Sunset Spas of Arizona LLC v. Chase Bank USA NA

• Court: District Court, D. Arizona
• Decided: May 21, 2026
• Docket: 2:25-cv-01822
• Status: Unknown

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 Sunset Spas of Arizona LLC, No. CV-25-01822-PHX-GMS

10 Plaintiff, ORDER

11 v.

12 Chase Bank USA NA,

13 Defendant. 14 15 Pending before the Court is Defendant JPMorgan Chase Bank, N.A.’s (“Chase”) 16 Motion to Dismiss Plaintiff Sunset Spas of Arizona LLC’s Complaint (Doc. 11). Though 17 the Motion to Dismiss was initially responsive to Plaintiff’s Complaint, Plaintiff has since 18 filed a First Amended Complaint (Doc. 21). The Court asked the parties to provide 19 supplemental briefing on the pending Motion to Dismiss with the First Amended 20 Complaint as the operative complaint. (Doc. 18 at 1-3). For the reasons discussed below, 21 Chase’s Motion is granted, and Plaintiff is granted leave to amend pursuant to this order. 22 BACKGROUND1 23 Plaintiff is an Arizona limited liability company, which sells “spas, hot tubs[,] and 24 other aquatic recreation equipment” in Arizona and Nevada. (Doc. 21 at 1-2). Plaintiff is 25 a customer of Chase—a nationally chartered bank incorporated in Delaware with its 26 principal place of business in New York. (Id. at 1-2).

27 1 This summary of the underlying facts accepts as true any non-conclusory factual allegations made by Plaintiff in its First Amended Complaint, with all inferences construed 28 in the light most favorable to Plaintiff. Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). 1 At issue here are charges made between July 2023 and December 2023 on Plaintiff’s 2 Chase credit card. (Id. at 2-3). The charges were to a “business or entity purporting to be 3 ‘Morgan’s Trucking,’” and totaled $68,850.00 (the “Unauthorized Charges”). (Id. at 3). 4 Morgan’s Trucking is “a legitimate business entity known to” Plaintiff, but the charges 5 were not paid to that entity. (Id. at 2-3). Rather, Plaintiff “believes the charges are the 6 result of some unknown entity ‘spoofing’ or otherwise impersonating the legitimate” entity. 7 (Id. at 3). 8 When Plaintiff became aware of these charges in December 2023, it notified Chase 9 and “requested reversal . . . and a refund of the total amount of the Unauthorized Charges.” 10 (Id.). After conducting an investigation—which Plaintiff alleges was “cursory, incomplete, 11 and negligent”—Chase refused to reverse or refund the Authorized Charges. (Id. at 3-4). 12 Plaintiff further alleges that this refusal was made “without any legitimate reason or just 13 cause.” (Id.). 14 Under the contract governing Plaintiff’s relationship to Chase as a Chase credit card 15 holder (the “Cardholder Agreement”),2 Chase agrees to “investigate” mistakes on 16 Cardholder’s statements “within 60 days after the suspected error appears on [the 17 Cardholder’s] billing statement.” (Doc. 17-1 at 11). After investigating, Chase will 18 “contact [the Cardholder] with [its] findings.” (Id.). Similarly, if a Cardholder is 19 “dissatisfied” with a purchase and has “attempt[ed] to resolve the problem with the 20 merchant,” the Cardholder can report it to Chase, which will then “research the problem 21 and contact [the Cardholder] with [its] findings.” (Id.). 22 Plaintiff filed its Complaint on May 27, 2025 (Doc. 1) and filed its First Amended 23 Complaint on April 2, 2026 (Doc. 21). In the First Amended Complaint, Plaintiff makes

