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 07-4732 MJJ ) ) MEMORANDUM OF POINTS AND ) AUTHORITIES FILED IN SUPPORT ) OF PLAINTIFFS' OPPOSITION TO ) Plaintiffs, DEFENDANTS' MOTION TO ) ) DISMISS vs. ) ) ) DATE: December 4, 2007 ) CHASE MANHATTAN BANK U.S.A., TIME: 9:30 a.m. ) N.A., a Delaware corporation, CHASE ) PLACE Courtroom 11 MANHATTAN BANK U.S.A., N.A. d.b.a. ) 19th Floor CHASE BANK U.S.A., N.A., JPMORGAN ) 450 Golden Gate Avenue CHASE & CO., a Delaware corporation; ) San Francisco, Calif. 94102 ) and DOES 1, through 100, inclusive, ) ) ) 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 CONTENTS .................................................................................... i ADDENDUM ................................................................................................ ii TABLE OF AUTHORITIES .............................................................................. iii I. 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) .............................................................................. 11 E. No Cause Of Action Is Barred By The Relevant Statute Of Limitations ..................................................................................... 12 F. Plaintiffs' Complaint Is Not Preempted By The National Bank Act ................... 15

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II.

1. Plaintiffs' Complaint Is Not Preempted By 12 C.F.R. §§ 7.4008 (d)(2)(iv) Or 7.4008(d)(2)(viii) ..................................................................... 17 2. The UCL, CLRA, And Common Law In The Context Of Plaintiffs' Complaint Have, At Most, Only An Incidental Effect On Defendants' Credit Operation ........................................................................... 23 3. Defendant JPMorgan Chase & Company Is Not A National Bank And Thus The Claims Against It May Not Be Preempted Under The National Bank Act Or Its Implementing Regulations ........................................... 25 III. CONCLUSION .................................................................................... 25

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ADDENDUM 1. Paragraphs of the Complaint specifying which terms of the agreements are unconscionable and citing relevant case that establishes unconscionability as a matter of law; 2. Lozano v. AT&T Wireless Services, Inc., 2007 U.S. App. LEXIS 22430 (9th Cir. September 20, 2007); 3. Freeman v. Mattress Gallery, 2007 Cal.App.Unpub.LEXIS 9102 at * 11-13 (Cal.App. November 8, 2007); 4. "Guidance on Unfair and Deceptive or Practices Act," (OCC Advisory Letter, March 22, 2002), 2002 OCC CB LEXIS 16, 2002 WL 521380.

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TABLE OF AUTHORITIES Page[s] Cases

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Abel v. Keybank USA, N.A., 313 F.Supp.2d 720 (N.D.Ohio 2004)...................................... 21, 22
4

Anderson Nat'l Bank v. Luckett, 321 U.S. 233, 64 S. Ct. 599, 88 L. Ed. 692 (1944) .................. 15
5

Augustine v. FIA Card Servs., N.A., 485 F. Supp. 2d 1172 (E.D. Cal. 2007) ............................. 10
6

Balistreri v. Pacifica Police Dept., 901 F.2d 696 (9th Cir. 1990)............................................. 2, 12
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Bank of America v. City and County of San Francisco, 309 F.3d 551 (9th Cir. 2002)................. 15 Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)................................ 1

9

Bernini v. Washington Mutual Bank, 446 F.Supp.2d 217 (S.D.N.Y. 2006) ................................ 24
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Berry v. American Express Publishing Co., 147 Cal.App.4th 224 (2006) ............................ 8, 9, 10 Bertero v. Superior Court, 216 Cal.App.2d 213, 230 Cal.Rptr. 719 (1963)................................... 5

12

Blanco v. Keybank USA, N.A., 2005 U.S.Dist.LEXIS 31768 (N.D.Ohio September 30, 2005) 22
13

Bradford-Whitney Corp. v. Ernst & Whinney, 872 F.2d 1152 (3d Cir. 1989)............................. 12
14

Breininger v. Sheet Metal Workers Intern., 493 U.S. 67, 110 S.Ct. 424, 107 L.Ed.2d 388 (1989)
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.................................................................................................................................................... 19
16

Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 126 S.Ct. 1204, 163 L.Ed.2d 1038
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(2006)........................................................................................................................................... 3
18

Daghlian v. DeVry Univ., Inc., 461 F.Supp. 1121 (N.D.Cal. 2006) .............................................. 5
19

