Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_08-cv-01392/USCOURTS-casd-3_08-cv-01392-4/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 15:1692 Fair Debt Collection Act

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- 1 - 08cv1392

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

DAVID TOURGEMAN,

Plaintiff,

CASE NO. 08-CV-1392 JLS (NLS)

ORDER: (1) GRANTING

PLAINTIFF’S EX PARTE

APPLICATION TO STRIKE ERIN

TOWNS’S DEPOSITION

TESTIMONY AND (2) GRANTING

PLAINTIFF’S MOTION FOR

LEAVE TO FILE A THIRD

AMENDED COMPLAINT

(Doc. Nos. 125, 141)

vs.

COLLINS FINANCIAL SERVICES, INC.;

NELSON & KENNARD; DELL

FINANCIAL SERVICES, L.P.; et al.,

Defendants.

Presently before the Court is Plaintiff’s motion for leave to file a third amended complaint.

(Doc. No. 125; see Doc. No. 125-1 (Mem. ISO Mot. to Amend).) Also before the Court are

Defendants Collins Financial Services (Collins) and Nelson & Kennard’s (N&K) notice of nonopposition (Doc. No. 133), Defendant Dell Financial Services’ (DFS) opposition (Doc. Nos. 135

(Opp’n to Mot. to Amend)), and Plaintiff’s reply (Doc. No. 138 (Reply)). Plaintiff has also moved

ex parte to strike portions of Erin Towns’s deposition errata sheet, which DFS relies upon in

opposition to Plaintiff’s motion for leave to amend. (Doc. No. 141 (Mem. ISO Mot. to Strike).) DFS

opposes Plaintiff’s ex parte application. (Doc. No. 150 (Opp’n to Mot. to Strike).) Having reviewed

the parties’ arguments and the law, the Court GRANTS Plaintiff’s ex parte application to strike and

GRANTS Plaintiff’s motion for leave to amend.

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 The most recent scheduling order to address the issue set a January 5, 2009 deadline for

motions to join parties and amend the pleadings. (Doc. No. 77, at 1.)

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BACKGROUND

On July 31, 2008, Plaintiff filed a complaint against, inter alia, Collins, N&K, and DFS

alleging violations of the Fair Debt Collection Practices Act (FDCPA) and California Rosenthal Act,

invasion of privacy, and negligence. (Doc. No. 1 (Compl.).) On April 6, 2009, Plaintiff amended his

complaint to add class allegations and a claim for violation of California Business and Professions

Code § 17200 (UCL claim). (Doc. No. 34 (FAC).) Plaintiff amended his complaint again on August

27, 2009 to, inter alia, tether its UCL claim to alleged violations of the FDCPA and Rosenthal Act.

(Doc. No. 60 (SAC); see also Doc. No. 58, at 11–12 (dismissing without prejudice Plaintiff’s UCL

claim against DFS for failure to state specific provisions of the FDCPA or Rosenthal Act that DFS

allegedly violated to trigger UCL).)

More than a year later, on October 4, 2010, Plaintiff filed the present motion for leave to

amend to change the proposed class definition, allege additional facts, and add defendants.1

 (See

Mem. ISO Mot. to Amend 1; see also Doc. No. 137-1 (Proposed TAC).) Plaintiff wishes to allege

newly discovered facts regarding DFS’ alleged sale of nonexistent debts to Collins. (Mem. ISO Mot.

to Amend 3–4; see Proposed TAC ¶¶ 20–22.) Plaintiff also wishes to join as defendants Collins

Financial Services USA, Inc. (Collins USA) and Paragon Way, Inc., which Plaintiff claims are alter

egos of Collins. (Mem. ISO Mot. to Amend 4–5; see Proposed TAC ¶¶ 7–8.) Finally, Plaintiff wishes

to amend its class allegations to incorporate newly discovered facts. (See Proposed TAC ¶¶ 35–53.)

DISCUSSION

1. Motion to Strike Portions of Erin Towns’s Errata Sheet

Plaintiff’s motion for leave to amend depends, at least in part, on Ms. Towns’s deposition

errata sheet. (See Opp’n to Mot. to Amend 5–6, 13.) Accordingly, the Court first addresses Plaintiff’s

motion to strike portions of that errata sheet.

