O'Donovan v. Cashcall, Inc.

Filing 119

TENTATIVE RULING re 110 MOTION filed by Krista O'Donovan, 113 MOTION Regarding Class Definitions filed by Cashcall, Inc.. Signed by Judge Maria-Elena James on 4/23/2012. (cdnS, COURT STAFF) (Filed on 4/23/2012) (Additional attachment(s) added on 4/23/2012: # 1 Tentative Order) (cdnS, COURT STAFF).

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UNITED STATES DISTRICT COURT

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Northern District of California

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KRISTA O'DONOVAN, EDUARDO DE LA
TORRE and LORI SAYSOURIVONG,
individually and on behalf of all others
similarly situated,

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No. C 08-3174 MEJ
TENTATIVE ORDER RE: CLASS
NOTICE/DEFINITIONS

Plaintiffs,
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v.
CASHCALL, INC., a California corporation,

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For the Northern District of California

UNITED STATES DISTRICT COURT

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[Docket Nos. 110 and 113 ]

Defendant.
_____________________________________/

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On November 15, 2011, the Court granted in part and denied in part Plaintiffs’ motion for

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class certification. Dkt. No. 100. Since then, the parties have been meeting and conferring in an

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attempt to agree on specific class definitions as well as a class notice plan. While many issues have

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been resolved through this meet and confer process and the Court’s previous order, several disputes

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remain and the parties have outlined these in the motions currently pending before the Court. Dkt.

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Nos. 110 and 113. The Court addresses the pending issues in turn below.

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Plaintiffs’ current proposal is to provide notice to the following two classes:

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(1) The “Loan Unconscionability Class”: “All individuals who, while residing in
California, borrowed from $2,500 to $2,600 at an interest rate of 90% or higher from
CashCall, Inc. for personal, family or household use at any time from June 30, 2004
to the present.”
(2) The “Conditioning Class”: “All individuals who, while residing in California,
borrowed money from CashCall, Inc. for personal, family, or household use at any
time from June 30, 2004 to the present.”

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Dkt. No. 111 at 2. With respect to the Loan Unconscionability Class, Defendant only takes issue

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with the end date of the class definition. Rather than providing notice to individuals who obtained

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loans “from June 30, 2004 to the present,” Defendant argues that the class should be limited to only

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those borrowers who obtained loans before July 11, 2011.1 This is because, on July 11, Defendant

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— following the United States Supreme Court decision in AT&T Mobility LLC v. Concepcion —

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changed the terms of its promissory note to include a clause that mandates arbitration for any

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lawsuits outside of small claims court and prohibits borrowers from being members of class action

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lawsuits. According to Defendant, the “most efficient and expeditious procedure to address this

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issue is to exclude CashCall borrowers who signed the arbitration agreement from the class

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definitions” at this stage of the proceedings. Dkt. No. 118 at 14.

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Plaintiffs contend that the above argument “suffers from several flaws and raises a host of

Plaintiffs only cursorily address some of these issues and state that if the Court does intend to

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consider Defendant’s argument, they should be entitled to conduct discovery and provide additional

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For the Northern District of California

issues that far exceed the scope of providing notice to the certified class.” Dkt. No. 117 at 11.

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UNITED STATES DISTRICT COURT

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briefing on whether Defendant’s arbitration clause is valid and enforceable.

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While the Court prefers not to delay class notice, it is concerned about the following

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situation. If borrowers who signed the post-July 11 promissory note receive the proposed notice and

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do not ask to be excluded, they will believe that they are part of this class action lawsuit and have

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given up their rights to individually sue Defendant. If the Court puts off its evaluation of the

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arbitration clause until a later date — as Plaintiffs propose — and then the clause is found to be

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valid, the post-July 11 borrowers would have to be notified that they are no longer members of the

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class. Besides the additional work and expenses this would require, it will also confuse potential

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class members about what is transpiring and the status of their legal rights. Accordingly, if Plaintiffs

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are unwilling to limit the class definitions to only those borrowers who obtained loans before July

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11, 2011, then the Court must decide this issue before notice is given. Plaintiffs have until May 31,

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2012 to oppose Defendant’s request to exclude from the class definitions any borrowers who signed

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the new arbitration agreement. If Defendant wishes to file a reply to Plaintiffs’ opposition, it should

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Defendant also contends that there should be a July 11, 2011 cutoff for the Conditioning

Class.
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do so by June 12, 2012.2
With respect to the Conditioning Class, Defendant argues the following: (1) the time period

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for the class definition should be limited to only those borrowers who obtained loans after March 13,

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2006 because the claim stems from the federal Electronic Funds Transfer Act (“EFTA”), which has

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a statute of limitations of one year, and not California’s Unfair Competition Law (“UCL”), which

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has a statute of limitations of four years; (2) if the four-year statute applies, then the relief that

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Plaintiffs seek — a refund of the nonsufficient funds fees they were charged — constitutes

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restitution rather than damages and is not available under the UCL, resulting in there being no basis

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to certify a class; and (3) under any circumstances, individual issues predominate the Conditioning

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The Court only needs to address Defendant’s first argument because it finds, as explained

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For the Northern District of California

UNITED STATES DISTRICT COURT

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Class and therefore the class cannot be certified.

below, that the EFTA’s one-year statute of limitations applies to the Conditioning Class. The Court

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notes that Defendant’s third argument was considered last year when the Court decided to certify

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what the parties now refer to as the Conditioning Class.3 Dkt. No. 100. Defendant asked the Ninth

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Circuit for permission to appeal this decision, which was denied. Dkt. No. 108. While the Court

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retains the inherent power to review class certification decisions, Defendant has not persuaded the

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Court that any circumstances have changed that would warrant reconsideration at this time.

