Free Memorandum in Opposition - District Court of California - California

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Matthew S. Hale, Esq. HALE & ASSOCIATES Calif. State Bar No. 136690 45 Rivermont Drive Newport News, VA 23601 Mailing Address: P.O. Box 1951 Newport News, VA 23601 Telephone No. (757) 596-1143 E-Mail: [email protected] Attorney for Plaintiffs, DAVID J. LEE and DANIEL R. LLOYD UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA ) Case No.: C-07-4765 CRB ) ) MEMORANDUM OF POINTS AND ) AUTHORITIES IN SUPPORT OF ) PLAINTIFFS' OPPOSITION TO ) Plaintiffs, DEFENDANTS AMERICAN ) ) EXPRESS TRAVEL RELATED vs. ) SERVICE COMPANY, INC. AND ) AMERICAN EXPRESS CENTURION ) BANK'S MOTION TO DISMISS ) AMERICAN EXPRESS TRAVEL RELATED SERVICES, INC., a New York ) ) corporation, AMERICAN EXPRESS ) DATE: November 30, 2007 CENTURION BANK, a Utah corporation, ) TIME: 10:00 a.m. AMERICAN EXPRESS BANK, FSB, a ) PLACE Courtroom 8 Utah corporation, and DOES 1, through ) 19th Floor ) 100, inclusive, ) 450 Golden Gate Avenue ) San Francisco, Calif. 94102 ) ) Defendants. ) ) DAVID J. LEE, and DANIEL R. LLOYD, as individuals and, on behalf of others similarly situated,

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TABLE OF CONTENTS Page TABLE OF AUTHORITIES ............................................................................... ii

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I. II.

SUMMARY OF ARGUMENT ................................................................... 1 ARGUMENT ........................................................................................ 2 A. Standard of Review ............................................................................. 2 B. Plaintiffs Have Standing To Maintain The Action And Its Various Causes Of Action ............................................................................... 3 C. Plaintiffs' Claims Concerning Their Charge, Credit, Gift, And Dining Cards Fall Within The Coverage Of The CLRA .................................. 6 D. The Complaint Meets The Specificity Requirements Of Fed.R.Civ.P. 9(b) .............................................................................. 14 E. No Cause Of Action Is Barred By The Relevant Statute Of Limitations As To Plaintiff Daniel R. Lloyd .............................................. 17

III.
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CONCLUSION .................................................................................... 20

ADDENDUM A. Shroyer v. New Cingular Wireless Servs., 498 F.3d 976 (9th Cir. 2007)

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TABLE OF AUTHORITIES Page[s] Cases

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AdvanceMe, Inc. v. RapidPay, LLC, 2007 U.S.Dist.LEXIS 59831 (E.D.Texas 2007) ................. 8
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Augustine v. FIA Card Servs., N.A., 485 F. Supp. 2d 1172 (E.D. Cal. 2007) ............................ 12
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Balistreri v. Pacifica Police Dept., 901 F.2d 696 (9th Cir. 1990)............................................. 3, 18
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Barber v. Palo Verde Mut. Water Co., 198 Cal. 649 (1926) ........................................................ 11
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Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)................................ 2
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Berry v. American Express Publishing Co., 147 Cal.App.4th 224 (2006) ............................. passim Bertero v. Superior Court, 216 Cal.App.2d 213, 230 Cal.Rptr. 719 (1963)................................... 5

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Bradford-Whitney Corp. v. Ernst & Whinney, 872 F.2d 1152 (3d Cir. 1989)............................. 18
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Daghlian v. DeVry Univ., Inc., 461 F.Supp. 1121 (N.D.Cal. 2006) .......................................... 1, 6
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DeLeonis v. Walsh, 140 Cal. 175 (1902)........................................................................................ 5
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Douglas v. United States District Court, 495 F.3d 1062 (9th Cir. 2007)....................................... 17 Flowers v. Carville, 310 F.3d 1118 (9th Cir. 2002)....................................................................... 20 Fox v. Ethicon Endo-Surgery, Inc., 35 Cal.4th 797 (2005) ........................................................... 19 Greenwood Trust Co. v. Massachusetts, 776 F.Supp. 21 (D.Mass. 1982) ..................................... 8

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Grewel v. Choudhury, 2007 U.S.Dist.LEXIS 81856 (N.D.Cal. October 27, 2007)................. 1, 14
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Hernandez v. Hilltop Financial Mortgage, Inc., 2007 U.S.Dist.LEXIS 808674 (N.D.Cal. October
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27, 2007) .......................................................................................................................... 1, 12, 13
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Hitz v. First Interstate Bank, 38 Cal.App.4th 274 (1995)........................................................ 1, 6, 7 Hogar Dulce Hogar v. Community Development Corp., 110 Cal.App.4th 1288 (2003) .......... 2, 19 Howard Jarvis Taxpayers Ass'n v. City of La Habra, 25 Cal.4th 809 (2001)........................... 2, 18 In re Ameriquest Mortgage Co., 2007 U.S.Dist.LEXIS 29641 (N.D.Ill. April 23, 2007)........ 1, 13

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In re Silicon Graphics, Inc. v. Sec. Litig., 183 F.3d 970 (9th Cir. 1999)....................................... 16 Jefferson v. Chase Home Finance LLC, 2007 U.S.Dist.LEXIS 36298 (N.D.Cal. May 3, 2007).. 1,