On September 8, 2010, Plaintiff deposed Ms. Towns, DFS’ “senior recovery manager,” in

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2

 The Court’s citations to Plaintiff’s memorandum in support of its application to strike

portions of Ms. Towns’s deposition testimony and the exhibits thereto refer to the unredacted

application filed under seal. (See Doc. No. 140 (Plaintiff’s motion to file portions of application under

seal); Doc. No. 142 (Order granting Plaintiff’s motion to file portions of application under seal); Doc.

No. 147 (unredacted version of application).) A redacted version of the application is available at

docket number 141.

3

 Rule 30(e)(1) provides:

On request by the deponent or a party before the deposition is completed, the deponent

must be allowed 30 days after being notified by the officer that the transcript or

recording is available in which: (A) to review the transcript or recording; and (B) if

there are changes in the form or substance, to sign a statement listing the changes and

the reasons for making them.

Fed. R. Civ. P. 30(e)(1).

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Austin, Texas. (Mem. ISO Mot. to Strike 1; see Doc. No. 147-1 (Towns Dep.).)2 During the

deposition, Ms. Towns testified that loans DFS sold to Collins consisted entirely of loans originated

by CIT Online Bank (CIT). (E.g., Towns Dep. 56:21–57:2; 84:19–23.) On October 3, 2010—the day

before Plaintiff moved to amend his complaint—Ms. Towns submitted an errata sheet purporting to

correct the original deposition transcript. (Doc. No. 147-2 (Errata Sheet).) The changes range from

corrections of transcription errors to outright contradictions. (See id.) Relevant here, Ms. Towns

changed her testimony to say that CIT, DFS, and American Investment Bank originated the loans DFS

sold to Collins, rather than just CIT. (Compare, e.g., Towns Dep. 56:19–21 (“[Question:] To your

knowledge, were any debts besides those originated by CIT included in this portfolio? [Answer:] My

understanding, they were CIT loans.”), with Errata Sheet 1 ([Page/Line:] 56:21 [Change & Reason:]

“To my understanding it consisted of AIB, CIT[,] and DFS loans.”).)

Federal Rule of Civil Procedure 30(e) allows changes to deposition testimony “in form or

substance” if made within thirty days of being notified that the transcript is available and accompanied

by a statement of the reasons for making them.3

 Although the Rule, by its terms, allows changes “in

form or substance,” Fed. R. Civ. P. 30(e)(1)(B), Ninth Circuit authority limits the Rule’s application

to “corrective, and not contradictory, changes,” Hambleton Bros. Lumber Co. v. Balkin Enters., Inc.,

397 F.3d 1217, 1226 (9th Cir. 2005). “The Rule cannot be interpreted to allow one to alter what was

said under oath. If that were the case, one could merely answer the questions with no thought at all

then return home and plan artful responses. . . . A deposition is not a take home examination.” Garcia

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4

 Ms. Towns arguably does explain some of her changes inasmuch as her errata sheet

identifies “Typo[s]” in the original transcription. (See Errata Sheet 1.) However, Ms. Towns does not

attempt to justify the contradictory changes that Plaintiff and the Court are concerned with here.

5

 DFS’ statement that it “is willing to provide an errata sheet delineating the reason for Ms.

Towns’[s] corrections” is unavailing. (Opp’n to Mot. to Strike 6.) Rule 30(e) required DFS to submit

a statement of reasons along with the original errata sheet, and the time for submitting a statement of

reasons has since elapsed. See Fed. R. Civ. P. 30(e)(1) (allowing deponent thirty days to submit

corrections); Errata Sheet 2 (dated October 3, 2010); see also Blackthorne v. Posner, 883 F. Supp.

1443, 1454 n.16 (D. Or. 1995) (excluding untimely errata sheet).

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v. Pueblo Country Club, 299 F.3d 1233, 1242 n.5 (10th Cir. 2002) (quoting Greenway v. Int’l Paper

Co., 144 F.R.D. 322, 325 (W.D. La. 1992)); accord Bartos v. Pennsylvania, 2010 WL 1657284, at

*5–6 (M.D. Pa. Apr. 23, 2010); Citgo Petroleum Corp. v. Ranger Enters., Inc., 632 F. Supp. 2d 878,

883–84 (W.D. Wis. 2009); Wyeth v. Lupin Ltd., 252 F.R.D. 295, 296–97 (D. Md. 2008); Donald M.

Durkin Contracting, Inc. v. City of Newark, 2006 WL 2724882, at *5 (D. Del. Sept. 22, 2006); Adams

v. Allied Sec. Holdings, 236 F.R.D. 651, 652 (C.D. Cal. 2006).

