Quesada et al-v-Bank of America Corporation

Filing 26

ORDER GRANTING 21 MOTION TO DISMISS, WITH LEAVE TO AMEND. Signed by Judge Jeremy Fogel on 9/8/2011. (jflc2, COURT STAFF) (Filed on 9/13/2011)

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1 2 **E-Filed 9/13/2011** 3 4 5 6 7 8 IN THE UNITED STATES DISTRICT COURT 9 FOR THE NORTHERN DISTRICT OF CALIFORNIA 10 SAN JOSE DIVISION 11 12 ELWOOD QUESADA, JAMES DeROSA, and All Others Similarly Situated, 13 Plaintiffs, 14 15 16 v. Case No. 5:11-cv-1703 (HRL) ORDER1 GRANTING MOTION TO DISMISS, WITH LEAVE TO AMEND [Re: Docket No. 21] BANK OF AMERICA INVESTMENT SERVICES, INC., NKA MERRILL LYNCH, PIERCE, FENNER & SMITH, INC. 17 Defendant. 18 19 20 Pursuant to Fed. R. Civ. P. 12 (b)(6), Defendant Merrill Lynch, Pierce, Fenner & Smith 21 Inc. (“Merrill Lynch”) moves to dismiss the complaint of Plaintiffs Elwood Quesada and James 22 DeRosa (collectively, “Plaintiffs”) for failure to state a legally cognizable claim. Merrill Lynch 23 contends that the applicable statute of limitations bars this action and that Plaintiffs have failed to 24 allege sufficient facts to support a claim under California’s Invasion of Privacy Act, Cal. Pen. 25 Code §§ 630, et seq. 26 The Court has considered the moving and responding papers and the oral arguments of 27 28 1 This disposition is not designated for publication in the official reports. Case No. 5:11-cv-1703 ORDER GRANTING MOTION TO DISMISS, WITH LEAVE TO AMEND (JFEX3) 1 counsel at the hearing on August 19, 2011. For the reasons discussed below, the motion will be 2 granted, with leave to amend. 3 4 I. BACKGROUND In January 2010, a Merrill Lynch employee called Quesada and DeRosa to discuss their 5 brokerage accounts with the firm. (FAC ¶ 23-24) Neither Plaintiff expected the calls to be 6 recorded, and neither consented to any recording. (Id.) Nonetheless, Plaintiffs discovered 7 approximately one year later that Merrill Lynch had recorded the calls. (FAC ¶ 25) 8 9 Plaintiffs filed this putative class action in the Santa Clara Superior Court on February 7, 2011, seeking statutory damages for violation of the Privacy Act. Merrill Lynch subsequently 10 removed the action to this Court and moved to dismiss. In response, Plaintiffs filed the FAC on 11 May 11, 2011. 12 II. LEGAL STANDARD 13 The Court may dismiss a complaint when it does not allege facts sufficient to state a 14 claim for which the law provides relief. See, e.g., Kelly v. Arizona, 409 Fed. Appx. 124, 126 (9th 15 Cir. 2010). Therefore, a plaintiff must allege “factual content that allows the court to draw the 16 reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 17 129 S. Ct. 1937, 1949 (2009), citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007). As it 18 evaluates a Rule 12(b)(6) challenge, the Court must take the plaintiff’s allegations as true and 19 construe them most favorably toward him. See Gompper v. VISX, Inc., 298 F.3d 893, 896 (9th 20 Cir. 2002). Conclusions of law posing as factual allegations, however, will not pass the test. 21 Anderson v. Clow (In re Stac Elecs. Sec. Litig.), 89 F.3d 1399, 1403 (9th Cir. 1996) (citation 22 omitted). 23 The Court may not dismiss a complaint without leave for the plaintiff to amend unless it 24 is clear that no amount of amending can save the complaint. Gompper, 298 F.3d at 898, citing 25 Polich v. Burlington Northern, Inc., 942 F.2d 1467, 1472 (9th Cir. 1991). 26 27 28 2 Case No. 5:11-cv-1703 ORDER GRANTING MOTION TO DISMISS, WITH LEAVE TO AMEND (JFEX3) 1 2 3 III. DISCUSSION A. Invasion of Privacy Act The Invasion of Privacy Act generally prohibits the intentional recording of a confidential 4 communication without consent. See Cal. Penal Code §§ 632. Merrill Lynch contends that 5 Plaintiffs have failed to allege sufficient facts to support any of the three elements of this claim. 