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Jones v. Tracy School Dist., 27 Cal.3d 99 (1980) .................................................................... 2, 19
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Kourtis v. Cameron, 419 F.3d 989 (9th Cir. 2007).................................................................... 2, 20 Lewis & Queen v. N.M. Ball Sons, 48 Cal.2d 141 (1954) ............................................................. 5 Lien Huyunh v. Chase Manhattan Bank, 465 F.3d 992 (9th Cir. 2007)........................................ 18 Lozano v. AT&T Wireless Services, Inc., 2007 U.S.App.LEXIS 22430 (9th Cir. September 20, 2007) ................................................................................................................................ 1, 4, 5, 6 Neel v. Magana, Olney, Levy, Cathcard & Gelfand, 6 Cal.3d 176 (1971) .................................. 19 Pareto v. F.D.I.C., 139 F.3d 696 (9th Cir. 1998) ............................................................................ 2 Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480 (9th Cir. 1995) ............................................ 2 Roots Ready Made Garments v. Gap, Inc., 2007 U.S.Dist.LEXIS 81108 (N.D.Cal. October 17, 2007) .......................................................................................................................................... 14 Shroyer v. New Cingular Wireless Servs., 498 F.3d 976 (9th Cir. 2007) ................................. 2, 17 Sprewell v. Golden State Warriors, 266 F.3d 979 (9th Cir. 2001) ................................................. 2 St. Agnes Medical Center v. PacifiCare of California, 31 Cal.4th 1187 (2003) ............................. 5 State ex rel. Metz v. CCC Information Services, Inc., 149 Cal.App.4th 402 (2007) .................... 20 Supermail Cargo v. United States, 68 F.3d 1204, 1206 (9th Cir. 1995)........................................ 18 United States v. City of Redwood City, 640 F.2d 963 (9th Cir. 1981) .......................................... 3 Van Slyke v. Capital One Bank, 503 F.Supp.2d 1353 (N.D.Cal. 2007)............................. 1, 12, 13 Wool v. Tandem Computers, Inc., 818 F.2d 1433 (9th Cir. 1985)............................................ 1, 16 Statutes California Bus. & Prof. Code § 17200 et seq. ............................................................................ 3, 4 California Civil Code § 1750 et seq....................................................................................... passim California Civil Code § 1761(b) ................................................................................................... 11 California Civil Code § 1770........................................................................................................ 10 California Civil Code § 1770(a)(19)............................................................................................... 4 California Civil Code § 1770(a)(23) (2007) ................................................................................. 10 California Civil Code §1770(a) .................................................................................................... 11

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Other Authorities United States Constitution, Article III ............................................................................................ 3 Rules Fed.R.Civ.P. 12(b) ........................................................................................................................ 16 Fed.R.Civ.P. 9(b) ................................................................................................................ 1, 14, 16

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I.

SUMMARY OF ARGUMENT

Plaintiffs have standing to maintain their action arising from an "injury in fact" suffered by them as a result of the unconscionability of the terms of Defendants' arbitration provision and the cardmember agreement: i.e., in paying the annual (or other) fee for their American Express cards, Plaintiffs got less than that for which they paid and did not receive the full value

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of the agreement. Lozano v. AT&T Wireless Services, Inc., 2007 U.S.App.LEXIS 22430 (9th Cir. September 20, 2007); Daghlian v. DeVry Univ., Inc., 461 F.Supp. 1121 (N.D.Cal. 2006). Plaintiffs' claims and causes of action concerning the charge cards, credit cards, gift cards, and dining cards issued to them by Defendants and for which they paid an annual (or other) fee fall within the coverage of the Consumer Legal Remedies Act ("CLRA" in that,

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among other reasons, charge cards/gift cards/dining cards do not involve any aspect of "credit" and, in any event, all the cards provide a "convenience service" for which Plaintiffs paid when they paid their annual (or other) fee for the cards. Berry v. American Express Publishing Co., 147 Cal.App.4th 224 (2006) Hitz v. First Interstate Bank, 38 Cal.App.4th 274 (1995); Van Slyke v. Capital One Bank, 503 F.Supp.2d 1353 (N.D.Cal. 2007); Hernandez v. Hilltop Financial Mortgage, Inc., 2007 U.S.Dist.LEXIS 808674 (N.D.Cal. October 27, 2007); Jefferson v. Chase Home Finance LLC, 2007 U.S.Dist.LEXIS 36298 (N.D.Cal. May 3, 2007); and In re Ameriquest Mortgage Co., 2007 U.S.Dist.LEXIS 29641 (N.D.Ill. April 23, 2007). Plaintiffs' Complaint complies with the specificity requirements of Fed.R.Civ.P. 9(b).

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Grewel v. Choudhury, 2007 U.S.Dist.LEXIS 81856 (N.D.Cal. October 27, 2007); and, Wool v. Tandem Computers, Inc., 818 F.2d 1433, 1440 (9th Cir. 1985). The claims and causes of action of Plaintiff Daniel R. Lloyd are timely and not barred by the running of the three year statute of limitations obtaining to claims under the CLRA and for

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fraud. In any event, the Complaint's failure to identify the date of discovery of the cause of action (which it is not required to do in any event) in the context of alleged continuing acts and violations requires denial of the motion to dismiss since the issue can only be determined in a motion for summary judgment. Howard Jarvis Taxpayers Ass'n v. City of La Habra, 25 Cal.4th 809, 815 (2001); Jones v. Tracy School Dist., 27 Cal.3d 99, 105 (1980); Hogar Dulce Hogar v.

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Community Development Corp., 110 Cal.App.4th 1288, 1295-96 (2003); Flowers v. Carville, 310 F.3d 1118, 1126 (9th Cir. 2002); and Kourtis v. Cameron, 419 F.3d 989, 999-1000 (9th Cir. 2007). II. A. ARGUMENT Standard Of Review

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A Rule 12(b)(6) motion tests the legal sufficiency of the claims asserted in a complaint. "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955, 1964-65, 167 L. Ed. 2d 929 (2007). "[F]actual allegations must be enough to raise a right to relief above the speculative level." Id. at 1965. In considering the motion, a court must accept as true all material allegations in the complaint, as well as all reasonable inferences to be drawn from them. 1 Pareto v. F.D.I.C., 139 F.3d 696, 699 (9th Cir. 1998). The complaint must be read in the light most favorable to the nonmoving party. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001); Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). It is, of course, true that a court need not accept as true unreasonable inferences or conclusory legal allegations cast in the form of factual allegations. Sprewell, 266 F.3d at 988. However, as set forth in the Complaint, no question can exist as to the unconscionability of the various terms of, for instance, the arbitration provision. Complaint, ¶ 71. See, e.g., Shroyer v. New Cingular Wireless Services, Inc., 498 F.3d 976 (9th Cir. 2007). In light of this case law, it is indeed strange that Defendants, in footnote 4 of their Memorandum, [Memorandum 3:26-28)], could actually state that Plaintiffs claim "will nonetheless fail on the merits."
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Dismissal pursuant to Rule 12(b)(6) is proper only where there is either a "lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990). For all of these reasons, it is only under extraordinary circumstances that dismissal is proper under Rule 12(b)(6). United States v. City of Redwood City, 640 F.2d 963, 966 (9th Cir. 1981). B. Plaintiffs Have Standing To Maintain The Action And Its Various Causes Of Action

