Linton v. Axcess Financial Services, Inc.

• Court: District Court, N.D. California
• Decided: June 30, 2023
• Docket: 3:23-cv-01832
• Status: Unknown

Opinion

1 2 3 4 5 IN THE UNITED STATES DISTRICT COURT 6 FOR THE NORTHERN DISTRICT OF CALIFORNIA 7 8 LAKISHA COLE LINTON, Case No. 23-cv-01832-CRB

9 Plaintiff,

ORDER GRANTING MOTION TO 10 v. REMAND

11 AXCESS FINANCIAL SERVICES, INC., 12 Defendant. 13 Plaintiff Lakisha Cole Linton (“Linton”) moves to remand her class action against 14 Defendant Axcess Financial Services, Inc. (“Axcess”) to the Alameda County Superior 15 Court. Mot. to Remand (dkt. 14). Axcess moves to dismiss Linton’s action for failure to 16 join an indispensable party. Mot. to Dismiss (dkt. 8). Because the Court lacks equitable 17 jurisdiction over Linton’s restitution claim, and Linton lacks Article III standing to bring a 18 claim for injunctive relief, the Court GRANTS Linton’s the motion to remand and 19 DENIES Axcess’s motion to dismiss as moot. 20 I. BACKGROUND 21 A. Plaintiff’s Allegations 22 Linton, a California resident, obtained a $1,000 consumer loan from Axcess, an 23 Ohio corporation. See Compl. (dkt. 1) ¶¶ 4–5, 14. Linton alleges that, because Axcess 24 does not hold a license to make loans in California, it is subject to the 10% maximum 25 interest rate limitations dictated by Article XV, § 1 of the California Constitution. See id. 26 ¶ 8. Under the parties’ Loan Agreement, Axcess set Linton’s interest rate at an Annual 27 Percentage Rate (“APR”) of 214.41%, far exceeding the 10% maximum interest rate 1 permitted under California law. Id. ¶ 15. Linton brings claims under California’s Unfair 2 Competition Law, Bus. & Prof. Code § 17200 et seq. (“UCL”), alleging that “[b]y 3 advertising, making, and/or servicing loans in California that carry interest rates exceeding 4 the maximum rate allowed by California law, Defendants have engaged in unlawful and/or 5 unfair business acts or practices, in violation of [the UCL].” Id. ¶ 31. 6 B. Procedural History 7 On February 24, 2023, Linton filed the putative class action complaint in the 8 Alameda County Superior Court. See Notice of Removal (dkt. 1) ¶ 5. Axcess timely 9 removed Linton’s action pursuant to the Class Action Fairness Act (“CAFA”). See id. ¶¶ 10 2, 12; 28 U.S.C. § 1332(d). Linton now moves to remand the case back to state court, 11 while Axcess moves to dismiss Linton’s action for failure to join an indispensable party. 12 See Mot. to Remand at 5, 8; Mot. to Dismiss at 9. 13 II. MOTION TO REMAND 14 A. LEGAL STANDARD 15 A defendant may remove “any civil action brought in a State court of which the 16 district courts . . . have original jurisdiction.” 28 U.S.C. § 1441(a). Under CAFA, federal 17 courts have diversity jurisdiction over class actions where the amount in controversy 18 exceeds $5 million. Id. § 1332(d). There is a “strong presumption” against removal 19 jurisdiction, and courts “strictly construe the removal statute against removal.” Gaus v. 20 Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). This “means that the defendant always has 21 the burden of establishing that removal is proper.” Hunter v. Philip Morris USA, 582 F.3d 22 1039, 1042 (9th Cir. 2009) (citation and internal quotation marks omitted). Any doubt 23 regarding the legitimacy of the removal favors remanding the case to state court. Id. 24 B. DISCUSSION 25 Linton moves to remand the case to state court for two reasons: first, because the 26 Court lacks equitable jurisdiction over her restitution and injunctive relief claims; second, 27 because she lacks Article III standing to bring her claim for injunctive relief. See Mot. to 1. Equitable Jurisdiction 1 Equitable jurisdiction, much like subject matter jurisdiction, is a limitation on 2 federal courts. See Schlesinger v. Councilman, 420 U.S. 738, 754 (1975). Equitable 3 jurisdiction is concerned with “whether consistently with the principles governing 4 equitable relief the court may exercise its remedial powers.” Id. Although equitable 5 jurisdiction is distinct from subject matter jurisdiction, both are “antecedent to hearing a 6 claim on the merits.” Guthrie v. Transamerica Life Ins. Co., 561 F. Supp. 3d 869, 874 7 (N.D. Cal. 2021). Therefore, whenever a federal court is presented with an equitable 8 claim, it must first determine whether it possesses equitable jurisdiction before it can 9 address the merits. See Guzman v. Polaris Indus., 49 F.4th 1308, 1314 (9th Cir. 2022). 10 In Sonner v. Premier Nutrition Corp., the Ninth Circuit held that traditional 11 equitable principles derived from federal common law apply to UCL restitution claims. 