Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_18-cv-03886/USCOURTS-cand-4_18-cv-03886-3/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 15:1601 Truth in Lending

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UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

J. EDWARDS JEWELRY DISTRIBUTING, LLC., 

Plaintiff, 

vs. 

WELLS FARGO & COMPANY, ET AL., 

Defendants.

CASE NO. 18-cv-03886-YGR 

ORDER GRANTING MOTION TO DISMISS

Re: Dkt. No. 41 

Plaintiff J. Edwards Jewelry Distributing, LLC (“J. Edwards”) brings this action 

individually and on behalf of all other persons similarly situated against defendants Wells Fargo & 

Company, Wells Fargo Bank, N.A. (collectively, “Wells Fargo”) and Does 1-10 for violating the 

California Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200, et seq. (“UCL”).1

 (Dkt. 

No. 40 (“FAC”) at 1-2, 38-39.) Specifically, plaintiff alleges that Wells Fargo “has created and 

maintains a credit card program through which it actively encourages retailers to build the ‘fees’ 

that these merchants must pay Wells Fargo into the regular price of goods and services, while 

representing to retail customers that the goods and services that they purchase are being financed 

at zero percent interest[,]” (the “Program”) and, thereby, “misled [plaintiff and class members] 

into promoting [d]efendants’ illegal financing scheme, and into paying unnecessary sales taxes.” 

(Id. at 2, 39.) On November 19, 2018, the Court granted Wells Fargo’s motion to dismiss 

plaintiff’s initial complaint and provided plaintiff leave to amend. (Dkt. No. 39 (“MTD Order”).) 

Plaintiff filed its first amended complaint (“FAC”) on December 6, 2018. (FAC.) 

 1

 The Court notes that although plaintiff’s FAC refers to violations of the Truth in Lending 

Act (“TILA”), plaintiff appears to have omitted from its FAC the cause of action for violation of 

TILA, which was included in the initial complaint. (Compare Dkt. No. 1 (“Initial Compl.”) at 37-

38 with FAC at 38-39.) 

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Now before the Court is Wells Fargo’s motion to dismiss plaintiff’s FAC for failure to 

state a claim under Rule 12(b)(6).2 (Dkt. No. 41 (“MTD”).) Having carefully considered the 

pleadings and the papers submitted, as well as oral argument from counsel on February 5, 2019, 

and for the reasons set forth more fully below, the Court hereby GRANTS Wells Fargo’s motion to 

dismiss with leave to amend. Therefore, plaintiff may file a second amended complaint. 

I. BACKGROUND

The background giving rise to this action is well-known, and the Court will not repeat it 

here. (See MTD Order at 2-3 (summarizing plaintiff’s allegations).) Plaintiff’s FAC contains the 

following additional allegations: 

Defendants’ unlawful and unfair business practices as detailed above [and below] 

emanate from California. Wells Fargo Bank N.A.’s principal place of business is 

San Francisco, California. As set forth explicitly in Defendants’ internet 

advertising for these programs, Defendants’ unlawful business practices are 

“provided by Wells Fargo Bank, N.A.” Further, when Named Plaintiff made 

inquiries with Defendants regarding the unlawful programs and practices 

discussed herein, it was specifically directed towards the business unit and 

managers that operated the program(s). These individuals work from and in 

California. Indeed, Named Plaintiff’s account representative stated directly that 

these issues had to be addressed with the business unit’s managers in California. 

Upon information and belief, Defendants’ business practices as described herein 

were created, managed and controlled by their business units and managers in 

California. Named Plaintiff is also informed and believes that, based on the 

representations by Defendants to Named Plaintiff: (1) the decisions regarding the 

Jewelry Advantage Program [and other programs operated by Defendants in the 

same manner] were made by Defendants in California; (2) the Jewelry Advantage 

Program [and the other programs operated by Defendants in the same manner] 

were conceived of by Defendants in California; (3) the promulgation by 

Defendants of the unlawful and unfair business practices described herein 

occurred in California; (4) the sales and marketing for Defendants’ unlawful and 

unfair business practices described herein occurred and were created by 

Defendants in California and emanated from California; and (5) Defendants’ 

improperly retained monies from their unlawful and unfair business practices 

described herein in California at Defendants’ principal place of business in 

 2

 In support of its motion, Wells Fargo requests that the Court take judicial notice of four 

New Mexico state court documents. (See Dkt. No. 42 (“RJN”).) The Court previously took 

judicial notice of these documents in its order dismissing plaintiff’s initial complaint, (see MTD 

Order at 8 n. 7), and finds judicial notice appropriate here for the same reasons as stated in that 

order. Accordingly, the Court GRANTS Wells Fargo’s request for judicial notice of these public 

records. The Court will afford them their proper evidentiary weight. 

