1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 NELSON SEQUEIRA, et al., Case No. 22-cv-07996-HSG
8 Plaintiffs, ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ 9 v. MOTIONS TO DISMISS, AND GRANTING DEFENDANTS’ 10 UNITED STATES DEPARTMENT OF REQUESTS FOR JUDICIAL NOTICE HOMELAND SECURITY, et al., 11 Re: Dkt. Nos. 63, 64, 65, 66, 68, 69, 70, 114 Defendants. 12 13 Pending before the Court are the motions to dismiss filed by Defendants U.S. Department 14 of Homeland Security; U.S. Immigration & Customs Enforcement; Western Union Financial 15 Services, Inc.; Continental Exchange Solutions, Inc., d/b/a Ria Financial Services and AFEX 16 Money Express; Viamericas Corporation; and DolEx Dollar Express, Inc. Dkt. Nos. 63–65, 68– 17 69. The Court held a hearing on the motions. For the reasons detailed below, the Court GRANTS 18 the motions in part and DENIES the motions in part. The Court relatedly GRANTS Defendants’ 19 associated requests for judicial notice. Dkt. Nos. 66, 70, 114. 20 I. BACKGROUND 21 Plaintiffs Nelson Sequeira, Orsay Alegria, and Ismael Cordero bring claims individually 22 and on behalf of a proposed class, alleging violations of the Right to Financial Privacy Act 23 (“RFPA”) and California’s Unfair Competition Law (“UCL”) by two groups of Defendants: (1) 24 the “Federal Government Defendants,” which include the U.S. Department of Homeland Security 25 (“DHS”) and U.S. Immigration and Customs Enforcement (“ICE”); and (2) the “Money Transfer 26 Defendants,” which include Western Union Financial Services, Inc. (“Western Union”), 27 Continental Exchange Solutions, Inc. (“Continental”), DolEx Dollar Express, Inc. (“DolEx”), and 1 In their First Amended Complaint, Plaintiffs allege that the Money Transfer Defendants 2 violated the RFPA by sharing Plaintiffs’ private financial and personal records with law 3 enforcement agencies, including the Federal Government Defendants, and that the Federal 4 Government Defendants in turn violated the RFPA by collecting and obtaining these private 5 financial and personal records. See id. ¶¶ 70–74. Plaintiffs allege that the financial records are 6 collected and shared through the Transaction Record Analysis Center (“TRAC”), a collaboration 7 of law enforcement agencies, including several federal government agencies like Defendants DHS 8 and ICE. Id. at ¶¶ 13, 15, 30–31, 39–43. Plaintiffs allege that this program, which has existed 9 since approximately 2014, was only recently made public, and that records indicate that it targets 10 immigrants and communities of color. Id. at ¶¶ 13, 27. TRAC gathers and makes available 11 consumer financial records from money transfer companies for money transfers greater than $500 12 sent to or from the Southwest border region, including Arizona, California, New Mexico, Texas, 13 and Mexico. Id. at ¶¶ 15, 17, 31, 36. According to the FAC, the information gathered is 14 sweeping, and not intended to focus on particular individuals suspected of criminal activity. See 15 id. at ¶ 37. Plaintiffs raise concerns that TRAC can “be weaponized against vulnerable groups 16 based on improper criteria, such as race, religion, or national origin.” Id. at ¶¶ 38, 49–52. 17 Plaintiffs further allege that the Money Transfer Defendants were aware that multiple federal 18 government agencies could access and obtain the information produced to TRAC. See id. at 19 ¶¶ 46–48. Finally, Plaintiffs allege that the Money Transfer Defendants’ sharing of their private 20 financial and personal records is in violation of the California Financial Information Privacy Act 21 (“Cal. FIPA”) and therefore constitutes an unlawful business practice under the UCL. See id. at ¶¶ 22 78–86. Defendants now move to dismiss the FAC. See Dkt. No. 63 (“Viamericas Mot.”), 64 23 (“Continental Mot.”), 65 (“DolEx Mot.”), 68 (“Federal Mot.”), 69 (“Western Union Mot.”). 24 II. LEGAL STANDARD 25 Federal Rule of Civil Procedure 8(a) requires that a complaint contain “a short and plain 26 statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). A 27 defendant may move to dismiss a complaint for failing to state a claim upon which relief can be 1 complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory.” 2 Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008). To survive a Rule 3 12(b)(6) motion, a plaintiff need only plead “enough facts to state a claim to relief that is plausible 4 on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is facially plausible 5 when a plaintiff pleads “factual content that allows the court to draw the reasonable inference that 6 the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). 7 In reviewing the plausibility of a complaint, courts “accept factual allegations in the complaint as 8 true and construe the pleadings in the light most favorable to the nonmoving party.” Manzarek v. 9 St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). Nevertheless, courts do not 10 “accept as true allegations that are merely conclusory, unwarranted deductions of fact, or 11 unreasonable inferences.” In re Gilead Scis. Secs. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008) 12 (quoting Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001)); see also 13 Steckman v. Hart Brewing, Inc., 143 F.3d 1293, 1295–96 (9th Cir. 1998) (“[W]e are not required 14 to accept as true conclusory allegations which are contradicted by documents referred to in the 15 complaint.”). Similarly, “a plaintiff can . . . plead himself out of a claim by including unnecessary 16 details contrary to his claims.” Sprewell, 266 F. 3d 988–89. Finally, questions that are purely 17 legal in nature, such as statutory interpretation, may properly be resolved on a motion to dismiss. 18 See Jordan v. Tr., No. 16-CV-02122-KAW, 2017 WL 396169, at *5 (N.D. Cal. Jan. 30, 2017) 19 (collecting cases). 20 III. DISCUSSION 21 A. RFPA 22 The Court begins with Defendants’ primary argument for dismissal of Plaintiffs’ RFPA 23 claim: because the Money Transfer Defendants are not “financial institutions” as defined by the 24 RFPA, Plaintiffs have failed to allege a legally cognizable theory upon which relief can be 25 granted. The RFPA provides, in relevant part, that “no Government authority may have access to 26 or obtain copies of, or [sic] the information contained in the financial records of any customer 27 from a financial institution unless” certain notice requirements are met. See 12 U.S.C. § 3402 1 “financial institution”, except as provided in section 3414 of this title, means any office of a bank, savings bank, card issuer as 2 defined in section 1602(n) [1] of title 15, industrial loan company, trust company, savings association, building and loan, or homestead 3 association (including cooperative banks), credit union, or consumer finance institution, located in any State or territory of the United 4 States, the District of Columbia, Puerto Rico, Guam, American Samoa, or the Virgin Islands; 5 12 U.S.C. § 3401 (1) (emphasis added). Plaintiffs allege that the Money Transfer Defendants are 6 “financial institutions under 12 U.S.C. § 3401(1) because they are consumer finance institutions 7 located in the United States.” FAC ¶ 67. Defendants argue that the term “consumer finance 8 institution” should be construed to mean a company whose core function and purpose is the 9 provision of financing and cash loans to the public, and that the allegations against the Money 10 Transfer Defendants do not satisfy that definition. See Viamericas Mot. at 7–9; Continental Mot. 11 at 8–10; DolEx Mot. at 7–10; Fed. Mot. at 4–9; Western Union Mot. at 6–9. Plaintiffs counter that 12 “consumer finance institution” should not be construed so narrowly, and that it should at least 13 encompass “institutions whose primary purpose is to assist consumers with financial transactions.” 14 Dkt. No. 76 (“Opp.”) at 10.1 This dispute therefore poses a threshold issue for Plaintiffs’ RFPA 15 claim. 16 i. “Consumer Finance Institution” 17 The RFPA does not expressly define the term “consumer finance institution.” The parties’ 18 dispute thus presents what appears to be a statutory interpretation issue of first impression in this 19 circuit. Two other federal courts, including the Seventh Circuit Court of Appeals, have considered 20 this issue in closely related contexts, and both adopted constructions consistent with the 21 Defendants’ position here. See Commodity Futures Trading Comm’n v. Worth Bullion Group, 22 Inc. (“Worth Bullion”), 717 F.3d 545, 550–51 (7th Cir. 2013) (interpreting “consumer finance 23 institution” to mean companies for which the provision of financing and cash loans is a “core 24 function and purpose.”); FTC v. Sterling Precious Metals, LLC (“Sterling”), 2013 WL 1442180, 25
26 1 At the hearing, Plaintiffs conceded that this definition was “a little overbroad,” and suggested a 27 narrower focus on “institutions that provide financial services to consumers as a core part of their business that are similar to the kinds of services provided by the other enumerated entities.” Dkt. 1 at *2–5 (S.D. Fl. Apr. 9, 2013) (same). However, these cases are neither binding nor directly 2 analogous, since none of them decided whether entities that do not provide loan or financing 3 services are nonetheless “consumer finance institutions” under the RFPA. Accordingly, the Court 4 must conduct its own analysis. 5 As with all questions of statutory interpretation, the Court begins “with the text of the 6 statute and with the presumption that Congress intended that the words used be given their plain 7 and ordinary meaning.” United States v. Pacheco, 977 F.3d 764, 767 (9th Cir. 2020). In 8 determining that plain and ordinary meaning, courts routinely consult dictionary definitions. See 9 City of Los Angeles v. Barr, 941 F.3d 931, 940 (9th Cir. 2019). If the language is ambiguous, the 10 Court may also look to “canons of construction, legislative history, and the statute’s overall 11 purpose to illuminate Congress’s intent.” Jonah R. v. Carmona, 446 F.3d 1000, 1005 (9th Cir. 12 2006). 