Curl v. CitiMortgage, Inc. et al
Filing
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ORDER by Judge Vince Chhabria granting 18 Motion to Dismiss with Leave to Amend Within 21 Days. (knm, COURT STAFF) (Filed on 10/17/2014)
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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CHANTELL CURL,
Case No. 14-cv-01829-VC
Plaintiff,
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v.
ORDER GRANTING DEFENDANTS'
MOTION TO DISMISS
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CITIMORTGAGE, INC., et al.,
Re: Dkt. No. 18
Defendants.
United States District Court
Northern District of California
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The motion to dismiss is granted.
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Plaintiff Chantell Curl sues Defendants CitiMortgage, Inc. and Mortgage Electronic
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Registration Systems, Inc. ("MERS"), bringing a number of claims related to a mortgage loan
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secured by real property in Antioch, California. Though not entirely clear, Curl's first cause of
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action, for "cancelation of voidable contracts" under California Revenue and Tax Code §§ 23304.5
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and 23305a, and violations of California Corporations Code §§ 191(c)(7) and 2015, appears to
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seek a determination that the deed of trust securing the mortgage note is void or voidable due
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either to MERS's failure to comply with California franchise tax laws or to its failure to obtain a
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valid Certificate of Qualification from the California Secretary of State. But even assuming these
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allegations stated a claim, it is clear from the face of the complaint that such a claim would be
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time-barred. Curl entered into the deed of trust, on which MERS is listed as beneficiary, as of
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June 5, 2008. Compl. ¶ 3. Curl's complaint was filed nearly six years later. Even if the deed of
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trust were a contract between Curl and MERS that was voidable based on MERS's status at the
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time of the transaction, California's four-year catch-all limitations period applies to actions to
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cancel an instrument. See Moss v. Moss, 128 P.2d 526, 528–29 (Cal. 1942).
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Curl's second and third causes of action, for intentional misrepresentation and negligent
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misrepresentation respectively, both fail to satisfy Federal Rule of Civil Procedure 9(b)'s
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heightened pleading requirement for fraud-based claims. To successfully plead claims grounded
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in fraud, a complaint must "state the time, place, and specific content of the false representations
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as well as the identities of the parties to the misrepresentation." Edwards v. Marin Park, Inc., 356
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F.3d 1058, 1066 (9th Cir. 2004) (quoting Alan Neuman Prods, Inc. v. Albright, 862 F.2d 1388,
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1392–93 (9th Cir. 1988)). Curl's complaint fails to provide the necessary allegations of "the who,
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what, where, when, and how" of the fraud. See Vess v. Ciba–Geigy Corp. USA, 317 F.3d 1097,
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1106 (9th Cir. 2003) (quoting Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1998)).
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Moreover, Curl's misrepresentation claims stem from representations Curl alleges were
United States District Court
Northern District of California
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made to her at the time she entered into the loan. Compl. ¶¶ 31, 35. Pursuant to California Code
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of Civil Procedure § 338(d), there is a three-year statute of limitations for "[a]n action for relief on
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the ground of fraud or mistake. The cause of action in that case is not deemed to have accrued
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until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake." For
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negligent misrepresentation, there is a two-year statute of limitations. Cal. Civ. Proc. Code
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§ 339(1). In her opposition to the motion to dismiss, Curl argues that her claims are not time
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barred because she did not discover the alleged misrepresentations until the completion of a
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forensic audit of her loan in 2013. Docket No. 23, page 7. But "[a] plaintiff whose complaint
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shows on its face that his claim would be barred without the benefit of the discovery rule must
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specifically plead facts to show (1) the time and manner of discovery and (2) the inability to have
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made earlier discovery despite reasonable diligence. The burden is on the plaintiff to show
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diligence, and conclusory allegations will not withstand demurrer." E-Fab, Inc. v. Accountants,
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Inc. Servs., 64 Cal. Rptr. 3d 9, 17 (Ct. App. 2007) (quoting McKelvey v. Boeing N. Am., Inc., 86
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Cal. Rptr. 2d 645, 651 (Ct. App. 1999)). Curl's complaint fails to specifically plead such facts.