Further, Rule 30(e) requires that any changes to deposition testimony be accompanied by a

statement of reasons explaining the changes. Fed. R. Civ. P. 30(e)(1)(B); accord Hambleton Bros.,

397 F.3d at 1224. Courts insist on strict compliance with Rule 30(e)’s technical requirements,

including the requirement of a statement of reasons. Hambleton Bros., 397 F.3d at 1224–26; Bartos,

2010 WL 1657284, at *5 (collecting cases); Brokaw v. Qualcomm, Inc., 2003 U.S. Dist. LEXIS

26519, at *26 (S.D. Cal. Mar. 4, 2003); Holland v. Cedar Creek Mining, 198 F.R.D. 651, 653 (S.D.

W. Va. 2001). Without a statement of reasons, a reviewing court cannot determine “whether the

alterations have a legitimate purpose.” Hambleton Bros., 397 F.3d at 1224–25.

Having analyzed Ms. Towns’s proposed changes, it is apparent that her errata sheet runs afoul

of Rule 30(e)’s procedural and substantive requirements. First, as a procedural matter, the errata sheet

is not accompanied by a statement of reasons explaining the changes.4

 This alone justifies striking

the errata sheet.5 See, e.g., Hambleton Bros., 397 F.3d at 1224–26. Second and more troubling is the

substance of Ms. Towns’s changes. Although some of the changes merely correct typographical errors

(see Errata Sheet 1), others directly contradict Ms. Towns’s sworn deposition testimony (see Mem.

ISO Mot. to Strike 2–3 (summarizing contradictory changes)). Changing “yes” to “no” and “correct”

to “no not correct” are paradigmatic examples contradiction, rather than correction. Hambleton Bros.,

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397 F.3d at 1226. Contradiction is not a proper use of an errata sheet.

DFS’ arguments in opposition to Plaintiff’s motion to strike are thoroughly unavailing. First,

DFS contends that the Court may strike an errata sheet under Hambleton Brothers only if the deponent

attempts to use the errata sheet to manufacture a genuine issue of material fact to defeat summary

judgment. (Opp’n to Mot. to Strike 3.) Thus, DFS contends, the Court should not strike Ms. Towns’s

errata sheet because “[n]o dispositive motion is presently on file.” (Id.) The Court, however, does

not read Hambleton Brothers so narrowly. Courts strike errata sheets in contexts beyond summary

judgment. See, e.g., Bartos, 2010 WL 1657284, at *8 (striking errata sheets for all purposes); Wyeth,

252 F.R.D. at 295 (precluding use of errata sheet at trial). The Court sees DFS’ reliance on Ms.

Towns’s errata sheet in opposition to Plaintiff’s motion for leave to amend as analogous to the use of

a contradictory errata sheet to create a factual dispute to defeat summary judgment. (See Opp’n to

Mot. to Amend 5 (arguing that “the facts refute” that CIT originated all of the loans DFS sold to

Collins and citing Ms. Towns’s errata sheet); id. at 13 (arguing that “[t]he accounts sold to Collins

included accounts from CIT, AIB, and DFS” and citing Ms. Towns’s errata sheet).) Accordingly, the

Court agrees with Plaintiff that Hambleton Brothers controls.

Second, DFS contends that the Court should not strike Ms. Towns’s errata sheet because

witness and documentary evidence corroborates Ms. Towns’s changes to her deposition testimony.

(Opp’n to Mot. to Strike 4–5.) Whether or not DFS is correct, this argument misses the point. DFS

chose Ms. Towns as its Rule 30(b)(6) designee and should have prepared her accordingly. (See id.

at 2 (noting that DFS designated Ms. Towns to speak to DFS’ business relationship with Collins, CIT,

and AIB).) DFS produced documents during Ms. Towns’s deposition—documents that DFS contends

corroborate Ms. Towns’s errata sheet changes—that Ms. Towns should have reviewed. (Id. at 5; Doc.

No. 150-1 (Ammerman Decl. in Opp’n to Mot. to Strike) Ex. B.) DFS had an opportunity to cross

examine Ms. Towns to clear up any inaccuracies. See Fed. R. Civ. P. 30(c)(1). To allow the proposed

changes now would undermine the Rule 30(b)(6) deposition and convert it to a “take home

examination.” Greenway, 144 F.R.D. at 325.