13 Defendants cite numerous dictionary definitions in support of their position that “consumer 14 finance institution” requires the provision of financing and loans as a core function of the 15 business. For example, Black’s Law Dictionary defines “finance company” as “[a] nonbank 16 company that deals in loans either by making them or by purchasing notes from another company 17 that makes the loans directly to borrowers” and “consumer finance company” as “[a] finance 18 company that deals directly with consumers in extending credit.” FINANCE COMPANY, BLACK’S 19 LAW DICTIONARY (11th ed. 2019); see also THE FREE DICTIONARY BY FARLEX, https://financial- 20 dictionary.thefreedictionary.com/Consumer+Finance+Companies (last visited on March 18, 2024) 21 (defining “consumer finance company” as “[a] nonbank lender,” and elaborating that “[a] 22 consumer finance company does not receive deposits, but does make loans to customers for 23 business or personal use. It derives its profits from the interest on these loans. It is also called 24 simply a finance company.”). Other dictionaries also support Defendants’ position. See 25 VOCABULARY.COM DICTIONARY, https://www.vocabulary.com/dictionary/consumer finance 26 company (last visited on March 18, 2024) (defining “consumer finance company” as “a finance 27 company that makes loans to people who have trouble getting a bank loan.”); ENCYCLOPEDIA 1 2024) (describing “consumer finance” as “making loans directly to consumers”); CAMBRIDGE 2 DICTIONARY, https://dictionary.cambridge.org/us/dictionary/english/consumer-finance (last visited 3 on March 18, 2024) (defining “consumer finance” as “the business of lending money to individual 4 people, rather than to companies[.]”). And other sources, including other statutes, also lend 5 support to the argument that the plain and ordinary meaning of “consumer finance institution” 6 requires some focus on the provision of loans. See PAUL F. SMITH, CONSUMER CREDIT COSTS 6 7 (Paul F. Smith ed., 1964) (“Consumer finance companies engage primarily in making personal 8 loans to consumers and are identified by their operations under state small-loan laws.”); Va. Code. 9 §6.2 -1500 (“‘Consumer finance company’ means a person engaged in the business of making 10 loans to individuals for personal, family, household, or other nonbusiness purposes.”). Even a 11 source cited by amicus Electronic Information Privacy Center supports Defendants’ position. See 12 The Motley Fool, Investing in Consumer Finance Stocks, https://www.fool.com/investing/stock- 13 market/market-sectors/financials/consumer-finance-stocks/ (last visited on March 18, 2024) 14 (“Consumer finance companies allow customers to bypass traditional banks and connect with 15 loans and credit cards tailored to their needs. . . . A consumer finance company is a non-bank 16 company that provides financial products to individuals. Some examples of consumer finance 17 products include: mortgages, automobile loans, student loans, personal loans, credit cards, [and] 18 payday loans and other alternative credit products.”).2 19 In contrast, Plaintiffs cite no support for their broader definition of “consumer finance 20 institution,” and instead simply assert that “[a]nother reasonable interpretation is that the term 21 covers all institutions that provide services related to consumer finances.” Opp. at 10. The Court 22 finds this unpersuasive. Plaintiffs’ only argument in support of their assertion is that some of the 23 Money Transfer Defendants describe themselves as providing “financial services,” but this 24 argument conflates the term “consumer finance institution” with the broader provision of 25
26 2 To the extent Plaintiffs object that these definitions do not use the word “institution,” the Court 27 finds persuasive the analysis in Sterling that “institution means an established organization that is dedicated to or primarily established for a particular cause or purpose [and] . . . a company can 1 “financial services,” which relate to money and investments generally. Contrast CAMBRIDGE 2 DICTIONARY, https://dictionary.cambridge.org/us/dictionary/english/financial-services (last visited 3 on March 18, 2024) (defining “financial services” as “business services relating to money and 4 investments, for example those offered by banks[.]”) with CAMBRIDGE DICTIONARY, 5 https://dictionary.cambridge.org/us/dictionary/english/consumer-finance (last visited on March 18, 6 2024) (defining “consumer finance” as “the business of lending money to individual people, rather 7 than to companies[.]”). That some of the Money Transfer Defendants describe themselves as 8 providing financial services is thus not probative of whether they are “consumer finance 9 institutions” under the RFPA. 10 Plaintiffs argue that Defendants’ proposed definition relies “solely on technical 11 dictionaries” and is inconsistent with the “common understanding” of the term, but that argument 12 is similarly unavailing. While Plaintiffs are correct that dictionary definitions are not dispositive 13 in questions of statutory interpretation, here they have not cited a single source, dictionary or 14 otherwise, that supports the assertion that their proffered definition is the “common 15 understanding” of the term “consumer finance institution.” Instead, the overwhelming weight of 16 authority presented to this Court supports Defendants’ position that the ordinary and common 17 meaning of “consumer finance institution” is a company that provides financing and cash loans to 18 consumers as a core function and purpose of its business. 