Davis v. Chase Bank U.S.A., N.A., et al., Case No. CV 06-04804 DDP (PJWx) (C.D.Cal.).... 2, 4
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DeLeonis v. Walsh, 140 Cal. 175 (1902)........................................................................................ 4
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Doe v. Kamehameha Schools, 470 F.3d 827 (9th Cir. 2007) ........................................................ 23 Douglas v. United States District Court, 495 F.3d 1062 (9th Cir. 2007)......................................... 2 Estate of Migliaccio v. Midland Natl. Ins. Co., 436 F.Supp.2d 1095 (N.D.Cal. 2006).................. 9

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First Nat'l Bank v. Missouri, 263 U.S. 640, 44 S. Ct. 213, 68 L. Ed. 486 (1924) ........................ 15
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Flowers v. Carville, 310 F.3d 1118 (9th Cir. 2002)....................................................................... 14 Fox v. Ethicon Endo-Surgery, Inc., 35 Cal.4th 797 (2005) ..................................................... 13, 14 Freeman v. Mattress Gallery, 2007 Cal.App.Unpub.LEXIS 9102 (Cal.App. November 8, 2007) 6

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Glenbrook Capital limited Partnership v. Mali Kuo, 2007 U.S.Dist.LEXIS 68353 (N.D. Cal. September 16, 2007) .................................................................................................................. 11 Harris v. Capital Growth Investors XIV, 52 Cal.3d 1142 (1991)................................................. 19 Hernandez v. Hilltop Financial Mortgage, Inc., 2007 U.S.Dist.LEXIS 808674 (N.D.Cal. October 27, 2007) .................................................................................................................................... 10 Hitz v. First Interstate Bank, 38 Cal.App.4th 274 (1995)................................................................ 7 Hogar Dulce Hogar v. Community Development Corp., 110 Cal.App.4th 1288 (2003) .............. 14 Howard Jarvis Taxpayers Ass'n v. City of La Habra, 25 Cal.4th 809 (2001)............................... 13 In re Ameriquest Mortgage Co., 2007 U.S.Dist.LEXIS 29641 (N.D.Ill. April 23, 2007)............ 10 Industrial Truckers Assn. v. Henry, 125 F.3d 1305 (9th Cir. 1997).............................................. 18 Industrial Truckers Assn. v. Henry, 909 F.Supp. 1368 (S.D.Cal. 1995) ...................................... 18 Jefferson v. Chase Home Finance LLC, 2007 U.S.Dist.LEXIS 36298 (N.D.Cal. May 3, 2007).. 9, 10 Jimeno v. Mobil Oil Corp., 66 F.3d 1514 (9th Cir. 1995) ............................................................ 17 Jones v. Tracy School Dist., 27 Cal.3d 99 (1980) ........................................................................ 14 Kourtis v. Cameron, 419 F.3d 989 (9th Cir. 2007)........................................................................ 14 Kroske v. US Bank Corp., 87 Empl. Prac. Dec. (CCH) P42, 260 (9th Cir. 2006) ........................ 16 Lewis & Queen v. N.M. Ball Sons, 48 Cal.2d 141 (1954) ............................................................. 4 Lewis v. BT Investment Managers, Inc., 447 U.S. 27, 100 S. Ct. 2009, 64 L. Ed. 2d 702 (1980) .................................................................................................................................................... 15 Lien Huyunh v. Chase Manhattan Bank, 465 F.3d 992 (9th Cir. 2007)........................................ 13 Lozano v. AT&T Wireless Services, Inc., 2007 U.S.App.LEXIS 22430 (9th Cir. September 20, 2007) ................................................................................................................................... passim McClellan v. Chipman, 164 U.S. 347, 17 S. Ct. 85, 41 L. Ed. 461 (1896); ................................ 15 Migliaccio v. Midland Natl. Ins. Co., 2007 U.S.Dist.LEXIS 8159 (N.D.Cal. January 26, 2007).. 9 Monroe Retail, Inc. v. Charter One Bank, N.A., 2007 U.S.Dist.LEXIS 68971 (N.D.Ohio September 18, 2007) .................................................................................................................. 25 Nagrampa v. Mailcoups, Inc., 469 F.3d 1257 (9th Cir. 2006)......................................................... 3
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National Bank v. Commonwealth, 76 U.S. (9 Wall.) 353, 19 L. Ed. 701 (1870)......................... 15 National State Bank v. Long, 630 F.2d 981 (3d Cir. 1980).......................................................... 15 Neel v. Magana, Olney, Levy, Cathcard & Gelfand, 6 Cal.3d 176 (1971) .................................. 13 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 Public Service Co. v. Batt, 67 F.3d 234 (9th Cir. 1995)................................................................ 23 Rose v. Chase Manhattan Bank U.S.A., N.A., 396 F.Supp.2d 1116 (C.D.Cal. 2005) ........... 20, 21 Shroyer v. New Cingular Wireless Services, Inc., 498 F.3d 976 (9th Cir. 2007)........................ 1, 2 SPGGC, LLC v. Blumenthal, 2007 U.S.App.LEXIS 24436 (2d Cir. October 19, 2007) ............ 25 Sprewell v. Golden State Warriors, 266 F.3d 979 (9th Cir. 2001) ............................................. 1, 2 St. Agnes Medical Center v. PacifiCare of California, 31 Cal.4th 1187 (2003) ............................. 5 St. Elizabeth's Hospital v. Secretary of Health and Human Services, 746 F.2d 918 (1st CDir. 1984) .......................................................................................................................................... 18 State ex rel. Metz v. CCC Information Services, Inc., 149 Cal.App.4th 402 (2007) .................... 14 Sunset Importers, Ltd. v. Continental Vintners, 790 F.2d 775 (9th Cir. 1991) ............................. 23 Supermail Cargo v. United States, 68 F.3d 1204 (9th Cir. 1995).................................................. 13 United States v. City of Redwood City, 640 F.2d 963 (9th Cir. 1981) .......................................... 2 United States v. Skinna, 931 F.2d 530 (9th Cir. 1990).................................................................. 17 Van Slyke v. Capital One Bank, 503 F.Supp.2d 353 (N.D.Cal. 2007)........................................... 9 Wells Fargo Bank v. Boutris, 419 F.3d 949 (9th Cir. 2005).......................................................... 15 Wilens v. TD Waterhouse Group, Inc., 120 Cal.App.4th 746, 15 Cal.Rptr.3d 271 (Cal.Ct.App. 2003) ............................................................................................................................................ 6 Wool v. Tandem Computers, Inc., 818 F.2d 1433 (9th Cir. 1985)................................................ 12 Statutes 12 U.S.C. § 1462 et seq................................................................................................................. 24 12 U.S.C. § 24 et seq..................................................................................................................... 15 California Bus. & Prof. Code § 17200 et seq. ....................................................................... passim

