Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_06-cv-00398/USCOURTS-caed-1_06-cv-00398-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 15:1681 Fair Credit Reporting Act

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

ROBERT WOODS, et al., )

)

Plaintiffs, )

v. )

)

ASSET RESOURCES, et al., )

)

Defendants. )

)

 )

1:06-cv-00398-SMS

ORDER GRANTING IN PART AND

DENYING IN PART THE MOTION OF

DEFENDANT PROTECTION ONE ALARM

MONITORING, INC. TO DISMISS (DOC.

22)

ORDER DENYING THE MOTION OF

DEFENDANT ASSET RESOURCES, INC.

TO DISMISS (DOC. 20)

Plaintiffs are proceeding with a civil action in this Court.

By order dated August 30, 2006, entered upon to the parties’

consent, Judge Oliver W. Wanger assigned this action to the

undersigned Magistrate Judge for all proceedings, including the

entry of final judgment, pursuant to 28 U.S.C. § 636(c), Fed. R.

Civ. P. 73(b), and Local Rule 73-301.

Pending before the Court are the motions of Defendant

Protection One Alarm Monitoring (POAM) and Defendant Asset

Resources (AR) to dismiss.

BACKGROUND

Defendants POAM and AR removed this action from the Merced

County Superior Court on April 6, 2006, on the basis of a first

amended complaint (FAC) filed in state court. The basis of this

Case 1:06-cv-00398-SMS Document 27 Filed 12/21/06 Page 1 of 44
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Court’s jurisdiction appears to be diversity of citizenship

because no claims under the Fair Credit Reporting Act are stated. 

Plaintiffs seeks compensatory and punitive damages from

Defendants for allegedly malicious and false publication of

derogatory and false credit information, breach of contract, and

violation of the California Consumer Credit Reporting Act, Cal.

Civ. Code § 1785.1 et seq. Defendant AR filed an answer in this

Court on May 9, 2006; Defendant POAM answered on August 29, 2006.

Defendant AR filed a motion to dismiss on October 27, 2006.

Plaintiff filed opposition (styled as a reply) on November 12,

2006 (Doc. 24). 

Defendant POAM filed a motion to dismiss on October 27,

2006. 

Plaintiff filed opposition (styled as a reply) on November

12, 2006 (Doc. 23). A reply was filed by Defendant POAM on

November 22, 2006 (Doc. 25).

On December 1, 2006, the motions came on regularly for

hearing at 9:30 a.m. in Courtroom 7 before the Honorable Sandra

M. Snyder, United States Magistrate Judge. P. Michael Pekin 

appeared on behalf of Plaintiffs. Alexander J. Harwin was present 

on behalf of Defendant POAM; Edgar De Verra and Christopher Mundt

appeared telephonically on behalf of Defendant AR. The Court had

reviewed all the papers submitted in support of the motion. After

argument, the parties were invited to submit to the Court a copy

of the original complaint filed in the Merced Superior Court on

or about August 2003. Thereafter the matter was submitted to the

Court for decision.

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MOTION TO DISMISS OF DEFENDANT POAM

I. Failure to State a Claim upon Which Relief May Be Granted

A motion pursuant to Fed. R. Civ. P. 12(b)(6) [failure to

state a claim upon which relief may be granted] may be raised

after the moving party has filed a responsive pleading to the

challenged complaint by way of a motion for judgment on the

pleadings pursuant to Fed. R. Civ. P. 12(c). Fed. R. Civ. P.

12(h); Aldabe v. Aldabe, 616 F.2d 1089, 1093 (9 Cir. 1980). A th

motion for judgment on the pleadings is properly granted when,

taking all allegations in the pleading as true, the moving party

is entitled to judgment as a matter of law. Merchants Home

Delivery Service, Inc. v. Frank B. Hall & Co., 50 F.3d 1486, 1488

(9 Cir. 1995). The standard on a motion for judgment on the th

pleadings is the same as that applied on a motion pursuant to

Fed. R. Civ. P. 12(b)(6). Hal Roach Studios, Inc. v. Richard

Feiner & Co., Inc., 896 F.2d 1542, 1550 (9 Cir. 1990). th

Fed. R. Civ. P 12(b)(6) provides for the making of a motion

to dismiss for failure to state a claim upon which relief can be

granted; such a motion tests the legal sufficiency of the claim

or claims stated in the complaint. Dismissal for failure to state

a claim is proper only if it is clear that no relief could be

granted under any set of facts that could be proved consistent

with the allegations. Cervantes v. City of San Diego, 5 F.3d

1273, 1274 (9 Cir. 1993). A complaint should not be dismissed th

under Rule 12(b)(6) "unless it appears beyond doubt that the

plaintiff can prove no set of facts in support of his claim which

would entitle him to relief." Conley v. Gibson, 355 U.S. 41,

45-46, (1957). Dismissal is proper only where there is either a

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lack of a cognizable legal theory, or an absence of sufficient

facts alleged under a cognizable legal theory. Balistreri v.

Pacifica Police Dept., 901 F.2d 696, 699 (9 Cir. 1990). th

In considering a motion under Fed. R. Civ. P. 12(b)(6), a

court must construe the complaint in the light most favorable to

the plaintiff; accept all well-pleaded factual allegations as

true; and determine whether the plaintiff can prove any set of

facts to support a claim that would merit relief. Cahill v.

Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9 Cir. 1996). th

Conclusory allegations of law and unwarranted inferences are

insufficient to defeat a motion to dismiss. Pareto v. Federal

Deposit Ins. Corp., 139 F.3d 696, 699 (9 Cir. 1998) Generally, a th

plaintiff must give the defendant fair notice of the claim and

the grounds for making the claim. Leatherman v. Tarrant County

Narcotics Intelligence and Coordination Unit, 507 U.S. 163, 168

(1993).

In determining a motion to dismiss or motion for judgment on

the pleadings, the Court generally considers only the complaint.

Hal Roach Studios, Inc. v Richard Feiner & Co., 896 F.2d 1542,

1555 n.19 (9 Cir. 1990) (as amended). However, the Court may th

consider matters that are properly the subject of judicial

notice. Mullis v. United States Bankcruptcy Court for Dist. of

Nevada, 828 F.2d 1385, 1388 (9 Cir. 1987). Further, Fed. R. Civ. th

P. 10(c) provides that a copy of any written instrument which is

an exhibit to a pleading is a part thereof for all purposes.

Materials properly attached to the complaint as exhibits pursuant

to Fed. Rule Civ. P. 10(c) may be properly considered in

determining whether a claim has been stated. Hal Roach Studios,

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Inc. v Richard Feiner & Co., 896 F.2d 1542, 1555 n.19 (9 Cir. th

1990) (as amended). When a written instrument or subject of

judicial notice contradicts allegations in a complaint to which

it is attached, the Court need not accept the allegations of the

complaint as true. Durning v. First Boston Corp., 815 F.2d 1265,

1267 (9 Cir. 1987). Further, without converting the motion to th

one for summary judgment, the Court properly considers materials

referred to in the complaint but not attached, such as the full

text of a document quoted only in part in the complaint, if the

complaint refers to the document, the document is central to the

plaintiff’s claim, and no party questions the authenticity of the

copy attached to the motion made pursuant to 12(b)(6). Branch v.

Tunnell, 14 F.3d 449, 454 (9 Cir. 1994) (overruled on other th

grounds in Galbraith v. County of Santa Clara, 307 F.3d 1119,

1127 (9 Cir. 2002)). th

A. Defamation

In California, defamation may be either by libel or slander.

Cal. Civ. Code § 44. Libel is a false and unprivileged

publication by writing, printing, picture, effigy, or other fixed

representation to the eye, which exposes any person to hatred,

contempt, ridicule, or obloquy, or which causes him to be shunned

or avoided, or which has a tendency to injure him in his

occupation. Cal. Civ. Code § 45. The elements are 1) an

intentional publication, 2) which is false, 3) defamatory, and 4)

unprivileged, and 5) which has natural tendency to injure or that

causes special damage. Smith v. Maldonado, 72 Cal.App.4th 637,

645 (1999). A publication is communication to some third person

who understands the defamatory meaning of the statement and its

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application to the person to whom reference is made. Id. 

