Scott Edelstein et al v. Westlake Wellbeing Properties LLC et al

Filing 27

ORDER GRANTING PLAINTIFFS' MOTION TO REMAND by Judge Andre Birotte Jr.: The Court hereby GRANTS Plaintiffs' Motion for Remand #11 and ORDERS that Plaintiffs' action be REMANDED to the state court from which it was removed. Case Remanded to Los Angeles Superior Court, Case No. BC669646. ( MD JS-6. Case Terminated. ) (gk)

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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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SCOTT EDELSTEIN, et al.,
Plaintiffs,

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ORDER GRANTING PLAINTIFFS’
MOTION TO REMAND [11]

v.

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Case No. CV 17-06488-AB (JEMx)

WESTLAKE WELLBEING
PROPERTIES, LLC, et al.,

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Defendants.

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Before the Court is Plaintiffs Scott Edelstein (“Edelstein”) and Steven Brooks’

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(“Brooks”) (collectively, “Plaintiffs”) Motion to Remand Action to State Court

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(hereinafter, “Mot.,” Dkt. No. 11). Defendant Westlake Wellbeing Properties

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(“Westlake Properties”) filed an opposition and Plaintiffs filed a reply. The Court heard

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oral argument on November 3, 2017. For the following reasons, the Court GRANTS

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Plaintiffs’ Motion.

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I.

FACTUAL BACKGROUND
Plaintiff Scott Edelstein is a resident of New York. (First Amended Complaint

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(“FAC,” Dkt. No. 10”) ¶ 1.) Plaintiff Steven Brooks is a resident of Thousand Oaks,

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California. (FAC ¶ 2.) Defendant Westlake Properties is a Delaware limited liability

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company with a principal place of business in Westlake Village, California. (FAC ¶ 3.)
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Westlake Properties owns the Four Seasons Westlake Village (“Westlake Four

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Seasons”). (FAC ¶ 3.) Defendant Four Seasons Hotel (“Four Seasons”) is a Canada

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corporation that manages more than thirty hotels and resorts across the United States,

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including the Westlake Four Seasons. (FAC ¶ 4.)

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In 2017, Edelstein used his MasterCard credit card to pay for his stay at the

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Westlake Four Seasons. (FAC ¶ 10.) Defendants provided him with a printed receipt

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for his payment. (FAC ¶ 10.) The printed receipt that Defendants provided Edelstein

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contained more than the last five digits of the credit card account number and the card’s

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expiration date. (FAC ¶ 10.) That same year, Brooks used his Visa credit card to pay

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for his stay at the Westlake Four Seasons. (FAC ¶ 11.) Defendants provided him with a

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printed receipt for his payment. (FAC ¶ 11.) The printed receipt Brooks received

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contained more than the last five digits of the credit card account number and the credit

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card expiration date. (FAC ¶ 11.) Plaintiffs allege that beginning on January 1, 2015, if

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not earlier, through at least April 2017, Defendants have provided credit card and debit

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card receipts that contained more than the last five digits of the account number and the

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card expiration date through machines that were provided to customers at the point of

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sale. (FAC ¶ 12.) Plaintiffs allege that the receipts Defendants provided violate the Fair

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and Accurate Credit Transactions Act (“FACTA”), 15 U.S.C. §§ 1681, et seq., and

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assert their claim as a putative class action.

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II.

PROCEDURAL BACKGROUND
Defendants removed this action from state court to this Court on September 1,

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2017. (See Dkt. No. 1, Defendants’ Notice of Removal.) On September 28, 2017,

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Plaintiffs filed their First Amended Complaints alleging a violation of FACTA on behalf

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of the individual Plaintiffs and all those similarly situated. (See FAC.) On October 3,

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2017, Plaintiffs filed their Motion to Remand, arguing that they lack Article III standing

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to pursue their claim in federal court, so it must proceed in state court.

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III.

LEGAL STANDARD

To bring suit in federal court, a party must meet the standing requirements of

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Article III of the Constitution. Standing “limits the category of litigants empowered to

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maintain a lawsuit in federal court to seek redress for a legal wrong.” Spokeo, Inc. v.

