NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS MAY 25 2023 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT
SOCIAL LIFE NETWORK, INC., No. 22-55774
Plaintiff-Appellant, D.C. No. 3:21-cv-00767-L-MDD v.
LGH INVESTMENTS, LLC; et al., MEMORANDUM *
Defendants-Appellees.
Appeal from the United States District Court for the Southern District of California M. James Lorenz, District Judge, Presiding
Argued and Submitted May 11, 2023 San Francisco, California
Before: S.R. THOMAS, CHRISTEN, and BRESS, Circuit Judges. Partial Concurrence and Partial Dissent by Judge S.R. THOMAS.
Social Life Network, Inc. (Social Life) appeals from the district court’s
dismissal under Federal Rule of Civil Procedure 12(b)(6) of Social Life’s complaint
against LGH Investments, LLC, Lucas Hoppel, and J.H. Darbie & Co. (collectively,
“LGH”) concerning Social Life’s April 2019 loan agreement with LGH. We review
the grant of a Rule 12(b)(6) motion de novo. Nguyen v. Endologix, Inc., 962 F.3d
* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. 405, 413 (9th Cir. 2020). We have jurisdiction under 28 U.S.C. § 1291. We affirm
in part and reverse in part.
1. The district court properly concluded that Social Life’s claim under
§ 29(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78cc(b), is untimely.
“[W]here, as here, the claim asserted is one implied under a statute that also contains
an express cause of action with its own time limitation, a court should look first to
the statute of origin to ascertain the proper limitations period.” Lampf, Pleva,
Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 359 (1991). For implied
causes of action under the Exchange Act, the proper limitations period is “a 1-year
period after discovery combined with a 3-year period of repose.” Id. at 360 (citing
15 U.S.C. §§ 78i(e), 78r(c)); see also Asdar Grp. v. Pillsbury, Madison & Sutro, 99
F.3d 289, 294 (9th Cir. 1996) (holding that “the one-year/three-year structure
governs” causes of action that are implied under § 10(b) of the Exchange Act). For
the 1-year period, the clock starts to run “when the litigant first knows or with due
diligence should know facts that will form the basis for an action.” Merck & Co. v.
Reynolds, 559 U.S. 633, 646 (2010) (quoting 2 C. Corman, Limitation of Actions
§ 11.1.1, at 134 (1991 & 1993 Supp.)).
Social Life executed its loan agreement with LGH on April 11, 2019. On this
date, Social Life could have determined with reasonable diligence that LGH was not
a registered securities dealer, which was a matter of public record. Social Life’s
2 Exchange Act claim, brought more than a year later in April 2021, is therefore time-
barred. Contrary to Social Life’s contention, the “continuing violation” doctrine
does not extend the statute of limitations here. Under that doctrine, “when a
defendant’s conduct is part of a continuing practice, an action is timely so long as
the last act evidencing the continuing practice falls within the limitations period.”
Bird v. Dep’t of Hum. Servs., 935 F.3d 738, 746 (9th Cir. 2019) (per curiam) (citation
omitted). Social Life’s Exchange Act claim is not based on LGH repeatedly
exercising its warrant to purchase stock, but on the singular event of LGH allegedly
entering an unlawful contract. Thus, the limitations period began to run in April
2019, and the continuing violations doctrine does not apply.
2. The district court erred in concluding that the financing agreement was
exempt from California’s usury laws. California Corporations Code § 25118(b)
provides that the “purchasers or holders” of “[a]ny one or more evidences of
indebtedness . . . shall be exempt from the usury provisions of the California
Constitution if . . . [t]he evidences of indebtedness aggregate at the time of issuance
at least three hundred thousand dollars ($300,000) in original face amount . . . .” The
district court concluded that LGH was exempt under this provision because Social
Life had received several loans from different lenders that, in “aggregate,” exceeded
$300,000 by July 2019, a few months after its agreement with LGH.
California courts have not resolved whether § 25118(b) aggregates “evidences
3 of indebtedness” across multiple lenders. We thus must predict how California
courts would resolve this question. See, e.g., Ticknor v. Choice Hotels Int’l, Inc.,
265 F.3d 931, 939 (9th Cir. 2001). Because § 25118(b) is a California statute, we
follow California’s rules of statutory interpretation. See Killgore v. SpecPro Pro.
Servs., LLC, 51 F.4th 973, 983 (9th Cir. 2022). We thus “first look to the plain
meaning of the statutory language, then to its legislative history and finally to the
reasonableness of a proposed construction.” MacIsaac v. Waste Mgmt. Collection
& Recycling, Inc., 36 Cal. Rptr. 3d 650, 655 (Ct. App. 2005) (citation omitted).