1. Defamatory Meaning

Plaintiffs alleged in the complaint that Plaintiffs were not

in default with respect to a two-year contract concerning

installation and maintenance of a home alarm entered into in

1999, and that the contract had been cancelled and voided and

replaced by a later contract concerning an Atwater residence that

was subsequently fully performed. Plaintiff alleged a publication

of derogatory consumer credit information as follows:

15. In June, 2003 plaintiffs learned for the first time

that defendants falsely published to credit reporting

services that plaintiffs had not made their required

contractual payments to defendants, had defaulted on

their payment schedule to defendants, and were indebted

to defendants (hereafter, “derogatory consumer credit

information”). 

16. This published statement of derogatory consumer credit

information was entirely false because plaintiffs missed

no payments, did not default on any obligation, and were

not indebted to defendant PROTECTION ONE.

17. The derogatory consumer credit information is libelous

on its face because the statements were intended to carry

the meaning, and they do state that plaintiffs do not pay

their legal debts and obligations and contracts.

Where the words or other matters that are the subject of a

defamation action are of ambiguous meaning, or are innocent on

their face and defamatory only in the light of extrinsic

circumstances, the plaintiff must plead and prove that as used,

the words had a particular meaning, or “innuendo,” that makes

them defamatory. Smith v. Maldonado, 72 Cal.App.4th 637, 645-46

(1999). This includes the requirement that in an instance of

ambiguous language, i.e., where the language is susceptible of

either a defamatory or innocent interpretation, the plaintiff

must also allege the extrinsic circumstances which show that the

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third person reasonably understood it in its derogatory sense

(the “inducement”). Id. If the words themselves, under any

circumstances, would convey to those who read or hear them a

meaning within the statutory definitions of libel and slander,

there is no need to plead an innuendo; and if the words under no

circumstances could convey a defamatory meaning, then no innuendo

can make them defamatory. Id. (citing Washer v. Bank of America,

21 Cal.2d 822, 828 (1943)).

Defendant POAM argues that the allegations of the complaint

are not sufficient to reflect a defamatory communication because

if one reviews Exhibit 1, the credit report that Defendant POAM

apparently made to Equifax, it reflects only an entry under

“DEROGATORY ACCOUNTS” of an unpaid debt to Asset Resources, an

admitted collection agency utilized by Defendant POAM, in the

amount of $650.00, reported in July 2002 and last activity on

February 2000; its “present status” is reflected as “COLLECTION.”

(Mot., Ex. 1, p. 5.)

Whether a statement is reasonably susceptible of a

defamatory meaning is a question for the Court. MacLeod v.Tribune

Publishing Co., 52 Cal.2d 536, 546 (1959). A mere allegation of

not paying debts is not defamatory per se. Gautier v. General

Telephone Company, 234 Cal.App.2d 302, 309 (1965). It may be

defamatory where it may be implied that a plaintiff failed to pay

an obligation from dishonest motives or from a desire to defraud

a creditor; further, it may be sufficient where there is an

allegation that the plaintiffs were engaged in a vocation where

credit is an important asset and necessary for the proper conduct

of their business. Id. pp. 309-10. Further, where there are

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allegations in the complaint that it was understood as an

allegation that the debtor never intended to pay and thus was

dishonest and not worthy or any credit, it may likewise be

defamatory. Ingraham v. Lyon, 105 Cal. 254, 257 (1894). 

Here, the complaint alleges that the statement is libelous

on its face because the statements were intended to carry the

meaning that plaintiffs did not pay their legal debts,

obligations, and contracts. (At p. 4.) It further alleges that

Plaintiff Robert Woods was a California Highway Patrolman, and

his wife later was employed there. It also alleged that the

Plaintiffs were unable to refinance their residence in June 2003

to take advantage of favorable interest rates, and that their

credit rating was excellent but for Defendant’s actions. It

alleges that Plaintiffs suffered a loss of reputation for being

creditworthy and reliable; they suffered shame and mortification

and emotional distress.

The document which Defendant POAM submits as being the

communication in question consists of a credit reporting of

Plaintiffs Robert A. Woods and Lori A.Woods dated June 11, 2003.

(Opp., Decl of Alexander J. Harwin in Support of Motion to

Dismiss/Strike, Doc. 22.) It lists under the heading “DEROGATORY

ACCOUNTS” a $650.00 debt owed to Asset Resources, the status of

which is “COLLECTION EF.” (Id. p. 7.) Given the context of credit

worthiness, and considering the heading and the injury to

Plaintiffs in their financial dealings, the statement may

reasonably be understood as one that Plaintiff/s undertook

obligations without the ability or intent to satisfy them and

that thus Plaintiff’s were not creditworthy. Considering all the

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allegations of the complaint and the documents referred to

therein, Plaintiff has alleged a defamatory statement.

2. Privilege

Defendant POAM argues that the defamation claim, like other

tort claims, is defeated by the application of Cal. Civ. Code §

47(c), which provides that a communication, without malice, to a

person interested therein, 1) by one who is also interested, or

2) by one who stands in such a relation to the person interested

as to afford a reasonable ground for supposing the motive for the

communication to be innocent, or 3) who is requested by the

person interested to give the information, is privileged. This

privilege is a codification of that known as the common interest

privilege pursuant to which the defendant bears the initial

burden of demonstrating that the allegedly defamatory

communication was made upon a privileged occasion, and the

plaintiff then bears the burden of proving that the defendant

made the statement with malice. Lundquist v. Reusser, 7 Cal.4th

1193, 1208 (1994). Where the complaint discloses a case of

qualified privilege, i.e., such as where the statement was made

upon a privileged occasion, no malice is presumed, and in order

to state a cause of action, the pleading must contain affirmative

allegations of malice in fact. Id. pp. 1209-12. The Plaintiff

must further present evidence sufficient to establish that the

statement was made with malice. Id. p. 1210. 

Plaintiffs concede that the privilege of § 47(c) applies and

that actual malice must be pleaded and proved to obtain judgment

against POAM for libel. (Opp. p. 2.) This concession appears to

be correct. Roemer v. Retail Credit Co., 3 Cal.App.3d 368, 370

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(applying it to mercantile agencies) (1970); Pavlovsky v. Board

of Trade, 171 Cal.App.2d 110, 113-14 (1959) (applying it to

credit reports of mercantile agencies who collect information and

sell it for a profit).

Defendant POAM argues that Plaintiff has failed to allege

malice.

Malice in defamation cases means actual or express malice,

including a state of mind arising from hatred or ill will toward

the plaintiff, or the state of mind demonstrated by a showing

that the defendant lacked reasonable grounds for belief in the

truth of the publication and therefore acted in reckless

disregard of the plaintiff’s rights. Roemer v. Retail Credit Co.,

44 Cal.App.3d 926, 936 (1975); see, Frommoethelydo v. Fire Ins.

Exchange, 42 Cal.3d 208, 217 (1986). Malice may be inferred from

facts showing a lack of reasonable or probable cause to believe

in the truth of a defamatory statement; the privilege does not

apply where there is a knowing lie or the making of a damaging

assertion without any reasonable backing. Stockton Newspapers,

Inc. v. Superior Court, 206 Cal.App.3d 966, 980 (1988)

(disapproved on another ground in Brown v. Kelly Broadcasting

Co., 48 Cal.3d 711, 720 n.18 (1989)).

Here, Plaintiffs alleged that despite having been told by

Defendants that the Los Banos contract was cancelled and nothing

was owed on it, POAM falsely reported the debt to the credit

reporting services, continued to ratify the report, and intended

to republish the erroneous account information, from June 2003

through March 2005, even after having acknowledged to Plaintiff

and to third parties in writing that the derogatory account

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information was incorrect, after the initiation of the lawsuit in

August 2003, and after POAM agents knew that the publishing of

the report of the derogatory account was in error. (FAC at 2-6.)

Plaintiffs alleged that Defendants’ conduct in continuing the

publication despite acknowledgment of its inaccuracy was

malicious and outrageous because only Defendants could

effectively remove the information. (Id. p. 6.) 

It is sufficient to allege what might otherwise be a legal

conclusion regarding a subjective state of mind where specific

facts are also alleged that would support the more general

allegation. Perkins v. Superior Court (General Telephone

Directory Company), 117 Cal.App.3d 1 (1981) (allegations of

repeated wrongful, intentional, and retaliatory republication in

a directory of information known to be erroneous sufficed to

allege malice where read not in isolation but in the context of

all the allegations of the complaint). That Plaintiffs had not

been notified of any deficiency and in fact had been told that no

money was owed on the account may be considered. See, Agarwal v.