24 2Though considering evidence outside the pleadings generally requires the Court to “convert the 12(b)(6) motion into a Rule 56 motion for summary judgment,” the Court can 25 “consider certain materials—documents attached to the complaint, documents incorporated by reference . . . —without converting” the motion. United States v. Ritchie, 26 342 F.3d 903, 907-08 (9th Cir. 2003). The Cardholder Agreement underlies the relationship between the parties and the Unauthorized Charges. Because Plaintiff’s claims 27 necessarily rely on the Cardholder Agreement, the fact that Plaintiff does not mention the Cardholder Agreement in the First Amended Complaint does not prevent consideration of 28 the document. Parrino v. FHP, Inc., 146 F.3d 699, 706 (9th Cir. 1998), superseded on other grounds by 28 U.S.C. § 1453. 1 five claims against Chase, four of which were included in the Complaint. (Compare Doc. 2 1, with Doc. 21). In Count I, Plaintiff alleges that Chase is liable for violating the Truth in 3 Lending Act (“TILA”) because it refused to refund the Unauthorized Charges. (Doc. 21 at 4 4-5). In Count II, Plaintiff alleges that Chase has violated § 204 of Article 4A of the 5 Uniform Commercial Code (“UCC”). (Id. at 5-6). In Count III, Plaintiff alleges that Chase 6 was negligent in its internal investigation of the Unauthorized Charges. (Id. at 6-7). In 7 Count IV, Plaintiff alleges that Chase converted Plaintiff’s funds—i.e., its “revolving line 8 of credit”—by refusing to reverse and refund the Unauthorized Charges. (Id. at 7-8). 9 Finally, in Count V, Plaintiff alleges that Defendant is liable for fraud for “misstatements 10 or omissions” it made in response to Plaintiff’s inquiries about the Unauthorized Charges 11 and about Chase’s investigation of those charges. (Doc. 21 at 8). Plaintiff seeks a refund 12 of the Unauthorized Charges from Defendant plus interest and late fees, other 13 compensatory damages (including fees and expenses that Plaintiff incurred in other 14 business transactions because of the Unauthorized Charge’s impact), punitive damages, 15 attorneys’ fees and costs, and any other just relief. (Id. at 5, 8-9). 16 Chase now moves to dismiss Plaintiff’s First Amended Complaint. (Doc. 11; Doc. 17 17; Doc. 22). 18 DISCUSSION 19 I. Legal Standard: Failure to State a Claim 20 Under Rule 12(b)(6), a party may move to dismiss a claim for relief by asserting 21 “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). “To 22 survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted 23 as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 24 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A 25 claim has facial plausibility when the plaintiff pleads factual content that allows the court 26 to draw the reasonable inference that the defendant is liable for the misconduct alleged.” 27 Id. “The plausibility standard . . . asks for more than a sheer possibility that a defendant 28 has acted unlawfully.” Id. 1 Indeed, the “[f]actual allegations must be enough to raise a right to relief above the 2 speculative level.” Twombly, 550 U.S. at 555. In reviewing the complaint and any 3 appropriately considered documents, the Court will “accept factual allegations in the 4 complaint as true and construe the pleadings in the light most favorable to the nonmoving 5 party.” Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). 6 The Court will not, however, accept as true unreasonable inferences or conclusory legal 7 allegations cast in the form of factual allegations. W. Mining Council v. Watt, 643 F.2d 8 618, 624 (9th Cir. 1981). 9 II. Application 10 A. Federal Claim—Count I: TILA Liability 11 Congress created TILA to “avoid the uninformed use of credit, and to protect the 12 consumer against inaccurate and unfair credit billing and credit card practices.” 15 U.S.C. 13 § 1601. Congress also created a cause of action against creditors “who fail[] to comply 14 with any requirement” of the Act, but it requires plaintiffs to bring their actions “within 15 one year from the date of the occurrence of the violation.” Id. § 1640(a), (e). Plaintiff 16 alleges that Chase violated § 1643 of TILA, which places limits on the liability of 17 cardholders, by refusing to refund the $68,850.00 in Unauthorized Charges. (Doc. 21 at 4- 18 5). A cardholder is only liable for unauthorized use of its credit card if the use was of an 19 accepted credit card and occurred before the card issuer was notified that an unauthorized 20 use had or might occur. 