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California. Moreover, there are numerous other class members who reside in 

California that have been injured in fact and lost money or property as a result of 

Defendants’ unlawful and unfair business practices described herein. 

(FAC at 29-30.)3

 

 Additionally, and relevant to the instant motion, plaintiff alleges as follows: 

In 2008 the Albuquerque office of the New Mexico Attorney General began investigating 

the sales practices of J. Edwards. (Id. at 24.) On October 11, 2012, Lori Chavez, then an 

Assistant Attorney General in that office, sent an email to counsel for J. Edwards, in 

which she stated that the Attorney General’s office had been “reviewing the state of the 

law as it concerns the offering of discounts by merchants to the public based upon the 

form of payment.” (Id. at 24-25 (citing FAC, Ex. 5).) Chavez’s email further indicated 

that, although the two primary sources of law—TILA and the Electronic Fund Transfer 

Act (“EFT”)—do not apply to J. Edwards because TILA regulates creditors and EFT 

regulates payment card networks involving electronic fund transfers, neither of which 

apply to J. Edwards, the Attorney General’s office “maintained [its] position that the 

application of discounts, previously utilized by J. Edwards, constitutes a hidden finance 

charge.” (Id.) 

Plaintiff attaches to its complaint a copy of the email from Chavez, as well as a 

letter from J. Edwards representative John Silverman to Wells Fargo Bank, N.A.’s 

Executive Vice President and General Counsel dated January 27, 2017 and a letter from 

J. Edwards attorney Robert Skipworth to Warren Buffett dated June 12, 2017. (See FAC, 

 3

 Plaintiff’s FAC also eliminates former plaintiff, John Silverman, and any reference 

thereto, (see, e.g., FAC at 1) and omits the second and third causes of action previously alleged in 

the initial complaint. (Compare Initial Compl. at 37-39 with FAC at 38-39.) Otherwise, 

plaintiff’s FAC is identical to the complaint initially filed on June 28, 2018. Plaintiff’s FAC also 

attaches seven exhibits, identical to those attached to the initial complaint. (See Dkt. Nos. 1-1, 40-

1.) 

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Exs. 5, 6, 7.) In the January 2017 letter, Silverman writes: 

While our claim of “interest free” financing was the subject of many 

conversations with customers, the issue gained the attention of the 

Attorney General. The AG’s position was that transactions with 

customers, which included the WF discounts and our corresponding 

pricing methods, were based on time, price differential. Furthermore, our 

pricing system with inflated prices to cover the WF discounts, were not 

“interest free” to customers but instead prices that included undisclosed 

finance charges. All elements of our transactions were not only a 

violation of TILA laws, but the advertising and promotion of the pricing 

as “interest free” violated various laws regarding deceptive trade, false 

advertising and unfair trade practices. The cost to defend and settle the 

matter with the AG was several hundred thousand dollars. 

(FAC, Ex. 6 at ECF 53.) The letter also states that following a Texas sales tax 

audit, J. Edwards’ attorney “has agreed with the AG’s position and determined 

that our financing programs were not ‘interest free’ rather included undisclosed 

finance charges paid to WF by the customer[,]” and that “[b]ecause we paid sales 

tax on the entire sale amount, which included finance charges, [our attorney] has 

determined that we have overpaid sales tax amounts, as finance charges are not 

subject to sales tax.” (Id.) In the June 2017 letter, Skipworth writes: 

J. Edwards was a Wells Fargo merchant dealer for many years and then 

became aware that the company was participating in a fraudulent 

financing scheme promoted by Wells Fargo. The Attorney General of the 

State of New Mexico filed suit against J. Edwards which centered around 

Wells Fargo’s “zero interest” financing scheme in which J. Edwards 

offered its customers Wells Fargo’s long term financing plans at zero 

interest. Unfortunately, the “zero interest” was not actually zero interest 

but instead had interest hidden in the prices consumers paid to Wells 

Fargo. The AG suit alleged that J. Edwards was violating many of the 

Truth-in-Lending Act (TILA) Regulation Z requirements with practically 

every sale. J. Edwards’ method of pricing, discounting, payment 

collection and sales tax collection violated TILA Regulation Z leading to 

charges of deceptive trade, false advertising, unfair business practices and 

fraud. 