Johnson, 25 Cal.3d 932, 945 (1979) (disapproved on another point

in White v.Ultramar, Inc., 21 Cal.4th 563 (1999)). Plaintiffs’

allegations suffice to put Defendants on notice that specific

repeated injurious conduct, undertaken despite knowledge of its

falsity, was done with a wilful and knowing disregard or

Plaintiffs’ rights. Because malice is sufficiently alleged,

Defendant’s argument that the complaint reflects a privilege on

its face rejected.

Further, Defendant POAM’s argument made later in the moving

papers (Mot. pp. 20-22) to the effect that there are insufficient

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allegations of oppression, fraud, or malice, which must be proven

pursuant to Cal. Civ. Code § 3294 by clear and convincing

evidence, is likewise rejected. Repeated publication, or

authorizing repeated publication, of incorrect derogatory

information can constitute a legally adequate basis for malice.

It is for the trier of fact to determine the precise strength of

the evidence. 

Accordingly, the Court concludes that Defendant POAM has not

shown that Plaintiffs’ defamation claim should be dismissed for

failure to state a claim.

The Court notes that in response to Defendant POAM’s motion,

Plaintiffs refer to documents that Plaintiffs submitted in

opposition to the motion of AR, including correspondence from

June 2003 through July 2004 from POAM to Plaintiff and others,

that would establish knowledge on the part of POAM of an

erroneous placement of the account with AR (Opp. to Mot. of AR,

Decl. of P. Michael Pekin, Exs. G-1 through G-3), as well as

credit reports from June 2003 and July 2004 (Exs. H-1 through H2) which still reflect the derogatory information. Counsel also

refers to deposition testimony of the director of collections for

POAM. The correspondence appears to have been referred to in the

complaint and does not appear to be disputed with respect to

authenticity. The materials do not appear to be necessary to the

Court’s conclusion, but in any event, they do not appear to

contradict the allegations of the complaint, which themselves are

sufficient. 

B. Breach of Contract: Second Claim

Defendants argue that the second and third causes of action

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for breach of contract fail to state claims upon which relief can

be granted. (Mot. p. 10.) 

Plaintiffs withdraw the third and fourth causes of action,

which are based on the CCCRAA, as pre-empted by the federal Fair

Credit Reporting Act. (Opp. to Mot. of POAM, Doc. 23, p. 5.) 

Thus, the Court will address only the second claim, which is

entitled, “BREACH OF CONTRACT BY COMMISSION OF COMMON LAW TORT OF

LIBEL,” (FAC p. 8), and which consists of re-allegations of the

defamation claim (at pp. 8-9, ¶¶ 33 through 37), as well as

statements that pursuant to the contracts between Plaintiffs and

Defendants, which were solicited by Defendant POAM, between 1999

and 2002, Defendants had an obligation to exercise care to avoid

injury to Plaintiff’s good credit standing, and Defendants

breached that special duty of care by committing libel, entitling

Plaintiffs to all “permissible recovery in both contract and tort

for the injuries complained of herein.” (Id. p. 9.) 

Defendants argue that the claim is insufficiently stated

because the terms of the contract are not set out verbatim or

attached to the complaint and incorporated by reference. Further,

Plaintiffs do not state which terms were violated. Defendants

attach to their opposition the Los Banos Contract from December

1, 1999. (Opp. Ex. 2.) Defendants argue that the terms of the

contract control and that they are contrary to Plaintiff’s

allegations.

The elements of a breach of contract claim under California

law are the contract, Plaintiffs’ performance or excuse for

nonperformance, Defendants’ conduct constituting a breach of the

contract, and resulting damage. Reichert v. General Ins. Co. of

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America, 68 Cal.2d 822, 830 (1968). 

Here, Plaintiffs did make allegations in the first claim,

which were incorporated into the second claim, that Plaintiffs

did perform their part of the contract and that no money was

owed. In the first claim Plaintiffs further referred to their two

contracts with POAM in effect between 1999 and 2002, but

Plaintiffs did not refer to the precise terms of the contracts in

question, and did not attached the contracts to the complaint. 

Plaintiffs have not pleaded the operative terms of the contract.

Instead, Plaintiffs have merely stated that an obligation arose

pursuant to the contract.

Generally, if the contract is written, the terms must be set

forth verbatim or a copy attached and incorporated by reference.

Otworth v. Southern Pac. Transportation Co., 166 Cal.App.3d 452,

458-59 (1985). A cause of action is not validly pleaded if there

is no mention of whether the contract is written or oral, no

setting forth any of the alleged terms, and no assertion that the

Plaintiff has either performed the contract or is excused from

performing. Id. at 459. It has even been held that where it

affirmatively appears that all the terms of the contract or the

legal effect thereof are not set forth, the complaint is

insufficient. See, Gilmore v. Lycoming Fire Ins. Co., 55 Cal.

123, 124 (1880).

The copy of the contract submitted by Defendants is lengthy

and contains much small or fine print. A promise on the part of

Defendants to exercise care to avoid injury to Plaintiffs’ good

credit standing is not immediately apparent.

Plaintiffs argue that the claim is based on an implied-inCase 1:06-cv-00398-SMS Document 27 Filed 12/21/06 Page 14 of 44
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law duty not to injure Plaintiff. (Opp. p. 6.) However, Plaintiff

has not stated those facts in the complaint.

The Court concludes that Plaintiff’s statement of the second

claim fails to give adequate notice to the Defendant of the

precise contractual basis of the claim. It does not appear that

it would be futile to grant leave to amend to Plaintiff. Thus,

the Court will permit amendment of the complaint to state a claim

in contract. 

C. Third and Fourth Claims

Defendant POAM engages in a lengthy argument to the effect

that the FAC’s third and fourth claims (breach of contract by

commission of violation of California’s Consumer Credit Reporting

Agencies Act (CCRAA), and straight violation of CCRAA) are

preempted by the federal Fair Credit Reporting Act. (Mot. pp. 12-

18.) 

Plaintiffs withdraw their third and fourth causes of action

on the ground of preemption. (Opp., Doc. 23, p. 5.) 

Thus, the Court will grant the motion to dismiss, without

leave to amend, as to Plaintiffs’ third and fourth claims

pursuant to the parties’ agreement that the claims are preempted

by federal law.

D. Lori Woods as Plaintiff

Defendant POAM argues that Lori Woods does not have standing

to assert a claim for the personal injury of libel because such

an interest is personal, and only Plaintiff Robert A. Woods had a

derogatory account posted on his credit reporting. Defendant

relies on Exhibit 1, page 1 (the actual derogatory posting),

which reflects in the column on the left that the derogatory

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account posting was for “B,” that is, the borrower, and not for

“C,” the co-borrower. 

Defamation is an invasion of the interest in reputation.

Smith v. Maldonado, 72 Cal.App.4th 637, 645 (1999). In order for

a defamatory statement to be published, it must be communicated

to some third person who understands the defamatory meaning and

application to the Plaintiff. Ringler Associates v. Maryland Cas.

Co., 80 Cal.App.4th 1165, 1179 (2000). It is recognized that an

individual may have an action where the defamatory matter is

directed against a class of persons to which he or she belongs if

the class is not too large, and it can be shown that those to

whom the matter is communicated reasonably understand that it is

intended to apply to the Plaintiff. 5 Witkin, Summary of

California Law, § 531, pp. 783-84 (10 ed. 2005) (citing numerous th

treatises and secondary sources). For example, it was possible

that a statement directed to “officials” of a particular

workers’s alliance might have been understood as referring to the

Plaintiff, one of three paid officials, but it was held that the

entire group contained over 160 members and thus was too large to

permit the inference that it was intended to apply to an unnamed

official. Noral v. Hearst Publications, 40 Cal.App.2d 348, 350-54

(1940). In Noral, the court held that despite Cal. Code Civ.

Proc. § 460, defamatory statements must defame an ascertainable

person with some certainty, such as where there is some fact

alleged that reveals that the statement was intended to refer to

the plaintiff or was reasonably susceptible of special

application to a given individual; where a group is very large

and nothing that is said applied in particular to the plaintiff,

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the plaintiff cannot recover. Id. p. 350-52.