19 Plaintiffs and amici nonetheless argue that this definition is contrary to Congress’s intent in 20 enacting the RFPA. The Court does not find these arguments persuasive for several reasons. 21 First, in a report by the Committee on Banking, Finance and Urban Affairs discussing the bill that 22 would eventually become the RFPA, the Committee stated that “[t]he term ‘consumer finance 23 institution’ is intended to mean a consumer finance company, a sales finance company, a small 24 loan company, a consumer discount company, or other similar institution.” H. Rep. No. 95-1383 25 at 49 (1978). Thus, it appears that Congress, when enacting the RFPA, intended or at least 26 understood that “consumer finance institution” would mean companies that provide loans.3 Other 27 1 reports suggest that Congress, when enacting the RFPA, was focused primarily on depository 2 institutions (e.g., banks) and lenders (e.g., credit card issuers). See 123 Cong. Rec. S7098 (daily 3 ed. May 5, 1977) (statement of Sen. Tower) (“The purpose of the bill is to protect the confidential 4 relationship between banks and credit card issuers and their customers.”). Defendants’ proposed 5 interpretation of “consumer finance institution” is, at minimum, not inconsistent with these 6 statements in the legislative history. 7 Second, and more importantly, Plaintiffs and amici’s argument that the RFPA was 8 intended as a statutory response to the Supreme Court’s decision in United States v. Miller, 425 9 U.S. 437 (1976), and thus intended to protect consumer privacy in all financial transactions 10 generally does not convince the Court that the specific term “consumer finance institution” should 11 be construed broadly. Even if the Court were to accept Plaintiffs and amici’s characterizations of 12 the RFPA’s purpose in protecting the privacy of financial transactions generally, that purpose 13 would only serve to inform the Court’s view of the RFPA as a whole, and provides the Court with 14 no reason to construe a specific term—“consumer finance institution”—in a way that would 15 appear contrary to the plain and common understanding of the term. Put another way, Plaintiffs’ 16 argument would logically require the Court to read out any specific features in the other exemplar 17 terms used within the RFPA’s definition of “financial institution” (e.g., bank, industrial loan 18 company, etc.) as a result of a general policy in favor of protecting the privacy of all financial 19 transactions, regardless of type. Such an approach would be contrary to Congressional intent in 20 defining “financial institution” with reference to specific types of entities, and the Court declines 21 to do so here. 22 Finally, the Court addresses Plaintiffs’ and amici’s policy arguments. Ultimately, while 23 the Court finds these arguments to be substantial as a public policy matter, they are insufficient to 24 change the result here. As with their legislative intent arguments, the critical flaw with these 25
26 an organization that makes loans to individuals and businesses.”); Pennsylvania Department of 27 Banking and Securities, https://www.dobs.pa.gov/Businesses/Non- Bank%20Licensees/Consumer%20Discount/Pages/default.aspx (last visited on March 18, 2024) 1 policy arguments is that while they cogently articulate the position that entities such as the Money 2 Transfer Defendants should be covered by the RFPA generally, they fail to show that the Money 3 Transfer Defendants actually are covered as “consumer finance institution[s],” a specific term 4 within the RFPA. And because “policy arguments cannot supersede the clear statutory text[,]” 5 Universal Health Servs., Inc. v. United States, 579 U.S. 176, 192 (2016), the Court cannot and will 6 not effectively rewrite the RFPA to broaden its scope, even if there might be persuasive public 7 policy reasons for doing so. It could well be that Congress simply did not envision the existence 8 or role of entities such as Money Transfer Defendants when enacting the RFPA, thus leaving a gap 9 in the statute’s privacy protections. But remedying any such gap is a task for Congress, not the 10 courts. See United States v. Nishiie, 996 F.3d 1013, 1028 (9th Cir. 2021) (“[P]ublic policy is fixed 11 by Congress, not the courts” (quotations omitted)). 12 Accordingly, the Court interprets the term “consumer finance institution” to mean a 13 company for which the provision of financing and cash loans to consumers is a core function and 14 purpose of its business. Because the FAC does not allege that Continental or Viamericas provide 15 loans as part of their business, Plaintiffs fail to allege that they are “consumer finance institutions,” 16 meaning that they have not stated a legally cognizable claim for relief as to these defendants. 17 Plaintiffs’ RFPA claim is therefore dismissed as to Continental and Viamericas. 