Third, DFS contends that Plaintiff’s requested relief—striking the contradictory portions of

Ms. Towns’s errata sheet—is not necessary because Plaintiff can impeach Ms. Towns using her

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original deposition testimony. (Opp’n to Mot. to Strike 6.) But the Court does not see why DFS

should suffer no penalty for its misuse of Rule 30(e). Contrary to DFS’ apparent suggestion, it will

not lose its only bite at the apple if the Court disallows the contradictory portions of Ms. Towns’s

errata sheet. DFS may, consistent with the rules of procedure and rules of evidence, present to the

trier of fact the changes and additions that DFS seeks to make to Ms. Towns’s testimony through the

errata sheet. Further, imposing no remedy at all for DFS’ clearly improper use of an errata sheet

would render null Rule 30(e)’s procedural and substantive requirements.

Accordingly, Plaintiff’s motion to strike is GRANTED. The Court STRIKES and deems

inadmissible for all further proceedings the following portions of Ms. Towns’s errata sheet: 56:21,

56:23, 57:2, 84:9, 84:13–14, 84:17–18, 84:21, 84:23, and 105:9.

2. Motion for Leave to File a Third Amended Complaint

A. Legal Standard

Leave to amend the complaint should be freely given “when justice so requires.” Fed. R. Civ.

P. 15(a)(2). But while Rule 15 should be interpreted liberally, leave to amend should not be granted

automatically. Jackson v. Bank of Haw., 902 F.2d 1385, 1387 (9th Cir. 1990). A trial court may deny

leave to amend if permitting an amendment “would prejudice the opposing party, produce an undue

delay in the litigation, or result in futility for lack of merit.” Id.

If there is a deadline for amendment set by a scheduling order, and the deadline has passed,

an amendment to the pleadings requires that the scheduling order be modified. Coleman v. Quaker

Oats Co., 232 F.3d 1271, 1294 (9th Cir. 2000). The scheduling order may be modified by leave of

court on a showing of good cause and with the judge’s consent. Fed. R. Civ. P. 16(b)(4).

B. Analysis

Plaintiff’s proposed amendments to the complaint are purportedly the products of information

disclosed during recent depositions. (Mem. ISO Mot. to Amend 2–5; Doc. No. 125-2 (Weaver Decl.

ISO Mot. to Amend) ¶¶ 2–5.) The Court addresses each category of proposed amendments in turn.

(1) Additional Facts

Plaintiff wishes to allege additional facts relating to his recent discovery that CIT Online Bank

was the creditor on 85,292 allegedly unpaid accounts that DFS sold to Collins, Plaintiff’s among them.

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6

 In summary, Plaintiff propounded its first set of written discovery on DFS and originally

noticed DFS’ deposition in April 2009. (Weaver Decl. ISO Reply ¶¶ 2, 3.) DFS generally refused

to respond to written discovery while dispositive motions were pending. (Id. ¶ 2.) Accordingly,

Plaintiff had to postpone DFS’ deposition. (Id. ¶ 3.) On November 23, 2009, the Court granted in part

and denied in part DFS’ motion to dismiss and denied Defendants’ motions for summary judgment.

(Doc. Nos. 89, 90.) Plaintiff then asked DFS to supplement its discovery responses and re-noticed its

deposition for late January 2010. (Weaver Decl. ISO Reply ¶ 2.) As of January 14, 2010, DFS had

not responded to Plaintiff’s discovery requests, and Plaintiff was again forced to postpone DFS’

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(Mem. ISO Mot. to Amend 1, 3–4; see Proposed TAC ¶¶ 21–22, 36–37.) Plaintiff also wishes to

allege facts regarding DFS’ alleged creation of “10,000 American Investment Bank loan agreements

that did not actually exist.” (Mem. ISO Mot. to Amend 4; see Proposed TAC ¶ 36.)

DFS, for its part, asserts that “the new allegations are not new information” (Opp’n to Mot.

to Amend 3, 11–13) and that it will be unduly prejudiced by an amendment alleging additional facts

(id. at 3–4, 9–11). DFS also contends that the allegations in the Proposed TAC are futile. (Id. at

13–19.)