(FAC, Ex. 7 at ECF 57.) 

\\ 

\\ 

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II. LEGAL STANDARD

Pursuant to Federal Rule of Civil Procedure 12(b)(6), a complaint may be dismissed for 

failure to state a claim upon which relief may be granted. Dismissal for failure to state a claim 

under Rule 12(b)(6) is proper if there is a “lack of a cognizable legal theory or the absence of 

sufficient facts alleged under a cognizable legal theory.” Conservation Force v. Salazar, 646 F.3d 

1240, 1242 (9th Cir. 2011) (quoting Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th 

Cir. 1988)). The complaint must plead “enough facts to state a claim [for] relief that is plausible 

on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is plausible on its 

face “when the plaintiff pleads factual content that allows the court to draw the reasonable 

inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 

678 (2009). If the facts alleged do not support a reasonable inference of liability, stronger than a 

mere possibility, the claim must be dismissed. Id. at 678-79; see also In re Gilead Scis. Sec. Litig., 

536 F.3d 1049, 1055 (9th Cir. 2008) (stating that a court is not required to accept as true 

“allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable 

inferences.”). 

If a court dismisses a complaint, it should give leave to amend unless “the pleading could 

not possibly be cured by the allegation of other facts.” Cook, Perkiss & Liehe, Inc. v. N. Cal. 

Collection Serv. Inc., 911 F.2d 242, 247 (9th Cir. 1990). 

III. DISCUSSION

A claim for violation of the UCL must be brought within four years of the date the cause of 

action accrues. Cal. Bus. & Prof. Code § 17208. Under California law, a “cause of action accrues 

when [it] is complete with all of its elements—those elements being wrongdoing, harm, and 

causation.” Aryeh v. Canon Bus. Solutions, Inc., 55 Cal. 4th 1185, 1191 (2013) (internal quotation 

marks and citations omitted). Said another way, “a UCL deceptive practices claim should accrue 

only when a reasonable person would have discovered the factual basis for a claim.” (Id. at 1195.) 

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Here, plaintiff alleges that Wells Fargo “has created and maintains a credit card program 

through which it actively encourages retailers to build the ‘fees’ that these merchants must pay 

Wells Fargo into the regular price of goods and services, while representing to retail customers 

that the goods and services that they purchase are being financed at zero percent interest[,]” and, 

thereby, “misled [plaintiff and class members] into promoting [d]efendants’ illegal financing 

scheme, and into paying unnecessary sales taxes.” (FAC at 2, 39.) 

The exhibits attached to the FAC show that plaintiff learned of the allegedly illegal nature 

of Wells Fargo’s credit card Program as a result of the New Mexico Attorney General’s 

investigation and lawsuit. (See FAC, Ex. 6 at ECF 53; Ex. 7 at ECF 57.) Plaintiff has alleged in 

its FAC that the Attorney General’s office contacted J. Edwards in October of 2012 and informed 

plaintiff of the office’s position that although the TILA and EFT do not apply to J. Edwards, “the 

application of discounts, previously utilized by J. Edwards, constitutes a hidden finance charge” as 

defined by those statutes. (FAC at 24-25.) Therefore, as of October 2012, plaintiff had notice that 

Wells Fargo’s credit card Program constituted an illegal financing scheme under TILA and EFT 

and therefore, reasonably could have discovered, and seemingly did discover, the factual basis for 

its UCL claim that it has been misled regarding the nature of that financing scheme. Aryeh, 55 

Cal. 4th at 1195. Thus, based on the face of plaintiff’s complaint and the exhibits attached thereto, 

the statute of limitations on plaintiff’s UCL claims against Wells Fargo regarding the alleged 

illegal financing scheme expired in October 2016.4 See Cal. Bus. & Prof. Code § 17208; see also 

 4

 The Court notes that the New Mexico state court documents submitted by Wells Fargo 

for judicial notice support this conclusion. On December 16, 2009, J. Edwards filed a complaint 

against the New Mexico Attorney General for declaratory judgment in the Second Judicial District 

Court of the State of New Mexico, County of Bernalillo. (See Dkt. No. 42-1, Ex. A (“State 

Compl.”).) The complaint states that “J. Edwards has entered into an arrangement with the Wells 

Fargo Bank through which Wells Fargo extends credit to J. Edwards’ customers.” (Id. ¶ 21.) The 

complaint further states that J. Edwards “seeks a judicial declaration that its pricing complies with 

applicable federal and state law.” (Id. ¶ 25.) The Attorney General responded and filed counterclaims for violations of the New Mexico Unfair Practices Act and the False Advertising Act on 