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California Bus. & Prof. Code § 17283.......................................................................................... 20 California Civil Code § 1670.5............................................................................................... 19, 23 California Civil Code § 1748.9............................................................................................... 20, 21 California Civil Code § 1750 et seq....................................................................................... passim California Civil Code § 1770.......................................................................................................... 8 California Civil Code § 1770(a)(19)............................................................................................... 5 California Civil Code § 1780(a) ................................................................................................... 20 California Code of Civil Proc. § 1281.4 ....................................................................................... 19 Civil Code § 1770(a)(19) .............................................................................................................. 19 O.R.C. § 1317 ............................................................................................................................... 21 Other Authorities "Guidance on Unfair and Deceptive or Practices Act," (OCC Advisory Letter, March 22, 2002), 2002 OCC CB LEXIS 16, 2002 WL 521380 ............................................................................ 16 United States Constitution, Article III ............................................................................................ 3 Rules

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Fed.R.Civ.P 12(b)(6)................................................................................................................... 1, 2
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Fed.R.Civ.P. 9(b) .......................................................................................................................... 11
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Regulations 12 C.F.R. § 560.2(d) ..................................................................................................................... 24 12 C.F.R. § 7.4008(a).................................................................................................................... 25 12 C.F.R. § 7.4008(d)(1)............................................................................................................... 24 12 C.F.R. § 7.4008(d)(2)(iv)................................................................................................... 17, 18 12 C.F.R. § 7.4008(d)(2)(viii)................................................................................................. 17, 19 12 C.F.R. § 7.4008(d)(iv).............................................................................................................. 16 12 C.F.R. § 7.4008(d)(viii) ..................................................................................................... 16, 21

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I.

INTRODUCTION Defendants have moved to dismiss the entirety of Plaintiffs' complaint. For the reasons

discussed below, the motion is without merit and should be denied. In that way, this Court may proceed to consideration of the merits of Plaintiffs' various causes of action, all of which center on the inescapable legal conclusion (based on controlling Ninth Circuit, California Supreme

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Court, and lower appellate courts) that the terms contained in Defendants' credit card agreements and, particularly, its arbitration provision are unconscionable and unlawful under the laws of the State of California. 1 II. ARGUMENT A. Standard Of Review

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A Rule 12(b)(6) motion tests the legal sufficiency of the claims asserted in a complaint.
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"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

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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.2 Pareto v. F.D.I.C.,