12 See 971 F.3d 834, 837 (9th Cir. 2020). In particular, Sonner held that a federal court in a 13 diversity action does not have equitable jurisdiction to award restitution to a party under 14 the UCL unless that party first establishes that they lack an adequate remedy at law. See 15 id. at 844. Importantly, courts in this Circuit have extended Sonner’s inadequate-remedy- 16 at-law requirement not only to equitable claims filed in federal court, but also to those 17 removed from state court. See, e.g., Slick v. CableCom, LLC, No. 22-CV-03415-JSC, 18 2022 WL 4181003, at *1, 3 (N.D. Cal. Sept. 12, 2022); Heredia v. Sunrise Senior Living 19 LLC, No. 8:18-CV-01974-JLS-JDE, 2021 WL 819159, at *3 (C.D. Cal. Feb. 10, 2021). 20 a. Equitable Jurisdiction over Linton’s Claim for Restitution 21 Here, Axcess does not dispute that, under Sonner, the Court has no equitable 22 jurisdiction over Linton’s restitution claim—nor could it. See Opp’n to Remand at 7. 23 Linton did not allege in her complaint that she lacked an adequate remedy at law. See 24 Compl. Linton argues that, while she could have sought legal remedies, such as damages 25 for usury, she elected not to do so. See Mot. to Remand at 5. Therefore, under Sonner, the 26 Court does not have equitable jurisdiction over Linton’s restitution claim. But the Court 27 must still decide whether Sonner applies to Linton’s claim for injunctive relief. b. Equitable Jurisdiction over Linton’s Claim for Injunctive 1 Relief 2 In Sonner, the Ninth Circuit did not explicitly address whether Sonner’s equitable 3 jurisdiction requirements applied exclusively to restitution or to all equitable remedies, 4 including injunctive relief. See 971 F.3d at 842. Courts applying Sonner are split on its 5 applicability to injunctive relief claims. See Kryzhanovskiy v. Amazon.com Servs., Inc., 6 No. 2:21-CV-01292-DAD-BAM, 2022 WL 2345677, at *4 (E.D. Cal. June 29, 2022) 7 (noting split in authority). 8 Some courts have held that Sonner’s equitable jurisdiction requirement applies to 9 injunctive relief just as it does any equitable remedy, dismissing or remanding claims when 10 there is an adequate remedy at law. See, e.g., In re MacBook Keyboard Litig., No. 5:18- 11 cv-02813-EJD, 2020 WL 6047253, at *3 (N.D. Cal. Oct. 13, 2020) (“[N]othing about the 12 Ninth Circuit’s reasoning [in Sonner] indicates that the decision is limited to claims for 13 restitution.”). Courts extending Sonner to claims for injunctive relief have done so 14 “primarily in cases where monetary damages could compensate for the harm suffered, such 15 as overpayment for defective or falsely advertised products.” Kryzhanovskiy, 2022 WL 16 2345677, at *4; see also In re MacBook, 2020 WL 6047253, at *3 (“Courts generally hold 17 that monetary damages are an adequate remedy for claims based on an alleged product 18 defect, and reject the argument that injunctive relief requiring repair or replacement is 19 appropriate.”). 20 Many other courts post-Sonner, however, have held that “[m]oney damages are an 21 inadequate remedy for [the] future harm” only remediable by injunctive relief. Andino v. 22 Apple, Inc., No. 2:20-cv-01628-JAM-AC, 2021 WL 1549667, at *5 (E.D. Cal. Apr. 20, 23 2021); see also Zeiger v. WellPet LLC, 526 F. Supp. 3d 652, 687 (N.D. Cal. 2021) 24 (holding that even if Sonner were to apply to injunctive relief, monetary damages would 25 still be an inadequate remedy because damages compensate consumers for past purchases, 26 whereas injunctive relief ensures that one can rely on a defendant’s representations in the 27 future). In Zeiger, Judge Orrick reasoned that “simply having any remedy at law is not 1 Therefore, while the availability of monetary damages forecloses certain types of 2 injunctive relief, including specific performance of a contract, “California’s consumer 3 protection laws permit courts to issue injunctions that serve different purposes and remedy 4 different harms than retrospective monetary damages.” Id. These courts hold that Sonner 5 does not bar plaintiffs’ claims for injunctive relief under the UCL.1 6 In accord with the latter line of caselaw, Axcess contends that Sonner is specifically 7 limited to restitution claims and does not preclude claims for injunctive relief to prevent 8 future harm. See Opp’n to Remand at 4–5. The Court agrees—while monetary damages 9 would compensate Linton for past loans acquired from Axcess under the allegedly 10 unlawful interest rates, they would not guarantee that Linton (or other borrowers) can 11 avoid these interest rates in the future. Because retrospective monetary damages will not 12 prevent the future harm only remediable by an injunction ordering Axcess to stop issuing 13 loans with unfair interest rates, the Court declines to extend Sonner’s inadequate-remedy- 14 at-law requirement to Linton’s injunctive relief claim. Therefore, the Court has equitable 15 jurisdiction over Linton’s claim for injunctive relief.2 16 2. Article III Standing 17 Although the Court retains equitable jurisdiction over Linton’s claim for injunctive 18 relief, Linton must also have Article III standing to bring her claim for injunctive relief in 19 federal court. See Davidson v. Kimberly-Clark Corp., 889 F.3d 956, 967 (9th Cir. 2018). 20

