Sparkman v. Comerica Bank

• Docket Number: 23-cv-02028-DMR
• Decision Date: 04 August 2023
• Parties: PAULA SPARKMAN, Plaintiff, v. COMERICA BANK, et al., Defendants.
• Court: U.S. District Court — Northern District of California

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PAULA SPARKMAN, Plaintiff, v. COMERICA BANK, et al., Defendants.

No. 23-cv-02028-DMR

United States District Court, N.D. California

August 4, 2023

ORDER ON MOTIONS TO DISMISS AND TO STRIKE

RE: DKT. NOS. 16, 18

Donna M. Ryu Chief Magistrate Judge

PlaintiffPaula Sparkman filed this putative class action against Defendants Comerica Bank and Conduent Business Services, LLC alleging claims under the Electronic Funds Transfer Act, 15 U.S.C. § 1693, and California law related to Defendants' operation of prepaid debit cards through which a state agency disburses child support payments.Defendants move pursuant to Federal Rule of Civil Procedure 12(b)(6) to dismiss the complaint.They also move to strike Sparkman's demand for a jury trial.[DocketNos. 16(Mot to Dismiss), 18 (Mot. to Strike).]This matter is suitable for determination without oral argument.CivilL.R. 7-1(b).For the following reasons, the motion to dismiss is granted in part and denied in part.The motion to strike is denied.

I.BACKGROUND

Sparkman makes the following allegations in the complaint, all of which are taken as true for purposes of the motion to dismiss.^[1] Sparkman is a single mother who lives with her daughter in California.She receives court-ordered child support from her daughter's father.In California, child support payments are made through California Child Support Services.Since 2020, that agency has contracted with Defendants to disburse child support payments to recipients through prepaid debit cards known as “Way2Go Card Prepaid Mastercard”(“Way2Go card”).Sparkman has used a prepaid debit card to access child support funds since 2015. Compl.¶¶ 11-13.

Defendants' Way2Go card informational sheet promises that “Mastercard's Zero Liability Protection assures you do not lose any funds if your Card is lost or stolen.”Defendants' Terms of Use for the Way2Go card contain several relevant provisions in the event a card is lost or stolen.The complaint quotes portions of Section 10 of the Terms of Use, entitled “Your Liability.”SeeCompl.¶¶ 15-17; 60-61.[Docket No. 16-1(Solis Decl. June 12, 2023)Ex. A (Comerica Bank Prepaid Mastercard Card Terms of Use)§ 10.]^[2] In relevant part, Section 10 states:

If you tell us within two (2) business days, after you learn of the loss or theft of your Card or PIN you can lose no more than $50 if someone used your Card or PIN without your permission.If you do not tell us within two (2) business days after you learn of the loss or theft of your Card of PIN, and we can prove that we could have stopped someone from using your Card or PIN without your permission if you had told us, you could lose as much as $500.

You are responsible for all authorized uses of your Card except as set forth below; you will not be responsible for an unauthorized use of your Card.An “unauthorized” use is a withdrawal or transaction that you or someone you authorized did not transact.We may refuse to reimburse you for a transaction you assert is unauthorized if: (1) you give your Card, Card number, and/or PIN to another person whom you expressly or implicitly authorize to use your Card, even if that person withdraws or purchases more than you authorized, or (2)we conclude that the facts do not reasonably support a claim of unauthorized use....

Terms of Use§ 10; Compl.¶¶ 14-17.

Sparkman's Way2Go card was stolen out of her car on November 29 or 30, 2022.She called the Way2Go card program on December 1, 2022 and reported the card stolen.“Defendants' agent told Ms. Sparkman that Defendants could not stop the unauthorized charges from going through and that Ms. Sparkman could not dispute the fraudulent charges until they went through.”Id.at ¶¶ 18, 19.Defendants issued a replacement Way2Go card within 5-7 days after she reported her card stolen and told her that she“would receive paperwork to dispute the unauthorized transactions within ten days.”She never received that paperwork.Id.at ¶¶ 20, 21.

Sparkman “followed up with Defendants by phone many times, including on December 9, 2022, when Defendants directed her to hand write out the list of charges she disputed.”On December 13, 2022, Sparkman emailed to Defendants a handwritten list of 21 disputed charges on her card totaling more than $1,000 made between November 30 and December 1, 2022.Id. at ¶¶ 22, 23.The unauthorized charges on Sparkman's Way2Go card were processed as credit transactions with a signature, without entry of a PIN.She filed a police report reporting the stolen card and fraudulent charges.Id.at ¶¶ 24, 26.