Further, as Plaintiff notes, there is authority for the

proposition that naming is not a necessary or necessarily

determinative factor; rather, it is whether under the facts the

statement may be understood to refer to the Plaintiff. See,

McGarry v. Norton, 137 Cal.App.2d 581 (1955) (sufficient to

allege that a motor vehicle was parked in front of plaintiffs’

place of business with sign saying “Nuts to You--You Old Witch”

because reasonable persons of ordinary intelligence, giving the

words their fair and natural meaning, could understand that the

plaintiffs were being described). 

Here, the complaint alleges that Plaintiffs Robert and Lori

Woods entered into the contracts to install and maintain the home

alarm, as well as the new contract upon moving to the new home;

both were told the first contract had no money owing; and both

performed the contracts. It is alleged that defendants “falsely

published to credit reporting services that plaintiffs had not

made their required contractual payments to defendants,” and had

defaulted and were indebted. (FAC p. 4.) The documents submitted

by Defendants show that the precise credit entry was concerning

only Defendant Robert Woods as “B,” or borrower, but it also

indicated in substance that the account owing to Asset Resources

was unpaid and had been referred to collection. Contract

documents list Lori Woods as a customer as well as her husband,

Robert (1999 contract, Doc. 22, pp. 14, 18). It therefore appears

that with respect to the claim alleged, a reasonable person could

understand that the reports of an account in default and in

collection status could refer to Plaintiff, a co-obligor, such

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that Plaintiff Lori Woods suffered an individual injury to her

reputation. 

The Court thus concludes that Plaintiff’s claim is

adequately alleged.

E. Damages

Defendant POAM’s argument concerning the insufficiency of

the allegations to constitute malice within the meaning of Cal.

Civ. Code § 3294 has previously been rejected; the allegations

are sufficient to state a claim based on repeated publication of

information known to be false in wilful and conscious disregard

for the rights of Plaintiffs and thus constituting despicable

conduct. "Malice" within § 3294 means conduct which is intended

by the defendant to cause injury to the plaintiff or despicable

conduct which is carried on by the defendant with a willful and

conscious disregard of the rights or safety of others. §

3294(c)(1). “Despicable conduct” is conduct that is so vile,

base, contemptible, miserable, wretched, or loathsome that it

would be looked down upon and despised by ordinary, decent

people, Mock v. Michigan Millers Mutual Ins. Co., 4 Cal.App.4th

306, 330 (1992); it has the character of outrage frequently

associated with crime, Tomaselli v. Transamerica Ins. Co., 25

Cal.App.4th 1269, 1287. If the defendant’s acts are

reprehensible, fraudulent, or in blatant violation of law or

policy, then punitive damages are appropriate. Id. Unintentional

conduct is not sufficient. Mock, 4 Cal.App.4th at 332. The

defendant must act with the intent to vex, injure, or annoy the

plaintiff, or with a conscious disregard of the plaintiff’s

rights. Neal v. Farmers Ins. Exchange, 21 Cal.3d 910, 922 (1978).

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Mere carelessness or ignorance does not justify punitive damages;

rather there must be tortious conduct rising to the level of

extreme indifference to the plaintiff’s rights, a level which

decent citizens should not have to tolerate. Tomaselli, 25

Cal.App.4th at 1286-87. 

Defendant POAM argues that Plaintiffs are not entitled to

punitive damages based on claims relating to breach of contract.

Cal. Civ. Code § 3294 provides for damages for the sake of

example and by way of punishing the defendant in an action for

breach of an obligation not arising from contract, where it is

proven by clear and convincing evidence that the defendant has

been guilty of oppression, fraud, or malice. As to contractual

recovery, the governing California law permits recovery in

contract actions of as nearly as possible the equivalent of

performance, or “the amount which will compensate the party

aggrieved for all the detriment proximately caused thereby, or

which, in the ordinary course of things, would be likely to

result therefrom.” Cal. Civ. Code § 3300.

Plaintiff’s defamation claim appears to be based on a tort

theory. Thus, with respect to Plaintiffs’ first claim, the tort

or defamation claim, Plaintiffs have pled entitlement to punitive

damages. With respect to the second claim, to the extent that it

constitutes an action on the contract, it does not appear that

Plaintiffs are entitled to punitive damages.

In summary, it is concluded that Plaintiff’s third and

fourth claims for relief fail to state claims upon which relief

may be granted pursuant to Rule 12(b)(6), and there is no basis

for granting leave to amend; further, Plaintiff’s second claim

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for breach of contract fails to state a claim, but leave to amend

should be granted; and Plaintiff’s claim for punitive damages

from a breach of contract in the second claim is stricken.

Otherwise, the motion of Defendant POAM to dismiss should be

denied. 

II. Indispensable Party

Defendant POAM argues that pursuant to Fed. R. Civ. P.

12(b)(7), the case should be dismissed because Plaintiff failed

to join an indispensable party, namely, Equifax. 

A motion to dismiss may be brought pursuant to Fed. R. Civ.

P. 12(b)(7) for failure to join a party under Rule 19. Such a

motion may be brought either before answering by a motion to

dismiss, by a motion for judgment on the pleadings, or even for

the first time at trial. Fed. R. Civ. P. 12(h)(2).

Fed. R. Civ. P. 19 provides:

(a) Persons to be Joined if Feasible. A person who

is subject to service of process and whose joinder will

not deprive the court of jurisdiction over the subject

matter of the action shall be joined as a party in the

action if (1) in the person's absence complete relief

cannot be accorded among those already parties, or (2)

the person claims an interest relating to the subject

of the action and is so situated that the disposition

of the action in the person's absence may (i) as a

practical matter impair or impede the person's ability

to protect that interest or (ii) leave any of the

persons already parties subject to a substantial risk

of incurring double, multiple, or otherwise

inconsistent obligations by reason of the claimed

interest. If the person has not been so joined, the

court shall order that the person be made a party. If

the person should join as a plaintiff but refuses to do

so, the person may be made a defendant, or, in a proper

case, an involuntary plaintiff. If the joined party

objects to venue and joinder of that party would render

the venue of the action improper, that party shall be

dismissed from the action.

(b) Determination by Court Whenever Joinder not

Feasible. If a person as described in subdivision

(a)(1)-(2) hereof cannot be made a party, the court

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shall determine whether in equity and good conscience

the action should proceed among the parties before it,

or should be dismissed, the absent person being thus

regarded as indispensable. The factors to be considered

by the court include: first, to what extent a judgment

rendered in the person's absence might be prejudicial

to the person or those already parties; second, the

extent to which, by protective provisions in the

judgment, by the shaping of relief, or other measures,

the prejudice can be lessened or avoided; third,

whether a judgment rendered in the person's absence

will be adequate; fourth, whether the plaintiff will

have an adequate remedy if the action is dismissed for

nonjoinder.

In determining a motion to dismiss for lack of an

indispensable party, it must first be determined whether the

absent party is necessary to the suit pursuant to Fed. R. Civ. P.

19(a). If the party is necessary, then if that party cannot be

joined, then it must be assessed whether the party is

indispensable so that in equity and good conscience, the suit

should be dismissed pursuant to Rule 19(b). Shermoen v. United

States, 982 F.2d 1312, 1317. The inquiry is a practical process,

is fact-specific, and is designed to avoid the harsh results of

rigid application. Id. p. 1317. The moving party has the burden

of proof that dismissal is necessary. Id. (quoting Makah Indian

Tribe v. Verity, 910 F.2d 555, 558 (9 Cir. 1990)). An objection th

pursuant to Rule 19 usually requires an evidentiary showing as to

the reasons why the absent party’s presence is necessary for a

just adjudication. Hess v. Gray, 85 F.R.D. 15, 21 (D.C.Ill.

1979); see Imperial v. Castruita, 418 F.Supp.2d 1174, 1178

(C.D.Cal.2006) (noting that conclusory statements, without any

evidence of the indispensable nature of the persons not named,

were insufficient to satisfy the analysis under Rule 19(a)).