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Robins, 136 S. Ct. 1540, 1547 (2016). The “irreducible constitutional minimum” of

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standing consists of three elements. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560

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(1992). “The plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable

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to the challenged conduct of the defendant, and, (3) that is likely to be redressed by a

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favorable judicial decision.” Spokeo, 136 S. Ct. at 1547. “The plaintiff, as the party

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invoking federal jurisdiction, bears the burden of establishing these elements.” Id.
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DISCUSSION

Plaintiffs’ argument in favor of remand is based on a lack of Article III standing.

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(See Mot.) Plaintiffs argue that the Supreme Court’s opinion in Spokeo, Inc v. Robins in

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conjunction with the Ninth Circuit’s opinion in Robins v. Spokeo, Inc. compels the

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finding that there is no injury-in-fact in this case. (Mot. at 5–7.) The Court agrees.

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In Spokeo, the plaintiff sued Spokeo for violations of the Fair Credit Reporting

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Act (“FCRA”) based on Spokeo’s online publication of incorrect information about him

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including his education level, socioeconomic status, age, and marital status. Robins v.

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Spokeo, Inc., 867 F.3d 1108, 1117 (9th Cir. 2017) (Spokeo II). The District Court

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dismissed his action for lack of standing, specifically, that he had failed to plead an

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injury-in-fact. Robins v. Spokeo, Inc., 742 F.3d 409, 411 (9th Cir. 2014) (Spokeo I). The

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Ninth Circuit reversed, holding that Robins had alleged sufficient injury to establish

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standing. Spokeo I, 742 F.3d at 413. The Supreme Court reversed the Ninth Circuit’s

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decision and remanded the case, directing the Ninth Circuit to specifically consider

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whether Robins had alleged a sufficiently concrete injury. Spokeo, 136 S. Ct. at 1550.

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While acknowledging that Congress retains the power to “elevat[e] to the status of

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legally cognizable injuries concrete, de facto injuries that were previously inadequate in

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law,” the Court emphasized that Congress’s elevation of intangible harms does not mean
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that a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute

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grants an individual a statutory right and then authorizes suit on behalf of any person.

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Spokeo, 136 S. Ct. at 1549. “Article III standing requires a concrete injury even in the

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context of a statutory violation.” Id. “A bare procedural violation” is not sufficient, in

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the absence of concrete harm, to satisfy the injury-in-fact requirement. Id.

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The Court then explained that a risk of real harm could satisfy the concreteness

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requirement. Id. The law has often recognized that risk of intangible harms merits

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recovery as evidenced by the existence of torts like libel or slander per se. Id. Thus, the

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Court did not exclude the possibility that a statutory violation, as articulated by

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Congress, may by itself be sufficient to satisfy the concreteness requirement. Id.

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However, this will not always be the case. Id. In the Court’s opinion, this was not the

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case with the FCRA. Id. at 1550.

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On remand, the Ninth Circuit sought to fashion a test for concreteness in light of

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the Supreme Court’s analysis. Spokeo II, 867 F.3d at 1113. The test the court adopted is

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two-pronged: (1) whether the statutory provisions at issue were established to protect his

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concrete interest (as opposed to purely procedural rights), and if so, (2) whether the

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specific procedural violations alleged in this case actually harm, or present a material

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risk of harm to, such interests. Id. The court found that by enacting the FCRA,

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Congress sought to protect a concrete interest, not simply a procedural right, because of

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the well-known risks involved in the publication of incorrect consumer reports. Id. at

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1114. It then went on to find that Robins faced a material risk of harm because not only

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did Spokeo aggregate incorrect information that pertained to important aspects of

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Robins’ life, it also published such incorrect information on the Internet. Id. at 1116–17.