The "injury in fact" that underlies Plaintiffs' causes of action and animates their Complaint is simply stated: 1. In paying their annual (or other) fee for their American Express cards, Plaintiffs purchased or acquired the contractual right to mandatory arbitration of all claims they had against Defendants and the merchants from whom they purchased goods or services with their American Express cards, [Complaint, ¶¶ 1, 2, 45-51] ; 2. the arbitration provision in the agreement which they had imposed upon them by Defendants on a "take it or leave it" basis is, as a matter of law, unconscionable, illegal, and unenforceable, [Complaint, ¶ 71]; 3. Plaintiffs have a claim of fraud against Defendants arising from Defendants' inclusion of unconscionable, illegal, and unenforceable terms in the cardmember agreement (excluding the arbitration provision), [Complaint, ¶¶ 5861]; 4. Plaintiffs want to but cannot, as a matter of law, enforce the unenforceable and illegal arbitration provision in order to exercise the right to mandatory arbitration for which they paid, [ibid]; 5. Plaintiffs thus got less than that for which they paid ­ i.e., they did not get the full value of their contract ­ and, as a result, lost money (the pecuniary value of the contractual right to mandatory arbitration), [Complaint, ¶¶ 1, 2, 48-53]. Defendants forward that Plaintiffs have not suffered the requisite "injury in fact" and do not

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otherwise have standing to maintain their causes of action under either Article III, the CLRA, the UCL, or common law fraud. Defendants are wrong since under controlling Ninth Circuit

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precedents and persuasive precedents from this District, standing does exist. motion to dismiss must, perforce, be denied.

Defendants'

Little need be said to refute Defendants' legal theory and argument since a recent decision of the Ninth Circuit ­ rendered several weeks after the filing of this Complaint ­ is dispositive of and conclusively establishes that Plaintiffs do have the requisite "injury in fact"

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and thus have standing to maintain all of their causes of action: Lozano v. AT&T Wireless Services, Inc., 2007 U.S.App.LEXIS 22430 (9th Cir. September 20, 2007). (A copy of the decision is Addendum A for the Court's convenience.) Defendants, of course, do not cite or even allude to the existence or holding of Lozano which involved a claim under the Consumer Legal Remedies Act ("CLRA")(California Code §§ 1750 et seq.), the Unfair Competition Law

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("UCL")(Bus. & Prof. Code §§ 17200 et seq.), and the Federal Communications Act arising from AT&T's billing practices. Lozano's agreement with AT&T contained an arbitration

provision similar to (but not nearly so onerous) as Defendants here since, among other things, it included a class action waiver as well as a no-consolidation term.

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Lozano argued that the AT&T agreement violated the CLRA (Section 1770(a)(19)) by having unconscionable terms included in it, albeit terms that did not include the class action waiver or no-consolidation term (no doubt since the Courts had not at the time of the initial filing of the complaint in 2002 developed the body of law now establishing those term's unconscionability). Relative to the CLRA claims, the Court of Appeal impliedly noted the

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requisites for standing (in the context of the class certification motion): "Any class certified under subsection (a)(19) necessitates a class definition that includes individuals who sought to bring class actions in California, but were precluded from doing so because of the class action waiver in AWS's arbitration agreement, and suffered some resulting damage. See Wilens v. TD Waterhouse Group, Inc., 120 Cal.App.4th 746, 15 Cal.Rptr.3d 271, 276-77 (Cal.Ct.App.

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2003)(holding a court may not presume damages based on the mere insertion of an unconscionable clause in a contract)." 2007 U.S.App.LEXIS at *8. That disposes of Defendants' CLRA standing argument. Just as

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the CLRA class members "who sought to bring class actions, but were precluded form doing so because of the class action waiver, and suffered some resulting damage" had standing so do Plaintiffs here. Plaintiffs here could not, as a matter of law, seek (and much less obtain) mandatory arbitration under the arbitration agreement of their fraud claim although they wanted to do so. 2 Complaint, ¶¶ 56-61.

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The crux of Defendants' argument and of Lozano's holding deals with the presence of an "injury in fact," the sine qua non for both Article III and UCL standing. The injury in Lozano was that Lozano did not get that for which he paid under his agreement with the defendant: "[W]e find that Lozano has properly stated an injury that he did not receive the full value of his contract ... and that his injury is redressable under the UCL." 2007 U.S.App.LEXIS at *10. The redressability for that injury was, of course, the restitutionary relief available under the UCL. Ibid. That the same situation obtains here does not require

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elaboration. Defendants, of course, argue that no arbitration took place ­ apparently again overlooking the fact that the right to invoke arbitration does not reside exclusively with them but is, in fact under the cardmember agreement, also a right paid for by Plaintiffs ­ and, hence,

Illegal contracts are unenforceable and it is against the public policy of California for a party to an illegal contract to even seek to enforce it. After all, the courts (and necessarily the arbitrator) are under a duty to instigate an inquiry if it appears to them that the contract may be illegal and ought not be enforced. See, e.g., Lewis & Queen v. N.M. Ball Sons, 48 Cal.2d 141 (1954). If illegality appears, it is the court's duty to refuse to entertain the action. DeLeonis v. Walsh, 140 Cal. 175 (1902). It is thus futile for Plaintiffs to invoke arbitration under an unenforceable arbitration provision and, in fact, doing so would be a waste of time and money. Bertero v. Superior Court, 216 Cal.App.2d 213, 230 Cal.Rptr. 719 (1963), disapproved on other grounds, St. Agnes Medical Center v. PacifiCare of California, 31 Cal.4th 1187 (2003).
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Plaintiffs' injury is hypothetical. As noted such arbitration was not legally possible. However, even if it was possible, it was not necessary in order to Plaintiffs to suffer the claimed injury and to therefore have standing. Daghlian v. DeVry Univ., Inc., 461 F.Supp. 1121 (N.D.Cal. 2006), which was cited with approval in Lozano, supports this conclusion. As Judge Morrow held: "Defendants emphasize that "nowhere in the FAC does [Daghlian] allege that he actually attempted to transfer to another school that refused to accept his DeVry units, thus forcing him to repeat courses or incur additional tuition expenses." In the absence of such an allegation, defendants assert, Daghlian has failed to show that he suffered the type of "injury in fact" necessary to maintain the third and fourth causes of action. [¶] Daghlian counters that he has adequately pled injury in fact. He argues that he suffered injury when he "spent tens of thousands of dollars in tuition expecting that his degree would be a foundation for further education" and "did not receive what he had bargained for." .... Although Daghlian does not allege that he attempted to transfer the credits to another educational institution, or that he was forced to begin his education anew at another institution, he does assert that he enrolled at DeVry and incurred $ 40,000 in debt "[i]n reliance on" defendants' misrepresentations and omissions about the transferability of credits. This sufficiently alleges that Daghlian personally suffered injury as a result of defendants' allegedly false and/or misleading advertising and unfair business practices." 461 F.Supp.2d at 1155-56 (emphasis added). This, of course, also holds true for Plaintiffs' standing to maintain their fraud cause of action. C. Plaintiffs' Claims Concerning Their Charge, Credit, Gift, And Dining Cards Fall Within The Coverage Of The CLRA

