Carnacchi v. Lendup et al

Filing 47

ORDER by Judge James Donato dismissing #1 Complaint, denying as moot #18 Motion to Compel. (jdlc1S, COURT STAFF) (Filed on 9/22/2017) (Additional attachment(s) added on 10/2/2017: #1 Certificate/Proof of Service) (hdjS, COURT STAFF).

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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MICHAEL A. CARNACCHI,
Plaintiff,

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United States District Court
Northern District of California

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Case No.16-cv-04851-JD
ORDER OF DISMISSAL

v.

Re: Dkt. No. 18
LENDUP, et al.,
Defendants.
Pro se plaintiff Michael Carnacchi has sued defendants LendUp (Flurish Inc., dba),

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Flurish, Inc., and LendUp Global Inc. (collectively “LendUp”) for RICO, equal protection and

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California state law claims relating to short-term loans he obtained online. Dkt. No. 1.

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Defendants have moved to compel arbitration based on agreements found in loan documents with

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Carnacchi. That motion is deferred to another day because a more basic problem in the adequacy

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of the complaint requires dismissal, with leave to amend.

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The operative facts are straightforward. In 2015, Carnacchi took out a series of short-term

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loans from LendUp. Some loans were in the amount $200, for which Carnacchi paid $230.10 --

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an interest charge of approximately 15%. See, e.g., Dkt. No. 1 ¶¶ 17-18. Other loans were in the

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amount of $250, for which Carnacchi paid $286.80 -- an interest charge of approximately 15%.

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Id. ¶¶ 19-21. On several occasions, Carnacchi was short of funds to repay the loans when due.

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Each time, he applied for and was granted an extension of the repayment date, with no apparent

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increase in the interest rate on the loans. See, e.g., id. ¶ 27-29.

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Carnacchi alleges that, at various times, he had trouble accessing online the documentation

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for his repayment extensions. When applying for one repayment extension, for example, he could

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not click through a hyperlink to see modified terms. Id. ¶ 27. He contacted LendUp about these

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difficulties, and the company asked for screenshots showing the problem Carnacchi was having.

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Id. ¶ 41. Carnacchi provided the screen shots, and LendUp responded that it had “escalated the

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issue for correction.” Id. ¶ 43. Carnacchi alleges that he never received a further response from

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LendUp. Id. ¶ 47.

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In addition to these allegations, the complaint gives substantial attention to whether Flurish

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is properly registered to do business in California under the fictitious business name LendUp.

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Id. ¶¶ 1-10. The gravamen of these paragraphs is that it is not.

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That is the sum total of the fact allegations. On that basis, Carnacchi attempts to state a

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federal racketeering claim against LendUp, 18 U.S.C. §§ 1961 et seq., and what appears to be an

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equal protection claim under the Fourteenth Amendment, among other counts.

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A pro se complaint is liberally construed, but it still must allege facts sufficient to state a

United States District Court
Northern District of California

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plausible claim. Lee v. State of Washington, 690 Fed. Appx. 974 (9th Cir. 2017). That means the

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complaint must provide “a short and plain statement . . . showing that the pleader is entitled to

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relief,” Fed. R. Civ. P. 8(a)(2), including “enough facts to state a claim . . . that is plausible on its

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face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is plausible on its face if,

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accepting all factual allegations as true and construing them in the light most favorable to the

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plaintiff, the Court can reasonably infer that the defendant is liable for the misconduct alleged.

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Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The plausibility analysis is “context-specific” and not

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only invites but “requires the reviewing court to draw on its judicial experience and common

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sense.” Id. at 679.

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The RICO and constitutional claims are the asserted grounds for federal question

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jurisdiction over the complaint, and so any deficiency in their adequacy also calls the Court’s

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subject matter jurisdiction into question. On the facts currently alleged, neither claim is plausible.

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Starting with RICO, a racketeering claim must allege “(1) conduct (2) of an enterprise (3)

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through a pattern (4) of racketeering activity (known as ‘predicate acts’) (5) causing injury to

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plaintiff’s ‘business or property.’” Living Designs, Inc. v. E.I. Dupont de Nemours, and Co., 431

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F.3d 353, 361 (9th Cir. 2005). Specific types of allegations are required to plausibly state a

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pattern of racketeering activity and the other elements, see, e.g., Hobbs v. California, 551 Fed.

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Appx. 352, 353 (9th Cir. 2014), none of which are present here. On its face, the complaint alleges
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only that Carnacchi elected to take out some short-term loans on which he agreed to pay interest,

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obtained repayment extensions when he could not meet the agreed-upon due dates, and

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experienced some problems accessing the extension agreements. Carnacchi’s allegations that the

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debt is unlawful are baseless. Nothing here remotely suggests a pattern of racketeering activity or

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a corrupt enterprise within the purview of the RICO statute. The allegations that Flurish did not

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properly register a fictitious business name do not change that conclusion.

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The Fourteenth Amendment claim is equally implausible. Carnacchi cites the Equal
Protection Clause to claim that a provision about usury in Section 1, Article XV of the California

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Constitution improperly creates “two classes of citizens based on an individual’s wealth.” Dkt.

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No. 1 ¶ 56. Even assuming purely for discussion that wealth distinctions are cognizable as equal

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United States District Court
Northern District of California

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protection issues, which itself is a highly doubtful proposition, this claim makes little sense. The

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claim appears to allege that individuals with a net worth exceeding $25,000 may qualify for

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exemption from the usury limitations and may charge higher interest rates, while individuals with

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less than that net worth may not. How or why this even applies to Carnacchi is left unsaid, and the

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wholly conclusory allegation that this exemption creates “a predator class of citizens who prey

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upon a suspect class” is neither plausible nor legally tenable.

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Consequently, the complaint is dismissed with leave to amend. If Carnacchi chooses to

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amend, he must file a new complaint by October 23, 2017. The new complaint must be

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consistent with this Order, and further pleading deficiencies will likely result in dismissal with

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prejudice. The Court declines to address the state law claims until a federal claim is adequately

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alleged. The motion to send the case to arbitration is denied without prejudice as moot, and may

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be renewed if the amended complaint is sustained.

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IT IS SO ORDERED.
Dated: September 22, 2017

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JAMES DONATO
United States District Judge

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