We conclude that the most logical and internally consistent interpretation of
§ 25118(b), and the one most consonant with the statutory text, is that § 25118(b)
exempts borrowers from usury protections when their “evidences of indebtedness”
with a single lender aggregate to $300,000 “at the time of issuance.” Nothing in
§ 25118(b) indicates that the provision “aggregate[s]” evidences of indebtedness
from transactions with different lenders. Cf. Agapitov v. Lerner, 133 Cal. Rptr. 2d
837, 843 (Ct. App. 2003) (“[T]he constitutional usury provision protecting
borrowers should be read broadly, and exemptions should be read strictly.”).
LGH’s contrary interpretation is not only less supported by the statutory text,
but also poses other problems. An interpretation of “aggregate” that includes loans
from other lenders would lead to the unusual result of loans initially subject to the
usury laws becoming retroactively exempt from those laws when the borrower later
4 acquires more than $300,000 in cumulative debt. In addition, basing § 25118(b)’s
exemption on aggregate loans from all lenders would pose practical hurdles for
lenders seeking to ascertain whether a high-interest loan is subject to California’s
usury laws. When § 25118 requires lenders to consider information about
borrowers, it does so explicitly. See Cal. Corp. Code § 25118(a) (requiring lenders
to evaluate the assets of borrowers based on their “most recent financial
statements”). The absence of any guidance in § 25118(b) as to borrowers sharing
financial information or how loans should be aggregated across multiple lenders
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NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS MAY 25 2023 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT
SOCIAL LIFE NETWORK, INC., No. 22-55774
Plaintiff-Appellant, D.C. No. 3:21-cv-00767-L-MDD v.
LGH INVESTMENTS, LLC; et al., MEMORANDUM *
Defendants-Appellees.
Appeal from the United States District Court for the Southern District of California M. James Lorenz, District Judge, Presiding
Argued and Submitted May 11, 2023 San Francisco, California
Before: S.R. THOMAS, CHRISTEN, and BRESS, Circuit Judges. Partial Concurrence and Partial Dissent by Judge S.R. THOMAS.
Social Life Network, Inc. (Social Life) appeals from the district court’s
dismissal under Federal Rule of Civil Procedure 12(b)(6) of Social Life’s complaint
against LGH Investments, LLC, Lucas Hoppel, and J.H. Darbie & Co. (collectively,
“LGH”) concerning Social Life’s April 2019 loan agreement with LGH. We review
the grant of a Rule 12(b)(6) motion de novo. Nguyen v. Endologix, Inc., 962 F.3d
* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. 405, 413 (9th Cir. 2020). We have jurisdiction under 28 U.S.C. § 1291. We affirm
in part and reverse in part.
1. The district court properly concluded that Social Life’s claim under
§ 29(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78cc(b), is untimely.
“[W]here, as here, the claim asserted is one implied under a statute that also contains
an express cause of action with its own time limitation, a court should look first to
the statute of origin to ascertain the proper limitations period.” Lampf, Pleva,
Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 359 (1991). For implied
causes of action under the Exchange Act, the proper limitations period is “a 1-year
period after discovery combined with a 3-year period of repose.” Id. at 360 (citing
15 U.S.C. §§ 78i(e), 78r(c)); see also Asdar Grp. v. Pillsbury, Madison & Sutro, 99
F.3d 289, 294 (9th Cir. 1996) (holding that “the one-year/three-year structure
governs” causes of action that are implied under § 10(b) of the Exchange Act). For
the 1-year period, the clock starts to run “when the litigant first knows or with due
diligence should know facts that will form the basis for an action.” Merck & Co. v.
Reynolds, 559 U.S. 633, 646 (2010) (quoting 2 C. Corman, Limitation of Actions
§ 11.1.1, at 134 (1991 & 1993 Supp.)).
Social Life executed its loan agreement with LGH on April 11, 2019. On this
date, Social Life could have determined with reasonable diligence that LGH was not
a registered securities dealer, which was a matter of public record. Social Life’s
2 Exchange Act claim, brought more than a year later in April 2021, is therefore time-
barred. Contrary to Social Life’s contention, the “continuing violation” doctrine
does not extend the statute of limitations here. Under that doctrine, “when a
defendant’s conduct is part of a continuing practice, an action is timely so long as
the last act evidencing the continuing practice falls within the limitations period.”
Bird v. Dep’t of Hum. Servs., 935 F.3d 738, 746 (9th Cir. 2019) (per curiam) (citation
omitted). Social Life’s Exchange Act claim is not based on LGH repeatedly
exercising its warrant to purchase stock, but on the singular event of LGH allegedly
entering an unlawful contract. Thus, the limitations period began to run in April
2019, and the continuing violations doctrine does not apply.
2. The district court erred in concluding that the financing agreement was
exempt from California’s usury laws. California Corporations Code § 25118(b)
provides that the “purchasers or holders” of “[a]ny one or more evidences of
indebtedness . . . shall be exempt from the usury provisions of the California
Constitution if . . . [t]he evidences of indebtedness aggregate at the time of issuance
at least three hundred thousand dollars ($300,000) in original face amount . . . .” The
district court concluded that LGH was exempt under this provision because Social
Life had received several loans from different lenders that, in “aggregate,” exceeded
$300,000 by July 2019, a few months after its agreement with LGH.