21 1 See also Rice v. Kimberly-Clark Corp., No. 2:21-cv-01519-DAD-KJN, 2022 WL 16804522, at 22 *4 (E.D. Cal. Nov. 8, 2022); Gross v. Vilore Foods Co., Inc., No. 20-cv-0894-DMS-JLB, 2020 WL 6319131, at *3 (S.D. Cal. Oct. 28, 2020); See Andino, 2021 WL 1549667, at *5; Brooks v. 23 Thomson Reuters Corp., No. 21-cv-01418-EMC, 2021 WL 3621837, at *10–11 (N.D. Cal. Aug. 16, 2021); Dekker v. Vivint Solar, Inc., No. C 19-07918 WHA, 2022 WL 827246, at *3–4 (N.D. 24 Cal. Mar. 18, 2022) 2 Although few courts have addressed equitable jurisdiction requirements under Sonner 25 specifically on a motion to remand, Linton relies on Guthrie, 561 F.Supp.3d at 879–81 and Clevenger v. Welch Foods, Inc., No.: SACV 23-00127-CJC (JDEx), 2023 WL 2390630, at *3–6 26 (N.D. Cal. Mar. 7, 2023), both of which remanded UCL injunctive relief claims back to state court based on a lack of equitable jurisdiction. See Mot. to Remand at 6–8. But neither Guthrie (which 27 only involved a claim for restitution) nor Clevenger squarely address Sonner’s application to injunctive relief. In contrast, Zeiger examined whether monetary damages serve as an “adequate” 1 To demonstrate Article III standing, a plaintiff must establish (1) that she has suffered an 2 injury in fact, (2) that her injury is fairly traceable to a defendant’s conduct, and (3) that 3 her injury would likely be redressed by a favorable decision. Lujan v. Defs. of Wildlife, 4 504 U.S. 555, 560–61 (1992). To have standing to bring a claim for injunctive relief, a 5 plaintiff must plead a “threat of injury [that is] actual and imminent, not conjectural or 6 hypothetical.” Davidson, 889 F.3d at 967 (quoting Summers v. Earth Island Inst., 555 U.S. 7 488, 493 (2009)). Past wrongs, by themselves, are insufficient to establish standing for 8 injunctive relief. See id. Rather, the plaintiff must show “a sufficient likelihood that he 9 will again be wronged in a similar way.” Id. (quoting City of Los Angeles v. Lyons, 461 10 U.S. 95, 111 (1983)). In the context of a consumer protection class action, a plaintiff must 11 plausibly allege that she intends to purchase the product in the future. See Davidson, 889 12 F.3d at 969–71. “As a general rule, if the district court is confronted with an Article III 13 standing problem in a removed case—whether the claims at issue are state or federal—the 14 proper course is to remand for adjudication in state court.” Id. at 970 n.6. 15 Following Davidson, courts in this Circuit have held that a plaintiff’s intention to 16 purchase a product in the future is necessary to establish Article III standing for injunctive 17 relief. See, e.g., Lanovaz v. Twinings N. Am., Inc., 726 F. App’x 590, 591 (9th Cir. 2018) 18 (holding that a plaintiff’s statement that she would “consider buying” the defendant’s 19 products does not satisfy Article III standing requirements for injunctive relief). 