15 U.S.C. § 1643(a)(1)(A), (E). Moreover, the card issuer must 21 have provided the cardholder with “adequate notice . . . of the potential liability,” a means 22 of notifying the card issuer of an unauthorized use, and a method to identify authorized 23 users. Id. § 1643(a)(1)(C)-(D), (F). In any event, a cardholder’s liability to the card issuer 24 for unauthorized charges cannot exceed $50. Id. § 1643(a)(1)(B). 25 Chase argues that Plaintiff has failed to state a TILA claim because its suit was filed 26 outside of § 1640(e)’s one-year statute of limitations. (Doc. 22 at 8-9). In the Ninth 27 Circuit, “the limitations period in Section 1640(e) runs from the date of consummation of 28 the transaction.” King v. California, 784 F.2d 910, 915 (9th Cir. 1986). This rule reflects 1 the fact that TILA’s existence “impute[s] to borrowers knowledge of their rights as 2 consumers of credit.” Id. at 914. 3 Nonetheless, “the doctrine of equitable tolling may, in the appropriate 4 circumstances, suspend the limitations period until the borrower discovers or had 5 reasonable opportunity to discover the” TILA violation “if the general rule would be unjust 6 or frustrate the purpose of the Act.” Id. at 915. The “basic inquiry is whether tolling the 7 statute in certain situations will effectuate the congressional purpose of” TILA. Id. (citing 8 Burnett v. N.Y. Cent. R.R. Co., 380 U.S. 424, 427 (1965)). The party attempting to toll the 9 limitation must show (1) it pursued its rights with reasonable diligence before and after (2) 10 the existence of some extraordinary circumstance that prevented a timely filing. Smith v. 11 Davis, 953 F.3d 582, 599-600 (9th Cir. 2020) (citing Holland v. Florida, 560 U.S. 631, 649 12 (2010)). Both reasonable diligence and the extraordinary nature of circumstances are 13 assessed on a case-by-case basis. Id. 14 The transactions at issue here occurred between July 2023 and December 2023. 15 (Doc. 21 at 2-3). And Plaintiff “immediately” notified Chase that the transactions were 16 unauthorized.3 (Id. at 3). Yet Plaintiff filed its Complaint in May 2025 (Doc. 1), over a 17 year after the last transaction in December 2023. Citing cases from the Seventh Circuit 18 and the District of Texas,4 Plaintiff argues that Chase’s refusal to refund the Unauthorized 19 Charges should be considered the start of the limitations period rather than the transaction 20 date. (Doc. 23 at 3-4). But Plaintiff does not provide a date of refusal, argue that it was 21 subject to any extraordinary circumstances, nor assert that it acted with reasonable 22 diligence in pursuing its rights under TILA. (See Doc. 21 at 2-5; Doc. 23 at 3). Because 23 the Ninth Circuit treats the date of transaction as the start-date for TILA’s statutory

24 3 Plaintiff does not state whether it notified Chase of each Unauthorized Charge as the transactions occurred or if it notified Chase of all the Unauthorized Charges after all of the 25 transactions had occurred. (See Doc. 21 at 2-4). 4 Chase’s arguments also rely on out-of-circuit cases. (Doc. 22 at 8-9). But one such case 26 from the Sixth Circuit—Borg v. Chase Manhattan Bank USA, NA, 247 Fed. App’x 627, 635 (6th Cir. 2007)—relied on Jones v. TransOhio Savings Ass’n, 747 F.2d 1037, 1043 27 (6th Cir. 1984), which the Ninth Circuit cited with approval in King, incorporating the Sixth Circuit’s reasoning into Ninth Circuit precedent to hold that the limitations period 28 runs from the date of transaction with equitable tolling available when appropriate. 784 F.2d at 914-15. 1 limitation and because Plaintiff has not argued that equitable tolling should apply in its 2 favor, Plaintiff’s TILA claim is time barred. 