6 Plaintiffs allege that Merrill Lynch carried out a concerted effort to call its customers in 7 California and that it “planned . . . and implemented” a system to record phone calls such as 8 those made to Quesada and DeRosa. (FAC ¶¶ 9-10) They also allege that Merrill Lynch failed 9 to train its employees, including the employee who allegedly called Plaintiffs, “to inform its 10 clients that [Merrill Lynch] was recording the calls.” (FAC ¶ 11) Plaintiffs contend that a 11 reasonable inference may be drawn from those allegations that Merrill Lynch intentionally 12 recorded the calls. (Opp’n to Mot. to Dismiss, 5:13-6:7) The Court agrees. 13 Plaintiffs also allege that the communications were confidential and therefore protected 14 by the Invasion of Privacy Act. A telephone call is confidential for purposes of the Act only if a 15 party has an objectively reasonable belief that the discussion is not being recorded. Flanagan v. 16 Flanagan, 27 Cal. 4th 766, 768 (2002). Here, Plaintiffs assert that neither of them “had a 17 reasonable expectation” that their calls would be recorded. (FAC ¶¶ 23-24) They allege that 18 Merrill Lynch called them to discuss personal financial matters but made no effort to notify them 19 or members of the putative class of the recording. (FAC ¶¶ 11, 23-24). Given the common 20 business practice of informing customers that their calls may be monitored in an effort to ensure 21 quality customer service, it is at least plausible that the absence of such a disclaimer would create 22 a reasonable expectation on Plaintiffs’ part that their calls would not be monitored. Because 23 Plaintiffs also allege their lack of consent to the recordings, the FAC sufficiently states a claim 24 for violation of the Invasion of Privacy Act. 25 B. Statute of Limitations 26 Generally, plaintiffs seeking statutory damages must comply with the one-year statute of 27 limitations set forth in Cal. C. C. P. § 340(a). See Montalti v. Catanzariti, 191 Cal. App. 3d 96, 28 98 (1987). However, time does not begin to run on such actions brought under the Invasion of 3 Case No. 5:11-cv-1703 ORDER GRANTING MOTION TO DISMISS, WITH LEAVE TO AMEND (JFEX3) 1 Privacy Act until the plaintiff discovers or should have discovered his injury. Id. at 99; see also 2 Kuschner v. Nationwide Credit, Inc., 256 F.R.D. 684, 690 (E.D. Cal. 2009) (given the nature of 3 secret recording, “it would defy logic” to deny plaintiffs discovery-rule exception). 4 “In order to rely on the discovery rule . . . , ‘[a] plaintiff whose complaint shows on its 5 face that his claim would be barred without the benefit of the discovery rule must specifically 6 plead facts to show (1) the time and manner of discovery and (2) the inability to have made 7 earlier discovery despite reasonable diligence.’” Fox v. Ethicon Endo-Surgery, Inc., 35 Cal. 4th 8 797, 808 (2005) at 808 (quoting McKelvey v. Boeing North American, Inc., 74 Cal. App. 4th 151, 9 160 (1999)); see also, Grisham v. Philip Morris U.S.A., Inc., 40 Cal. 4th 623, 638 (2007) 10 (holding that smoker must plead facts showing her inability to discover her addiction to tobacco 11 earlier); Rhynes v. Stryker Corp., 2011 WL 2149095 (N.D. Cal. 2011) (denying exception 12 because complaint stated only that “plaintiff was unaware of the injury from the defect” until 13 after the expired statute of limitations period). 14 Here, Plaintiffs allege only that they “discovered Defendant’s surreptitious recording . . . 15 approximately one year later . . . .” (FAC ¶ 25) They do not provide any specific facts that 16 explain how they made this discovery or why they were unable to do so earlier. Accordingly, 17 their claim is subject to dismissal as untimely. Because it appears that Plaintiffs may be able to 18 allege sufficient facts to satisfy the requirements of the delayed discovery rule, leave to amend 19 will be granted. 20 IV. ORDER 21 Good cause therefor appearing, the motion to dismiss is GRANTED. Any amended 22 complaint shall be filed within twenty (20) days of the date of this order. 23 24 IT IS SO ORDERED. 25 26 Dated: 9/8/2011 JEREMY FOGEL United States District Judge 27 28 4 Case No. 5:11-cv-1703 ORDER GRANTING MOTION TO DISMISS, WITH LEAVE TO AMEND (JFEX3)

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