The determination of whether a non-party should be joined

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pursuant to Rule 19(a) rests within the discretion of the Court

based on a consideration of the facts of the case and the

policies underlying the rule. Bakia v. Los Angeles County of

State of California, 687 F.2d 299, 301 (9th Cir.1982). Rule 19

requires a trial court to engage in a two-step analysis. The

first step is to consider whether nonjoinder would prevent the

award of complete relief, or the absentee's interests would

otherwise be prejudiced or the persons already parties would be

subject to a substantial risk of double or inconsistent

obligations. The Ninth Circuit has instructed courts to consider

various policies when deciding whether a non-party should be

joined, including the plaintiff's right to decide whom he shall

sue, avoiding multiple litigation, providing the parties with

complete and effective relief in a single action, protecting the

absentee, and fairness to the other party. The determination is

heavily influenced by the facts and circumstances of each case.

It is a misapplication of Rule 19(a) to add parties who are

neither necessary nor indispensable, who are not essential for

just adjudication, and who have a separate cause of action

entirely. Id. at 301. The absence of an entity that is separately

or independently liable does not generally impede the defense of

present defendants. Behrens v. Donnelly, 236 F.R.D. 509, 514-15

(D.Haw. 2006). 

Defendant POAM makes assertions of fact to the effect that

Plaintiff’s account was reported to Equifax on July 15, 2001, and

that Plaintiffs discovered the derogatory account in June 2003.

Plaintiffs commenced their lawsuit on July 24, 2003, naming

Defendant POAM as the only defendant, with 100 “Doe” defendants

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named. This is supported by documentation referred to in the

complaint as well as counsel’s declaration.

Defendant POAM also claims that on numerous occasions, Asset

Resources (AR) contacted Equifax and requested that Plaintiff’s

name be removed from Equifax’s reporting system; there is a

genuine issue of fact as to why Equifax refused to comply with

Asset Resources’ numerous requests. The only source for such data

named by Defendant POAM is the motion to dismiss of AR. (Mot. of

POAM p. 19.) Reference to that document shows that it consists of

a declaration of Michael Pekin, Plaintiffs’ counsel, supported by

references to “[t]he record from the proceedings in state court,”

referring to the case before it was removed to this Court. The

references to the state court record are not in turn supported by

documentation in some respects. There are references to

depositions of Mary Moorman, POAM’s director of collections, and

excerpts are quoted from a deposition taken in February 2006,

tending to show that Plaintiffs did not owe a balance on the

first contract, that it was unknown why the account was placed

for collections from Los Banos, and that there was no evidence of

an attempt of the Los Banos POAM people to contact anyone in

Atwater about a collection. It is asserted that the state court

action commenced in July 2003, and that POAM moved for summary

judgment in February 2006 on the ground that malice was not

effectively pleaded; Plaintiffs conceded the point and filed a

first amended complaint (FAC). There are assertions concerning

the state of the evidence in Plaintiff’s possession (presumably

from discovery) as of December 20, 2005, when the motion to amend

was filed, to the effect that it indicated that Defendant Asset

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Resources was the express agent of Defendant POAM but did not

have conclusive information due to the state of ongoing

discovery; however, as of December 2005 there was no reason or

tactical advantage to bringing in an agency from Minnesota into

California litigation where complete relief could be obtained

from the principal, POAM, which had accepted state court

jurisdiction and had litigated there for two years. (Decl. pp. 6-

9.)

Pekin further declared that the thrust of Moorman’s

deposition was that POAM’s collection department in June 2003

sent three letters of apology to Plaintiffs and to Asset

Resources accepting responsibility for having placed Plaintiffs’

account into collections erroneously and representing that the

derogatory information had been pulled from the collections

agency and would have no future effect on Plaintiffs’ credit.

(Decl. p. 9, referring to Exs. G1 through G3, which include a

letter of June 23, 2003, addressed to whom it might concern to

the effect that the accounts were erroneously placed with Asset

Resources Collection Agency and that any reference of the

accounts should be removed from the credit bureau report of

Robert Woods.) The declaration refers to exhibits H-1 from June

2003, H-2 from July 2004, and H-3 from November 2004, long after

the letters had issued, still reflecting the derogatory account

and a credit score apparently affected by this until March 2005,

when the account was removed and the credit score jumped 93

points from 660 in November 2004 to 753 in March 2005. The

listing under present status states “COLLECTION EF.” There is

also an indication under the Equifax credit score model of a

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“derogatory public record or collection filed.” This evidence

tends to show that Equifax was the entity continuing to report

the delinquent account on the CCI credit reports. 

Counsel further declares that Moorman testified that it was

AR’s fault that the derogatory information had remained against

Plaintiffs’ credit for over a year and a half after POAM had

actual knowledge of the falsity of the statement. (Decl. 10-11.)

Moorman testified that on September 15, 2003, POAM had

documentation of a conversation with AR confirming that the

account was closed and paid in full on the credit reporting

bureau. Thereafter, POAM failed to admit that there was an agency

relationship between POAM and AR; counsel characterized the

position of POAM as blaming AR for assuring POAM in September

2003 that the account had been removed from Equifax for a year

and a half before it was actually removed. (Decl. p. 11.) Two

weeks after the Moorman deposition, Plaintiffs’ counsel moved to

name AR in place of a “Doe.” 

There does not appear to be any evidence supporting the

assertion that AR repeatedly contacted Equifax to remove the

account.

However, it may be assumed from the credit reports that

Equifax continued to report the account as in collection status

from AR. It is clear that POAM contacted AR about the account to

correct the error; considering the absence of evidence on the

point, it may be that AR did not effectively relay that

information to Equifax. Another possibility is that AR did

contact Equifax and that Equifax continued to publish the

incorrect information.

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With respect to application of the law to the facts,

Plaintiffs’ position is essentially correct. Equifax under either

factual scenario would appear to be a joint tortfeasor. A joint

tortfeasor is not a necessary party because the liability of

tortfeasors is joint and several; thus, complete relief may be

afforded by joining only one. Temple v. Synthes Corp., 498 U.S.

5, 7 (1990) (relying on the text, history, and comments to Rule

19 to hold that it was not necessary to join doctor and hospital

in patient’s suit against manufacturer of defective device that

had been surgically implanted; the absent entities were simply

permissive, and not necessary, parties because they were joint

tortfeasors); Countrywide Home Loan, Inc. v. Superior Court, 69

Cal.App.4th 785, 793-94 (1999) (mortgage banker suing developers

and other alleged participants in a fraudulent “builder bailout”

scheme was held not to be required to join the original lender

and individual borrowers because complete relief could be

afforded between the extant parties, particularly where the

interests of the absent party had been assigned to a party).

Where the threshold requirements of Rule 19(a) are not satisfied,

such as where the absent parties are merely joint tortfeasors,

there is no need to conduct the inquiry under Rule 19(b). Temple,

498 U.S. at 7.

Here, it appears that complete relief may be obtained by

Plaintiffs against Defendants even in the absence of Equifax. A

trier of fact could determine the conduct of each Defendant and

the damages suffered by the Plaintiffs as a result of that

conduct. It does not appear that the absentee's interests would

be prejudiced or the persons already parties would be subject to

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a substantial risk of double or inconsistent obligations. It is

not clear that any of the present parties would represent the

interest of the absent tortfeasor; it is possible that the

various tortfeasors would have inconsistent defenses, but it is

not known at this time. It is generally not sufficient to make an

absent joint tortfeasor a necessary party where there is a

possibility that in the absence of the party (here Equifax), the

present defendant might be liable in the original action and lose

a subsequent action for contribution against the joint

tortfeasor. The defendant can avoid, or could have avoided, this

harm by impleading the joint tortfeasor in the pending case. The

present defendants have not previously sought to do so.

Countrywide Home Loans, Inc., 69 Cal.App.4th at 796-97 (quoting 4

Moore’s Federal Practice § 19.03); Stabilisierungsfonds Fur Wein

v. Kaiser Stuhl Wine Distributors Pty. Ltd., 647 F.2d 200, 208

(D.C.Cir. 1981) (same regarding trade infringement).

The Court may consider the timeliness of a motion pursuant

to Rule 12(b)(7) if it appears that the defendant is interposing

the motion for its own defensive purposes rather than to protect

the absent party’s interests. Fireman’s Fund Ins. Co. v. National

Bank of Cooperatives, 103 F.3d 888, 896-97 (9 Cir. 1996) th

(relying in part on the Committee Notes to the 1966 amendment of

Rule 19). It appears that the moving defendants could have sought

joinder for their own protection earlier. There is no evidence

that the absent party would be bound by the judgment in the

instant case, so there does not appear to be any prejudice to

that party. 