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According to the explicit terms of the Defendants' cardmember agreement, the various cards issued by Defendants involved here are to be used for the "purchase of goods and

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services." Complaint, Ex.19. As a matter of law and fact, when one pays the annual or purchase fee for these American Express cards one purchases a "service" from Defendants rather than just a piece of rectangular shaped plastic. As explained in Hitz v. First Interstate Bank, 38 Cal.App.4th 274 (1995), a credit card and its agreement allows the card holder (1) to transact purchases of goods or services quickly and efficiently, and (2) to borrow (finance) a

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specific purchase or service. As a result, the agreement is not just an extension of credit and, in fact, "is much more than that, encompassing convenience services in addition to extension of credit." 38 Cal. 4th at p. 286. As the Court explained, "A textbook on commercial banking explains these two discrete functions: "The popularity of credit cards is due to the many advantages they offer as a means of payment. These advantages have created two general distinct patterns of credit card use among cardholders--convenience and revolving credit. Many cardholders pay their outstanding balances in full each month; consequently, they incur no monthly finance charge. In fact, nearly half of the cardholders can be classified as convenience users. The remaining cardholders use credit cards as a source of credit and infrequently pay their entire outstanding monthly balance. Both of these uses have distinct advantages over cash, checks, and other means of payment. Convenience use minimizes the need to carry cash, allows the user to defer payment for goods and services for a short time, and establishes a favorable payment record that is important in credit evaluations. Revolving credit users realize the same advantages plus one other, namely, they increase their ability to purchase goods and services and in so doing avoid the red tape involved in obtaining a personal loan. Moreover, the credit card holder has considerable flexibility in the timing and amount of debt repayment." (Reed & Gill, Commercial Banking, supra, p. 337, italics added.) An economist whose work is cited by amicus curiae California Bankers Association similarly describes credit cards as encompassing two features: "payments services" for "convenience users" who wish to make purchases "without paying cash or writing a check," and "credit features" for those who wish to borrow. (Litan, The Economics of Credit Cards, supra, pp. 2, 4.) The convenience feature of credit cards is surely a "service" ..., wholly apart from the credit feature. Observers of the banking industry view the convenience feature as such; the publications quoted above both include references to "credit card services." (Reed & Gill, Commercial Banking, supra, at pp. 339-340; Litan, The Economics of Credit Cards, supra, at p. 2.) A credit card user enjoys various benefits other than borrowing--primarily cashless and checkless purchasing-regardless of whether the credit feature is used. Indeed, convenience use without borrowing is the "reason that some banks levy a flat charge on the use of the card." (Reed & Gill, supra, at p. 339.) Thus, some users even pay for these two features separately: their annual charge for the card is attributable to the convenience feature, while they pay for use of the credit feature through finance charges." 38 Cal.App.4th at 286-287. The existence and purchase of this "convenience service" by

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Plaintiffs is specifically alleged in the Complaint:
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"18. The American Express charge card does not involve "credit" and the purchase of a card membership purchases and provides only a "convenience service" for the card holder. The charge card has distinct advantages over cash, checks, and other means of payment: the convenience use it provides minimizes the need to carry cash, allows the card holder to defer payment for a short time (until receipt of the monthly billing statement), and establishes a favorable payment record that is important in financial evaluations." Complaint, ¶ 18. See also id, ¶ 19 (credit card provides convenience service; ¶ 21 (gift and

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dining card provides convenience service). Some of the cards issued by Defendants are "charge" cards rather than "credit" cards. The charge card, in the present context, is distinguished by the fact that payment of the annual fee for the card requires that the monthly balance be paid in full upon receipt of the monthly billing statement. See, e.g., AdvanceMe, Inc. v. RapidPay, LLC, 2007 U.S.Dist.LEXIS 59831

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(E.D.Texas 2007); Greenwood Trust Co. v. Massachusetts, 776 F.Supp. 21, 43 (D.Mass. 1982). No credit term or feature thus attaches to the charge card. Some of the cards involved in this action are "credit" cards: "19. The purchase of a card membership (for which a fee is paid) relative to a credit card purchases and provides, at least in great part, a "convenience service" even when "credit" can be implicated if the monthly balance is not paid in full upon receipt of the monthly billing statement. It provides a means of payment which leaves the option open to the card holder to either pay his/her monthly statement in full upon its receipt (and thus not incur any interest indebtedness or otherwise use the "credit" service of the card) or to not pay the bill in full and use the revolving credit feature. Regardless of which option is chosen by the card holder, the use of the credit card has distinct advantages over cash, checks, and other means of payment: i.e., the credit card not only minimizes the need to carry cash and allows the user to defer payment and establish a favorable credit history but also, importantly, increases the card holder's ability to purchase goods and services and in so doing avoid the red tape involved in obtaining a personal loan. Plaintiffs are informed and believe, and on that basis allege, that some holders of credit cards do, from time to time or all of the time, pay the monthly balance in full upon receipt of the monthly billing statement and do not avail themselves of the credit feature of the card."