3 Accordingly, Chase’s motion is granted as to Plaintiff’s TILA claim. Nonetheless, 4 because it may be possible for Plaintiff to amend its First Amended Complaint to allege 5 facts that satisfy the requirements of equitable tolling and effectuate TILA’s congressional 6 purpose, Plaintiff is granted leave to amend this claim. Fed. R. Civ. P. 15(a)(2). 7 B. State Law Claims 8 1. Choice of Law 9 As an initial matter, the Court asked the parties to provide supplemental briefing on 10 the choice-of-law governing Plaintiff’s claims. (Doc. 18 at 2). Federal courts sitting in 11 diversity apply the choice-of-law rules of the forum state. Klaxon Co. v. Stentor Elec. Mfg. 12 Co., 313 U.S. 487, 496 (1941). When deciding choice-of-law questions, Arizona courts 13 follow the Restatement (Second) of Conflict of Laws (the “Restatement”). See Landi v. 14 Arkules, 172 Ariz. 126, 130, 835 P.2d 458, 462 (Ct. App. 1992). 15 For contract claims, a choice-of-law provision is effective if the dispute between the 16 parties could have been “resolved by an explicit provision in their agreement.” Cardon v. 17 Cotton Lane Holdings, 173 Ariz. 203, 208, 841 P.2d 198, 203 (1992) (quoting Restatement 18 § 187(1)). Further, Restatement § 187(2) provides that, even if the contract could not have 19 resolved a particular dispute, the parties’ choice-of-law provision will apply “unless (1) the 20 chosen state has no relationship to the parties and the transaction, or (2) the application of 21 the chosen state’s law would violate a fundamental policy of the forum state.” Id. at 207, 22 841 P.2d at 202 (quoting Restatement § 187(2)). 23 In contrast, “[c]laims arising in tort are not ordinarily controlled by a contractual 24 choice of law provision,” but are “decided according to the” choice of law rules “of the 25 forum state.” Winsor v. Glasswerks PHX, LLC, 204 Ariz. 303, 306, 63 P.3d 1040, 1043 26 (Ct. App. 2003) (citing Sutter Home Winery, Inc. v. Vintage Selections, Ltd., 971 F.2d 401, 27 407 (9th Cir. 1992)); see also KPG Healthcare LLC v. LaborEdge LLC, No. CV-25-00769, 28 2025 WL 3763929, at *8-9 (D. Ariz. Dec. 30, 2025) (describing circumstances in which 1 Arizona’s choice of law rules apply contractual choice of law provisions to tort claims). 2 That being said, “contractual choice of law provisions may apply to tort claims under 3 certain circumstances.” Winsor, 204 Ariz. at 307, 63 P.3d at 1044. “Whether a choice of 4 law provision applies to tort claims depends on whether resolution of the claims relates to 5 interpretation of the contract.” Id. (citation modified) (quoting Manetti-Farrow, Inc. v. 6 Gucci Am., Inc., 858 F.2d 509, 514 (9th Cir. 2008)); see, e.g., KPG Healthcare, 2025 WL 7 3764929 at *9; Honeywell Int’l Inc. v. Forged Metals Inc., No. CV-19-03730, 2019 WL 8 5960063, at *2 (D. Ariz. Nov. 13, 2019) (applying a contractual choice of law provision to 9 a tort claim because the tort claim relied on contract interpretation). 10 In this case, Plaintiff has both contract and tort claims, and the Cardholder 11 Agreement contains a choice of law provision which plainly states that the “agreement and 12 [Plaintiff’s] account will be governed by federal law, as well as the law of Delaware, and 13 will apply no matter where you live or use this account.” (Doc. 17-1 at 13). First, 14 Plaintiff’s UCC claim, which sounds in contract, will be governed by Delaware law. 15 Delaware is related to the parties because Defendant is incorporated in that state. (Doc. 21 16 at 1). Further, though Plaintiff relies on Arizona law, it also points out that there is no 17 “material difference between Arizona [and] Delaware . . . law” (Doc. 23 at 2-3), such that 18 the application of Delaware law will not violate any fundamental policy of Arizona. 