The paragraphs of the Complaint specifying which terms of the agreements are unconscionable and citing relevant cases that establish their unconscionability as a matter of law are, for the Court's convenience, reproduced and attached as Addendum 1 hereto. 2 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, ¶ 55, 77. 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 1 of their Memorandum, [Memorandum 1::261

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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). 3 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, 25, 26, 31-38] ; 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, ¶¶ 55, 77]; 3. Plaintiffs have a claim of fraud against Defendants arising from Defendants' inclusion of unconscionable, illegal, and unenforceable terms in the

28)], would actually state that Plaintiffs claim "will nonetheless fail on the merits." Of course, Defendants' statement was no doubt based on the untoward and completely meritless belief that California law will not control the decision on Plaintiffs' claims. Defendants' argument concerning the applicability of Delaware law is of no moment since, as the Ninth Circuit recently held in Douglas v. United States District Court, 495 F.3d 1062 (9th Cir. 2007), and Shroyer, 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. In any event, Defendants are bound by the final order and unappealed order issued in Davis v. Chase Bank U.S.A., N.A., et al., Case No. CV 06-04804 DDP (PJWx) (C.D.Cal.) (in which all present defendants were defendants), that California law is controlling with regards to issues of unconscionability and that, indeed, the arbitration provision is unconscionable as a matter of law. 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).
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cardmember agreement (excluding the arbitration provision), [Complaint, ¶¶ 4046]; 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; Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006), Nagrampa v. Mailcoups, Inc., 469 F.3d 1257 (9th Cir. 2006)]; 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, 35-38]. Defendants forward that Plaintiffs have not suffered the requisite "concrete" redressable "injury

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in fact" and so do not have standing to maintain their causes of action under either United States Constitution, Article III, the CLRA , the UCL , or common law fraud. Defendants are wrong since under controlling Ninth Circuit precedents and persuasive precedents from this District, standing does exist. Little need be said to refute Defendants' argument other than citation to the recent

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dispositive opinion of the Ninth Circuit in 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 2 for the Court's convenience.) Defendants, understandably, do not cite or even allude to Lozano which involved a claim under the Consumer Legal Remedies Act ("CLRA")(California Civil

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Code §§ 1750 et seq.), the Unfair Competition Law ("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 noconsolidation term.

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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, UCL, CLRA, and fraud standing. The
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injury in Lozano was that the Plaintiff 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 great elaboration. Defendants, of course, argue that no arbitration took place and "Plaintiffs nowhere allege

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they were forced to individually arbitrate any claim against Chase." Defendants' Memorandum at 9:3-4. Defendants overlook four matters that render their argument meritless. First,

Defendants overlook that the right to invoke arbitration does not reside exclusively with them but is, in fact under the card agreement, also a right paid for by Plaintiffs. Second, Defendants are collaterally estopped from even arguing that their arbitration provision is unenforceable

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since they have already litigated and lost that matter in Davis v. Chase Bank U.S.A., N.A., et al., supra, (Chases' motion to compel arbitration denied on basis that it was unconscionable and unenforceable). Third and as is clear from the Complaint, the terms of Defendants' arbitration provision and agreement are, as a matter of law, unconscionable and unenforceable. See

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4

Complaint, ¶¶ 55, 71. They are, therefore and under California law, illegal. Fourth, any arbitration by Plaintiffs is, as a matter of law, not legally possible.
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Resultantly, Plaintiffs'

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 to 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.
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injury is neither hypothetical nor conjectural: they want to but cannot arbitrate their claims due to the unconscionability, unenforceability, and illegality of Defendants' agreement. However, even if it was possible to arbitrate them, it was not necessary to do so in order for 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,

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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. It is also sufficient to establish Plaintiffs' standing to maintain their CLRA causes of

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action. In Lozano the Plaintiff argued that the AT&T agreement violated the California Civil Code § 1770(a)(19) by having unconscionable terms included in it. Relative to the CLRA

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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claims, the Court of Appeal impliedly noted the 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. 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 (emphasis supplied). The requisite damage is the "injury in fact" found to exist in Lozano. 5 That disposes of Defendants' CLRA standing argument. Just as 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

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Plaintiffs here. Plaintiffs here could not, as a matter of law, seek (and much less obtain) mandatory arbitration under the arbitration agreement even they wanted to do so. C. Plaintiffs' Claims Concerning Their Charge, Credit, Gift, And Dining Cards Fall Within The Coverage Of The CLRA

According to the explicit terms of the Defendants' cardmember agreement, Plaintiffs' Chase cards are "to be used to pay for goods and services." Complaint, Ex.14. As a matter of law and fact, when one pays the annual or purchase fee for these American Express cards one