January 15, 2010. (See Dkt. No. 42-1, Ex. B (“State Answer”).) Therein, the Attorney General 

states that J. Edwards “practice of charging an increased or greater sales price for credit 

transactions than for cash transactions constitutes a hidden finance charge.” (Id. ¶ 31.) The 

parties filed a partial stipulated consent decree on August 28, 2012. (See Dkt. No. 42-1, Ex. C 

(“Decree”).) Therein, “without the admission of any violation of law or wrongdoing while 

offering the financing, leasing and sale of diamonds and jewelry to the general public,” J. Edwards 

stipulated to a permanent injunction regarding the financing, leasing and sale thereof. (Id.) 

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Rivera v. Peri & Sons Farms, Inc., 735 F.3d 892, 901 (9th Cir. 2013). 

To avoid application of the statute of limitations, plaintiff first avers that Wells Fargo’s 

conduct subjects it to the “continuous wrong” and “continuous accrual” principles of statutes of 

limitation and, therefore, that plaintiffs incurred an injury in fact under the UCL within four years 

of the initiation of this action.5 (Dkt. No. 43 (“Opp.”) at 10-11, 12.) “Generally speaking, 

continuous accrual applies whenever there is a continuing or recurring obligation: When an 

obligation or liability arises on a recurring basis, a cause of action accrues each time a wrongful 

act occurs, triggering a new limitations period . . . . Because each new breach of such an obligation 

provides all the elements of a claim – wrongdoing, harm, and causation . . . – each may be treated 

as an independently actionable wrong with its own time limit for recovery.” Aryeh, 55 Cal.4th at 

1199. Accordingly, a plaintiff may pursue wrongs for which the statute of limitations has not yet 

expired, even if earlier wrongs would be barred. Id. at 1199-1200. 

Plaintiff argues that Wells Fargo’s conduct falls into this category because their 

“obligations to operate their programs in compliance with Federal law is a continuing obligation 

of both TILA and the UCL.” (Opp. at 11.) As a preliminary matter, the Court is not aware of, and 

plaintiff does not provide, any authority for finding that compliance with federal, or state, law 

constitutes a continuing obligation within the meaning of the continual accrual principle. (See id.

(citing Bilyue v. Guy, No. CV 17-4546 FMO (ASx), 2017 WL 7066400, at *1 (C.D. Cal. 2017) 

(applying the theory of continuous accrual to plaintiffs’ UCL claims and finding that plaintiffs 

 

Therefore, it appears that plaintiff was on notice of the potential illegality of Wells Fargo’s credit 

program at least as early as December 2009. 

5

 Although plaintiff’s FAC does allege that J. Edwards “has suffered such injuries by 

Defendants’ conduct within four years of the filing of the Complaint in this action[,]” nowhere in 

the FAC does plaintiff include any information or allegation regarding transactions occurring 

within the four-year window immediately preceding filing of the initial complaint. (FAC at 39; 

see also Opp. at 12 (stating that that Program transactions “occurred within four years of the filing 

of this action”).) During the February 5, 2019 hearing, plaintiff’s counsel informed the Court that 

a Program transaction did occur within the four-year window and that he believed the transaction 

occurred in Texas, however he could not provide any additional information. To the extent that 

plaintiff files a second amended complaint, it must include a factual basis for the allegation that 

Program transaction occurred within the four-year period immediately preceding plaintiff’s filing 

of the initial complaint. Counsel is reminded of his Rule 11 obligations. 

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may recover under a recording contract for the four years preceding the filing of the complaint).)6 

Plaintiff does allege that it “was injured each and every time a consumer used the Jewelry 

Advantage program operated by [d]efendants at [p]laintiff’s stores[,]” but fails to allege any 

continuing contractual obligation underlying that harm of which it was a party.7 (See Opp. at 12.) 