19 Cardon, 173 Ariz. at 207, 841 P.2d at 202. Plaintiff’s UCC claim is therefore subject to 20 the choice of law provision in the Cardholder Agreement. Id. 21 Second, as for Plaintiff’s tort claims—for negligence, conversion, and fraud—the 22 parties dispute whether Plaintiff’s claims truly sound in tort or in contract law, whether the 23 terms of the Cardholder agreement are relevant to these claims, and what substantive law 24 should apply. (Doc. 22 at 3-7; Doc. 23 at 2-3). Though both parties claim that the outcome 25 is the same under either Delaware or Arizona law, Defendant argues that Delaware law 26 governs while Plaintiff asks the Court to apply Arizona law. (Doc. 22 at 3-7; Doc. 23 at 2- 27 3). The Court need not resolve this dispute as to Plaintiff’s fraud claim because substantive 28 law is not necessary to resolve the motion as to that claim, as discussed below. In contrast, 1 substantive law is necessary to resolve the motion on Plaintiff’s negligence and conversion 2 claims. Though tort law—as opposed to contract law—applies to these claims, the 3 adjudication of both claims would require interpretation of the Cardholder Agreement 4 because that contract establishes the relationship between the parties. Indeed, because 5 Plaintiff has not alleged any relationship between the parties beyond that defined by the 6 Cardholder Agreement, the scope of Chase’s duties to Plaintiff are limited to the scope of 7 its duties within the contract—including conducting investigations like the one Plaintiff 8 alleges was negligent. Similarly, the Cardholder Agreement governs the parties’ creditor- 9 debtor relationship and the transfer of funds between them—including the funds at issue in 10 Plaintiff’s conversion claim. Accordingly, the Court will apply the contractual choice of 11 law provision, and Delaware law will apply to Plaintiff’s tort claims as necessary. 12 2. Count II: Liability Under Article 4A of the UCC 13 Plaintiff alleges that Chase has violated Article 4A of the UCC, which governs 14 “funds transfer,” Del. Code tit. 6 § 4A-101 et seq., by not refunding the Unauthorized 15 Charges to Plaintiff’s credit card. (Doc 21 at 5-6). But Plaintiff’s argument fails. Under 16 the plain language of the statute, the Unauthorized Charges cannot be considered a “funds 17 transfer.” 18 A funds transfer is a “unique method of payment to be governed by unique rules 19 that address the particular issues raised by” it. U.C.C. § 4A-102 cmt. (Unif. L. Comm’n 20 2022).5 It is a “series of transactions” beginning with a payment order made for the purpose 21 of making a payment to the order’s beneficiary. Del. Code tit. 6 § 4A-104(a). A payment 22 order is an instruction sent to a bank “to pay, or to cause another bank to pay, a fixed or 23 determinable amount of money to [the] beneficiary.” Id. § 4A-103(1). The sender must 24 “directly” transmit the order to the bank without any conditions for payment (aside from

25 5 “In interpreting a statute, [Delaware state courts] give considerable deference to an official commentary written by the statute’s drafters and available to the General Assembly 26 before the statutory enactment.” Kallop v. McAlister, 678 A.2d 526, 530 (Del. 1996); see also Burkhart v. Genworth Fin., Inc., 275 A.3d 1259, 1273 n.82 (Del. Ch. 2022) (noting 27 that Delaware state courts may consider “uniform law comments as persuasive authority” even when such comments are not given Kallop deference). The Uniform Law 28 Commission’s 2022 comments were available in 2023 when the Delaware General Assembly amended its UCC provisions. Act of Aug. 18, 2023, 84 Del. Laws ch. 174. 1 the time of payment) and reimburse the bank—either through direct payment or the bank’s 2 debiting of the sender’s account. Id. § 4A-103(1)(i)-(iii). 3 Because the sender must initiate a funds transfer, id. § 4A-103(iii), this definition 4 of payment order “exclude[s] from Article 4A payments made by check or credit card.” 5 U.C.C. § 4A-104 cmt. 5. Indeed, a credit card charge is a transmission “to the creditor who 6 then presents” a request for payment to the debtor’s bank. Id. Because the debtor does not 7 “directly” transmit instructions to its bank, a credit card charge does not qualify as a 8 “payment order” under the statutory definition. See Del. Code tit. 6 § 4A-103(a)(1)(iii). 