Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_07-cv-00671/USCOURTS-cand-3_07-cv-00671-35/pdf.json

Nature of Suit Code: 371
Nature of Suit: Truth in Lending
Cause of Action: 15:1601 Truth in Lending

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

DAVID VAN SLYKE, FRANKLIN CHAN

and THOMAS E. BROWNING, on behalf of

themselves and all others similarly situated,

Plaintiffs,

 v.

CAPITAL ONE BANK, CAPITAL ONE

FINANCIAL CORPORATION, and

DOES 1–100, inclusive,

Defendants. /

No. C 07-00671 WHA

ORDER DENYING MOTION FOR

LEAVE TO FILE A THIRD

AMENDED COMPLAINT AND

DENYING PLAINTIFFS’

MOTION TO CERTIFY A CLASS

INTRODUCTION

In this putative class action involving defendants’ credit-card practices, plaintiffs move

for leave to file a third amended complaint. An order granting summary judgment on plaintiffs’

deceit claims and claims under California Section 17200 issued on November 7, 2007,

eliminating all of plaintiffs’ extant claims. Plaintiffs proposed amendment comes long after a

scheduling order was in place in this action. Moreover, plaintiffs have failed to plead any new

allegations that could sustain a claim for deceit or violation of the unfair-competition laws. 

Accordingly, plaintiffs’ motion for leave to file a third amended complaint is DENIED. Since

plaintiffs have no claims remaining in this action, plaintiffs’ motion to certify a class is also

DENIED. Defendants’ counterclaims remain, and plaintiffs’ motion to dismiss the

counterclaims is still pending. 

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United States District Court

For the Northern District of California

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STATEMENT

Plaintiffs David Van Slyke, Myrna Bragado, Susanna Garcia, and Robert Hart are all

holders of credit-card accounts with defendant Capital One Bank. Defendant Capital One

Financial is Capital One Bank’s parent company. Both defendants are located in Virginia.

Given the extensive motion practice in this action, the operative facts have been

recounted more fully in prior orders. This action was originally filed on February 1, 2007. It

asserted claims for: (1) violations of the Truth in Lending Act; (2) violations of California’s

Consumer Legal Remedies Act; (3) violations of California’s Unfair Competition Law,

Business & Professions Code § 17200; and (4) deceit and omission of material facts. On

April 9, 2007, defendants filed motions to transfer venue and to dismiss under Rule 12(b)(6). 

An order dated June 7, 2007, denied the motion to transfer. The motion to dismiss was granted

as to the CLRA claim; the remainder of the motion was denied. 

Plaintiffs filed their first amended complaint on June 27, 2007, omitting the CLRA

claim. Thereafter, defendants filed a motion for leave to file a motion for reconsideration

regarding certain issues raised by their motion to dismiss. An order thereon struck plaintiffs’

allegations regarding Capital One’s state of mind from plaintiffs’ deceit claim because Capital

One’s intention that its cardholders default on their accounts was not a fact that could be

misrepresented or omitted. The remainder of the motion was denied. 

On July 3, 2007, plaintiffs filed their second amended complaint to conform to the prior

order. That complaint also added plaintiffs Bragado, Garcia, and Hart. Defendants filed a

motion to dismiss plaintiffs’ TILA claim on July 12, 2007. At the same time, they moved for

summary judgment on all of plaintiff Browning’s claims and all claims against Capital One

Financial. The motion for summary judgment on Browning’s claims was granted because his

claims were barred by a prior settlement. The motion for summary judgment as to Capital One

Financial was granted as to the TILA claim but denied as to all other claims. The motion to

dismiss was granted but plaintiffs were permitted to file a motion for leave to file an amended

complaint. The order made explicit that the only amendments presented on that motion were

amendments to plaintiffs’ TILA claim to plead their “interest on fees” theory. Plaintiffs made a

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number of other changes to their deceit and Section 17200 claims in that proposed pleading. 

After a round of briefing, plaintiffs’ motion for leave to file an amended complaint was denied

on September 28, 2007, because plaintiffs’ proposed amendments did not state a claim under

TILA. Plaintiffs other proposed amendments were not addressed by that order. Those

amendments are now the subject of this motion. 

Three more motions were filed on September 27, 2007. Defendants filed two

voluminous motions for summary judgment — one directed at plaintiffs’ deceit claims and the

other directed at plaintiffs’ unfair-competition claims. At the same time, plaintiffs filed a

motion to certify a class. Plaintiffs filed this motion for leave to file a third amended complaint

on October 5, 2007. Plaintiffs’ motion to shorten time to hear this motion at the same time as

the motions for summary judgment was denied. 