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Complaint, ¶ 19. Although having an available credit feature, such cards do not necessarily implicate credit, a situation that exists when the monthly balance is paid in full upon receipt of the monthly billing statement. Ibid. The third category of Defendants' cards involved in this action are the "prepaid" cards: i.e., the American Express Gift Card and the American Express Dining Card. They too do not involve credit and their purchase pays for a "convenience"

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service: "21. The purchase of an American Express Gift Card purchases and provides a convenience service since it can be used at retailers, restaurants, amusement parks, sporting events, movie and other theaters, spas, salons and certain other merchants that are located in the United States and that accept the American Express Card, including mail order, online and brick and mortar establishments. It cannot be used at car rentals, cruise lines, for recurring billing purchasers, or at casinos or ATMs. The purchase of an American Express Dining Card purchases and provides a convenience service as well since it can be used not only for dining at restaurants but, according to the official American Express website, can now be used for the same purposes as a Gift card. Both the Dining Card and the Gift Card have distinct advantages over cash, checks, and other means of payment: the convenience use it provides minimizes the need to carry cash or checks or in any way incur indebtedness of any type (including credit)." Complaint, ¶ 21. Indeed, as set forth in Exhibits 17 and 18, American Express itself admits that

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neither is a "charge card, a credit card, or a debit card." Defendants, lumping together all of various charge cards, credit cards, gift cards, and dining cards issued by it into one large group they like to call "credit cards," seek dismissal of all CLRA-related causes of action. Their ground for doing so is that "neither the Agreements themselves nor the arbitration agreements are agreements for the `sale or lease of goods or services' as required to pursue a claim under the CLRA." Defendants' Memorandum at 10:2-4. Relying on Berry v. American Express Publishing Co., 147 Cal.App.4th 224 (2006), Defendants forward that "credit" cannot fall within the coverage of the CLRA's definition of "goods or services" and, hence, that their "credit cards" are not subject

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a cause of action under the CLRA relative to their "insert[ing] an unconscionable term" into the agreement and its arbitration provision. In forwarding that position, Defendants not only

obviously ignore the explicit allegations of the Complaint but also, and more seriously, misread and misapply Berry. 3 As was explicitly stated in Berry, its real holding is that credit, standing alone and

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without more, is not a service covered by the CLRA: "We conclude neither the express text of CLRA nor its legislative history supports the notion that credit transactions separate and apart from any sale or lease of goods or services are covered under the act" 147 Cal.App. at 233. It is, however, Berry's holding that "providing credit separate and apart from the sale or lease of any specific good or service falls outside the scope of section 1770,"

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3

[id. at 232 (italics in original)], that results in Berry actually supporting Plaintiffs' position and, due to the presence of the above-discussed "convenience service" purchased by card holders by payment of their annual (or other) fee for the American Express card, rendering Defendants' motion meretricious. 4 5 This is particularly so with regard to the "charge" cards as well as the

That is indeed strange and strained since Defendants' present counsel represented them in

Berry.
4

Plaintiffs, for purposes of the present motion only, accept that Berry was rightly decided. That is not to say, however, that it actually was since the Berry panel of the Orange County Court of Appeals ignored salient points that, if proper weight had been given to them, should have required a different result. For instance, the basis for that decision was the unexplained deletion of "money or credit" from the definition of consumer during the various mark-ups that preceded the statute's passage. Although purportedly basing its decision on the CLRA's legislative history, the Berry court, in reaching its strained, hyper technical reading of the statute, ignored salient aspects of that history that, if considered, would likely have changed the result. One such aspect was the 1995 amendment that made the conduct described in Section 1770(a)(23) (2007) unlawful: "The home solicitation ... of a consumer who is a senior citizen where a loan is made encumbering the primary residence of that consumer for the purposes of paying for improvements and where the transaction is part of a pattern or
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Dining Card and Gift Card. None of those even have a "credit" element. As a result, Berry is completely inapposite to them and they fall squarely within the coverage of the CLRA. Defendants have, of course, also misread and misapplied the various precedents that have discussed and applied Berry. Defendants state, as the hallmark of their argument, "... since Berry, a uniform line of cases holds broadly that the CLRAS generally does not regulate financial services. These broad rulings extend the Berry rule to all of the payment cards alleged in the instant Complaint. Even if `credit' is not extended through the dining or gift cards, they nonetheless are tools to substitute for the use of `money.'" Defendants' Memorandum at 13:1-5. First, the same reasoning applies if one characterizes the cards at issue as implicating "money" rather than credit. In each instance the fees paid

purchased, in the "money" context, the same "convenience service" obtaining in the "credit"
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context.

Second, precedents applying the actual holding of Berry support the Plaintiffs'

position. Primary amongst these is one of the cases cited by Defendants in support of their just-

practice in violation of either subsection (h) or (i) of Section 1639 of Title 14 of the United States Code [Truth in Lending Act] ..." (Emphasis added) The import of this is obvious. Since solicitation of a consumer "where a loan is made" is now included as one of the "unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer...," [Section 1770(a)(emphasis added)], it may be concluded that "the sale or lease of goods or services" definitionally includes "money" and "credit." This conclusion is borne out by relevant rules of statutory interpretation. Consistent with the well-settled rule that an amendment is considered to be a continuation of the original law, words and provisions used in the original act are presumed to be used in the same sense in the amendment. Barber v. Palo Verde Mut. Water Co., 198 Cal. 649 (1926). Hence, the addition of "loans" to the acts for which a "consumer" can make a claim under the CLRA necessarily means that "goods or services" prior to the amendment included such things as "loans" and, hence, both "money" and "credit" insofar as these are implicated by consumer credit/charge cards such as the American Express card. This is, of course, consistent with the CLRA's express language. As relevant here, "services" within the CLRA's scope include "work, labor, and services for other than business or commercial use, including services furnished in connection with the sale or repair of goods." California Civil Code § 1761(b) (emphasis supplied).
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quoted position: Van Slyke v. Capital One Bank, 503 F.Supp.2d 1353 (N.D.Cal. 2007). In Van Slyke, Judge Alsup dismissed the CLRA claim involving allegations that that Capital One's repetitive issuance of sub-prime credit cards and a laying on of late fees involved "a predatory scheme involving the extension of multiple lines of credit and high and deceptive fees thereon" rather than an extension of credit. Id. at 359. It was, as the Court noted, hard to see the

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distinction between the two. In that instance "plaintiffs still have not identified any good or service -- the challenge is to the extension of credit. Of course, plaintiffs bought goods and services with their credit cards. But not from defendants. Plaintiffs do not allege that they were given or had purchased special rights or options under their agreement. They do not allege that defendants sold them any goods under the credit agreement (other than a plastic card evidencing a line of credit). And, they do not allege that defendants sold them any services. In short, this case deals only with the extension of credit, in however unseemly a manner, not with the sale or lease of goods or services. plaintiffs still have not identified any good or service -- the challenge is to the extension of credit." Ibid. Relying on Berry's holding the "issuing a line of credit, apart from providing any other