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The Conditioning Class claim stems from the allegation that Defendant violated the EFTA

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by conditioning the extension of credit on a customer agreeing to electronic payment. This violation

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of a federal statute is also the predicate for Plaintiffs’ UCL claim. Both parties agree that the EFTA

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has a one year statute of limitations while the UCL’s is four years. The issue for the Court is

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whether Plaintiffs’ claim is limited by the EFTA’s statute of limitations or the UCL’s longer

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If Plaintiffs require more time to conduct discovery, they may request an extension from
the Court.
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In its reply, Defendant points out that during the class certification stage it did not
specifically argue that Plaintiffs’ attempt to recover nonsufficient funds fees results in a host of
individual issues that would make a class action unmanageable. Defendant, however, does not
explain why it failed to raise this argument earlier.
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limitations period may be invoked. Neither of the parties provide authority on this exact question

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and it appears to be an issue of first impression.

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The Court follows the view adopted by other courts that have analyzed a similar issue and

statute of limitations. In Jordan v. Paul Financial, LLC, the plaintiff brought UCL claims against

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the defendant that were predicated on violations of the federal Truth in Lending Act (TILA). 644

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F.Supp.2d 1156, 1171 (N.D. Cal. 2009). TILA, like the EFTA, requires claimants to file a lawsuit

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within one year of any alleged violation. Id. The Jordan Court held that because the plaintiff’s

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“UCL claim is predicated on TILA violations, it may proceed only to the extent that the TILA

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violations are not time barred.” Id. at 1172. Other courts have reached similar decisions. See

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Adams v. SCME Mortg. Bankers Inc., 2009 U.S. Dist. LEXIS 46600, at *28 (E.D. Cal. May 22,

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For the Northern District of California

found that UCL claims predicated on other federal law should be governed by that federal law’s

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UNITED STATES DISTRICT COURT

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2009) (holding that if a TILA claim is time barred, a UCL claim based on TILA violations also fails

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because courts should not permit a plaintiff to “plead around an absolute bar to relief simply by

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recasting the cause of action as one for unfair competition”); Newsom v. Countrywide Home Loans,

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Inc., 714 F.Supp.2d 1000, 1014 (N.D. Cal. 2010) (finding that it is improper for the plaintiffs to

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attempt to revive an otherwise time-barred TILA claim, which has a one year statute of limitations,

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under the guise of a fraud claim, which has a three year statute of limitations).

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Plaintiffs urge the Court to not follow these cases for two principle reasons. First, they argue

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that the EFTA contains a safe harbor clause that allows states to provide greater protection to

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consumers than under the provisions in the EFTA. See U.S.C. § 1693q (“A State law is not

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inconsistent with this subchapter if the protection such law affords any consumer is greater than the

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protection afforded by this subchapter.”). This argument is misplaced. The issue here is not

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whether California has enacted its own version of the EFTA, but whether Plaintiffs may assert a

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UCL claim predicated on the EFTA and not be required to comply with the EFTA’s statute of

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limitations. Second, Plaintiffs contend that the above TILA decisions are inapplicable because they

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have misinterpreted Silvas v. E*Trade Mortgage Corporation and are consequently based on a

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flawed preemption analysis. 514 F.3d 1001, 1007 n. 3 (9th Cir. 2008). Plaintiffs again miss the

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mark with this argument. While both Adams and Newsom discussed Silvas, they both concluded on

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separate grounds that a federal statute’s limitations period should apply when a state law cause of

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action is based on it. See Newsom, 714 F.Supp.2d at 1014 (“As set forth above, a state law claim

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premised on violations of TILA is preempted. In addition, Plaintiffs impermissibly are attempting to

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revive an otherwise time-barred TILA claim under the guise of as fraud claim.”) (emphasis added).

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The Court agrees with this approach since parties should not be able to predicate their UCL claim on

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a statute but then ignore that statute’s limitations period. Based on the above, the Court finds that

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the EFTA’s one year statute of limitations applies to Plaintiffs’ claim. The definition for the

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Conditioning Class should therefore be limited to only those borrowers who obtained loans after

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March 13, 2006.4
Plaintiffs have also requested the Court to appoint their current counsel of record (James

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For the Northern District of California

UNITED STATES DISTRICT COURT

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Sturdevant, principal of the Sturdevant Law Firm, Arthur Levy, principal of the Law Office of

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Arthur D. Levy, and Whitney Stark, associate at Rukin, Hyland, Doria & Tindall) as class counsel.

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Defendants have not objected to this request and the Court finds that counsel of record meet the

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standards outlined for class counsel in FRCP 23(g). Accordingly, they are appointed as class

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counsel.

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Lastly, on January 3, 2012, based on the parties’ request, the Court vacated the deadline for

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the parties to complete mediation in this matter. Dkt. No. 102. The new deadline to complete

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mediation is now set for August 31, 2012.

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IT IS SO ORDERED.

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Dated:
_______________________________
Maria-Elena James
Chief United States Magistrate Judge

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Both parties agree that the statute of limitations was tolled when Plaintiffs filed a class
action complaint on these issues in state court on March 13, 2007.
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