Erceg v. Lendingclub Corp.
| Decision Date | 28 July 2020 |
| Docket Number | Case No. 20-cv-01153-HSG |
| Citation | 475 F.Supp.3d 1071 |
| Parties | Luka ERCEG, Plaintiff, v. LENDINGCLUB CORPORATION, Defendant. |
| Court | U.S. District Court — Northern District of California |
Perry J. Narancic, LexAnalytica, PC, Palo Alto, CA, Adam J. Levitt, Pro Hac Vice, Amy E. Keller, Pro Hac Vice, DiCello Levitt Gutzler LLC, Chicago, IL, Justin James Hawal, Pro Hac Vice, Mark A. DiCello, DiCello Levitt Gutzler LLC, Mentor, OH, for Plaintiff.
Alexandra Michele Jackson, Jay Thomas Ramsey, Fred R. Puglisi, Valerie Elizabeth Alter, Sheppard Mullin Richter & Hampton LLP a Limited Liability Partnership Including Professional Corp., Los Angeles, CA, for Defendant.
HAYWOOD S. GILLIAM, JR., United States District Judge Defendant LendingClub Corporation ("LendingClub" or "Defendant") moves to stay the pending action, or alternatively to dismiss ("Mot.," Dkt. No. 30) the first amended complaint (Dkt. No. 27 ("FAC")). Briefing on the motion is complete. Dkt. No. 34 ("Opp."); Dkt. No. 35 ("Reply"). Plaintiff Luka Erceg ("Plaintiff") alleges three causes of action: violations of (1) California Penal Code § 632 ;1 (2) California Penal Code § 632.7 ; and (3) Mass. Gen. Law. Ch. 272 § 99. See FAC ¶¶ 51, 63, 75. On July 9, 2020, the Court held a hearing on the motions. Dkt. No. 37. For the reasons below, the Court GRANTS IN PART AND DENIES IN PART Defendant's Motion.
Plaintiff alleges that in the course of attempting to secure financing for his children's tutoring, he submitted an application to "Your Tuition Solutions," a loan broker owned and/or operated by Springstone Financial LLC, which is a subsidiary of LendingClub. See FAC ¶ 16. Following the application process, a representative of LendingClub, located at a call center in Massachusetts, left a telephone message for Plaintiff on his cellphone requesting a return call. Id. ¶ 19. Plaintiff, who was located in California, returned the call at the direct line of the LendingClub representative, and left several voicemails. Id. ¶ 20.
Plaintiff alleges that on October 3, 2018, he received a return call from the LendingClub representative, and did not receive notice that the call was being recorded. Id. ¶ 21. The representative proceeded to ask Plaintiff about the loan application, at which point the conversation became contentious when LendingClub's representative accused Plaintiff of fraud. Id. ¶¶ 21-22.
The LendingClub representative later filed an application for a protective order against Plaintiff, claiming that Plaintiff threatened her during the call. Id. ¶ 23. On February 14, 2019, during a hearing related to the protective order, the representative's attorney played a recording of the telephone call between representative and Plaintiff. Id. ¶ 24. Plaintiff alleges that this was the first time he was informed or had reason to know that he had been recorded. Id.
During the course of the protective order hearing, a separate LendingClub employee testified that it was the company's "protocol" to record "pretty much anything" that involved an interaction between LendingClub and its customers and clients. Id. ¶ 25. Plaintiff alleges that at no time during the October 3, 2018 telephone conversation was he advised that the call was being recorded. Id. ¶ 26. Plaintiff also alleges that during the recorded conversation, he disclosed sensitive personal and financial information at the request of the LendingClub representative, including social security numbers. Id. ¶ 27. Plaintiff contends that despite having policies requiring its customer service representatives to inform individuals that they may be recorded, LendingClub failed to enforce this policy and does not always disclose to customers that it is recording the call. Id. ¶ 6.
Plaintiff seeks relief on behalf of a nationwide class of "[a]ll individuals who have had their telephone calls with LendingClub recorded by LendingClub without their knowledge and consent." Id. ¶ 32.