(a) Undue Delay

DFS’ contention that the new allegations are not new information appears to be premised upon

the fact that Plaintiff’s FAC dismissed AIB and named CIT as a defendant. (Opp’n to Mot. to Amend

12.) At that time, however, Plaintiff believed that “[Collins’ and N&K’s] naming of the wrong

original creditor was an isolated incident that resulted from [their] lack of meaningful involvement

in the collection of debts.” (Reply 2.) Until Ms. Towns’s deposition, Plaintiff had no reason to

believe that Collins’ and N&K’s naming of the wrong creditor resulted from DFS’ alleged creation

of 10,000 AIB accounts that never actually existed. (See Weaver Decl. ISO Mot. to Amend ¶ 5.)

Accordingly, DFS’ contention that “Plaintiff has known about the AIB/CIT mix up since at least

January 2009” lacks merit. (Opp’n to Mot. to Amend 3.)

Nor is the Court persuaded that Plaintiff’s recent discovery of the subject information resulted

from undue delay. DFS contends that Plaintiff delayed in taking Ms. Towns’s deposition “because

Plaintiff was in a discovery dispute with Collins and N&K, not with DFS.” (Opp’n to Mot. to Amend

12.) The facts do not bear DFS’ contention out. As Plaintiff’s counsel’s declaration summarizes,

Plaintiff’s multiple postponements of DFS’ deposition largely resulted from DFS’ refusals to respond

to written discovery.6

 (See Doc. No. 138-1 (Weaver Decl. ISO Reply) ¶¶ 2–5.) Plaintiff did not act

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deposition. (Id. ¶ 3 & Ex. 1.) In April 2010, Plaintiff propounded a second set of discovery requests

on DFS. (Id. ¶ 4.) After the parties met and conferred, DFS produced documents and supplemented

its discovery responses in June 2010 and July 2010, respectively. (Id.) With those documents and

responses in hand, Plaintiff re-noticed DFS’ deposition for September 2010. (Id. at ¶ 5.)

7

 Nevertheless, the Court will permit a limited extension of the discovery deadline and pretrial

dates to allow the parties to conduct additional discovery on Plaintiff’s new allegations.

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unreasonably in waiting to conduct DFS’ deposition until DFS responded to written discovery.

(b) Prejudice

DFS also argues that Plaintiff’s proposed amendments would prejudice DFS because

“Plaintiff’s proposed amendments are tantamount to bringing a new class action lawsuit.” (Opp’n to

Mot. to Amend 9.) The Court disagrees. Plaintiff has long contended that DFS sold inaccurate

account information to Collins. (See, e.g., FAC ¶ 24 (“As a result of its failure to process payments

properly, Defendants [DFS] and CIT falsely indicated the existence of an alleged debt by Plaintiff,

which alleged debt Defendants [DFS] and/or CIT subsequently sold to Defendant Collins . . . .”).)

Plaintiff’s proposed amendments simply allege newly discovered facts that explain why DFS sold

inaccurate account information to Collins. (See Proposed TAC ¶¶ 20–22, 35–36.) Notably, Plaintiff

does not seek to allege any new causes of action. Cf. Morongo Band of Mission Indians v. Rose, 893

F.2d 1074, 1079 (9th Cir. 1990) (affirming denial of motion for leave to amend to add claim under

Racketeer Influenced and Corrupt Organizations Act). Accordingly, the Court is not convinced that

allowing Plaintiff’s proposed amendments would “greatly alter[] the nature of the litigation.” Id.

DFS also notes that Plaintiff’s motion for leave to amend “comes on the eve of the discovery

cut-off[,] leaving Defendants without the time or allowable written discovery available to inquire into

this new case.” (Id. at 10.) Courts do not look favorably on motions for leave to amend made at or

near the close of discovery. See, e.g., Solomon v. North Am. Life & Cas. Ins. Co., 151 F.3d 1132, 1139

(9th Cir. 1998). Here, however, the late hour of Plaintiff’s motion for leave to amend does not reflect

a lack of diligence on Plaintiff’s part. Rather, it was DFS’ obstreperousness in discovery that

prevented Plaintiff from learning the facts that give rise to his proposed amendments. This fact

warrants an exercise of discretion in Plaintiff’s favor.7

(c) Futility of Amendment

DFS also argues that the Court should deny Plaintiff leave to amend because the Proposed

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TAC’s allegations are futile. (See Opp’n to Mot. to Amend 13–19.) “[A] proposed amendment is

futile only if no set of facts can be proved under the amendment to the pleadings that would constitute

a valid and sufficient claim or defense.” Miller v. Rykoff-Sexton, Inc., 845 F.2d 209, 214 (9th Cir.

1988).