Defendants answered the complaint and filed counterclaims against each named plaintiff

on October 12, 2007. The hearing on defendants’ motions for summary judgment and

plaintiffs’ motion to certify a class was held on November 1, 2007. An order issued on

November 7, 2007, granting both of defendants’ motions for summary judgment. Because this

motion was still pending, that order deferred ruling on plaintiffs’ motion to certify a class. 

Moreover, in opposing defendants’ motions, plaintiffs introduced a host of new theories on their

deceit and Section 17200 claims. The summary-judgment order declined to address those

theories because they did not appear in the operative complaint. Discovery in this action closes

on January 11, 2008, and trial is set for May 19, 2008. 

ANALYSIS

Leave to amend a complaint shall be freely given when justice so requires under

Rule 15(a). This standard is applied liberally. “In the absence of any apparent or declared

reason — such as undue delay, bad faith, or dilatory motive on the part of the movant, repeated

failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing

party by virtue of allowance of the amendment, etc. — the leave sought should, as the rules

require, be ‘freely given.’” Foman v. Davis, 371 U.S. 178, 182 (1962); FRCP 15(a). Rule 15(a)

does not apply, however, when a district court has established a deadline for amended pleadings

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under FRCP 16(b). See Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 607–608

(9th Cir. 1992). Once the Court has entered a scheduling order, the liberal policy favoring

amendments no longer applies. Subsequent amendments are not allowed without a request to

first modify the scheduling order. At that point, any modification must be based on a showing

of good cause. Coleman v. Quaker Oats Co., 232 F.3d 1271, 1294 (9th Cir. 2000). 

1. ORDER DATED SEPTEMBER 28, 2007.

As an initial matter, the parties disagree over the meaning of the Court’s order dated

September 28, 2007, on plaintiffs’ first motion for leave to file an amended complaint. The

order on defendants’ motion to dismiss and for partial summary judgment invited plaintiffs to

file a motion for leave to add their “interest on fees” theory presented at the hearing. 

Defendants are correct that plaintiffs were permitted to amend only their TILA claim to present

their “interest on fees” theory that they introduced at the hearing. Defendants are also correct

that plaintiffs made additional amendments to that complaint in contravention of the Court’s

order. Those other amendments were not addressed by the order on plaintiffs’ motion for leave

to amend because they were invited. Plaintiffs did not explicitly state that they were asking

leave to amend other portions of the order, so such leave was not granted. 

Defendants now argue that this motion by plaintiffs is actually a motion for

reconsideration of the order issued September 28, 2007. Since plaintiffs finally included a

redlined version of their complaints, it is apparent that this proposed pleading and the proposed

pleading from plaintiffs’ motion for leave to file an amended complaint are identical except that

plaintiffs removed the TILA claim. On the prior motion, plaintiffs argued that these proposed

amendments merely conformed to the evidence. They were not addressed in the prior motion

because plaintiff was not permitted to make such amendments. Since they were not addressed,

the instant motion cannot be considered a motion for reconsideration. Otherwise, plaintiffs

would be denied their right to have the motion considered on the merits.

2. DILIGENCE.

The inquiry under Rule 16(b)’s good cause standard first focuses on the diligence of the

party seeking the amendment. “The district court may modify the pretrial schedule ‘if it cannot

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reasonably be met despite the diligence of the party seeking the extension.’” Johnson, 975 F.2d

at 609 (quoting FRCP 15 advisory committee notes). If the party seeking modification was not

diligent, then the inquiry should end.

Defendants argue that plaintiffs were not diligent in seeking leave to amend the

complaint. Plaintiffs argue that their amendments were based on facts about defendants’ fee

practices which they obtained on August 9, 2007. They also contend that they first sought to

make these amendments to the complaint on August 27, along with the amendments to their

TILA claim. That order did not, however, give plaintiffs permission to amend their other

claims; it only dealt with a narrow ground identified at the hearing. The order was quite clear

on that point. 

Plaintiffs filed this motion two months later on October 9, 2007. Defendants note that

the deadline to amend pleadings in this action was June 28, 2007, but defendants mistakenly

focus on the time between this motion and the deadline to amend the pleadings. More telling is

how long plaintiffs waited from discovery of the new facts until seeking leave to amend. See

Zivkovic v. S. Cal. Edison Corp., 302 F.3d 1080, 1087–88 (9th Cir. 2002). Here, plaintiffs

knew of these new facts in August but did not ask leave to amend until October 9. It is true that

other motion practice was taking place in this action, but plaintiffs have never previously asked

permission to make these amendments. While plaintiffs’ delay was not lengthy, it still disfavors

allowing leave to amend, given the various deadlines, such as class certification, summary

judgment, and trial in the case management order. 