California courts have not resolved whether § 25118(b) aggregates “evidences
3 of indebtedness” across multiple lenders. We thus must predict how California
courts would resolve this question. See, e.g., Ticknor v. Choice Hotels Int’l, Inc.,
265 F.3d 931, 939 (9th Cir. 2001). Because § 25118(b) is a California statute, we
follow California’s rules of statutory interpretation. See Killgore v. SpecPro Pro.
Servs., LLC, 51 F.4th 973, 983 (9th Cir. 2022). We thus “first look to the plain
meaning of the statutory language, then to its legislative history and finally to the
reasonableness of a proposed construction.” MacIsaac v. Waste Mgmt. Collection
& Recycling, Inc., 36 Cal. Rptr. 3d 650, 655 (Ct. App. 2005) (citation omitted).
We conclude that the most logical and internally consistent interpretation of
§ 25118(b), and the one most consonant with the statutory text, is that § 25118(b)
exempts borrowers from usury protections when their “evidences of indebtedness”
with a single lender aggregate to $300,000 “at the time of issuance.” Nothing in
§ 25118(b) indicates that the provision “aggregate[s]” evidences of indebtedness
from transactions with different lenders. Cf. Agapitov v. Lerner, 133 Cal. Rptr. 2d
837, 843 (Ct. App. 2003) (“[T]he constitutional usury provision protecting
borrowers should be read broadly, and exemptions should be read strictly.”).
LGH’s contrary interpretation is not only less supported by the statutory text,
but also poses other problems. An interpretation of “aggregate” that includes loans
from other lenders would lead to the unusual result of loans initially subject to the
usury laws becoming retroactively exempt from those laws when the borrower later
4 acquires more than $300,000 in cumulative debt. In addition, basing § 25118(b)’s
exemption on aggregate loans from all lenders would pose practical hurdles for
lenders seeking to ascertain whether a high-interest loan is subject to California’s
usury laws. When § 25118 requires lenders to consider information about
borrowers, it does so explicitly. See Cal. Corp. Code § 25118(a) (requiring lenders
to evaluate the assets of borrowers based on their “most recent financial
statements”). The absence of any guidance in § 25118(b) as to borrowers sharing
financial information or how loans should be aggregated across multiple lenders
suggests that the aggregation rule in § 25118(b) does not extend beyond a single
lender.
Because we think the text sufficiently supports Social Life, LGH’s proffered
legislative history is unnecessary to our decision. But we note that in explaining
both how § 25118(b) applies to a “transaction” and how it is based on a New York
statute that does the same, the legislative history more probably supports Social
Life’s position.1
LGH fairly responds that Social Life is a sophisticated outfit and that the usury
1 We decline Social Life’s request to certify this issue to the California Supreme Court because it is sufficiently clear that § 25118(b) does not call for the aggregation of loans across multiple lenders. We note that because LGH made only one loan, we need not consider whether the statute requires aggregation of multiple loans by the same lender. Social Life’s Request for Judicial Notice (Dkt. No. 15) is GRANTED.
5 laws are supposed to exempt from their protections those companies that “by reason
of their own business and financial experience or that of their professional advisers,
could reasonably be assumed to have the capacity to protect their own interests in
connection with the transaction.” Cal. Corp. Code § 25118(f)(2). But to implement
this statutory purpose, California has enacted the specific rules in § 25118(b), which
do not exempt LGH’s loan. The specific provisions of the statute, and not the
broader statutory purpose, must govern. Spotlight on Coastal Corruption v. Kinsey,
271 Cal. Rptr. 3d 867, 881 (Ct. App. 2020) (“Particular provisions of law ordinarily
prevail over more general provisions.”).
Because LGH’s loan did not exceed $300,000, it is not exempted from
California’s usury laws under § 25118(b). Importantly, this does not mean that
LGH’s loan to Social Life was, in fact, usurious. Although LGH asks that we affirm
the district court on this alternative ground, this issue is properly left to the district
court in the first instance.
AFFIRMED IN PART, REVERSED IN PART, and REMANDED. 2
2 The parties shall bear their own costs on appeal.
6 FILED MAY 25 2023 Social Life Network, Inc. v. LGH Investments, LLC; No. 22-55774 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS
S.R. THOMAS, Circuit Judge, concurring in part and dissenting in part:
I agree that the district court properly concluded that Social Life’s claim
under § 29(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78cc(b), is
untimely. However, I would hold that the district court also properly concluded
that the financing agreement was exempt from California’s usury laws, for the
reasons given by the district court. Therefore, I concur in part and respectfully
dissent in part.