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6

good or service, was not a transaction covered by the CLRA," [id. at 358], the Court concluded that dismissal was appropriate. However, here the absence of the thing that led to dismissal in Van Slyke is present: the "convenience service" purchased from Defendant. The other Courts that have considered the question have reached similar conclusions. 6 Just recently, Judge Illston in Hernandez v. Hilltop Financial Mortgage, Inc., 2007 U.S.Dist.LEXIS 808674 (N.D.Cal. October 27, 2007), in holding that "mortgage loans, and the activities involved in receiving and maintaining one" ­ a loan, of course, necessarily involves credit -- falls within the coverage of the CLRA noted:

The one exception to this statement is Augustine v. FIA Card Servs., N.A., 485 F. Supp. 2d 1172 (E.D. Cal. 2007), which made just a passing reference, without any analysis, to Berry.
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"[u]nlike in Berry, the situation in the present case involves more than the mere extension of a credit line. Instead, the circumstances here deal not just with the mortgage loan itself, but also with the services involved in developing, securing and maintaining plaintiffs' loan. See Hitz, 38 Cal. App. 4th 274, 286-87, 44 Cal. Rptr. 2d 890 (Cal. Ct. App. 1995) (finding, in a non-CLRA context, that credit cards provide not only extensions of credit but also certain convenience features that constitute "services")." So too did Judge Henderson, reach a similar conclusion in Jefferson v. Chase Home Finance

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7

LLC, 2007 U.S.Dist.LEXIS 36298 at *3 (N.D.Cal. May 3, 2007): "In a related context, an intermediate California appellate court concluded that credit card agreements encompass convenience services in addition to an extension of credit and that, therefore, such agreements qualify as contracts for "services" under a non-CLRA statute. Hitz v. First Interstate Bank, 38 Cal. App. 4th 274, 286-88, 44 Cal. Rptr. 2d 890 (1995). Chase did cite to one recent case where an intermediate California appellate court concluded that issuance of a credit card does not constitute a "service" under the CLRA, but this Court does not find that case persuasive here because (a) the state court relied heavily on the legislature's consideration and rejection of including "credit" as part of the CLRA's definitions and (b) the court failed to consider whether, as the Hitz court concluded, a credit card agreement involves other services in addition to simply an extension of credit. Berry v. Am. Express Publishing, Inc., 147 Cal. App. 4th 224, 229-33, 54 Cal. Rptr. 3d 91 (2007)." The bottom line on all of this is that dismissal is not appropriate. 7 This conclusion was recently reached, under circumstances similar to those existing here, in In re Ameriquest Mortgage Co., 2007 U.S.Dist.LEXIS 29641 (N.D.Ill. April 23, 2007)(applying California law). Following a thorough analysis of the "convenience" service and the CLRA's non-coverage of credit except in the circumstances established by Berry, the District Court concluded: "it is not inconceivable that, consistent with the allegations of the complaint, plaintiffs could prove the existence of tangential "services" associated with their residential mortgages and establish that these transactions were covered by the CLRA. See McMillan v. Collection Professionals, Inc., 455 F.3d 754, 759 (7th Cir. 2006) (dismissal inappropriate unless a court finds there is "no set of facts

In view of Berry, Jefferson, Hernandez, and Van Slyke it is obvious that Defendants' characterization of the CLRA as never providing coverage for financial services is clearly wrong. After all, are not mortgage loans, for instance, "financial services"?
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consistent with the pleadings under which the plaintiff could obtain relief."). Accordingly, we deny defendants' motion to dismiss plaintiffs' Twelfth Cause of Action." Id. at *5. D. The Complaint Meets The Specificity Requirements Of Fed.R. Civ.P. 9(b)

A fair reading of Plaintiffs' complaint, in all of its prolixity, creates a reasonable belief that, with regard to the fraud cause of action, it more than complies with the specificity requirement of Fed.R.Civ.P. 9(b). In fact, it is difficult to envision a pleading that could have greater compliance with that Rule. Accordingly, Defendants' motion to dismiss on that basis

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must be denied.

The standard for adjudging whether compliance with Rule 9(b) exists was described by
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this Court in Grewel v. Choudhury, 2007 U.S.Dist.LEXIS 81856 (N.D.Cal. October 25, 2007): "Under Rule 9(b), an averment of fraud should state with particularity the circumstances constituting the fraud. Fed.R.Civ.P. 9(b). `Under California law, the elements needed to establish fraud are (1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (or scienter) (3) intent to defraud, i.e., to induce reliance; and (5) resulting damages.' G. Hirsch & Co., Inc. v. Amerisourcebergen Corp., 2006 U.S.Dist. LEXIS 32895, 2006 WL 1348568 (N.D.Cal. May 17, 2006)... The Ninth Circuit has interpreted Rule 9(b) to require that `allegations of fraud must be specific enough to give defendants notice of the particular misconduct which is alleged to constitute the fraud charged so that they can defend against the charge and not just deny that they have done nothing wrong.' Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir. 2001)(citations and quotations omitted). `The complaint must specify such facts as the times, dates, places, benefits received, and other details of the alleged fraudulent activity.' Neubronner v. Milken, 6 F.3d 666, 671-72 (9th Cir. 1993)." 2007 U.S.Dist.LEXIS 81856 at *2 (emphasis supplied). See also Roots Ready Made Garments v. Gap, Inc., 2007 U.S.Dist.LEXIS 81108 (N.D.Cal. October 17, 2007). That standard is met here if for no other than reason than it cannot be seriously argued that Defendants are not on

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sufficiently put on notice of their specific misconduct and surrounding facts to mount a defense.
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The only lack of purported specificity identified by Defendants is that: "Plaintiffs fail to identify with the requisite particularity any statements made by anyone at American Express upon which Plaintiffs relief at the time they obtained their credit cards. Plaintiffs allege no specific acts of wrongdoing by American Express." Defendants' Memorandum at 14:19-22 (underlining in original). Once again Defendants have created their own straw man by emphasizing the time Plaintiff "obtained" his card and downplaying that the Plaintiff's annual payment of the fee in and after 2003 as well as amendments to the agreement in, among other times, 2005 are not also accrual triggers. Even if