3. PREJUDICE TO DEFENDANTS.

Prejudice to the non-moving party, though not required under Rule 16(b), can supply

additional reasons to deny a motion. Coleman, 232 F.3d at 1295. “A need to reopen discovery

and therefore delay proceedings supports the district court’s finding of prejudice from a delayed

motion to amend the complaint.” Lockheed Martin Corp. v. Network Solutions, Inc., 194 F.3d

980, 986 (9th Cir. 1999). 

The discovery cutoff is currently January 11, 2008. Defendants argue that if this

amendment is allowed to go forward, they will have to redo a considerable amount of

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discovery. While deposing named plaintiffs, defendants contend that they did not ask them

about these new practices in the proposed pleadings. Defendants would not know whether or

not plaintiffs had ever been injured by those practices. Defendants also asked plaintiffs via

interrogatory to identify all fees that they contended were fraudulently, unfairly, or unlawfully

charged and to state all facts to support that contention (Second McCabe Decl. on MSJ, Exh. F). 

They never stated the facts on which they now rely. Pursuant to Rule 26, plaintiffs had an

ongoing obligation to amend their interrogatory responses if they learned that those responses

were in some way materially incorrect or incomplete. Plaintiffs did not do so. 

Plaintiffs argue in response that defendants have been on notice of plaintiffs’ intent to

make these amendments since the prior motion for leave to amend. This may be so, but since

plaintiffs ignored the Court’s order, this argument carries little weight. Moreover, plaintiffs

presented a host of entirely new theories, many of which do not appear even in this version of

the complaint, in their oppositions to defendants’ earlier motions for summary judgment. The

changes to this version of the amended pleading may be minimal, but plaintiffs cannot be

allowed to amend their complaint whenever and however they wish. 

A motion for leave to amend should not be used as a vehicle to circumvent summary

judgment. See Schacter-Jones v. Gen. Tel. of Cal., 936 F.2d 435, 443 (9th Cir. 1991), overruled

on other grounds by Cramer v. Consol. Freightway, Inc., 255 F.3d 682, 692–93 (9th Cir. 2001). 

Defendants argue that this is precisely what is happening here. This motion was filed shortly

after defendants’ motions for summary judgment. Since plaintiffs seek to add the same

allegations in their prior proposed pleading that were not addressed by the order, it is not clear

that plaintiffs had some nefarious purpose in mind. Still, defendants would suffer some

prejudice if this amendment were allowed to go forward. 

4. FUTILITY.

“Leave to amend need not be granted when an amendment would be futile.” In re

Vantive Corp. Sec. Litig., 283 F.3d 1079, 1097 (9th Cir. 2002). Prior orders have already

determined that amending the complaint to plead that defendants’ failure to disclose “interest on

fees” violated TILA was futile. The order noted that according to plaintiffs’ credit-card

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agreements, defendants had disclosed the balance on which interest was charged. Plaintiffs’

earlier motion for leave to amend was denied on that ground. Plaintiffs now argue that these

same allegations can form the basis of their claims for deceit and unfair competition. These

new allegations are simply a repackaging of plaintiffs’ old allegations. For instance, plaintiffs

now argue that the practice of billing fees to the cycle after the cycle in which they were

incurred is deceptive. They also argue that defendants’ practice of charging interest on fees

incurred is deceptive, unlawful, and unfair. 

Summary judgment has already been granted on both the deceit and unfair-competition

claims. Plaintiffs alleged that the minimum payments requested on their monthly statements

were insufficient to keep them out of default. If cardholders paid the minimum payment, they

would still incur more fees. The order held that defendants’ actual practices precluded that

from happening, provided plaintiffs did not nothing to trigger more fees in the next cycle (Order

6–9). Plaintiffs’ theory, however, shifted considerably from defendants’ motion to plaintiffs’

opposition to plaintiffs’ representations at the hearing. At the hearing, the theory had

transformed into an argument that defendants’ practice of billing fees to the cycle after the cycle

in which they were incurred was unfair or deceptive. The order held that that practice was not

deceptive, unlawful, or unfair because there was no way Capital One could anticipate when a

cardholder would exceed his or her credit limit (Order 12–13). Since summary judgment has

already been granted on these theories, amending the complaint to add these allegations would

be futile.

Turning to plaintiffs’ “interest on fees” theory, plaintiffs’ credit-card agreements and

statements show that defendants disclosed that fees were added to the purchase segment of the

account. They were added the date that the fee was incurred, and interest accrued on the

purchase segment at the rate stated in the agreement. It is proper to consider these facts at this

stage because plaintiffs, at least for some iterations of their complaints, appended copies of the

credit-card agreements. Since this practice was disclosed, it cannot form the basis of a deceit

claim or a fraudulent unfair practice claim. 