First, DFS argues that amendment of Plaintiff’s negligence claim would be futile because DFS

owed Plaintiff no independent duty of care. (Opp’n to Mot. to Amend 16–17.) At this stage and with

limited briefing, the Court is reluctant to hold as a matter of law that DFS owed Plaintiff no duty of

care. Plaintiff cites persuasive authority suggesting that DFS, as a creditor, owed Plaintiff, its

customer and debtor, “a duty of reasonable care in the handling of his account, which includes the

collection of his debt.” Colo. Capital v. Owens, 227 F.R.D. 181, 188 (E.D.N.Y. 2005). Accordingly,

the Court cannot conclude that amendment of Plaintiff’s negligence claim would be clearly futile.

Second, DFS argues that Plaintiff’s amended negligence claim would be time-barred. (Opp’n

to Mot. to Amend 17–19.) The Court disposed of DFS’ statute of limitations defense in ruling on DFS’

motion to dismiss Plaintiff’s FAC:

Based on the facts as Plaintiff alleges them, the first time he reasonably could [have]

become aware that his debt had been mismanaged by DFS was when the state

collection action was filed against him in 2007. Since Plaintiff filed the instant action

in mid-2008, the two[-]year statute of limitations on his negligence claim had yet to

run.

(Doc. No. 58, at 14.) The same holds true here. (See Proposed TAC ¶ 29.) DFS’ argument to the

contrary demonstrates remarkable bad faith.

DFS also contends that the Proposed TAC’s allegations do not relate back to the original

complaint. “The relation-back doctrine requires that the amended complaint must (1) rest on the same

general set of facts, (2) involve the same injury, and (3) refer to the same instrumentality, as the

original complaint.” Norgart v. Upjohn Co., 981 P.2d 79, 96 (Cal. 1999). As discussed above,

Plaintiff has long contended that DFS sold inaccurate account information to Collins and that Plaintiff

suffered injury from DFS’ sale of inaccurate account information. (See FAC ¶ 24.) The Proposed

TAC’s allegations do not materially differ in this respect. Accordingly, the proposed amendments

relate back.

Third, DFS argues that Plaintiff lacks standing to bring a claim under California Business and

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8

 DFS’ cited authorities do not convince the Court otherwise. SeeChurchill Vill., 169 F. Supp.

2d at 1126–27; Norwest Mortg., Inc. v. Superior Court, 85 Cal. Rptr. 2d 18, 23–25 (Cal. Ct. App.

1999). In Churchill Village, the court held that in-state sales alone did not establish a nexus with

California because only ten percent of the defendant’s total sales occurred in California. 169 F. Supp.

2d at 1127. In Norwest Mortgage, the court held the UCL inapplicable to non-California residents for

whom the Defendant’s conduct occurred in states other than California. 85 Cal. Rptr. at 23–25. DFS

has given the Court no reason to believe Plaintiff can prove no set of facts that would establish his and

the class members’ standing to pursue claims under the UCL.

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Professions Code section 17200 (the UCL) because Plaintiff is a resident of Mexico. (Opp’n to Mot.

to Amend 19.) “[S]ection 17200 does not support claims by non-California residents where none of

the alleged misconduct or injuries occurred in California.” Churchill Vill., LLC v. Gen. Elec. Co., 169

F. Supp. 2d 1119, 1126 (N.D. Cal. 2000). Here, Plaintiff’s claim unquestionably has a nexus with

California—Plaintiff alleges that (1) his computer was shipped to a California address, (2) DFS

provided Collins with a California address for Plaintiff, (3) Defendants sent letters to Plaintiff at

California addresses, (4) N&K filed suit against Plaintiff in California state court, and (5) N&K served

process on Plaintiff’s father in California. (Proposed TAC ¶¶ 16, 24, 27, 29, 31.) Plaintiff also

proffers evidence that “California was ‘in the top five’ when it came to the number of alleged debtors

in the debt portfolio DFS sold to Collins.” (Weaver Decl. ISO Reply ¶ 8.) Accordingly, the Court

is unconvinced that “no set of facts can be proved under the amendment to the pleadings that would

constitute a valid and sufficient claim” under the UCL.8

 Miller, 845 F.2d at 214; see Keilholtz v.

Lennox Hearth Prods. Inc., 268 F.R.D. 330, 339–40 (N.D. Cal. 2010) (applying UCL where nineteen

percent of defendant’s sales occurred in California, seventy-six percent of defendant’s products were

partially manufactured in California, and three percent of defendant’s products were manufactured

exclusively in California).