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that were not so, the Complaint abounds with specificity concerning the "statements" made by Defendants that underlay the fraud The cardmember agreement came with or after the

charge/credit/gift/dining cards were issued (not when they "obtained" their cards by having their applications approved by Defendants) as alleged in 1. ¶ 28 (when in April 2006 Lee obtained his Starwood American Express card), 2. ¶¶ 39-40 (Lloyd's receipt of the card in 2003 and then the agreement, including an amendments thereto in ensuing years), 3. ¶ 29 [Lee, after getting first American Express card sent a Civil Code § 1782 letter to Defendants in November 2006 concerning the unconscionability of the agreement), 4. ¶ 30 (Lee obtained in November 2006 a reply to that letter from American Express in which it was stated that New York law controlled and, inferentially, the agreement was conscionable under that law), 5. ¶ 31 (all of which were statements made by American Express after it already knew of and was bound by the ruling in Berry v. American Express Publishing Co., Case No. 05CC00049 (O.C. Superior Court), that California law controlled the cards under a conflicts of law analysis, a final ruling to which American Express was bound under res judicata principles), 6. ¶ 33 (these types of misrepresentations were the continuing practice of Defendants),

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7. ¶ 34 (in reliance on the statements made in the November 2006 letter from American Express concerning the legality and conscionability of the card agreement, Lee paid the annual fee on his Starwood American Express Card), 8. ¶ 35 (in reliance on the statements made in the November 2006 letter from American Express concerning the legality and conscionability of the card agreement, Lee purchased an American Express Gift Card and Dining Card, respectfully), 9. ¶¶ 36-38 (in reliance on the statements made in the November 2006 American Express letter, Lee applied for, obtained and paid for an American Express Green charge card), 10. ¶ 39 (Lloyd paid his annual fee in 2003 following review of American Express agreement's statements concerning right to include terms in the cardmember agreement), 11. ¶ 41 (Lloyd in each year up to and including 2007 paid his annual fee for his card in reliance on all of the above-statements and writings), and 12. ¶ 83 (Lloyd sent letter pursuant to Civil Code § 83 to Defendants upon discovery of Defendants' fraud). Even had such specificity not been presented in the Complaint, the fact that each document

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8

which is implicated by and supports the cause of action and claim is attached as exhibits to the Complaint more than meets the notice and specificity requirements of Rule 9 (b). As was held in Wool v. Tandem Computers, Inc., 818 F.2d 1433, 1440 (9th Cir. 1985): "In cases of corporate fraud where the false and misleading information is conveyed in prospectuses, registration statements, annual reports, press releases, or other `group-published information,' it is reasonable to presume that these are the collective actions of the officers. Under such circumstances, a plaintiff fulfills his particularity requirement of Rule 9(b) by pleading the misrepresentations with particularity...." 8

The myriad of American Express-generated documents attached to the Complaint as Exhibits can be used for this purpose since it is well-settled that when confronted with a Fed.R.Civ.P. 12(b) motion this court may consider exhibits submitted with or alleged in the complaint. See In re Silicon Graphics, Inc. v. Sec. Litig., 183 F.3d 970, 976 (9th Cir. 1999).
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Defendants' motion to dismiss on the basis of non-compliance with Rule 9(b) should be denied. E. No Cause Of Action Is Barred By The Relevant Statute Of Limitations As To Plaintiff Daniel R. Lloyd Defendants have forwarded that the Plaintiff Lloyd's CLRA and fraud causes of action against American Express Centurion Bank are time-barred. 9 The purported "factual" bases underlying that argument are that "Lloyd obtained the charge card at issue and the card agreement in January 2003)", [Defendants' Memorandum at 15:15-16], and Defendants' ipse

9 10 11 12 13 14

dixit conclusion that "[t]he facts underlying Plaintiffs' [sic] alleged fraud claim were fully known to them [sic] when Plaintiff Lloyd obtained the American Express Platinum charge card from Centurion Bank, and received his cardmember agreement, in January, 2003." Id. at 16:710. The limitations period for both fraud and the CLRA is three years. 10 Defendants' argument is without merit and must be denied. In determining this is so it must, of course, be noted that

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This covers Causes of Action Four, Five, Six, Ten, Eleven, Twelve, and Thirteen as to Plaintiff Lloyd alone. Thus, even assuming that Lloyd's claims were untimely ­ an assumption not borne out by the facts or law ­ these causes of action remain since no allegation was made concerning untimeliness of Plaintiff Lee's identical claims. Defendants' argument concerning the applicability of Utah and New York law to the limitations argument is of no moment and reflects Defendant's untoward belief that they (being as they are, the law of the State designated in the cardmember or card agreement as being the choice of controlling law) provides the law of decision or, for that matter. Defendant is, of course, wrong in believing that since, as the Ninth Circuit recently held in Douglas v. United States District Court, 495 F.3d 1062 (9th Cir. 2007), and Shroyer v. New Cingular Wireless Servs., 498 F.3d 976 (9th Cir. 2007), California law is controlling when it comes to the matters raised in the Complaint concerning the unconscionability of Defendant's cardmember agreements, including notably its arbitration provision. That is, of course, consistent with a long line of California precedents as well. In any event, Defendants are bound by the final order and unappealed order issued by the Superior Court and entered in Berry v. American Express Publishing Co., supra, (in which all present defendants were defendants), that California law is controlling with regards to issues of unconscionability. The doctrine of res judicata and/or collateral estoppel obviously preclude Defendants from making any argument concerning California being the controlling law.
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10

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Plaintiffs have no burden relating to initially establishing in their Complaint the timeliness of their causes of action, [see, e.g., Bradford-Whitney Corp. v. Ernst & Whinney, 872 F.2d 1152, 1161 (3d Cir. 1989)], while the Defendants do have a burden of establishing the absence of sufficient facts to support the cause of action. See, e.g., Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990). That the Complaint itself avers that the actions complained of occurred within the past three years is, without more, sufficient to overcome Defendants' argument. See Complaint, ¶ 104. The Complaint also specifically alleges that Plaintiff Lloyd also has made annual fee payments from the time he received the card up to and including the present time, [id., at ¶ 41-42], and that Defendants have periodically amended the cardmember agreement (apparently most recently in 2005, a time well within the 3-year limitations period).

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Id., ¶¶ 3 (page 7:9-15), 40, 64, 71. Quite frankly, the Complaint, consistent with controlling California precedents dealing with accrual of causes of action, alleges sufficient facts to overcome Defendants' argument. Indeed, Defendants' argument presents the paradigm of a statute of limitations dismissal

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argument that the Ninth Circuit has repeatedly held should not be granted. See, e.g., Lien Huyunh v. Chase Manhattan Bank, 465 F.3d 992, 99-97 (9th Cir. 2007); Supermail Cargo v. United States, 68 F.3d 1204, 1206 (9th Cir. 1995). It is, of course, true that Plaintiff Lloyd got his first American Express card in 2003. However, the overarching error of Defendants'

position is that Lloyd's cause of action did not necessarily and automatically accrue so as to
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trigger the running of the statute of limitations at the time he received the card.