Because it does not appear that Equifax is a necessary

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party, the analysis pursuant to Rule 19(b) will not be

undertaken.

Accordingly, Defendants’ motion pursuant to Rule 12(b)(7)

will be denied.

MOTION OF DEFENDANT ASSET RESOURCES, INC. 

Defendant Asset Resources, Inc. (AR) moves to dismiss

Plaintiff’s complaint and seeks reasonable attorney’s fees,

costs, and disbursements. (Mot. p. 2.) AR represents that it was

not joined as a party Defendant until March 28, 2006; Plaintiff

does not dispute this assertion.

I. Statute of Limitations

Defendant AR argues that the claims against it are timebarred.

A. Motion Procedure

Although ordinarily a motion pursuant to Rule 12(b)(6)

cannot be used to raise an affirmative defense, where the

complaint on its face discloses an absolute defense or bar to

recovery, such as the running of a statute of limitations, a

motion to dismiss for failure to state a claim lies. Jablon v.

Dean Witter & Co., 614 F.2d 677, 682 (9 Cir. 1980). On the other th

hand, where the running of the statute cannot be determined from

the face of the complaint, a motion for summary judgment is the

proper procedure. Supermail Cargo, Inc. v. United States, 68 F.3d

1204, 1206 (9 Cir. 1995). If the defense is not apparent on the th

face of the complaint, and the motion to dismiss is not

accompanied by acceptable affidavits, use of the summary judgment

procedure is appropriate. Jablon v. Dean Witter & Co., 614 F.2d

677, 682 (9 Cir. 1980). A motion to dismiss based on the running th

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of the statute of limitations may be granted only if the

assertions of the complaint, read with the required liberality,

would not permit the plaintiff to prove that the statute was

tolled; that is, it must appear beyond doubt that the plaintiff

can prove no set of facts that would establish the timeliness of

the claim. Jablon, 614 F.2d at 682. The factual and legal issues

must be sufficiently clear to permit the Court to determine with

certainty whether the doctrine could be successfully invoked.

Supermail Cargo, Inc. v. United States, 68 F.3d at 1207.

B. Limitations Period 

With respect to a contract action, Cal. Civ. Proc. Code §

337(1) requires that an action for breach of contract or

liability founded upon an instrument in writing be brought within

four years. Defendant AR argues that Plaintiffs were compelled to

bring suit against AR no later than July 15, 2005 (four years

after July 15, 2001, when the report first was made). The Court

notes that suit was brought by this time, but AR was not named as

a Defendant until March 28, 2006. Thus, the discussion of

relation back of the naming of Doe defendants, which is set forth

below, is pertinent to the running of the statute on the contract

claim.

With respect to defamation, Defendant points to Cal. Civ.

Proc. Code § 340(c), which provides that an action for libel must

be maintained within one year. Each time a defamatory

communication is communicated to a third person who understands

its defamatory meaning as applied to the plaintiff, there is a

publication which gives rise to a new defamation cause of action

under California law. Shively v. Bozanich, 31 Cal.4th 1230, 1242-

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43 (2003). Defendant argues that the account was reported to

Equifax on July 15, 2001; hence, Plaintiffs were required to

bring suit for defamation on or before July 15, 2002.

Testimony and other evidence summarized by Plaintiffs’

counsel and not disputed by Defendants indicates that in June

2003 in connection with housing financing, Plaintiffs first

learned of the derogatory information, contacted AR, and informed

POAM that the account was incorrectly reported as delinquent; in

September 2003, POAM confirmed with AR that the derogatory

information was incorrect, was removed, and would not affect

Plaintiffs’ credit. The incorrect derogatory information remained

on the account until March 2005, with AR’s knowledge of

inaccuracy from September 2003 and its assertion to POAM that it

had cleared the matter. 

Thus, the publications in question begin on July 15, 2001,

and extend through March 2005. The one-year statute of

limitations runs on July 15, 2002, absent something to take the

case without the statute. Defendant AR notes that it was not

until March 28, 2006, that AR was substituted into the action in

place of a “Doe” defendant, and the requirement of malice was

adequately pleaded. Thus, argues AR, the statutes of limitation

bar Plaintiffs’ claims against AR.

C. Discovery Rule

Plaintiffs contend that the “discovery rule” applies to save

the claims, and further that Plaintiff did not have actual

knowledge of malice, and thus did not have knowledge of the

existence of a claim against AR, until Mary Noonan gave

deposition testimony on February 16, 2006, that as early as

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September 2003 AR had acknowledged to POAM that AR knew that the

derogatory report was false and had corrected the information.

With respect to the discovery rule, the period of

limitations generally commences when the cause of action accrues,

which for defamation is at the time of injury, or when the

statement is published or communicated to a person other than the

person being defamed. Shively v. Bozanich, 31 Cal.4th 1230, 1246-

47 (2003). However, there is a principle of tort law to the

effect that the accrual of a cause of action is tolled until the

time the plaintiff knows, or with reasonable diligence should

have known, the injury occurred. This rule effectively delays the

accrual of a cause of action until the plaintiff discovered or

reasonably should have discovered or suspected the factual basis

for his or her claim. Shively v. Bozanich, 31 Cal.4th at 1248.

The California Supreme Court in Shively declined to apply this

principle in a defamation case with respect to a published book

but recognized that this rule most frequently applies where it is

particularly difficult for the plaintiff to observe or understand

the breach of duty, or when the injury itself or its cause is

hidden or beyond what the ordinary person could be expected to

understand. Id. It has also been recognized that this rule has

been applied to defamation cases, Bernson v. Browning-Ferris

Industries, 7 Cal.4th 926, 931-32 (1994), and to a confidential

credit report, as an example of a document to which the Plaintiff

had no access or cause to seek access. Shively, id. at pp. 1249-

1253. See also, Manguso v. Oceanside Unified School District, 88

Cal.App.3d 725 (1979) (personnel file). 

It is alleged that Plaintiffs first discovered the

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derogatory, false publication in June 2003 from credit services;

and that Plaintiffs performed their contracts with POAM and were

never told that any money was owed on the cancelled Los Banos

contract. (FAC at p. 3-4.) 

Although no California Supreme Court case precisely on point

is found, the case before the Court appears to be an appropriate

situation in which to apply the discovery principle to save the

running of the statute of limitations. 

Thus, if Plaintiffs first discovered the defamation in the

summer of 2003, suit would have to be brought by the summer of

2004. Plaintiff did bring suit within this time, but Plaintiff

did so by naming “Doe” defendants; Plaintiff later substituted

Defendant AR in place of a Doe in March 2006.

D. Relation Back of Substitution of Named Defendant

 for a “Doe” Defendant 

Fed. R. Civ. P. 15 provides in pertinent part:

(c) Relation Back of Amendments. An amendment of a

pleading relates back to the date of the original

pleading when

(1) relation back is permitted by the law that

provides the statute of limitations applicable to the

action, or

(2) the claim or defense asserted in the amended

pleading arose out of the conduct, transaction, or

occurrence set forth or attempted to be set forth in

the original pleading, or

(3) the amendment changes the party or the naming

of the party against whom a claim is asserted if the

foregoing provision (2) is satisfied and, within the

period provided by Rule 4(m) for service of the summons

and complaint, the party to be brought in by amendment

(A) has received such notice of the institution of the

action that the party will not be prejudiced in

maintaining a defense on the merits, and (B) knew or

should have known that, but for a mistake concerning

the identity of the proper party, the action would have

been brought against the party.

The delivery or mailing of process to the United

States Attorney, or United States Attorney's designee,

or the Attorney General of the United States, or an

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agency or officer who would have been a proper defendant if

named, satisfies the requirement of subparagraphs (A) and (B) of

this paragraph (3) with respect to the United States or any

agency or officer thereof to be brought into the action as a

defendant.

In a case pending in federal court on the basis of diversity

jurisdiction, the governing law concerning the statute of

limitations is state law, including the state law of relation

back of amendments to pleadings. Lindley v. General Electric Co.,

780 F.2d 797, 799-801 (9 Cir. 1986). Rule 15(c) should not be th

applied to defeat an action that is not time-barred under state

law. Id. at 800-801.