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An alternative basis for Plaintiffs' standing to maintain their CLRA causes of action also exists: the "damage" suffered by them as a direct result of a violation of their statutory right under the CLRA to be free from the inclusion of unconscionable contract terms such as those that Defendants included in the card agreement and arbitration provision. This was established in the just-issued Freeman v. Mattress Gallery, 2007 Cal.App.Unpub.LEXIS 9102 at * 11-13 (Cal.App. November 8, 2007) (a copy of the decision is Addendum 3 hereto for the Court's convenience). If one is needed, a monetary value may be placed on the violation of the Plaintiffs' just noted statutory right by Defendants since California law recognizes that "nominal damages" are required when the value of the violation of a right cannot otherwise be determined.
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also pays for a "convenience service" rather than just a piece of rectangular shaped plastic. 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 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." Hitz v. First Interstate

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Bank, 38 Cal.App.4th 274, 286 (1995). 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." ... [¶] 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." 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 (italics in original, internal citations omitted). The existence and purchase of this "convenience service" by Plaintiffs is specifically alleged in the Complaint. Complaint, ¶ 18:

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Ignoring the "convenience service" provided by their credit cards and paid for by Plaintiffs, Defendants seek dismissal of all CLRA-related causes of action since "the Agreements between Chase and Plaintiffs do not constitute agreements for the `sale or lease of goods or services' as required to pursue a claim under the CLRA." Defendants' Memorandum at 16:3-4. 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 cards are not subject to 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.

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As was explicitly stated in Berry, its actual holding is that credit, standing alone and 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 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," [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 Plaintiffs rendering Defendants' motion meretricious.

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Defendants not only misread and misapply the various precedents that have discussed and applied Berry but also the CLRA's overall applicability to "financial services." Defendants argue "since Berry, a uniform line of cases holds broadly that the CLRA does not regulate financial services." Defendants' Memorandum at 18:22-23. That, to be kind, is not only an

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overstatement but is also incorrect. For instance, Defendants cite Migliaccio v. Midland Natl. Ins. Co., 2007 U.S.Dist.LEXIS 8159 (N.D.Cal. January 26, 2007), in support of this general premise because it held annuities are not covered by the CLRA. However, Defendants

apparently overlook that Estate of Migliaccio v. Midland Natl. Ins. Co., 436 F.Supp.2d 1095, 1109 (N.D.Cal. 2006), denied a motion to dismiss CLRA claims based on "estate and financial

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services" while granting it as to annuities. See Jefferson v. Chase Home Finance LLC, 2007 U.S.Dist.LEXIS 36298 at *3 (N.D.Cal. May 3, 2007). Further, precedents applying the actual holding of Berry support the Plaintiffs' position disprove Defendants' thesis. In Van Slyke v. Capital One Bank, 503 F.Supp.2d 353 (N.D.Cal. 2007), a case upon which Defendants place primary reliance, Judge Alsup dismissed the CLRA

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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 distinction between the two. In that instance

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"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. (emphasis added). Relying on Berry's actual holding that "issuing a line of credit, apart from providing any other good or service, was not a transaction covered by the CLRA," [id. at

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358], the Court thus concluded that dismissal was appropriate. However, here the absent thing that led to dismissal in Van Slyke is present here: the "convenience service."
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Other Courts that have considered the question have reached similar conclusions 6 and, in fact, hold that the CLRA does cover "financial services." Just recently, Judge Illston in

Hernandez v. Hilltop Financial Mortgage, Inc., 2007 U.S.Dist.LEXIS 808674 (N.D.Cal. October 27, 2007), adopting the "convenience service" as falling within the CLRA, held that "mortgage loans, and the activities involved in receiving and maintaining one" ­ a loan, of course,

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necessarily involves credit -- falls within the coverage of the CLRA. Judge Henderson in Jefferson v. Chase Home Finance LLC, supra, agreed: "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)." 2007 U.S.Dist.LEXIS 36298 at *3. The bottom line on all of this is that dismissal is not appropriate. 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

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6

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

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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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 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. The standard for adjudging whether compliance with Rule 9(b) exists was described by this Court in Glenbrook Capital limited Partnership v. Mali Kuo,

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2007 U.S.Dist.LEXIS 68353 at * 11 (N.D. Cal. September 16, 2007). That standard is met here if for no other than reason than it cannot be seriously argued that Defendants are not on sufficiently put on notice of their specific misconduct and surrounding facts to mount a defense. The only lack of purported specificity identified by Defendants is that:

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"Plaintiffs fail to identify with the requisite particularity any statements made by anyone at Chase upon which Plaintiffs relief at the time they obtained their credit cards. Plaintiffs allege no specific acts of wrongdoing by Chase." Defendants' Memorandum at 20:4-6 (underlining in original). Once again Defendants have created their own straw man by emphasizing the time Plaintiffs "obtained" their cards and downplaying that the Plaintiffs' annual payment of the fee in and after 2003 as well as

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amendments to the agreement in, among other times, 2005 are not also accrual triggers. Even if that were not so, the Complaint abounds with specificity concerning the "statements" made by Defendants that underlay the fraud: 1. ¶ 25 (Lee, who obtained his card in the late 1990s, paid his annual fee for the card during each year to the present),
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2. ¶ 26 (Lloyd, who obtained his card in or about 2000, paid his annual fee for the card during each year to the present), 3. ¶¶ 25, 26 (the card agreement, including the arbitration provision) received by both Lee and Lloyd accompanying the delivery of their respective cards has been amended as late as 2005); 4. ¶ 68 [Lee, after discovering the unconscionability of the agreement wrote his Civil Code § 1782 letter to Defendants on January 30, 2007concerning the unconscionability of the agreement); and, 5. ¶¶ 27-30, 38, 40-45 (listing misrepresentations and that the continuing practice of Defendants of making them). Even had such specificity not been presented in the Complaint, the fact that each document 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). See Wool v.

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Tandem Computers, Inc., 818 F.2d 1433, 1440 (9th Cir. 1985). E. No Cause Of Action Is Barred By The Relevant Statute Of Limitations Defendants have forwarded that the Plaintiffs causes of action are time-barred. The purported "factual" bases underlying that argument are that Lloyd obtained his card in or about 2000, Lee obtained his card in the late 1990's, and Defendants' ipse dixit conclusion that "[t]he facts underlying Plaintiffs' fraud claim were fully known to Plaintiffs when they obtained the

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Chase credit cards that are the subject of the litigation." Defendants' Memorandum at 10:27 ­ 11:1. Defendants' argument is without merit. In determining this is so it must, of course, be noted that 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

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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
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complained of occurred within the past three years is, without more, sufficient to overcome Defendants' argument. See Complaint, ¶ 76 ("Beginning at least three years prior to the filing of the Complaint ... Chase made misrepresentations...."). The Complaint also specifically alleges that each Plaintiff also has made annual fee payments from the time he received the card up to and including the present time, [id., at ¶ 25-26], and that Defendants have periodically

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amended the card agreement (apparently most recently in 2005, a time well within the 3-year and 4-year limitations periods). Ibid, 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 argument that
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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). Defendants' overarching error is that Plaintiffs' causes of action did not necessarily and automatically accrue so as to trigger the running of the statute of limitations

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at the time they each first received ("obtained") 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 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). 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, ¶¶ 34-37, 40. That occurs at the time each payment of the annual fee was made, and/or at the time

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of the 2005 (and each post-2000) amendment to the arbitration provision was made, and/or at the time at which each charge to Plaintiffs' card was made which was subject to the terms of the agreement and arbitration provision, and/or at the time of the first use of an additional or replacement card (which reactivated the agreement to the agreement). Each of these matters could (and did) occur within the relevant limitations periods.

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Even if factual accrual had not, as it did, occur within the respective limitations period, several important exceptions to the basic accrual rule exist which are applicable here and assure that accrual occurred within the 3 and 4 years preceding the filing of the action: (1) the "discovery" rule which postpones accrual until Plaintiff discovers or has reason to discover the cause of action, [id., 35 Cal.4th at 807]: (2) the "delayed discovery" rule, [see, e.g., Jones v.

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Tracy School Dist., 27 Cal.3d 99, 105 (1980); Hogar Dulce Hogar v. Community Development Corp., 110 Cal.App.4th 1288, 1295-96 (2003) (""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")];

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and, (3) the "continuing" nature of Defendants' actions rule, [see, e.g., Flowers v. Carville, 310 F.3d 1118, 1126 (9th Cir. 2002) (in the presence of "continuing wrongful conduct, the statute of limitations doesn't begin to run until that conduct ends."); State ex rel. Metz v. CCC Information Services, Inc., 149 Cal.App.4th 402, 418-19 (2007). The bottom line on all of this was noted in Kourtis v. Cameron, 419 F.3d 989, 999-1000

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(9th Cir. 2007), in reversing a dismissal on statute of limitations grounds under circumstances analogous to those present here: "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 identify the date on which the Kourtises discovered these acts of continuing infringement, it can not be concluded that the Kourtises' claim is
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time barred in its entirety. ... Cameron is free, of course, to pursue the statute of limitations issue on summary judgment." (Internal citations omitted) This Court should reach the same conclusion here and deny Defendants' motion to dismiss.