9 Plaintiff alleges that Chase violated § 4A-204, which requires a bank to refund 10 certain unauthorized payment orders. (Doc. 21 at 6). Though the transactions at issue here 11 were unauthorized, they were charges to Plaintiff’s credit card and not payment orders. 12 Even assuming that all other elements of Plaintiff’s claim are satisfied, the unauthorized 13 charges cannot be considered payment orders because Plaintiff was not the sender and did 14 not directly initiate the series of transactions. Del. Code tit. 6 § 4A-103(a)(1). As such, 15 Chase is correct that Plaintiff has no legally cognizable UCC claim. 16 Under the plain language of Delaware’s statute—which excludes the transactions at 17 issue from Article 4A—there are no facts that Plaintiff could allege to state a plausible 18 claim based on the Unauthorized Charges. Accordingly, any amendment would be futile 19 and Plaintiff’s UCC claim is dismissed without leave to amend. Allen v. City of Beverly 20 Hills, 911 F.2d 367, 373 (9th Cir. 1990) (denying leave to amend because futility and the 21 chance to previously amend “plainly reveal[ed]” that plaintiff’s claim should be dismissed 22 with prejudice). 23 3. Count III: Negligence 24 Plaintiff alleges that Chase was negligent in conducting its investigation of the 25 Unauthorized Charges, which resulted in Chase’s refusal to issue a refund. (Doc. 21 at 6- 26 7). Chase challenges this claim on two bases: (1) Plaintiff’s failure to allege that Chase 27 owed it any non-contractual duty and (2) the economic loss doctrine. (Doc. 11 at 6-7). 28 Because Delaware’s economic loss rule plainly bars Plaintiff’s claim, the Court grants 1 Chase’s motion to dismiss without considering the issue of duty and grants Chase’s motion 2 to dismiss. 3 Plaintiff alleges that “Chase was negligent in conducting whatever investigation it 4 commenced after Sunset Spas notified it of the fraudulent charges,” resulting in Chase’s 5 failure to refund the Unauthorized Charges. (Doc. 23 at 5). Chase correctly asserts that 6 the economic loss rule is implicated by Plaintiff’s claim, and further, is correct that 7 Delaware’s economic loss rule bars Plaintiff’s tort claim, limiting Plaintiff to only contract 8 remedies. 9 “The economic loss doctrine is a judicially created doctrine that prohibits recovery 10 in tort where . . . the only losses suffered are economic in nature.” Danforth v. Acorn 11 Structures, Inc., 608 A.2d 1194, 1196 (Del. 1992), abrogated in part by 6 Del. C. §§ 3651- 12 52; Snowstorm Acquisition Corp. v. Tecumseh Prods. Co., 739 F. Supp. 2d 686, 710 (D. 13 Del. 2010) (“The economic loss doctrine precludes recovery in negligence for losses that 14 are solely economic in nature.”). Where “no personal injury or property damage has been 15 alleged” and a plaintiff’s “cause of action for negligence rests entirely upon an economic 16 loss theory,” the plaintiff’s claim “fails as a matter of law” because “purely economic losses 17 are unrecoverable” under Delaware law. Sterling v. Beneficial Nat’l Bank NA, No. 91C- 18 12-005, 1994 WL 315365, at *3 (Del. Super. Ct. Apr. 13, 1994) (citing Danforth, 608 A.2d 19 1194); Bell Helicopter Textron, Inc. v. Tridair Helicopters, Inc., 982 F. Supp. 318, 322 n.5 20 (D. Del. 1997) (describing Sterling as a case “in which the Delaware Superior Court found 21 that a negligence action was barred by the economic loss doctrine where a bank negligently 22 mishandled a loan and subordination agreement,” and “plaintiffs had not alleged any 23 property damage claims, but rather purely economic loss caused to their bank account 24 itself”). For pure economic loss, a plaintiff is “limited to remedies under the Uniform 25 Commercial Code, and may not proceed in tort.” Delmarva Power & Light v. Meter- 26 Treater, Inc., 218 F. Supp. 2d 564, 569 (D. Del. 2002) (citing Danforth, 608 A.2d at 1195- 27 97). 