Cal. Civ. Proc. Code 474 provides in pertinent part:

When the plaintiff is ignorant of the name of a

defendant, he must state that fact in the complaint, or

the affidavit if the action is commenced by affidavit,

and such defendant may be designated in any pleading or

proceeding by any name, and when his true name is

discovered, the pleading or proceeding must be amended

accordingly....

Cal. Civ. Proc. Code § 474 permits a plaintiff to designate as

“Doe” defendants parties whose true identities are unknown at the

time the complaint is filed. Under California law, an amended

pleading will relate back to the date of an earlier filing when

the amended pleading 1) is based on the same general set of facts

as the original, 2) seeks relief for the same injuries, and 3)

refers to the same incident or instrumentality. Norgart v. Upjohn

Co., 21 Cal.4th 383, 408-09 (1999); Abreau v. Ramirez, 284

F.Supp.2d 1250, 1257 (C.D.Cal.2003) (citing Edwards v. Superior

court, 93 Cal.App.4th 172 (2001)). Further, for an amendment that

is sought with respect to a “Doe” defendant not originally named

in the original complaint, 1) the original complaint must state a

valid cause of action against the now-identified Doe defendant;

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2) the Plaintiff must have been genuinely ignorant of the

Defendant’s identity or of the facts rendering the defendant

liable when the original complaint was filed; and 3) the amended

complaint must be based on the same general set of facts as the

original complaint and must refer to the same accident and

injuries. Austin v. Massachusetts Bonding & Ins. Co., 56 Cal.2d

596, 600-601 (1961).

Under California law, the application of Cal. Civ. Proc.

Code § 474 and the relation-back principle does not depend upon

notice to the defendants or any lack thereof. Sobeck & Assocs.,

Inc. v. B&R Investments, 215 Cal.App.3d 861, 869-70 (1989). The

knowledge of the Plaintiff is tested at the time suit is filed.

Sobeck, 215 Cal.App.3d p. 867. Where after acquiring knowledge of

the identity of a Doe defendant, a Plaintiff delays in seeking to

amend the complaint, the Court must determine whether the delay

was unreasonable and whether the Defendant suffered specific

prejudice; where no specific prejudice is shown, the action will

not be time barred. Sobeck, 215 Cal.App.3d 861, 869; Barrows v.

American Motors Corp., 144 Cal.App.3d 1, 9 (1983). A plaintiff is

entitled to employ § 474 even if the Plaintiff has constructive

or legal knowledge of the identity; generally, merely having the

means to discover knowledge is irrelevant; actual knowledge is

required. General Motors v. Superior Court, 48 Cal.App.4th 580,

593-94 (1996). It has been held that it is the Defendant’s burden

to establish when Plaintiff actually knew of the identity.

Breceda v. Gamsby, 267 Cal.App.2d 167, 179 (1968).

Here, it appears not to be contested that the amended

pleading is based on the same general set of facts as the

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original. The facts must be the same operative facts, or those

which create a right to recovery, which here are the reporting of

the account incorrectly by POAM to AR, and the reporting by AR of

the account to a credit agency that ran a report reflecting the

incorrect information. Reference to the original complaint (Orig.

Complt. pp. 1-4.) shows that the amended pleading is based on the

same general facts as the original pleading. Barrington v. A. H.

Robins Co., 39 Cal.3d 146, 151-52 (1985). The original complaint

referred to publishing the derogatory account information to

credit reporting services. The amended complaint now on file

added allegations of additional publications that occurred after

the filing of the original complaint. It thus reflects

supplemental misconduct which is still part and parcel of an

effort to seek relief for the same injuries on the basis of the

same primary rights invaded, even though it was not precisely the

same damages being claimed. See, Rowland v. Superior Court

(Zappia), 171 Cal.App.3d 1214, 1216-18 (added claim for mental

distress for observing death of Plaintiff’s son involved same

injury as wrongful death suit for son’s death due to

electrocution; court noted the well established policy of

allowing amendments liberally to avoid the bar of the statute

where recovery sought was based on the same general set of facts,

and distinguished the injury from the measure of damages); Austin

v. Massachusetts Bonding & Ins. Co., 56 Cal.2d 596 (1961)

(allegation of liability as a surety on a bond was a permissible

amendment in a suit involving alleged failure to deliver the bond

as a principal–same general set of facts and same general

defalcations). Here, the same primary right of the personal

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interest in reputation was invaded in each claim. Accordingly,

the amendment sought relief for the same injuries.

There is a split of authority as to whether or not

supplemental claims relate back to the original complaint so as

to avoid a statute of limitations defense. Some cases hold that

there is no relation back of supplemental complaints because they

do not supersede an original complaint and thus must stand on

their own. ITT Gilfillan, Inc. v. Los Angeles, 136 Cal.App.3d

581, 589 (1982) (amended and supplemental complaint alleging

entitlement to tax refunds in addition to those mentioned in the

first amended complaint held not to relate back to the original

complaint); Lee v.Bank of America NTSA, 27 Cal.App.4th 197, 214

(1994) (amendment of wrongful demotion complaint after statute of

limitations had run on an independent action to allege wrongful

termination held not to relate back because it alleged different

wrongful conduct than that alleged in the first complaint). Other

cases hold that where the original complaint gives notice that

alleged wrongful conduct is of a continuing nature, a

supplemental complaint based on the same conduct does relate back

for purposes of the statute of limitations. Bendix Corp. v. Los

Angeles, 150 Cal.App.3d 921, 926 (1984) (amended and supplemental

complaint alleging additional tax refunds after limitations

period had run held to relate back because the named defendants

had notice of the subject of dispute and suffered no prejudice);

Lamont v. Wolfe, 142 Cal.App.3d 375, 381-82 (1983) (amendment to

complaint originally alleging wife’s claim for medical

malpractice and husband’s claim for loss of consortium allowed

after running of statute of limitations to allege husband’s suit

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as wife’s heir for her wrongful death on theory that the same

type of loss (loss of consortium) was involved). These cases seem

consistent with the general principle that a supplemental

pleading should supplement the cause of action or defense

originally pleaded, as distinct from stating an entirely new

cause of action. See, Flood v. Simpson, 45 Cal.App.3d 644, 647

(1975), and authorities there cited. They also seem consistent

with the liberal allowance of amendments concerning the same

general set of facts and in the absence of prejudice. See, Austin

v. Massachusetts Bonding & Ins. Co., 56 Cal.2d 596, 600 (1961).

Accordingly, the Court concludes that the same injuries were

involved. 

With respect to reference to the same incident, accident, or

instrumentality, the instrumentality which causes the injury must

be the same. Coronet Mfg. Co. v. Superior Court (McMahon, 90

Cal.App.3d 342, 347 (1979). Thus, in Coronet Mfg. Co., an

amendment alleging a defective lamp socket and switch to a

complaint that had alleged negligent manufacture of a hair dryer

did not relate back because the injury was from a different

instrumentality; in Barrington v. A.H. Robins Co, 39 Cal.3d at

151, an amendment to allege injury from a defective intrauterine

device did not relate back to a claim of negligent medical

treatment and failure to warn of dangers from taking a specified

drug. Here, the amendment alleged continued publication by AR of

credit information that would be reflected in third party credit

data bases; it did not change the instrumentality.

 Thus, it appears that the general requirements for relation

back have been satisfied. 

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With respect to the additional requirements where a

complaint is amended after the statute of limitations has run to

identify a “Doe” defendant and to assert a cause of action

against that defendant not included in the original complaint,

Defendant AR claims that no valid claim was stated against AR. 

The Court must determine whether the original complaint

stated a valid cause of action against Defendant AR. The original

complaint alleged that the defendants, including the “Doe”

defendants, of whom Plaintiffs alleged they were ignorant and who

were alleged to be responsible for the occurrences alleged in the

complaint and to have proximately caused Plaintiffs’ damages, had

published to credit reporting services a false report that

Plaintiffs had not made their required contractual payments,

which were republished by credit reporting agencies, and which

resulted in Plaintiffs’ being unable to refinance their home as

well as loss of reputation as to creditworthiness. (P. 3.) 

Defendant AR argues that because malice was not properly

alleged in the original complaint, no valid claim was stated

against it. Plaintiffs alleged in the original complaint that

despite Plaintiffs’ repeated demands to retract the libelous

statements, defendants had failed to do so and thus were liable

for punitive damages. 