18 However, the FAC does allege that Western Union provides consumer financial services 19 including “lending services,” FAC ¶ 6, and that DolEx provides financial services including 20 “personal lending,” and advertises “quick and easy personal loans.” FAC ¶ 9. Western Union and 21 DolEx protest that these allegations are untrue, but the Court finds these to be factual disputes that 22 cannot be resolved on a motion to dismiss. Because Plaintiffs’ well-pled allegations must be taken 23 as true on a Rule 12(b)(6) motion, the Court finds that Plaintiffs have sufficiently alleged that 24 Western Union and DolEx are “financial institutions” under the RFPA. The Court next turns to 25 these defendants’ other arguments for dismissal of the RFPA claim. 26 ii. “Customer” 27 DolEx argues that Plaintiffs’ RFPA claim should be dismissed because Plaintiffs have 1 The RFPA defines “customer” as “any person or authorized representative of that person who 2 utilized or is utilizing any service of a financial institution, or for whom a financial institution is 3 acting or has acted as a fiduciary, in relation to an account maintained in that person’s name.” 12 4 U.S.C. § 3401(5). DolEx argues that, because Plaintiffs have failed to allege that they utilized 5 DolEx’s services “in relation to an account maintained in [their] name,” they have failed to state a 6 cognizable claim for relief under the RFPA. DolEx Mot. at 5–6. 7 This dispute raises yet another question of statutory interpretation: whether the modifying 8 phrase “in relation to an account maintained in that person’s name” modifies both preceding 9 clauses of Section 3401(5), or only the immediately preceding clause “for whom a financial 10 institution is acting or has acted as a fiduciary.” DolEx urges the former, while Plaintiffs urge the 11 latter. Again, the Ninth Circuit has not spoken on this question, but the weight of authority 12 appears to support DolEx’s position. See Chao v. Cmty. Tr. Co., 474 F.3d 75, 81 (3d Cir. 2007), 13 as amended (Mar. 7, 2007) (applying common rules of grammar in finding that account 14 requirement applies to RFPA’s definition of “customer”); Duncan v. Belcher, 813 F.2d 1335, 1338 15 (4th Cir. 1987) (finding that plaintiffs were “customers” under RFPA because they “are ‘persons’ 16 who ‘utilized’ a ‘service of a financial institution,’ and that service was related to “‘an account 17 maintained in [their] name.’”); Young v. Union, No. 06-CV-00114-CRB (PR), 2012 WL 18 12844773, at *7 (N.D. Cal. Aug. 29, 2012), aff’d sub nom. Young v. Trans Union, 616 F. App’x 19 301 (9th Cir. 2015) (granting summary judgment on RFPA claim where plaintiff failed to present 20 evidence rebutting contention that defendant “VISA does not maintain accounts in cardholders’ 21 names and does not enter into direct relationships with cardholders.”). However, at least one case 22 has adopted Plaintiffs’ position. See In re Blunden, 896 F. Supp. 996, 1000 n.1 (C.D. Cal. 1995) 23 (“The Taons half-heartedly suggest that because they do not have accounts with Bank, they are not 24 Bank’s customers. This argument is without merit. Section 3401(5) defines ‘customer’ as ‘any 25 person . . . who utilized . . . any service of a financial institution . . . .’ This definition is broad 26 enough to include loan applicants.”). 27 1 While the Court disagrees with DolEx’s characterization of the statute as “unambiguous,”4 2 it nonetheless agrees with the weight of authority in concluding that, to be a “customer” under the 3 RFPA, a plaintiff must allege that the financial institution in question maintains an account in their 4 name. Plaintiffs’ only argument in favor of their interpretation is that the Court should apply the 5 rule of last antecedent, under which “a limiting clause or phrase . . . should ordinarily be read as 6 modifying only the noun or phrase it immediately follows.’” Opp. at 18 (quoting Hall v. U.S. 7 Dep’t of Agric., 984 F.3d 825, 837 (9th Cir. 2020)). But as the Third Circuit in Chao noted, this 8 rule is “not absolute and can . . . be overcome by other indicia of meaning.” Chao, 474 F.3d at 81; 9 accord United States v. Wasson, 627 F. App’x 604, 607 (9th Cir. 2015). In Chao, the court 10 rejected the rule of last antecedent as inapplicable to the RFPA’s definition of “customer,” based 11 upon the common grammatical rule that “a phrase that is set off by commas can be excised from a 12 sentence.” Chao, 474 F.3d at 81. Thus, under common grammatical interpretation, the phrase “or 13 for whom a financial institution is acting or has acted as a fiduciary,” should be excisable from the 14 RFPA’s definition of “customer,” leaving the phrase “any person or authorized representative of 15 that person who utilized or is utilizing any service of a financial institution . . . in relation to an 16 account maintained in that person’s name.” 12 U.S.C. § 3401(5). This Court finds that reasoning 17 persuasive. And another form of “indicia of meaning”—legislative history—also supports this 18 interpretation: in its report on the RFPA, the Committee on Banking, Finance and Urban Affairs 19 stated explicitly that “[t]he definitions of ‘financial records’ and ‘customer,’ taken together, are 20 intended to preclude application of the bill to anyone other than the person to whose account 21 information the government seeks access. They would exclude, for example, the endorsers of 22 checks and guarantors of loans.” H. Rep. No. 95-1383 at 49 (1978) (emphasis added). Such an 23 express statement of legislative intent, combined with the weight of authority and the Third 24 Circuit’s persuasive reasoning in Chao, leads this Court to conclude that the term “customer,” as 25