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Curl's fourth cause of action, for breach of contract, fails because her complaint does not
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identify any express contractual provision that was breached by Defendants. See First
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Commercial Mortgage Co. v. Reece, 108 Cal. Rptr. 2d 23, 33 (Ct. App. 2001) ("[T]he elements of
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[a breach of contract] cause of action are the existence of the contract, performance by the plaintiff
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or excuse for nonperformance, breach by the defendant and damages."); see also In re Leisure
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Corp., C-03-03012 RMW, 2007 WL 607696 (N.D. Cal. Feb. 23, 2007) ("[Plaintiff]'s allegations
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do not set forth a viable breach of the contract claim because . . . [Plaintiff] cannot point to any
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specific contractual term that was breached by [Defendant]."); Gutierrez v. State Farm Mut. Ins.
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Co., 5:11-CV-03111 EJD, 2012 WL 398828 (N.D. Cal. Feb. 7, 2012); Kroetch v. BAC Home Loan
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Servs., C 11-2860 MEJ, 2011 WL 4502350, at *4 (N.D. Cal. Sept. 27, 2011).
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Similarly, Curl's fifth cause of action, for breach of the warranty of good faith and fair
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dealing, fails because the complaint fails to identify any express provision in any contract upon
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which the implied covenant attaches. See Racine & Laramie, Ltd. v. Dep't of Parks & Recreation,
14 Cal. Rptr. 2d 335, 339 (Ct. App. 1992) ("If there exists a contractual relationship between the
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United States District Court
Northern District of California
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parties . . . the implied covenant is limited to assuring compliance with the express terms of the
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contract, and cannot be extended to create obligations not contemplated in the contact."); Foley v.
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Interactive Data Corp., 765 P.2d 373, 394 (Cal. 1988) ( "The covenant of good faith is read into
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contracts in order to protect the express covenants or promises of the contract, not to protect some
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general public policy interest not directly tied to the contract's purposes."). Nor does the
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complaint identify any special relationship that would allow tort recovery. See Pension Trust
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Fund for Operating Eng'rs v. Fed. Ins. Co., 307 F.3d 944, 955 (9th Cir. 2002) ("Generally, no
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cause of action for the tortious breach of the implied covenant of good faith and fair dealing can
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arise unless the parties are in a 'special relationship' with 'fiduciary characteristics.' Thus, the
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implied covenant tort is not available to parties of an ordinary commercial transaction where the
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parties deal at arms' length." (citations omitted) (quoting Mitsui Mfrs. Bank v. Superior Court, 260
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Cal. Rptr. 793, 795–96 (Ct. App. 1989)).
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Curl's sixth cause of action, for negligence, fails because it does not plausibly allege any
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duty owed to Curl. See Mendoza v. City of L.A., 78 Cal. Rptr. 2d 525, 528 (Ct. App. 1998) ("The
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elements of a cause of action for negligence are (1) a legal duty to use reasonable care, (2) breach
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of that duty, and (3) proximate cause between the breach and (4) the plaintiff's injury."). The
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complaint alleges that the defendants owed Curl a duty to "provide her with mortgages and rates
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that are not predatory, as well as loan documents that are not unconscionable" and to "negotiate
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with her in good faith" after she requested a loan modification. However, under California law "a
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financial institution owes no duty of care to a borrower when the institution's involvement in the
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loan transaction does not exceed the scope of its conventional role as a mere lender of money."
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Nymark v. Heart Fed. Sav. & Loan Assn., 283 Cal. Rptr. 53, 56–57 (Ct. App. 1991); see also id.
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("[A] lender has no duty to disclose its knowledge that the borrower's intended use of the loan
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proceeds represents an unsafe investment."). And it is well established that loan modifications fall
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well within a financial institution's conventional money-lending role. See Gonzalez v. Wells
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Fargo Bank, 5:12-CV-03842 EJD, 2012 WL 5350035 (N.D. Cal. Oct. 29, 2012).
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Curl points to Alvarez v. BAC Home Loans Servicing, L.P., 176 Cal. Rptr. 3d 304 (2014),
where the California Court of Appeal found that a plaintiff had stated a claim for negligence based
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United States District Court
Northern District of California
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on the plaintiffs' allegations in that case "that defendants owed them a duty to exercise reasonable
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care in the review of their loan modification applications once they had agreed to consider them."