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F. Plaintiffs' Complaint Is Not Preempted By The National Bank Act Defendants contend that, as nationally chartered banks, all of the terms of their credit card agreements are governed solely by federal law, the National Bank Act (12 U.S.C. § 24 et seq.), and its implementing regulations. "State law theories may not be used be used to mount a facial attack on the terms of a national bank's credit card agreement," 7 or so they say. That

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broad overstatement and conclusion is not supported by the terms of the National Bank Act, its implementing regulations, or legal precedents. Indeed, nothing in the National Bank Act

expressly preempts general deceptive practices statutes as a class. 8 Bank of America v. City and County of San Francisco, 309 F.3d 551 (9th Cir. 2002). Nor are they subject to conflict

Defendants' Memorandum at 1:16-17. Banking is not an area in which Congress has evidenced an intent to occupy the entire field to the exclusion of the states, and thus, state legislatures may legislate in all areas not expressly or impliedly preempted by federal legislation. See, e.g., Lewis v. BT Investment Managers, Inc., 447 U.S. 27, 38, 100 S. Ct. 2009, 2016, 64 L. Ed. 2d 702 (1980); First Nat'l Bank v. Missouri, 263 U.S. 640, 656, 44 S. Ct. 213, 215, 68 L. Ed. 486 (1924); Wells Fargo Bank v. Boutris, 419 F.3d 949, 963 (9th Cir. 2005). In fact, federal courts have recognized that "national banks have traditionally been governed in their daily course of business far more by the laws of the State than of the Nation. All [of] their contracts are governed and construed by State laws." National Bank v. Commonwealth, 76 U.S. (9 Wall.) 353, 362, 19 L. Ed. 701 (1870). Except for a few instances in which Congress has explicitly preempted state regulation of national banks, "regulation of banking has been one of dual control since the passage of the first National Bank Act in 1863." National State Bank v. Long, 630 F.2d 981, 985 (3d Cir. 1980). Thus, the rule is that state laws apply, "the exception being the cessation of the operation of such laws whenever they expressly conflict with the laws of the United States or frustrate the purpose for which the national banks were created, or impair their efficiency to discharge [their] duties . . . ." McClellan v. Chipman, 164 U.S. 347, 357, 17 S. Ct. 85, 87, 41 L. Ed. 461 (1896); see also Anderson Nat'l Bank v. Luckett, 321 U.S. 233, 248, 64 S. Ct. 599, 607, 88 L. Ed. 692 (1944) ("national banks are subject to state laws, unless those laws infringe the national banking laws or impose undue burden on the performance of the banks' functions").
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preemption since, for instance, the Office of the Comptroller of the Currency, the agency charged with enforcement of the National Bank Act, itself has taken the position that the UCL is not preempted. See "Guidance on Unfair and Deceptive or Practices Act," (OCC Advisory Letter, March 22, 2002), 2002 OCC CB LEXIS 16, 2002 WL 521380, at 3 n. 2 (citing the UCL specifically, "A number of state laws prohibit unfair or deceptive acts or practices, and such

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laws may be applicable to insured depository institutions.") (A copy of the Advisory Letter is Addendum 4 hereto for the Court's convenience). Nor are they subject to field preemption due to the absence of a pervasive consumer protection regulatory scheme. See, e.g., Kroske v. US Bank Corp., 87 Empl. Prac. Dec. (CCH) P42, 260 (9th Cir. 2006). If the situation was otherwise, the National Bank Act's implementing regulations would not provide an explicit preemption

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exception for State laws dealing with, among other things, contracts and torts and the Comptroller would not have noted that State consumer protection laws are not preempted as a class. Defendants forward that Plaintiffs may not maintain any of their causes of action

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because the statutes upon which they are based are preempted by the National Bank Act's implementing regulations (specifically, 12 C.F.R. §§ 7.4008(d)(iv) and (viii)). Defendants' argument is based upon an overbroad misrepresentation of Plaintiffs' claims and the relief which they seek: i.e., that by this action Plaintiffs "impermissibly would have California law rewrite the terms and disclosures that Chase includes in its Agreements, implicating Chase's core power

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to lend money." Defendant's Memorandum at 13:10-12. It is also based on rather cavalier descriptions of the case holdings as well as the principles which they purportedly support. Three initial comments in these regards should be made. First, "rewriting" the agreement is most assuredly not what Plaintiffs seek, what the UCL/CLRA/common law authorize, or, what

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this Court may order. 9 Second, although the motion to dismiss is made on behalf of a national bank, it is also made on behalf of an entity (Defendant JPMorgan Chase & Co.) that is not a national bank and to which, accordingly, preemption does not apply. Third, Defendants have the burden of proof on their affirmative defense of preemption,10 and, providing only numerous ipse dixits and misrepresentations of the record, they have woefully failed to meet their burden.