"[T]he power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants." Landis v. N. Am. Co. , 299 U.S. 248, 254, 57 S.Ct. 163, 81 L.Ed. 153 (1936). In deciding whether to issue a stay, the Court should consider three factors: (1) "the possible damage which may result from the granting of a stay;" (2) "the hardship or inequity which a party may suffer in being required to go forward;" and (3) "the orderly course of justice measured in terms of the simplifying or complicating of issues, proof, and questions of law which could be expected to result from a stay." CMAX, Inc. v. Hall , 300 F.2d 265, 268 (9th Cir. 1962). "The proponent of a stay bears the burden of establishing its need." Id. (quoting Clinton v. Jones , 520 U.S. 681, 708, 117 S.Ct. 1636, 137 L.Ed.2d 945 (1997) ). "[If] there is even a fair possibility that the stay for which [the requesting party] prays will work damage to [someone] else," then the party seeking a stay "must make out a clear case of hardship or inequity in being required to go forward." Landis , 299 U.S. at 255, 57 S.Ct. 163. A district court's decision to grant or deny a Landis stay is a matter of discretion. Dependable Highway Express, Inc. v. Navigators Ins. Co. , 498 F.3d 1059, 1066 (9th Cir. 2007).
Federal Rule of Civil Procedure 8(a) requires that a complaint contain "a short and plain statement of the claim showing that the pleader is entitled to relief[.]" A defendant may move to dismiss a complaint for failing to state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6). "Dismissal under Rule 12(b)(6) is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory." Mendiondo v. Centinela Hosp. Med. Ctr. , 521 F.3d 1097, 1104 (9th Cir. 2008). To survive a Rule 12(b)(6) motion, a plaintiff must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A claim is facially plausible when a plaintiff pleads "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).
In reviewing the plausibility of a complaint, courts "accept factual allegations in the complaint as true and construe the pleadings in the light most favorable to the nonmoving party." Manzarek v. St. Paul Fire & Marine Ins. Co. , 519 F.3d 1025, 1031 (9th Cir. 2008). Nonetheless, Courts do not "accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." In re Gilead Scis. Sec. Litig. , 536 F.3d 1049, 1055 (9th Cir. 2008). And even where facts are accepted as true, "a plaintiff may plead [him]self out of court" if he "plead[s] facts which establish that he cannot prevail on his ... claim." Weisbuch v. Cty. of Los Angeles , 119 F.3d 778, 783 n.1 (9th Cir. 1997) (quotation marks and citation omitted).
If dismissal is appropriate under Rule 12(b)(6), a court "should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts."
Lopez v. Smith , 203 F.3d 1122, 1130 (9th Cir. 2000) (quotation marks and citation omitted).
Pursuant to Rule 12(f), a party may move to strike from a pleading "any insufficient defense or any redundant, immaterial, or impertinent and scandalous matter." Fed. R. Civ. P. 12(f). Where the complaint demonstrates that a class action cannot be maintained on the facts alleged, a defendant may move to strike class allegations prior to discovery. See Sanders v. Apple, Inc. , 672 F. Supp. 2d 978, 990 (N.D. Cal. 2009). Before a motion to strike is granted, however, the court must be convinced that any questions of law are clear and not in dispute, and that under no set of circumstances could the claim or defense succeed. Id. (citing RDF Media Ltd. v. Fox Broadcasting Co. , 372 F. Supp. 2d 556, 566 (C.D. Cal. 2005) ).
Section 632.7 makes it a violation to, without consent, "intercept[ ] or receive[ ] and intentionally record[ ]" a cellphone communication. The California Court of Appeal recently held that Smith v. LoanMe, Inc. , 43 Cal. App. 5th 844, 848, 257 Cal.Rptr.3d 61 (2019). That ruling, which is fatal to Plaintiff's section 632.7 cause of action because Plaintiff does not allege that a third-party eavesdropper recorded the call at issue, is currently on appeal to the California Supreme Court, and Defendant seeks a stay of this action pending the outcome of that appeal. Review granted , 260 Cal.Rptr.3d 433, 460 P.3d 757 (Cal. Apr. 1, 2020) ; Mot. at 2.
Defendant contends that the California Supreme Court's ultimate holding in Smith will impact the analysis of both Plaintiff's section 632.7 and section 6322 causes of action, such that the Court should stay the entirety of this action until the California Supreme Court rules. Mot. at 7.3 The Court agrees that the California Supreme Court's ruling could be dispositive of the section 632.7 cause of action by clarifying whether that section allows participants in a phone call to intentionally record it, as the California Court of Appeal held.
Although Defendant does not seek dismissal of the section 632 cause of action, the Court agrees that the California Supreme Court's decision...
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