Plaintiffs conceded that they failed adequately to allege

malice in the original complaint. However, it appears that the

requirement that the original complaint state a claim is not that

a perfectly sufficient legal claim be stated, but rather that the

original complaint attempt to state a claim against the actual

entity ultimately served as a formerly fictitiously named

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defendant. See, Marasco v. Wadsworth, 21 Cal.3d 82, 85-89 (1978).

There the original complaint did not state a claim against the

driver because the decision that invalidated the guest statute

that had precluded an action against the driver in the original

complaint had not been rendered when the original complaint was

filed. The complaint did state claims against others and alleged

that the negligence of fictitiously named defendants contributed

to the harm. The Supreme Court of California held that because

the amended complaint involved the identical accident and

injuries (same collision, and same death of the decedent) as that

referenced in the original complaint, the amendment to name the

driver after the statute of limitations had run related back. The

fact that the original complaint did not state a specific claim

against the actual individual ultimately named as a Doe was not

significant because the amendment substituted for Does persons

sought to be held responsible based on the same occurrence and

damage alleged in the original complaint, and the change of the

basis of liability of the Does from that of another car’s driver

to the decedent’s driver was not any more drastic than the change

from principal to surety reflected by the amendment in Austin.

The court further noted:

The original complaint attempts to state a claim

against all the defendants, whether sued by true or

fictitious names.(Hollister Canning Co. v. Superior

Court (1972) 26 Cal.App.3d 186 [102 Cal.Rptr. 713].) In

this respect, plaintiff need do no more than set forth

or attempt to set forth a cause of action against such

defendants.(Austin, supra, 56 Cal.2d 596, 599.)

Accordingly, plaintiff's original complaint stated a

claim with at least as much particularity as the state

of the case law and the applicable statutes would

allow, and with as much specificity as was required in

these earlier cases. These observations distinguish

this case from Williams v. Goodman (1963) 214

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Cal.App.2d 856, 861 [29 Cal.Rptr. 877], where there was

absolutely no attempt by the pleader to assert a claim

against the fictitiously named defendants.

Marasco v. Wadsworth, 21 Cal.3d at 87.

Here, the original complaint adequately attempted to state a

claim against Doe defendants as being involved in the

publication. The fact that a claim was stated but was not

perfectly legally sufficient does not preclude relation back

where there was an attempt of the nature in the present case to

set forth a claim against Defendant AR. It thus appears that the

nature of the original complaint was not such that precludes

relation back. 

As to AR’s claim that Plaintiff had actual knowledge

concerning the identity of AR as a defendant, it is established

that the knowledge contemplated by § 474 is knowledge of the

person’s identity as well as knowledge of the facts making him or

her liable when the complaint was filed. Scherer v. Mark, 64

Cal.App.3d 834, 841 (1976).

There is no evidence that at the time that the complaint was

filed, Plaintiffs had knowledge of facts concerning the state of

mind of AR. It appears that they knew of three letters emanating

in June from POAM, which stated that the information had been

incorrectly sent to Asset Resources Collections, an outside

collection agency, and the process of pulling the information was

in process or had been completed. This indicates that AR was a

conduit for the information, but it does not indicate that AR was

responsible for the continuous postings that were later

discovered or that it had any particular knowledge of the status

of the account information. Admissions by Plaintiffs’ counsel of

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knowledge as of November 2005 regarding an agency relationship

between POAM and AR do not permit an inference that the evidence

supporting that knowledge as known at the time the complaint was

filed. As Plaintiffs argue, and as Defendants themselves

forcefully argue, malice is an essential element of defamation in

this context of qualified privilege. There is no evidence that

malice on the part of AR was known by Plaintiffs at the time the

original complaint was filed.

Defendant AR argues that Plaintiffs should be judicially

estopped from arguing that they did not know of the role of AR,

as distinct from its identity and involvement, because they did

not raise this lack of knowledge of role in attempting to obtain

leave to amend in the state court before the action was removed.

Defendant AR asserts that the only basis of seeking amendment in

state court was that Plaintiffs had discovered the identity of a

Doe defendant.

Federal law governs the application of judicial estoppel in

federal court. Helfand v. Gerson, 105 F.3d 530, 534 (9 Cir. th

1997) (diversity case). Judicial estoppel is an equitable

doctrine that precludes a party from gaining an advantage by

asserting one position and then later seeking an advantage by

taking a clearly inconsistent position. Hamilton v. State Farm

Fire & Cas. Co., 270 F.3d 778, 782 (9 Cir. 2001). Some factors th

which may be considered in determining whether to apply a

judicial estoppel are 1) whether the party’s position is clearly

inconsistent with its earlier position; 2) whether the party has

succeeded in persuading a court to accept that party’s earlier

position so that judicial acceptance of an inconsistent position

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in a later proceeding would create the perception that either the

first or the second court was misled; and 3) whether the party

seeking to assert the inconsistent position would derive an

unfair advantage or impose an unfair detriment on the opposing

party if not estopped. Id. at 782-83 (quoting New Hampshire v.

Maine, 532 U.S. 742, 121 S. Ct. 1808, 1815 (2001)). The estoppel

is invoked not only to prevent a party from gaining an advantage

by taking inconsistent positions, but also because of general

considerations of the orderly administration of justice, regard

for the dignity of judicial proceedings, and to protect against a

litigant’s playing “fast and loose” with the courts. Id. at 782.

 In this circuit, the court must have relied upon or

accepted the previous inconsistent position; however, the

doctrine may be applied to inconsistent positions taken in two

different proceedings. Id. at 783. 

Here, the two positions are not substantially inconsistent;

recognizing at this juncture that information regarding role has

not been shown to have been possessed at the time the suit was

originally filed would not necessarily create the perception that

either court was misled. Finally, no unfairness appears in

permitting the joinder of AR and amendment; AR has the

opportunity by way of the present motion and by all other

available means permitted by the pertinent statutes and rules to

address the pleadings. Accordingly, Plaintiffs will not be

judicially estopped.

Defendant AR argues that it was prejudiced in that it was

not able to defend itself at the initial stage of the lawsuit and

could not attack Plaintiffs’ complaint, which was defective

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because it did not allege malice. It should be noted that the FAC

contains allegations of malice, and Defendant AR is able to raise

to this Court any defects in the pleading of the complaint.

In summary, it is concluded that Defendant AR has not shown

that at the pertinent time, Plaintiffs knew of the identity and

role, state of mind, and malice of AR such that a claim was

stated against it independently of a claim against Defendant

POAM.

Further, in light of the state of discovery and evidence

before the Court, it is concluded that no unreasonable delay in

naming Defendant AR occurred, and no legally sufficient and

specific prejudice has been demonstrated by Defendant AR to

prevent relation back of the amendment. 

Therefore, the Court concludes that Plaintiffs’ naming of AR

is not barred by the statute of limitations because the statute

had not run; it related back to the filing of the original

complaint that named “Doe” defendants. 

II. Failure to Join Equifax

Defendant AR makes essentially the same arguments regarding

Plaintiffs’ failure to join Equifax as are made by Defendant

POAM. The Court rejects the argument that Equifax is a necessary

party for the reasons previously expressed and concludes that

Defendant has not shown that the action should be dismissed for

failure to join a party.

DISPOSITION

Accordingly, it IS ORDERED that

1) The motion of Defendant Protection One Alarm Monitoring,

Inc., to dismiss IS GRANTED IN PART without leave to amend

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pursuant to Fed. R. Civ. Proc. 12(b)(6) with respect to

a) Plaintiffs’ third and fourth claims to relief, which

fail to state claims upon which relief may be granted, and

b) Plaintiffs’ prayer for punitive damages in

Plaintiffs’ second claim for relief based on breach of contract,

which IS STRICKEN;

2) Further, the motion of Defendant Protection One Alarm

Monitoring, Inc., IS GRANTED with respect to Plaintiff’s second

claim for breach of contract, with leave to Plaintiffs to file an

amended complaint no later than fifteen days after the date of

service of this order; and

3) The motion of Defendant Protection One Alarm Monitoring,

Inc., IS OTHERWISE DENIED; and

4) The motion of Defendant Asset Resources, Inc., to dismiss

IS DENIED. 

IT IS SO ORDERED.

Dated: December 21, 2006 /s/ Sandra M. Snyder 

icido3 UNITED STATES MAGISTRATE JUDGE

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