(2) Joinder of Collins USA and Paragon Way

Federal Rules of Civil Procedure 19 and 20 govern who may be joined as a party. Rule

20(a)(2) allows for the permissive joinder of defendants if “any right to relief is asserted against them

jointly, severally, or in the alternative with respect to or arising out of the same transaction,

occurrence, or series of transactions or occurrences” and “any question of law or fact common to all

defendants will arise in the action.” Fed. R. Civ. P. 20(a)(2).

 Plaintiff proposes to join Collins USA and Paragon Way as defendants because newly

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 The Court also gives great weight to the acquiescence of Collins, which presumably has the

most to lose from Collins USA and Paragon Way’s joinder. (See Doc. No. 133.) As to DFS’

unsupported, two-sentence opposition to the proposed defendants’ joinder, the Court can neither

conceive of a legitimate reason for DFS to oppose the joinder of Collins USA and Paragon Way nor

understand why these companies statuses as Collins’ alter egos renders their joinder a “sham.” 

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discovered facts suggest that the proposed defendants are alter egos of Collins. (Mem. ISO Mot. to

Amend 4–5; Weaver Decl. ISO Mot. to Amend ¶ 5.) Notably, Collins does not oppose the proposed

amendment. (Doc. No. 133.) DFS, in a footnote, contends that “the additions of Collins USA and

Paragon Way adds nothing to the Complaint. If what Plaintiff alleges is true, that these entities are

alter egos of the already existing Defendant Collins . . . , adding these defendants is a sham.” (Opp’n

to Mot. to Amend 13 n.1.)

Based upon the facts Plaintiff cites in support of the alleged alter ego relationship and the

Proposed TAC’s allegations, the Court finds that Collins USA and Paragon Way can be properly

joined as defendants in this action. (See Weaver Decl. ISO Mot. to Amend ¶ 5 & Ex. C; Proposed

TAC ¶¶ 7–9, 13, 15; Fed R. Civ. P. 20(a)(2).) Plaintiff’s claims against Collins USA and Paragon

Way arise from the same series of transactions as its claims against Collins, N&K, and DFS—DFS’

sale of charged off debts to Collins and Collins’ attempt to collect on those debts. (See Compl. ¶¶ 9,

13, 15.) Plaintiff’s claims will require the Court to determine whether Defendants’ actions violated

California and federal law. Joinder of Collins USA and Paragon Way is therefore permissible.9

(3) Class Definitions

Finally, DFS argues that “the class definitions in the [Proposed TAC] are incomprehensible,

overbroad, and have no nexus whatsoever with the alleged wrongdoing by DFS.” (Opp’n to Mot. to

Amend 15.) Class allegations are rarely tested at the pleading stage. Gillibeau v. City of Richmond,

417 F.2d 426, 432 (9th Cir. 1969). Rather, Courts test class allegations through a motion for class

certification. In re Wal-Mart Stores, Inc. Wage & Hour Litig., 505 F. Supp. 2d 609, 615 (N.D. Cal.

2007). As the Court stated in its order denying DFS’ motion to dismiss Plaintiff’s FAC:

District courts must take a “close look” at the claims and evidence to determine the

validity of a class certification. A separate hearing to determine class certification thus

respects the language of the [Federal Rules of Civil Procedure] and precedents of the

Supreme Court and Ninth Circuit, as well as the value of class action litigation.

(Doc. No. 58, at 14 (citing Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 615 (1997)) (citation

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omitted).) DFS’ challenge to the class definitions in the Proposed TAC is therefore premature. DFS

may challenge the class allegations at the class certification stage.

CONCLUSION

For the reasons stated, Plaintiff’s ex parte application to strike Ms. Towns’s errata sheet is

GRANTED. (Doc. No. 141.) Plaintiff’s motion for leave to file a third amended complaint is also

GRANTED, and the scheduling order is MODIFIED accordingly. (Doc. No. 125.) Plaintiff shall

file his third amended complaint within seven days of the date that this Order is electronically

docketed. Within seven days of the date Plaintiff files his amended complaint, the parties SHALL

SUBMIT to Judge Stormes a joint motion to extend the pretrial dates to accommodate a limited

reopening of discovery to investigate Plaintiff’s new allegations.

IT IS SO ORDERED.

DATED: November 22, 2010

Honorable Janis L. Sammartino

United States District Judge

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