26 4 DolEx cites Chao for this proposition, but the Chao court was in turn citing to Pittsburgh Nat. 27 Bank v. United States, 771 F.2d 73, 75 (3d Cir. 1985), which held that the RFPA’s definition of customer “unambiguously . . . pertains only to the financial records of individuals and small 1 defined in the RFPA, was meant to exclude persons who “utilized or [are] utilizing any service of 2 a financial institution” but not “in relation to an account maintained in that person’s name.” 3 Because the FAC does not allege that Plaintiffs “utilized or [are] utilizing any service” of Money 4 Transfer Defendants “in relation to an account maintained in [their] name[s],” Plaintiffs have 5 failed to plead a cognizable claim for relief under the RFPA.5 6 iii. RFPA Conclusion 7 The Court finds that Plaintiffs have failed to allege a cognizable claim for relief under the 8 RFPA for two separate reasons. First, Plaintiffs fail to adequately allege that Continental and 9 Viamericas are “consumer finance institutions” under the RFPA, and second, Plaintiffs fail to 10 adequately allege that they are “customers” under the RFPA. Accordingly, the Court GRANTS 11 Defendants’ motion to dismiss as to Plaintiffs’ RFPA claim. 12 B. UCL 13 The Court turns next to Plaintiffs’ UCL claim. Plaintiffs’ UCL claim is predicated on 14 Money Transfer Defendants’ alleged violation of the California Financial Information Privacy 15 Act, Cal. Fin. Code §§ 4050, et seq. (“Cal. FIPA”). Unlike the RFPA, Cal. FIPA explicitly covers 16 money transfer businesses. See Cal. Fin. Code § 4052(c) (“‘Financial institution’ means any 17 institution the business of which is engaging in financial activities as described in Section 1843(k) 18 of Title 12 of the United States Code and doing business in this state.”); 12 U.S.C. 19 § 1843(k)(4)(A) (providing that “the following activities shall be considered to be financial in 20 nature,” including “[l]ending, exchanging, transferring, investing for others, or safeguarding 21 money or securities” (emphasis added)). 22 i. Standing 23 First, Continental argues that Plaintiffs have failed to allege facts sufficient to establish 24
25 5 Plaintiffs argue briefly that they used Money Transfer Defendants’ services in relation to 26 accounts in their names, and that “DolEx’s own filings indicate that it maintains ‘accounts’ for its customers.” Opp. at 18. But these arguments are not allegations in the FAC, and the Court does 27 not consider them on a Rule 12(b)(6) motion to dismiss. See Schneider v. Cal. Dep’t. of Corr., 151 F.3d 1194, 1197 n. 1 (9th Cir.1998). That said, the Court would not be surprised if Plaintiffs 1 standing for a UCL claim. See Continental Mot. at 16–17. In order to establish standing under the 2 UCL, as amended by California Proposition 64, a plaintiff must demonstrate that he has “suffered 3 injury in fact and has lost money or property as a result of the unfair competition.” Cal. Bus. Prof. 4 Code § 17204 (emphasis added); see also Kwikset Corp. v. Superior Ct., 51 Cal. 4th 310, 323 5 (2011). In other words, “a plaintiff must demonstrate some form of economic injury[,]” such as if 6 he “(1) surrender[ed] in a transaction more, or acquire[d] in a transaction less, than he or she 7 otherwise would have; (2) ha[d] a present or future property interest diminished; (3) be deprived 8 of money or property to which he or she has a cognizable claim; or (4) be required to enter into a 9 transaction, costing money or property, that would otherwise have been unnecessary.” Kwikset, 10 51 Cal. 4th at 323. Here, Plaintiffs Sequeira and Cordero satisfy that burden by alleging that, had 11 they known of Western Union’s alleged violations of the Cal. FIPA, they “would not have paid 12 Western Union to process the transaction[s], and would instead have searched for alternative ways 13 of sending [their] money.” FAC ¶¶ 53, 55. However, Plaintiff Alegria, the only plaintiff alleged 14 to have used Continental, Viamericas, or DolEx’s services, does not allege any such economic 15 injury. Cf. FAC ¶ 54. Instead, Plaintiff Alegria only alleges that he “feels distress and that his 16 privacy has been violated because of the companies’ sharing of his personal information with law 17 enforcement.” Id. 18 Because Plaintiff Alegria has alleged no loss of money or property as a result of the 19 unlawful conduct alleged in Plaintiffs’ UCL claims, Plaintiff Alegria does not have standing to 20 pursue a UCL claim. Accordingly, Plaintiffs’ UCL claim is dismissed as to Continental, 21 Viamericas, and DolEx. See In re Tobacco II Cases, 46 Cal. 4th 298, 319 (2009) (holding that 22 UCL’s statutory standing requirements conforms with established class action requirement that 23 named plaintiffs must demonstrate standing in order to pursue class action claim); In Re Kizer v. 24 Tristar Risk Mgmt., 13 Cal. App. 5th 830, 849 (2017), as modified (July 26, 2017) (“To bring a 25 class action claim under the UCL, the representative plaintiff must establish he or she has standing 26 under the UCL, as amended by Proposition 64, and that all of the foregoing requirements for a 27 class action are satisfied, including that common issues of fact or law predominate and that the 1 Western Union, and so the Court next turns to Western Union’s other arguments for dismissal. 