28 1 Here, Plaintiff alleges only economic loss stemming from a negligent investigation 2 of the Unauthorized Charges—an investigation which Chase agreed to perform under the 3 Cardholder Agreement. (Doc. 11 at 6; Doc. 13 at 7; Doc. 17-1 at 11). These losses are 4 unrecoverable under Delaware tort law. Sterling, 1994 WL 315365, at *3 (citing Danforth, 5 608 A.2d 1194). In other words, because Plaintiff’s negligence claim “rests entirely upon 6 an economic loss theory,” it “fails as a matter of law.” Id. 7 As such, Plaintiff’s negligence claim is dismissed without leave to amend as any 8 amendment would be futile. Allen, 911 F.2d at 373 (denying leave to amend because 9 futility and the chance to previously amend “plainly reveal[ed]” that plaintiff’s claim 10 should be dismissed with prejudice). 11 4. Count IV: Conversion 12 Similarly, Plaintiff has failed to state a claim of conversion against Chase. In 13 Delaware, “any distinct act of dominion wrongfully exerted over the property of another, 14 in denial of his right, or inconsistent with it, is a conversion.” Kyle v. Apollomax, LLC, 987 15 F. Supp. 2d 519, 525 (D. Del. 2013) (quoting Drug Inc. v. Hunt, 168 A. 87 (1933)). To 16 maintain such an action, the plaintiff must have “had a property interest in the converted 17 goods[,] . . . had a right to possession of the goods[,] and . . . sustained damages.” Goodrich 18 v. E.F. Hutton Grp., Inc., 542 A.2d 1200, 1203 (Del. Ch. 1988). Generally, a conversion 19 claim arising from a breach of contract is barred; a plaintiff alleging such a claim must sue 20 in contract. Kyle, 987 F. Supp. 2d at 525 (citing Kuroda v. SPJS Holdings, LLC, 971 A.2d 21 872, 889 (Del. Ch. 2009)). As such, “an action for conversion of money will lie only where 22 there is an ‘obligation to return the identical money’”—i.e., “only when it can be described 23 or identified as a specific chattel, but not where an indebtedness may be discharged by the 24 payment of money generally.” Goodrich, 542 A.2d at 1203. When these conditions are 25 not met, any claim for conversion of money “must be dismissed.” Id. 26 Here, Plaintiff alleges that it “has the right to the availability of funds on its 27 revolving line of credit,” and that Chase converted $68,850.00 of those funds by refusing 28 to refund the Unauthorized Charges. (Doc. 13 at 8; Doc. 21 at 7-8). In response, Chase 1 argues that the funds6 at issue cannot be the subject of a conversion action because (1) they 2 cannot “be described, identified or segregated,” (2) Chase had no “obligation to treat the 3 funds in a specific manner,” and (3) Plaintiff does not show that any injury could not be 4 remedied by the payment of funds generally. (Doc. 11 at 10; Doc. 17 at 6; Doc. 22 at 12- 5 13). Though Plaintiff does describe the funds at issue—the $68,850.00 of Unauthorized 6 Charges paid to an entity purporting to be Morgan Trucking between July 2023 and 7 December 2023—and makes the conclusory assertion that it had an immediate possessory 8 interest in those funds, it makes no allegation that the funds can be identified or segregated, 9 or that Chase had an obligation to return the identical money. (See Doc. 13 at 8; Doc. 21 10 at 7-8). Specifically, Plaintiff does not explain how funds within a “revolving line of 11 credit” could be discretely identified or segregated from other funds, or describe any 12 obligation owed to it by Chase beyond the operation of their general debtor-creditor 13 relationship. Because Plaintiff’s “claim could be satisfied by a general monetary payment, 14 . . . [it] cannot be enforced.” Kyle, 987 F. Supp. 2d at 526. 15 Accordingly, Plaintiff’s claim “must be dismissed.” Goodrich, 542 A.2d at 1203. 