Under

California law, a cause of action accrues "upon the occurrence of the last element essential to the cause of action," [Howard Jarvis Taxpayers Ass'n v. City of La Habra, 25 Cal.4th 809, 815 (2001)], or when the cause of action is "complete with all of its elements." Fox v. Ethicon

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Endo-Surgery, Inc., 35 Cal.4th 797, 807 (2005). In other words, the statute of limitations accrues when a plaintiff has the right to sue on a cause of action. Neel v. Magana, Olney, Levy, Cathcard & Gelfand, 6 Cal.3d 176, 187 (1971) At common law, that is usually at the time of the injury. Id., 35 Cal.4th at 808. Here, of course, the alleged "injury" is when Plaintiff did not "get that for which he paid." Complaint, ¶¶ 1, 2, 48-53. That occurs at the time each payment of the

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annual fee was made (well within the 3 year limitations period), and/or at the time of the 2005 amendment to the arbitration provision and cardmember agreement (well within the 3 year limitations period), and/or at the time at which each charge to Plaintiff Lloyd's charge card was made which was subject to the terms of the agreement and arbitration provision (well within the 3 year limitations period, and/or at the time of the first use of an additional or replacement card

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(which reactivated the agreement to the agreement, well within the 3 year limitations period). Even if factual accrual had not, as it did, occur within the 3 year limitations period, several important exceptions to the basic accrual rule exist which are applicable here and assure that accrual occurred within the 3 years preceding the filing of the action. The first is the

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"discovery" rule which postpones accrual until Plaintiff discovers or has reason to discover the cause of action. Id., 35 Cal.4th at 807. Another exception applicable under the facts pled in the Complaint is the "delayed discovery" rule. See, e.g., Jones v. Tracy School Dist., 27 Cal.3d 99, 105 (1980); Hogar Dulce Hogar v. Community Development Corp., 110 Cal.App.4th 1288, 1295-96 (2003). Under the "delayed discovery" rule

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"when an obligation or liability arises on a recurring basis [like the need to make the annual fee payment to Defendants for the credit card], a cause of action accrues each time a wrongful act occurs, triggering a new limitations period." Hogar Dulce Hogar, 110 Cal.App.4th at 1295. So too does the "continuing" nature of

Defendants' actions present an exception. See, e.g., Flowers v. Carville, 310 F.3d 1118, 1126

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gth Cir. 2002)(in the presence of "continuing wrongful conduct, the statute of limitations loesn't begin to run until that conduct ends."); State ex rel. Metz v. CCC Information Services,

The bottom line on all of this was noted in Kourtis v. Cameron, 419 F.3d 989, 999-1000 gth Cir. 2007), in reversing a dismissal on statute of limitations grounds under circumstances ~nalogous those present here: to "The initial act ... indeed falls outside the statute of limitations. Nevertheless, the complaint also alleges several acts of continuing infringement .... Because the complaint does not identifl the date on which the Kourtises discovered these acts of continuing infringement, it can not be concluded that the Kourtises' claim is time barred in its entirety. ... Cameron is free, of course, to pursue the statute of limitations issue on summary judgment." (Internal citations omitted) rhis Court should reach the same conclusion here and deny Defendants' motion to dismiss.

111.

CONCLUSION

>.

For the reasons stated above and on the record as a whole, Defendants' motion tc lismiss is without merit and should be denied. Dated: November 9,2007 Respectfully submitted,

Matthew S. Hale Attorney for Plaintiffs David J. Lee and Daniel R. Lloyd

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Addendum

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Page 1

2007 U.S. App. LEXIS 22430, *

PAUL LOZANO, on behalf of himself and all others similarly situated and as a private attorney general on behalf of the members of the general public residing within the State of California, Plaintiff-AppelleeCross Appellant, v. AT&T WIRELESS SERVICES, INC., a Delaware Corporation, Defendant-Appellant-Cross Appellee. Nos. 05-56466, 05-56511 UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT 2007 U.S. App. LEXIS 22430 June 4, 2007, Argued and Submitted, Pasadena, California September 20, 2007, Filed PRIOR HISTORY: [*1] Appeal from the United States District Court for the Central District of California William J. Rea, District Judge, Presiding. * D.C. No. CV02-00090-AHS. * After this appeal was filed, the Honorable Alicemarie H. Stotler replaced the late Honorable William J. Rea as presiding judge in this case. . Lozano v. At&T Wireless, 2003 U.S. Dist. LEXIS 21780 (C.D. Cal., Oct. 28, 2003) DISPOSITION: VERSED in part. AFFIRMED in part, RE-

JUDGES: Before: Cynthia Holcomb Hall and Consuelo M. Callahan, Circuit Judges, and James L. Robart, ** District Judge. ** The Honorable James L. Robart, United States District Judge for the Western District of Washington, sitting by designation. OPINION BY: ROBART OPINION ROBART, District Judge: This opinion addresses cross-appeals of the district court's order denying in part, and granting in part, Paul Lozano's class certification [*2] motion. Lozano appeals the district court's denial of a nationwide class for his Federal Communications Act ("FCA") and declaratory relief claims. Lozano also appeals the court's denial of a California subclass on these claims, as well as his breach of contract claim. AT&T Wireless Services, Inc. ("AWS") appeals the district court's certification of a California subclass for Lozano's state law claims. We have jurisdiction to hear this appeal pursuant to Rule 23(f) of the Federal Rules of Civil Procedure

COUNSEL: J. Paul Gignac (argued) and Katherine Donoven, Arias, Ozzello & Gignac, LLP, Santa Barbara, California, and Peter Bezek and Robert A. Curtis, Foley Bezek Behle & Curtis, LLP, Santa Barbara, California, for the plaintiff-appellee-cross appellant. James C. Grant (argued) and Kelly Twiss Noonan, Stokes Lawrence, P.S., Seattle, Washington, and Mark E. Weber and Gabriel J. Pasette, Gibson, Dunn & Crutcher, LLP, Los Angeles, California, for the defendant-appellantcross appe