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1.

Plaintiffs' Complaint Is Not Preempted By 12 C.F.R. §§ 7.4008((d)(2)(iv) Or 7.4008(d)(2)(viii)

It is ironically interesting that Defendants take the position that the CLRA does not even cover lending (due to the credit element that must definitionally be a part of the "loan"), and indeed make that argument a centerpiece of their Motion. Defendants' Memorandum at 16-19. How is the CLRA preempted if, as Defendants forward, it has no relationship to lending and does not cover Defendant's lending operation? The two arguments are obviously at odds with each other. Notably, the arguments made by Defendants on the CLRA coverage issue actually supports Plaintiffs' position that the CLRA is not preempted.
9

See, e.g., Jimeno v. Mobil Oil Corp., 66 F.3d 1514, 1526 (9th Cir. 1995)(the burden of proof is on the party asserting an affirmative defense); United States v. Skinna, 931 F.2d 530, 533 (9th Cir. 1990)("The burden of asserting and supporting a defense of preemption is on [the defendant]"). In light of this rule, Defendants nonetheless argue that somehow Plaintiffs had what can only be characterized as a very strange burden relative to matters they should have included in the Complaint:
10

"In spite of these plain statements of federal primacy, Plaintiffs identify no provision of the NBA or the OCC's regulations prohibiting class action waivers or limiting how national banks may structure their credit card agreements' arbitration clauses, because no such federal provision exists." Defendants' Memorandum at 15:16-19 (underscoring in original). Obviously Plaintiffs were under no duty to anticipate or plead around any possible affirmative defense in their Complaint. But what is really strange is that Defendants actually do recognize that neither the National Banking Act nor its implementing regulations either prohibit or permit the means by which an arbitration clause must be structured. The absence of such a provision obviously negatively impacts Defendants' argument and not Plaintiffs' allegations since it clearly establishes the absence of express or conflict preemption and is, in fact, an admission by Defendants that their arguments concerning Subsections 7.4008(d)(2)(iv) and (viii) are without support. After all, it is only with the presence of "such federal provision" that preemption can arise.
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Addressing first the argument that the Complaint, UCL, CLRA, and common law are preempted because of their supposed relation to the "terms of credit," Defendant has failed to quote the important portion of the regulations relating to "terms of credit" (importance, in this instance, being measured by support to Plaintiffs' position): "The terms of credit, including the schedule for repayment of principal and interest, amortization of loans, balance, payments due, minimum payments, or term to maturity of the loan, including the circumstances under which a loan may be called due and payable upon the passage of time or a specified even external to the loan." Subsection 7.4008(d)(2)(iv) (emphasis added, signifying the portions not quoted by Defendants). Defendants' argument (and, indeed, its underlying premise) would have this Court believe that "terms of credit" encompasses the various terms in their card agreements that

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Plaintiffs challenge as being unconscionable and, hence, in violation of the CLRA, UCL, and common law. That is wrong: Defendants' argument is based on a misreading of the regulation and, in fact, is nothing more than a blatant attempt to, by the use of ellipses, mislead this Court. "Terms of credit," as used in this subsection, relates to various types of financial "loan"

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or fee information.

It most assuredly does not, for instance, consist of such things as

Defendants' arbitration provision's class action waiver, injunction waiver, consolidation of claims preclusion, and the other unconscionable provisions specified in the Complaint, ¶¶ 55 (a)-(q), 77-78. That is borne out by, among other things, standard rules of regulatory

interpretation such as ejusdem generis (literally, "of the same kind'). 11 When specific words follow general ones (such as exists here), the rule restricts application of the general term to

The rule applies equally to regulations and statutes. See, e.g., St. Elizabeth's Hospital v. Secretary of Health and Human Services, 746 F.2d 918 (1st CDir. 1984); Industrial Truckers Assn. v. Henry, 909 F.Supp. 1368, 1374 (S.D.Cal. 1995), revd. on other grounds, 125 F.3d 1305 (9th Cir. 1997).
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things that are similar to those enumerated. 12 "Terms of credit" is thus limited to things in the same class as those listed in the regulation: i.e., payment terms and other money-related matters. Applied here that necessarily means the contractual terms