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Id. at 306. But while it may be the case under Alvarez that, once a lending institution agrees to
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consider a loan modification, it then has a duty to exercise reasonable care in doing so, Curl's
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complaint does not allege that CitiMortgage ever agreed to consider her application for a loan
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modification. See Compl. ¶¶ 47–50.
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In her opposition to the defendants' motion to dismiss, Curl argues that CitiMortgage has a
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duty under California Civil Code § 2923.6(b) to "offer [Curl] the opportunity to apply [for a loan
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modification] and to consider her application." Section 2923.6(b) provides that "[i]t is the intent
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of the Legislature that the mortgage servicer offer the borrower a loan modification or workout
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plan if such a modification or plan is consistent with its contractual or other authority." While this
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provision expresses the California Legislature's "strong preference for fostering more cooperative
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relations between lenders and borrowers who are at risk of foreclosure," Jolley v. Chase Home
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Fin., LLC, 153 Cal. Rptr. 3d 546, 571 (2013), it does not establish that a lender owes the borrower
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a duty to consider every application for a loan modification.
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Curl's seventh cause of action alleges violation of California Business and Professions
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Code § 17200 (the "UCL"). The UCL prohibits unfair competition, defined as "any unlawful,
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unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading
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advertising." Cal. Bus. & Prof. Code § 17200. "Each prong of the UCL is a separate and distinct
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theory of liability." Kearns v. Ford Motor Co., 567 F.3d 1120, 1127 (9th Cir. 2009). Curl appears
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to bring her UCL claims under the "unlawful" prong. See Compl. ¶¶ 52–58. But Curl's complaint
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does not plausibly allege any violation of any constitutional, statutory, or regulatory provision that
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would provide the basis of an "unlawful business . . . act" claim. See Farmers Ins. Exch. v.
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Superior Court, 826 P.2d 730, 734 (Cal. 1992); see also Stearns v. Select Comfort Retail Corp.,
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763 F. Supp. 2d 1128, 1150 (N.D. Cal. 2010) (explaining that "common-law claims cannot form
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the basis for a UCL claim" brought under the "unlawful" prong). Moreover, to the extent that Curl
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attempts to bring a claim "grounded in fraud" under any prong of the UCL, the pleading of such a
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claim fails to satisfy the particularity requirement of Rule 9(b). See Vess, 317 F.3d at 1103–04.
United States District Court
Northern District of California
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Curl's eighth and ninth causes of action, for declaratory and injunctive relief respectively,
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do not state stand-alone claims. Because Curl's substantive claims fail, these claims must also be
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dismissed. As none of the individual causes of action in Curl's complaint states a plausible claim
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for relief, the Court need not reach the defendants' alternative argument that Curl's claims are
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barred by the doctrine of judicial estoppel. Furthermore, the defendants have not adequately
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explored this issue in their motion to dismiss—for example, although the defendants' judicial
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estoppel argument may well have merit, the defendants have not adequately explained how Curl's
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failure to amend her bankruptcy schedules to include the claims she now brings against the
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defendants satisfies the factors that "typically inform the decision whether to apply the doctrine in
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a particular case," New Hampshire v. Maine, 532 U.S. 742, 750 (2001). In the bankruptcy context,
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those factors include whether
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(1) the positions are clearly inconsistent ("a claim does not exist" vs. "a claim
does exist"); (2) the plaintiff-debtor succeeded in getting the first court (the
bankruptcy court) to accept the first position; and (3) the plaintiff-debtor obtained
an unfair advantage (discharge or plan confirmation without allowing the
creditors to learn of the pending lawsuit).
Ah Quin v. Cnty of Kauai, 733 F.3d 267, 271 (2013).
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Although it is difficult to imagine Curl will be able to amend her complaint to cure its
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defects, dismissal is with leave to amend. If she chooses to file an amended complaint, she must
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do so within 21 days of the date of this order.
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IT IS SO ORDERED.
Dated: October 17, 2014
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VINCE CHHABRIA
United States District Judge
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United States District Court
Northern District of California
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