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Here, Plaintiffs are alleging a violation of FACTA. (See FAC.) In support of

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their claim, Plaintiffs allege that Defendants printed more than five digits of their credit

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cards on a receipt and that this receipt was given to Plaintiffs. (FAC ¶¶ 10–11.) While

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FACTA grants Plaintiffs the statutory right to be protected from such conduct and

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authorizes suit in instances of violation, this bare procedural violation is not sufficient to
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allege an injury-in-fact. Unlike the plaintiff in Spokeo, Plaintiffs have not plead any

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facts to show that the sensitive information printed on the receipts was seen by anyone

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except them. Recently, a court in this District made this precise distinction between the

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facts in Spokeo and a FACTA violation. Alvarado v. Univ. of S. Cal., No. 17-3671-

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GW(AJWx), 2017 U.S. Dist. LEXIS 155608, at *4–5 (C.D. Cal. Sept. 22, 2017). The

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simple printing of the digits on the receipt does not create a sufficient risk of harm like

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the kind Congress sought to protect when it enacted FACTA. Alvarado, 2017 U.S. Dist.

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LEXIS 155608, at *5. In enacting FACTA, Congress’ main concern was identity theft.

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Id. Plaintiffs here have pled no facts that suggest that Defendants’ actions exposed them

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to a material risk of identity theft or other kinds of economic and reputational harm.

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Since Defendants have failed to distinguish Alvarado from the case at bar, the Court

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finds it apposite and holds that Plaintiffs have not alleged a concrete enough injury to

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satisfy the injury-in-fact requirement.

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We turn next to the issue of the appropriate remedy for Plaintiffs’ lack of

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standing. Plaintiffs rely on a recent case from the Ninth Circuit to argue that in the

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absence of Article III standing, this Court should remand a removed action back to state

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court. (Mot. at 8.) The Court agrees.

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In Polo v. Innoventions International, the Ninth Circuit determined that a district

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court must remand a removed action if it finds that it cannot exercise subject-matter

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jurisdiction. Polo v. Innoventions Int’l, L.L.C., 833 F.3d 1193, 1196 (9th Cir. 2016).

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Lack of Article III standing is a subject-matter jurisdiction defect for which the

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appropriate remedy is remand, not dismissal. Id. “Remand is the correct remedy

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because a failure of federal subject-matter jurisdiction means only that the federal courts

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have no power to adjudicate the matter. State courts are not bound by the constraints of

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Article III.” Id. While the Polo case involved only state claims remanded back to state

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court, the case at bar involves the violation of a federal statute. However, the rationale

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of Polo does not draw such a distinction and requires remand whether the claim is

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brought under state or federal law. Advocates for Individuals with Disabilities L.L.C. v.
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Home Depot USA Inc., No. CV-16-01002-PHX-ROS, 2017 U.S. Dist. LEXIS 6930, at

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*6 (D. Ariz. Jan. 13, 2017). While the Ninth Circuit has not directly remanded a federal

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claim back to state court, other circuits have explicitly done so, despite the odd nature of

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such a transfer. See Smith v. Wisconsin Dep’t of Agric. Trade & Consumer Prot., 23

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F.3d 1134, 1142 (7th Cir. 1994); City of Kansas v. Yarco Co., 625 F.3d 1038, 1041 (8th

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Cir. 2010) (remanding entire case, including federal claim); Roach v. W. Virginia Reg’l

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Jail & Corr. Facility Auth., 74 F.3d 46, 49 (4th Cir. 1996) (remanding case, including

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§ 1983 claim). Since the California Constitution does not contain a “case or

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controversy” requirement like the one in the Federal Constitution, Plaintiffs may fare

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better in state court. Nat’l Paint & Coatings Ass’n, Inc. v. State, 58 Cal. App. 4th 753,

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760–61 (Ct. App. 1997).

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V.

CONCLUSION
The Court hereby GRANTS Plaintiffs’ Motion for Remand and ORDERS that

Plaintiffs’ action be REMANDED to the state court from which it was removed.

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IT IS SO ORDERED.

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Dated: November 15, 2017

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HONORABLE ANDRÉ BIROTTE JR.
UNITED STATES DISTRICT COURT JUDGE

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