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This version of the complaint also adds allegations that named plaintiff Myrna Bragado

had a payment-protection plan through Capital One. Originally, only Hart alleged that he had

such a plan. The summary-judgment order granted defendants’ motion on that claim because

Hart actually testified, and his account statements showed, that he never had such a payment

protection plan; only an account in his wife’s name had a payment-protection plan (Order 18). 

In this iteration of the complaint, Bragado alleges that she had a payment-protection plan. She

only alleges that she paid fees; she does not allege that she, herself, was harmed by any of

defendants’ practices. Accordingly, this cannot form the basis of a claim, and this amendment

would be futile. 

Finally, plaintiffs argued in their opposition brief to defendants’ motions for summary

judgment that a number of practices — some old and some new — were fraudulent, deceptive,

unlawful, and unfair (UCL Opp. 3–4). Some of these theories are referenced in the proposed

pleading, many are not. These practices were: (1) failing to disclose and “misrepresenting”

that Capital One targeted subprime consumers with solicitations for multiple credit cards based

on calculations that subprime cardholders would generate the most revenue in fees; (2) failing

to adequately disclose that they charged interest on fees; (3) failure to disclose that fees can

generate fees; (4) failure to disclose that as many as three overlimit fees can be charged for a

single incident; (5) failure to disclose that the minimum payment does not include penalty fees;

(6) failure to disclose that fees and interest on the fees were billed in the cycle following the one

in which they were incurred; (7) failed to disclose that the reason payments must be posted by

3:00 p.m. rather than 12:00 a.m. on the due date was to generate fees, not because of operational

limitations; (8) failure to disclose that the purpose of the so-called 25-day grace period was to

generate additional fees; (9) Capital One’s receiving numerous customer complaints; and

(10) failure to disclose limitations and exclusions regarding payment-protection plans before

cardholders agreed to purchase them. 

Prior orders have already ruled on a number of these theories. The first theory was

addressed in the order on defendants’ motion to dismiss and motions for summary judgment. 

Capital One is merely betting that subprime customers will default. While this may be bad

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social policy, it is not illegal. The second, third, fifth, and sixth items in this laundry list were

disposed of by defendants’ motions for summary judgment. Plaintiffs could not show that they

were harmed by any of those practices Capital One used to calculate its minium payments. This

motion has already disposed of the tenth item — the summary-judgment order already held that

Hart never had a payment-protection plan, and in this iteration of the complaint, Bragado did

not plead that she was harmed. 

The remainder of these theories do not appear in the proposed pleading, even construing

it liberally. Even so, many of them have fatal flaws. Importantly, on the fourth theory, none of

the named plaintiffs have ever alleged that they personally were charged three overlimit fees for

a single incident. In the seventh theory, that Capital One misrepresented its reasons for setting

the payment deadline at 3:00 p.m., the alleged misrepresentation does not cause the harm. The

harm comes from the earlier deadline itself. So too for the eighth theory about the 25-day grace

period. The harm comes from the 25-day grace period itself, not from Capital One’s reasons for

setting it. Finally, the mere fact that Capital One has received many customer complaints does

not, without more explanation of what those complaints were about, could not constitute a

deception or an unfair practice. The large number of complaints has little to do with these

named plaintiffs. 

Here, even if plaintiffs were allowed to add the numerous theories they tossed out in

opposing defendants’ motions, they still would not have a viable complaint. Plaintiffs’

proposed amendment would be futile. Adding any of the new theories would be futile as well. 

This order is merely denying leave to amend. It does not resolve all of these theories on the

merits. In future litigation between the parties or others, no one should claim that this order has

blessed any of the practices subject to this order. Accordingly, plaintiffs’ motion for leave to

file a third amended complaint is DENIED. Since this order and the order on defendants’

motions for summary judgment disposed of all of plaintiffs’ claims, plaintiffs’ motion to certify

a class is DENIED. Judgment shall be entered for defendants. 

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CONCLUSION

For all of the above-stated reasons, plaintiffs’ motion for leave to file a third amended

complaint is DENIED. In turn, plaintiffs’ motion to certify a class is DENIED. This case was

sold to the Court on a theory that proved untrue and the balance of the proceeding has become a

helter-skelter scramble to find some substitute, with the paperwork flowing into the clerk’s

office at a fantastic rate. The plaintiffs’ side of this case is now over. All that remains is to

resolve the counterclaims. 

IT IS SO ORDERED.

Dated: November 13, 2007. 

WILLIAM ALSUP

UNITED STATES DISTRICT JUDGE

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