16 Given the nature of the funds at issue here and the nature of the parties’ relationship under 17 the Cardholder Agreement, Plaintiff has no plausible claim and any further amendment 18 would likely be futile. As such, Plaintiff’s conversion claim is dismissed without leave to 19 amend. Allen, 911 F.2d at 373 (denying leave to amend because futility and the chance to 20 previously amend “plainly reveal[ed]” that plaintiff’s claim should be dismissed with 21 prejudice). 22 5. Count V: Fraud 23 Finally, Plaintiff has failed to state a claim for fraud because it has not “state[d] with 24 particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). 25 “[W]hile a federal court will examine state law to determine whether the elements 26 of fraud have been pled sufficiently to state a cause of action, the Rule 9(b) requirement 27 6 Chase also asserts that Plaintiff’s allegations do not involve any “funds” but rather involve 28 “an allegedly unauthorized debt” (Doc. 17 at 7) yet does not elaborate on the significance of this distinction to Plaintiff’s conversion claim. 1 that the circumstances of the fraud must be stated with particularity is a federally imposed 2 rule.” Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009) (quoting Vess v. 3 Ciba-Geigy Corp. USA, 317 F.2d 1097, 1103 (9th Cir. 2003)). Indeed, “Rule 9(b) demands 4 that the circumstances constituting the alleged fraud ‘be specific enough to give defendants 5 notice of the particular misconduct . . . so that they can defend against the charge and not 6 just deny that they have done anything wrong.’” Id. at 1124 (quoting Bly–Magee v. 7 California, 236 F.3d 1014, 1019 (9th Cir. 2001) (citation modified). 8 Therefore, to state a claim for fraud, “a pleading must identify the who, what, when, 9 where, and how of the misconduct charged, as well as what is false or misleading about the 10 purportedly fraudulent statement, and why it is false.” Moore v. Mars Petcare US, Inc., 11 966 F.3d 1007, 1019 (9th Cir. 2020) (quoting Davidson v. Kimberly-Clark Corp., 889 F.3d 12 956, 964 (9th Cir. 2018)). In other words, while “[m]alice, intent, knowledge, and other 13 conditions of a person’s mind may be alleged generally,” Fed. R. Civ. P. 9(b), a plaintiff 14 must “state the time, place, and specific content of the false representation as well as the 15 identities of the parties to the misrepresentation.” Schreiber Distrib. Co. v. Serv–Well 16 Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986). 17 Here, Plaintiff’s allegations of fraud are a mere “formulaic recitation of the elements 18 of a [fraud] cause of action,” Twombly, 550 U.S. at 555, with insertions of “Chase” and 19 “Sunset Spas” into each element of the fraud claim. (Doc. 13 at 9; Doc. 21 at 8). Plaintiff 20 only avers that “Chase made misstatements or omissions . . . regarding Chase’s compliance 21 with various legal requirements surrounding the reporting of unauthorized charges” 22 without specifying the content of the allegedly fraudulent statements, without stating why 23 those statements were false, and without providing “when, where, and how” these 24 statements were made. (Doc. 21 at 8); Moore, 966 F.3d at 1019. 25 Accordingly, though Plaintiff lists the elements of fraud, it does not do so in a 26 manner sufficiently specific to satisfy Rule 9(b), and thus, fails to state a plausible fraud 27 claim. Defendant’s Motion to Dismiss is thus granted as to Count V. Because it may be 28 possible, however, for Plaintiff to amend its First Amended Complaint to allege fraud with 1 || the degree of specificity required by Rule 9(b) as described above, it is granted leave to amend this claim. Fed. R. Civ. P. 15({a)(2). 3 CONCLUSION 4 IT IS THEREFORE ORDERED that Defendant’s Motion to Dismiss (Doc. 11) 1s 5|| GRANTED. Should Plaintiff elect to file an amended complaint pursuant to this order, 6|| Plaintiff shall do so within twenty-one (21) days of the filing of this order. 7 Dated this 21st day of May, 2026.

10 Senior United States District Judge 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

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