2 ii. Legislative Bar 3 Western Union argues that because the Cal. FIPA does not provide a private right of 4 action, Plaintiffs cannot bring a UCL claim predicated on an alleged violation of that statute. See 5 Western Union Mot. at 13–14. But the California Supreme Court has made clear that a predicate 6 statute need not itself be independently actionable for a plaintiff to bring a claim under the UCL’s 7 unlawful prong. See Kasky v. Nike, Inc., 27 Cal. 4th 939, 950 (2002), as modified (May 22, 2002) 8 (“A private plaintiff may bring a UCL action even when the conduct alleged to constitute unfair 9 competition violates a statute for the direct enforcement of which there is no private right of 10 action.” (quotations omitted)). Instead, “the UCL cannot be used to state a cause of action the gist 11 of which is absolutely barred under some other principle of law.” Zhang v. Superior Court, 57 12 Cal. 4th 364, 377 (2013) (quoting Stop Youth Addiction, Inc. v. Lucky Stores, Inc., 17 Cal. 4th 553, 13 566 (1998)). Such a bar can come from the statutory language itself, see, e.g., Cal. Civ. Code § 14 1798.150(c) (“Nothing in this title shall be interpreted to serve as the basis for a private right of 15 action under any other law.”), or from some other source of law, see Stop Youth Addiction, 17 Cal. 16 4th at 564 (litigation privilege would bar UCL action). “The rule does not, however, prohibit an 17 action under the [UCL] merely because some other statute on the subject does not, itself, provide 18 for the action or prohibit the challenged conduct.” Cel-Tech Commc'ns, Inc. v. Los Angeles 19 Cellular Tel. Co., 20 Cal. 4th 163, 182 (1999). 20 Western Union argues that Cal. FIPA absolutely bars enforcement under any other law by 21 explicitly stating that “the civil penalties provided for in this section shall be exclusively assessed 22 and recovered in a civil action brought in the name of the people of the State of California . . . by 23 any of the following: (1) The Attorney General (2) the … regulator … of the financial 24 institution.” See Cal. Fin. Code § 4057(e) (emphasis added). The Court disagrees. In Stop Youth 25 Addiction, the California Supreme Court considered a closely analogous issue, where the 26 defendants argued that California Penal Code Section 308(a)’s statutory scheme providing that 27 whosoever sells, gives or furnishes tobacco to a minor “is subject to either a criminal action for a 1 attorney” acted as a legislative bar to the plaintiffs’ UCL claim. There, the California Supreme 2 Court rejected the argument, finding that the California Penal Code did not act as an absolute 3 legislative bar, because the defendants had failed to show that the California legislature intended 4 Section 308 to be the exclusive means of combating sales of tobacco to minors, and that its 5 language did not “expressly provide” that its remedies would not be cumulative of remedies under 6 the UCL. Stop Youth Addiction, 17 Cal. 4th at 572–73. 7 Western Union argues that the term “exclusively” in Cal. FIPA distinguishes this case 8 from Stop Youth Addiction, but a closer inspection of the statutory language does not support that 9 conclusion. Here, the language Western Union relies upon states that “the civil penalties provided 10 for in this section shall be exclusively assessed and recovered in a civil action brought in the name 11 of the people of the State of California . . . .” Cal. Fin. Code § 4057(e) (emphasis added). 12 Notably, this section does not say that the remedies provided shall be the only civil remedies 13 available for a violation of the Cal. FIPA’s protections. Instead, the Court reads this to establish 14 that the civil penalties assessed under Cal. Fin. Code § 4057(a) (e.g., $2,500 per individual 15 violation) may only be assessed and recovered in a civil action brought by the government, but not 16 to make those remedies the exclusive means for obtaining any relief for violations of the Cal. 17 FIPA. As was the case in Stop Youth Addiction, there is no evidence here that the Cal. FIPA 18 “expressly provides” that the civil penalties of Section 4057 are not cumulative of remedies under 19 the UCL. Absent any such express provision, Plaintiffs are entitled to pursue their UCL claim 20 under the unlawful prong. See Cal. Bus. & Prof. Code § 17205 (“Unless otherwise expressly 21 provided, the remedies or penalties provided by this chapter are cumulative to each other and to 22 the remedies or penalties available under all other laws of this state.”); Stop Youth Addiction, 17 23 Cal. 4th at 573 (“[E]ven were we to conclude . . . that Penal Code section 308 and the STAKE Act 24 are a comprehensive scheme for combating teen smoking, we would still confront the fact that in 25 neither of these provisions is it ‘expressly provided’ that remedies under the UCL and those 26 statutes are not cumulative to each other.”). 