Second, plaintiff argues that its “claim for violation of the UCL are [sic] also subject to 

delayed discovery and fraudulent concealment.” (Opp. at 13 (citing FAC at 30-34).) Plaintiff 

alleges in its FAC that Wells Fargo “actively concealed the TILA violations . . . while 

simultaneously touting the legality and soundness of the program.” (FAC at 31; see also id. at 

32.) Plaintiff does not address, either in the FAC or its opposition, the fact that J. Edwards 

appears to have been on notice of the potentially illegality of the Program at least as early as 

October 2012.8 (See id.; see also Opp. at 13 (stating simply “Here, Plaintiff has alleged sufficient 

facts for the Court to deny (at the pleading stage) Defendants’ Motion”).) As noted above, as of at 

least October 2012, plaintiff had notice that Wells Fargo’s credit card Program constituted an 

 6

 See, by contrast, cases regarding ongoing contractual obligations: Tsemetzin v. Coast 

Fed’l Sav & Loan Ass’n, 57 Cal.App.4th 1334, 1344 (1997) (finding that the statute of limitations 

commenced under a rental agreement for each month when the increased payment was due 

pursuant to rental contract and not paid); Armstrong Petroleum Corp. v. Tri-Valley Oil & Gas Co., 

116 Cal.App.4th 1375, 1388-89 (2004) (finding that because performance of underlying 

contractual obligations is severable due to monthly payment obligation and therefore created a 

recurring obligation); Walker v. Blackground Records, LLC, 2017 WL 8186040, *4 (E.D. Cal. 

2017) (finding continuous accrual where defendants allegedly failed to make “periodic” payments 

owed under various recording contracts). 

7

 The Court notes that the Program dealer agreement, which plaintiff attached to its 

complaint, provides for termination by either party at any time, specifying that the agreement “will 

remain effective until one party gives the other party written notice of its decision to terminate” 

the agreement. (Dkt. No. 40-1, Ex. 1 (“Agreement”) ¶ 10(a).) Plaintiff has not alleged that it was 

forced to remain a party to the agreement. Nor has plaintiff alleged that the customer’s use of the 

Program resulted in a recurring payment scheme that might create a continuing obligation. (See 

FAC at 18-20 (describing a Program transaction as a one-time exchange between customer, Wells 

Fargo, and plaintiff).) 

8

 Nor does plaintiff address the fact that J. Edwards entered into a consent decree with the 

Attorney General of New Mexico on August 28, 2012, the terms of which included a permanent 

injunction that instructing that “should [J. Edwards] offer third party financing through a third 

party financing company, such as Wells Fargo, [J. Edwards] shall not charge any additional fees in 

excess of the sticker price[,]” which is elsewhere defined as “the price at which [J. Edwards] 

actually and regularly sells jewelry.” (Decree ¶¶ 14, 11.) During the February 5, 2019 hearing, 

plaintiff’s counsel could not confirm whether plaintiff had violated the consent decree by engaging 

in Program transactions in New Mexico after August 28, 2012. 

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illegal financing scheme under TILA and EFT and reasonably could have discovered, and 

seemingly did discover, the factual basis for its UCL claim that it has been misled regarding the 

nature of that financing scheme. (See FAC, Ex. 6 at ECF 53; Ex. 7 at ECF 57; see also State 

Compl. ¶ 21; State Answer ¶ 31; Decree ¶¶ 11, 14); c.f. Cortez v. Second Chance Home Loans, 

LLC, No. 2:18-cv-07896 WBS EFB, 2018 WL 6216426, at *2 (E.D. Cal. Nov. 28, 2018) (noting 

that the question of “when a plaintiff actually discovered or reasonably should have discovered the 

facts for purposes of the delayed discovery rule is a question of fact unless the evidence can 

support only one reasonable conclusion”). Therefore, plaintiff cannot credibly claim that the 

alleged illegality of the Program was actually concealed. Accordingly, based on the allegations in 

the FAC, because the four-year statute of limitations on plaintiff’s UCL claim expired at least as 

early as October 2016, well before plaintiff filed the initial complaint in the instant action on June 

28, 2018, and plaintiff has not sufficiently alleged application of the continuous accrual or delayed 

discovery and fraudulent concealment doctrines, the Court finds that plaintiff’s claim is barred by 

the statute of limitations. 

IV. CONCLUSION 

For the foregoing reasons, the Court GRANTS Wells Fargo’s motion to dismiss. Plaintiff 

requests leave to amend, which the Court provides reminding counsel of their Rule 11 obligations. 

To the extent that plaintiff has a basis for filing a second amended complaint, plaintiff shall so file 

by March 8, 2019. If not filed, the FAC will be dismissed with prejudice. Defendants shall 

respond fourteen (14) days later. 

This Order terminates Docket Number 41. 

IT IS SO ORDERED. 

Dated: 

 YVONNE GONZALEZ ROGERS

 UNITED STATES DISTRICT COURT JUDGE

February 8, 2019

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