Washburn v. Prudential Ins. Co. of Am.
| Decision Date | 24 November 2015 |
| Docket Number | Case No. 15–cv–04009–SI |
| Citation | 158 F.Supp.3d 888 |
| Court | U.S. District Court — Northern District of California |
| Parties | Gina Washburn, Plaintiff, v. Prudential Insurance Company of America, Defendant. |
Jennifer Susan Rosenberg, Robert M. Bramson, Bramson, Plutzik, Mahler & Birkhaeuser LLP, Walnut Creek, CA, Joseph Stephen Genshlea, Genshlea Law and Mediation, Sacramento, CA, for Plaintiff.
Laura Leigh Geist, Andrew S. Azarmi, Kelly Denise Fair, Dentons US LLP, San Francisco, CA, for Defendant.
Defendant Prudential Insurance Company of America moves to dismiss plaintiff Gina Washburn's complaint for failure to state a claim. On November 20, 2015, the Court heard arguments on defendant's motion. For the reasons set forth below, the Court GRANTS defendant's motion to dismiss plaintiff's complaint. Plaintiff is given leave to file an amended complaint by December 11, 2015 . The case management conference scheduled for December 4, 2015 is rescheduled for January 15, 2015 at 2:30 p.m.
The following allegations are taken from plaintiff's first amended complaint (“FAC”):
Plaintiff Gina Washburn submitted a signed application for life insurance to defendant Prudential Life Insurance Company. Dkt. No. 13, FAC ¶ 12. Plaintiff alleges that “the application did not authorize Prudential to charge compound interest on the balances due on policy and/or premium loans, nor did it even disclose that Prudential might do so.” Id .
Sometime after the issuance of the Policy, defendant provided plaintiff “a loan secured by the cash value and death benefit value of the Policy.” Id. ¶ 14. Defendant charged compound interest on this loan. Id. ¶ 15. Plaintiff alleges that she “never signed any agreement authorizing Prudential to charge her compound interest.” Id.1
Plaintiff originally filed this lawsuit in state court as a putative class action. Defendant removed the action pursuant to the Class Action Fairness Act, 28 U.S.C. §§ 1332(d)
, 1453(d). The FAC alleges four claims based on the charging of compound interest: (1) declaratory relief; (2) Unfair Competition Law; (3) Initiative Measure, Stats. 1919, p. lxxxiii, §§ 2-3 (codified in Civil Code §§ 1916 -2, 1916-3); and (4) unjust enrichment and money had and received. The FAC alleges that “[a]ll of these causes of action arise from defendant's pattern and practice of charging compound interest on life insurance policy and premium loans without a written agreement signed by the borrower providing for such compounding.” FAC ¶ 1. Now before the Court is defendant's motion to dismiss plaintiff's first amended complaint for failure to state a claim.
Under Federal Rule of Civil Procedure 12(b)(6)
, a district court must dismiss a complaint if it fails to state a claim upon which relief can be granted. To survive a Rule 12(b)(6) motion to dismiss, the plaintiff must allege “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). This “facial plausibility” standard requires the plaintiff to allege facts that add up to “more than a sheer possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). While courts do not require “heightened fact pleading of specifics,” a plaintiff must allege facts sufficient to “raise a right to relief above the speculative level.” Twombly , 550 U.S. at 555, 570, 127 S.Ct. 1955.
In deciding whether a plaintiff has stated a claim upon which relief can be granted, the court must assume that the plaintiff's allegations are true and must draw all reasonable inferences in the plaintiff's favor. See Usher v. City of Los Angeles , 828 F.2d 556, 561 (9th Cir.1987)
. However, the court is not required to “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).
If the Court dismisses the complaint, it must then decide whether to grant leave to amend. The Ninth Circuit has “repeatedly held that a district 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)
(citations and internal quotation marks omitted).
Plaintiff alleges that defendant violated Initiative Measure, Stats. 1919, p. lxxxiii (the “1918 Initiative”), which is codified in California Civil Code § 1916
-1 through § 1916 -5. In particular, plaintiff claims that defendant violated the prohibition on charging compound interest “unless an agreement to that effect is clearly expressed in writing and signed by the party to be charged therewith.” Cal. Civ. Code § 1916 -2. Defendant argues that, as an incorporated admitted insurer, it is exempt from entirety of the Usury Law2 under the California Constitution and the California Insurance Code. Plaintiff responds that the exemption extends only to the 1918 Initiative's provisions setting the maximum rate of interest, not the disclosure and consent requirements for compound interest. This dispute turns solely on statutory interpretation.
When interpreting statutes, a court should “aim 'to ascertain the intent of the enacting legislative body so that [it] may adopt the construction that best effectuates the purpose of the law.”' Klein v. United States , 50 Cal.4th 68, 77, 112 Cal.Rptr.3d 722, 235 P.3d 42 (Cal.2010)
(quoting Hassan v. Mercy Am. River Hosp. , 31 Cal.4th 709, 715, 3 Cal.Rptr.3d 623, 74 P.3d 726 (Cal.2003) ). The first step of statutory interpretation is to look “to the words of the statute 'because the statutory language is generally the most reliable indicator of legislative intent.”' Id. (quoting Hassan , 31 Cal.4th at 715, 3 Cal.Rptr.3d 623, 74 P.3d 726 ). If the statutory language is ambiguous or does not demonstrate its intended meaning, courts then look to the “statute's legislative history and the historical circumstances behind its enactment.” Id. Lastly, courts “may consider the likely effects of a proposed interpretation because where uncertainty exists consideration should be given to the consequences that will flow from a particular interpretation.” Id. (internal quotation marks and citation omitted). It is important to apply these rules of statutory construction in order. Mt. Hawley Ins. Co. v. Lopez , 215 Cal.App.4th 1385, 1396, 156 Cal.Rptr.3d 771 (Cal.Ct.App.2013). Also, the canons of statutory interpretation “apply equally to constitutional provisions.” Indep. Energy Producers Ass'n, Inc. v. State Bd. of Equalization , 125 Cal.App.4th 425, 437, 22 Cal.Rptr.3d 562 (Cal.Ct.App.2004).
The 1918 Initiative regulates interest rates and the requirements for charging compound interest and interest on interest. In full, it states:
No person, company, association or corporation shall directly or indirectly take or receive in money, goods or things in action, or in any other manner whatsoever, any greater sum or any greater value for the loan or forbearance of money, goods or things in action than at the rate of twelve dollars upon one hundred dollars for one year; and in the computation of interest upon any bond, note, or other instrument or agreement, interest shall not be compounded, nor shall the interest thereon be construed to bear interest unless an agreement to that effect is clearly expressed in writing and signed by the party to be charged therewith . Any agreement or contract of any nature in conflict with the provisions of this section shall be and void as to any agreement or stipulation therein contained to pay interest and no action at law to recover interest in any sum shall be maintained and the debt can not be declared due until the full period of time it was contracted for has elapsed.
Cal. Civ. Code § 1916
-2 (emphasis added).
3 of the California Constitution, adopted after the 1918 Initiative, also contains caps on interest rates, and proscribes the collection of other compensation that exceeds the authorized interest amount, creates exempt classes, and vests authority in the California Legislature over exempt classes. It provides:
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