27 \\ iii. Statutory Immunity Under Cal. FIPA and the Annunzio–Wylie Anti–Money 1 Laundering Act 2 Western Union argues that Plaintiffs cannot allege a cognizable UCL claim under the 3 unlawful prong, because its conduct was not unlawful under the Cal. FIPA or alternatively, 4 immunized by the Annunzio–Wylie Anti–Money Laundering Act. See Western Union Mot. at 5 10–12; 14–17. These arguments raise affirmative defenses, which the Court does not have an 6 adequate factual record to resolve at this stage.6 See Coronado v. Bank Atl. Bancorp, Inc., 222 7 F.3d 1315, 1319 (11th Cir. 2000) (“The plain language of [Annunzio–Wylie Act Section 8 5318(g)(3)] supplies an affirmative defense to claims against a financial institution for disclosing 9 an individual’s financial records or account-related activity.” (quotations omitted)); Simpson 10 Strong-Tie Co., Inc. v. Gore, 49 Cal. 4th 12, 23 (2010) (“In California, it has been declared that 11 where the statute has exemptions, exceptions or matters which will avoid the statute the burden is 12 on the claimant to show that he falls within that category.” (quotations omitted)); People v. Fisher, 13 96 Cal. App. 4th 1147, 1151 (2002) (“It is well established that where a statute first defines an 14 offense in unconditional terms and then specifies an exception to its operation, the exception is an 15 affirmative defense to be raised and proved by the defendant.” (quotations omitted)). 16 Accordingly, the Court DENIES Western Union’s motion to dismiss on these grounds. See 17 Commodity Futures Trading Comm’n v. Monex Credit Co., 931 F.3d 966, 972 (9th Cir. 2019) 18 (“Rule 8 does not require plaintiffs to plead around affirmative defenses” because “dismissal 19 based on an affirmative defense is permitted when the complaint establishes the defense.” 20 (emphasis original)). 21 iv. UCL Conclusion 22 Because the Court finds that Plaintiffs have failed to allege they have standing to pursue a 23 UCL claim against Continental, Viamericas, or DolEx, the Court GRANTS Continental, 24 Viamericas, and DolEx’s motions to dismiss as to Plaintiffs’ UCL claim. The Court DENIES 25 26 6 For instance, Western Union argues that it is entitled to absolute immunity under the Annunzio– Wylie Act because its disclosures were pursuant to Arizona court orders. However, Western 27 Union’s argument glosses over the fact that these court orders reflect a settlement agreement that Western Union entered into (presumably voluntarily) with the State of Arizona. See Dkt. No. 70- 1 Western Union’s motion to dismiss as to Plaintiffs’ UCL claim. 2 C. Leave to Amend 3 Defendants argue at various points that dismissal should be with prejudice. Whether to 4 grant leave to amend is within the discretion of the district court, which may deny leave to amend 5 “due to ‘undue delay, bad faith or dilatory motive on the part of the [party seeking leave to 6 amend], repeated failure to cure deficiencies by amendments previously allowed, undue prejudice 7 to the opposing party by virtue of allowance of the amendment, [and] futility of amendment.’” 8 Leadsinger, Inc. v. BMG Music Pub., 512 F.3d 522, 532 (9th Cir. 2008) (quoting Foman v. Davis, 9 371 U.S. 178, 182, (1962)). Because the Court cannot conclude at this stage that amendment 10 would be futile, the Court grants Plaintiffs leave to amend. 11 D. Requests for Judicial Notice 12 Related to their motions to dismiss, Western Union, DolEx, and Continental request the 13 Court take judicial notice of subpoenas, court orders, and other publicly available documents 14 relating to their production of financial records to the Arizona state government and/or TRAC. 15 See Dkt. Nos. 66, 70, 114. Plaintiffs do not challenge these requests or argue that the existence of 16 the documents cannot “be accurately and readily determined from sources whose accuracy cannot 17 reasonably be questioned.” Fed. R. Evid. 201(b). Accordingly, the Court GRANTS Defendants’ 18 requests for judicial notice and takes notice of the existence of the documents, without accepting 19 their underlying factual contents as true. See Parks v. Port of Oakland, No. 16-CV-04061-HSG, 20 2017 WL 2840704, at *2 n.1, 2 (N.D. Cal. July 3, 2017).
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27 \\ IV. CONCLUSION Continental, Viamericas, DolEx, and Federal Government Defendants’ motions to dismiss 2 are GRANTED WITH LEAVE TO AMEND. Dkt. Nos. 63-65, 68. Western Union’s motion to 3 dismiss is GRANTED WITH LEAVE TO AMEND as to Plaintiffs’ RFPA claim, and DENIED 4 as to Plaintiffs’ UCL claim. Dkt. No 69. Any amended complaint must be filed within 28 days 5 from the date of this Order. The Court also GRANTS Defendants’ requests for judicial notice. 6 Dkt. Nos. 66, 70, 114. 7 IT IS SO ORDERED. 8 Dated: 3/21/2024
10 HAYWOOD S. GILLIAM, JR. United States District Judge
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