Sparkman did not receive “paperwork” from Defendants until after she made repeated phone calls and “was eventually told that Defendants had already denied her claim for reimbursement of the disputed charges.”On January 5, 2023, Defendants mailed Sparkman a packet “that included reprinted copies of letters dated December 1, 2022 and December 14, 2022” that Sparkman had not previously received.The December 1, 2022 letter acknowledged receipt of Sparkman's complaint of the same date.Other documents confirm that Defendants opened her claim on December 1, 2022.Id. at ¶¶ 27-29.

The December 14, 2022 letter from Defendants Go Program Fraud Services Department denied Sparkman's claim for reimbursement for the unauthorized transactions, stating the following grounds: “(1)‘we found a conflict in the information provided by you and the information resulting from our research'; and (2)‘we cannot confirm that fraud occurred.'”It appeared to be a form letter.Id.at ¶¶ 30, 31.Sparkman “continued to follow up with Defendants by phone and email, including by submitting an appeal” of the denial.Defendants have refused to credit the stolen funds to her account.Id.at ¶ 32.

Based on these allegations, Sparkman asserts the following claims for relief: 1) violation of the Electronic Funds Transfer Act(“EFTA”), 15 U.S.C. § 1693g; 2) breach of contract; 3) unlawful business practices in violation of the Unfair Competition Law (“UCL”), California Business & Professions Code section 17200 et seq.; and 4) unfair business practices in violation of the UCL.

Sparkman seeks to represent a California class of allegedly similarly situated persons, defined as:

All persons issued a California Way2Go Card® Prepaid Mastercard® who (1) notified Defendants that one or more charges on their account were unauthorized or disputed; and (2) were denied reimbursement on the grounds that Defendants(i) could not confirm fraud occurred; or (ii) found a conflict in information provided during an investigation, through the date of any class certification order in this action.

Compl.¶ 35.She also seeks to represent an “EFTA subclass”:

All persons in the Class who (1) were denied on or after April 27, 2022 through the date of any class certification order in this action and (2) whose denial was with regard to a disputed charge (or charges) totaling more than $50.

Defendants move to dismiss the complaint and to strike Sparkman's demand for a jury trial.

II.MOTION TO DISMISS

A.Legal Standard

A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the claims alleged in the complaint.SeeParks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484(9th Cir.1995).When reviewing a motion to dismiss for failure to state a claim, the court must “accept as true all of the factual allegations contained in the complaint,”Erickson v. Pardus, 551 U.S. 89, 94(2007)(citation omitted), and may dismiss a claim “only where there is no cognizable legal theory” or there is an absence of “sufficient factual matter to state a facially plausible claim to relief.”Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041(9th Cir.2010)(citingAshcroft v. Iqbal, 556 U.S. 662, 677-78(2009);Navarro v. Block, 250 F.3d 729, 732(9th Cir.2001))(quotation marks omitted).A claim has facial plausibility when a plaintiff“pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”Iqbal, 556 U.S. at 678(citation omitted).In other words, the facts alleged must demonstrate “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.”Bell Atl. Corp. v. Twombly, 550 U.S. 554, 555(2007)(citingPapasan v. Allain, 478 U.S. 265, 286(1986));seeLee v. City of L.A., 250 F.3d 668, 679(9th Cir.2001), overruled on other grounds byGalbraith v. Cty. of Santa Clara, 307 F.3d 1119(9th Cir.2002).

B.Discussion

1.Choice of Law

As an initial matter, Defendants argue that in addition to the EFTA, Michigan law governs the parties' dispute based on the following provision in the Terms of Use: “These Terms will be governed by and construed in accordance with applicable federal law and the laws of the State of Michigan, without reference to its conflict of law principles.”Terms of Use¶ 20.Accordingly, they argue, Michigan law governs Sparkman's breach of contract claims and altogether preclude the UCL claims.Mot. 5-6, 10-11.Sparkman contends that this choice of law provision is not enforceable and asks the court to apply California law.Opp'n 6-8.

The court must determine which law applies to the question of enforceability of the choice of law provision.The Ninth Circuit has made conflicting rulings about whether federal or state law applies to the choice of law rule determination.For example, the court has held that in cases where, as here “[subject matter] jurisdiction is not based on diversity of citizenship . . . federal common law choice-of-law rules apply.”Huynh v. Chase Manhattan Bank, 465 F.3d 992, 997(9th Cir.2006);accordSchoenberg v. Exportadora de Sal, S.A. de C.V., 930 F.2d 777, 782(9th Cir.1991)(“federal...