20 Additionally, courts in this Circuit have consistently held that Davidson’s Article III 21 standing requirements do not exclusively apply to cases filed in federal court, but also to 22 cases that originated in state court and were then removed to federal court. See, e.g., 23 Benton v. CVS Pharmacy, Inc, 604 F. Supp. 3d 889, 893 (N.D. Cal. 2018) (remanding for 24 lack of Article III standing for injunctive relief after determining that “plaintiffs express no 25 interest in ever purchasing homeopathic products in the future . . . [which] is necessary to 26 establish Article III standing”); Turnier v. Bed Bath & Beyond Inc., No. 3:21-CV-1008-L- 27 MSB, 2021 WL 3022430, at *2 (S.D. Cal. July 16, 2021) (remanding after determining 1 for Article III standing for injunctive relief); Takahashi-Mendoza v. Coop. Regions of 2 Organic Producer Pools, No. 22-CV-05086-JST, 2023 WL 3856722, at *3 (N.D. Cal. May 3 19, 2023) (denying a motion to dismiss for lack of Article III standing because plaintiff 4 alleged she “would consider purchasing Defendant’s [product if it was produced] in a 5 manner consistent with its advertising”). 6 Linton’s complaint alleges no imminent or actual threat of future harm. Axcess 7 points to Linton’s allegations in her complaint that “she has suffered harm and that such 8 purported acts of unfair competition ‘will continue’ ‘[u]nless enjoined and restrained by 9 this Court,’” as a basis for Article III standing. Opp’n to Remand at 10 (quoting Compl. ¶ 10 35). But this statement does not indicate Linton’s intention to obtain another loan from 11 Axcess, which is what Davidson requires. There is thus no likelihood that Linton will be 12 harmed in the future by Axcess’s allegedly unlawful interest rates. 13 Because Linton alleges no intention to obtain another loan from Axcess—even at a 14 reasonable rate—she has no Article III standing to bring her claim for injunctive relief. 15 See Davidson, 889 F.3d at 970–72; see also In re Coca-Cola Prod. Mktg. & Sales Pracs. 16 Litig., No. 20-15742, 2021 WL 3878654, at *2–3 (9th Cir. Aug. 31, 2021); Lanovaz, 726 17 F. App’x at 591. 18 Because the Court lacks equitable jurisdiction over Linton’s restitution claim and 19 Linton lacks Article III standing to bring her claim for injunctive relief, the Court remands 20 the case back to state court.3 21 III. MOTION TO DISMISS 22 Axcess moves to dismiss Linton’s action for failure to join CCBank, which it argues 23 3 The Court remands the case (as opposed to dismissing for lack of jurisdiction) for two reasons. 24 First, courts consistently remand cases initially filed in state court and later found to lack equitable 25 jurisdiction under Sonner. See, e.g., Guthrie, 561 F. Supp. 3d at 877–80; Clevenger, 2023 WL 2390630, at *5–6. Second, in Davidson, after the case was removed from state court under CAFA 26 and subsequently determined to lack Article III standing, the Ninth Circuit remanded the case. See 889 F.3d at 970 n.8 (citing Polo v. Innoventions Int’l, LLC, 833 F.3d 1193, 1196 (9th Cir. 27 2016) (“Remand is the correct remedy because a failure of federal subject-matter jurisdiction 1 || is an indispensable party. See Mot. to Dismiss at 4—9. Because the Court grants Linton’s 2 || motion to remand, Axcess’s motion to dismiss is denied as moot. 3 || IV. CONCLUSION 4 For the foregoing reasons, the Court GRANTS Linton’s motion to remand and 5 || DENIES as moot Axcess’s motion to dismiss. 6 IT IS SO ORDERED. 7 Dated: June 30, 2023 € E = CHARLES R. BREYER 8 United States District Judge 9 10 11 12

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