1985).

In January 2004, the OCC issued 12 C.F.R. § 7.4008 to clarify the applicability of state law to national banks' non-real estate lending activities. 69 Fed. Reg. at 1905. The regulation begins by reiterating the national banks' grant of federal power...